[Federal Register Volume 73, Number 91 (Friday, May 9, 2008)]
[Rules and Regulations]
[Pages 26788-26874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-1219]



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 412



Medicare Program; Prospective Payment System for Long-Term Care 
Hospitals RY 2009: Annual Payment Rate Updates, Policy Changes, and 
Clarifications; and Electronic Submission of Cost Reports: Revision to 
Effective Date of Cost Reporting Period; Final Rule

  Federal Register / Vol. 73, No. 91 / Friday, May 9, 2008 / Rules and 
Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1393-F and CMS-1199-F]
RINs 0938-AO94 and 0938-AN87


Medicare Program; Prospective Payment System for Long-Term Care 
Hospitals RY 2009: Annual Payment Rate Updates, Policy Changes, and 
Clarifications; and Electronic Submission of Cost Reports: Revision to 
Effective Date of Cost Reporting Period

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

ACTION: Final rule.

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SUMMARY: This final rule updates the annual payment rates for the 
Medicare prospective payment system (PPS) for inpatient hospital 
services provided by long-term care hospitals (LTCHs). We are also 
consolidating the annual July 1 update for payment rates and the 
October 1 update for Medicare severity long-term care diagnosis-related 
group (MS-LTC-DRG) weights to a single rulemaking cycle that coincides 
with the Federal fiscal year (FFY). In addition, we are clarifying 
various policy issues.
    This final rule also finalizes the provisions from the Electronic 
Submission of Cost Reports: Revision to Effective Date of Cost 
Reporting Period interim final rule with comment period that was 
published in the May 27, 2005 Federal Register which revises the 
existing effective date by which all organ procurement organizations 
(OPOs), rural health clinics (RHCs), Federally qualified health centers 
(FQHCs), and community mental health centers (CMHCs) are required to 
submit their Medicare cost reports in a standardized electronic format 
from cost reporting periods ending on or after December 31, 2004 to 
cost reporting periods ending on or after March 31, 2005. This final 
rule does not affect the current cost reporting requirement for 
hospices and end-stage renal disease (ESRD) facilities. Hospices and 
ESRD facilities are required to continue to submit cost reports under 
the Medicare regulations in a standardized electronic format for cost 
reporting periods ending on or after December 31, 2004.

DATES: The provisions of this final rule are effective on July 8, 2008.

FOR FURTHER INFORMATION CONTACT:

Tzvi Hefter, (410) 786-4487 (General information).
Judy Richter, (410) 786-2590 (General information, payment adjustments 
for special cases, onsite discharges and readmissions, interrupted 
stays, co-located providers, and short-stay outliers).
Michele Hudson, (410) 786-5490 (Calculation of the payment rates, MS-
LTC-DRGs, relative weights and case-mix index, market basket, wage 
index, budget neutrality, and other payment adjustments).
Ann Fagan, (410) 786-5662 (Patient classification system).
Linda McKenna, (410) 786-4537 (Payment adjustments and interrupted 
stay).
Elizabeth Truong, (410) 786-6005 (Federal rate update, budget 
neutrality, other adjustments, and calculation of the payment rates).
Michael Treitel, (410) 786-4552 (High cost outliers and cost-to-charge 
ratios).
Darryl E. Simms, (410) 786-4524 (Electronic Submission of Cost Reports: 
Revision to Effective Date of Cost Reporting Period).

Table of Contents

I. Background of the LTCH PPS
    A. Legislative and Regulatory Authority
    B. Criteria for Classification as a LTCH
    1. Classification as a LTCH
    2. Hospitals Excluded from the LTCH PPS
    C. Transition Period for Implementation of the LTCH PPS
    D. Limitation on Charges to Beneficiaries
    E. Administrative Simplification Compliance Act (ASCA) and 
Health Insurance Portability and Accountability Act (HIPAA) 
Compliance
II. Summary of the Provisions of This Final Rule
III. Medicare Severity Long-Term Care Diagnosis-Related Group (LTC-
DRG) Classifications and Relative Weights
    A. Background
    B. Patient Classifications Into MS-LTC-DRGs
    C. Organization of MS-LTC-DRGs
    D. Method for Updating the MS-LTC-DRG Classifications and 
Relative Weights
    1. Background
    2. FY 2008 MS-LTC-DRG Relative Weights
IV. Changes to the LTCH PPS Payment Rates and other Changes for the 
2009 LTCH PPS Rate Year
    A. Overview of the Development of the Payment Rates
    B. Consolidation of the Annual Updates for Payment and MS-LTC-
DRG Relative Weights to One Annual Update
    C. LTCH PPS Market Basket
    1. Overview of the Rehabilitation, Psychiatric and Long-Term 
Care (RPL) Market Basket
    2. Market Basket Estimate for the 2009 LTCH PPS Rate Year
    D. One-time Prospective Adjustment to the Standard Federal Rate
    E. Standard Federal Rate for the 2009 LTCH PPS Rate Year
    1. Background
    2. Standard Federal Rate for the 2009 LTCH PPS Rate Year
    F. Calculation of LTCH Prospective Payments for the 2009 LTCH 
PPS Rate Year
    1. Adjustment for Area Wage Levels
    a. Background
    b. Updates to the Geographic Classifications/Labor Market Area 
Definitions
    (1) Background
    (2) Update to the CBSA-Based Labor Market Area Definitions
    (3) Clarification of New England Deemed Counties
    (4) Codification of the Definitions of Urban and Rural Under 42 
CFR Part 412, Subpart O
    c. Labor-Related Share
    d. Wage Index Data
    2. Adjustment for Cost-of-Living in Alaska and Hawaii
    3. Adjustment for High-Cost Outliers (HCOs)
    a. Background
    b. Cost-to-Charge Ratios (CCRs)
    c. Establishment of the RY 2009 Fixed-Loss Amount
    d. Application of Outlier Policy to Short-Stay Outlier (SSO) 
Cases
    4. Other Payment Adjustments
    5. Technical Correction to the Budget Neutrality Requirement at 
Sec.  412.523(d)(2)
    G. Conforming Changes
V. Computing the Adjusted Federal Prospective Payments for the 2009 
LTCH PPS Rate Year
VI. Monitoring
VII. Method of Payment
VIII. RTIs Research
IX. Electronic Submission of Cost Reports: Revision to Effective 
Date of Cost Reporting Period
    A. Background
    B. Provisions of the Interim Final Rule with Comment Period
    C. Analysis of and Responses to Public Comments
    D. Provisions of the Final Regulations
X. Collection of Information Requirements
XI. Regulatory Impact Analysis
    A. RY 2009 LTCH PPS
    1. Introduction
    a. Executive Order 12866
    b. Regulatory Flexibility Act (RFA)
    c. Impact on Rural Hospitals
    d. Unfunded Mandates
    e. Federalism
    f. Alternatives Considered
    2. Anticipated Effects of Payment Rate Changes
    a. Budgetary Impact
    b. Impact on Providers
    c. Calculation of Prospective Payments
    d. Results
    (1) Location
    (2) Participation Date
    (3) Ownership Control
    (4) Census Region
    (5) Bed size
    e. Effects on the Medicare Program
    f. Effects on Medicare Beneficiaries

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    3. Accounting Statement
    B. Electronic Submission of Cost Reports: Revision to Effective 
Date of Cost Reporting Period
Regulations Text
Addendum
Table 1: Long-Term Care Hospital Wage Index for Urban Areas for 
Discharges Occurring From July 1, 2008 through September 30, 2009
Table 2: Long-Term Care Hospital Wage Index for Rural Areas for 
Discharges Occurring from July 1, 2008 through September 30, 2009
Table 3: FY 2008 MS-LTC-DRG Relative Weights, Geometric Average 
Length of Stay, Short-Stay Outlier Threshold and IPPS-Comparable 
Threshold (for Short-Stay Outlier Cases)

Acronyms

    Because of the many terms to which we refer by acronym in this 
rule, we are listing the acronyms used and their corresponding terms 
in alphabetical order below:
3M Health Information System
AHA American Hospital Association
AHIMA American Health Information Management Association
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
ASCA Administrative Simplification Compliance Act of 2002 (Pub. L. 
107-105)
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 
106-113)
BIPA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Benefits Improvement and Protection Act of 2000 
(Pub. L. 106-554)
BLS Bureau of Labor Statistics
BN Budget neutrality
CBSA Core-based statistical area
CC Complications and comorbidities
CCR Cost-to-charge ratio
C&M Coordination and maintenance
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
COLA Cost of living adjustment
COP Condition of participation
CPI Consumer Price Index
CY Calendar year
DSH Disproportionate share of low-income patients
DRGs Diagnosis-related groups
ECI Employment Cost Index
FI Fiscal intermediary
FY Fiscal year
FFY Federal fiscal year
HCO High-cost outlier
HCRIS Hospital cost report information system
HHA Home health agency
HHS (Department of) Health and Human Services
HIPAA Health Insurance Portability and Accountability Act (Pub. L. 
104-191)
HIPC Health Information Policy Council
HwHs Hospitals within hospitals
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification (codes)
IME Indirect medical education
I-O Input-Output
IPF Inpatient psychiatric facility
IPPS [Acute Care Hospital] Inpatient Prospective Payment System
IRF Inpatient rehabilitation facility
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MAC Medicare Administrative Contractor
MCE Medicare code editor
MDC Major diagnostic categories
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare provider analysis and review
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173)
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173)
MSA Metropolitan statistical area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCHS National Center for Health Statistics
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986 (Pub. L. 99-509)
OMB Office of Management and Budget
OPM U.S. Office of Personnel Management
O.R. Operating room
OSCAR Online Survey Certification and Reporting (System)
PIP Periodic interim payment
PLI Professional liability insurance
PMSA Primary metropolitan statistical area
PPI Producer Price Indexes
PPS Prospective payment system
PSF Provider specific file
QIO Quality Improvement Organization (formerly Peer Review 
organization (PRO))
RIA Regulatory impact analysis
RPL Rehabilitation psychiatric long-term care (hospital)
RTI Research Triangle Institute, International
RY Rate year (begins July 1 and ends June 30)
SIC Standard industrial code
SNF Skilled nursing facility
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982 (Pub. L. 97-
248)
TEP Technical expert panel
UHDDS Uniform hospital discharge data set

I. Background of the LTCH PPS

A. Legislative and Regulatory Authority

    Section 123 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) as amended by section 307(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554) provides for payment for both the operating 
and capital-related costs of hospital inpatient stays in long-term care 
hospitals (LTCHs) under Medicare Part A based on prospectively set 
rates. The Medicare prospective payment system (PPS) for LTCHs applies 
to hospitals described in section 1886(d)(1)(B)(iv) of the Social 
Security Act (the Act), effective for cost reporting periods beginning 
on or after October 1, 2002.
    Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ``a 
hospital which has an average inpatient length of stay (as determined 
by the Secretary) of greater than 25 days.'' Section 
1886(d)(1)(B)(iv)(II) of the Act also provides an alternative 
definition of LTCHs: Specifically, a hospital that first received 
payment under section 1886(d) of the Act in 1986 and has an average 
inpatient length of stay (LOS) (as determined by the Secretary of 
Health and Human Services (the Secretary)) of greater than 20 days and 
has 80 percent or more of its annual Medicare inpatient discharges with 
a principal diagnosis that reflects a finding of neoplastic disease in 
the 12-month cost reporting period ending in fiscal year (FY) 1997.
    Section 123 of the BBRA requires the PPS for LTCHs to be a ``per 
discharge'' system with a diagnosis-related group (DRG) based patient 
classification system that reflects the differences in patient 
resources and costs in LTCHs.
    Section 307(b)(1) of the BIPA, among other things, mandates that 
the Secretary shall examine, and may provide for, adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In the August 30, 2002 Federal Register, we issued a final rule 
that implemented the LTCH PPS authorized under BBRA and BIPA (67 FR 
55954). This system uses information from LTCH patient records to 
classify patients into distinct MS-long-term care diagnosis-related 
groups (MS-LTC-DRGs) based on clinical characteristics and expected 
resource needs. Payments are calculated for each MS-LTC-DRG and 
provisions are made for appropriate payment adjustments. Payment rates 
under the LTCH PPS are updated annually and published in the Federal 
Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97-248) for payments for inpatient services provided by a LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The

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regulations implementing the TEFRA reasonable cost-based payment 
provisions are located at 42 CFR part 413.) With the implementation of 
the PPS for acute care hospitals authorized by the Social Security 
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the 
Act, certain hospitals, including LTCHs, were excluded from the PPS for 
acute care hospitals and were paid their reasonable costs for inpatient 
services subject to a per discharge limitation or target amount under 
the TEFRA system. For each cost reporting period, a hospital-specific 
ceiling on payments was determined by multiplying the hospital's 
updated target amount by the number of total current year Medicare 
discharges. (Generally, in this document when we refer to discharges, 
the intent is to describe Medicare discharges.) The August 30, 2002 
final rule further details the payment policy under the TEFRA system 
(67 FR 55954).
    In the August 30, 2002 final rule, we also presented an in-depth 
discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
BN requirements mandated by section 123 of the BBRA. The same final 
rule that established regulations for the LTCH PPS under 42 CFR part 
412, subpart O, also contained LTCH provisions related to covered 
inpatient services, limitation on charges to beneficiaries, medical 
review requirements, furnishing of inpatient hospital services directly 
or under arrangement, and reporting and recordkeeping requirements. We 
refer readers to the August 30, 2002 final rule for a comprehensive 
discussion of the research and data that supported the establishment of 
the LTCH PPS (67 FR 55954).
    In the June 6, 2003 Federal Register, we published a final rule 
that set forth the FY 2004 annual update of the payment rates for the 
Medicare PPS for inpatient hospital services furnished by LTCHs (68 FR 
34122). It also changed the annual period for which the payment rates 
are effective. The annual updated rates are now effective from July 1 
through June 30 instead of from October 1 through September 30. We 
refer to the July through June time period as a ``long-term care 
hospital rate year'' (LTCH PPS rate year). In addition, we changed the 
publication schedule for the annual update to allow for an effective 
date of July 1. The payment amounts and factors used to determine the 
annual update of the LTCH PPS Federal rate are based on a LTCH PPS rate 
year. While the LTCH payment rate update is effective July 1, the 
annual update of the DRG classifications and relative weights for LTCHs 
are linked to the annual adjustments of the acute care hospital 
inpatient DRGs and are effective each October 1.
    The Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) 
(Pub. L. 110-173) that was enacted on December 29, 2007 has various 
effects on the LTCH PPS. The new law's provisions also have varying 
timeframes of applicability. First, we note that certain provisions of 
the MMSEA provided that Secretary shall not apply, for cost reporting 
periods beginning on or after the date of the enactment of the MMSEA 
(December 29, 2007) for a 3-year period: The extension of payment 
adjustments at Sec.  412.534 to ``grandfathered LTCHs'' (a long term 
care hospital identified by the amendment made by section 4417(a) of 
Pub. L. 105-33); and the payment adjustment at Sec.  412.536 to 
``freestanding'' LTCHs. In addition, the new law provides that the 
Secretary shall not apply, for the 3-year period beginning on the date 
of enactment of the Act the revision to the SSO policy that was 
finalized in the rate year RY 2008 LTCH PPS final rule (72 FR 26904 and 
26992) and the one-time adjustment to the payment rates provided for in 
Sec.  412.523(d)(3). The statute also provides that the base rate for 
RY 2008 be the same as the base rate for RY 2007 (the revised base 
rate, however, does not apply to discharges occurring on or after July 
1, 2007 and before April 1, 2008); for a 3-year moratorium (with 
specified exceptions) on the establishment of new LTCHs, LTCH 
satellites, and on the increase in the number of LTCH beds. The new law 
also revises in the threshold percentages for certain co-located LTCHs 
and LTCH satellites governed under Sec.  412.534. Finally, the MMSEA 
provides for an expanded review of medical necessity for admission and 
continued stay at LTCHs. In this final rule, we are establishing the 
applicable Federal rates for RY 2009 consistent with section 1886(m)(2) 
of the Act as amended by MMSEA. We are also revising the regulations at 
Sec.  412.523(d)(3) to change the methodology for the one-time budget 
neutrality adjustment and to comply with section 114(c)(4) of the 
MMSEA. Other policy revisions necessitated by the statutory changes of 
the MMSEA were addressed in separate rulemaking document and other 
provisions required by this new law will be addressed in the future.

B. Criteria for Classification as a LTCH

1. Classification as a LTCH
    Under the existing regulations at Sec.  412.23(e)(1) and (e)(2)(i), 
which implement section 1886(d)(1)(B)(iv)(I) of the Act, to qualify to 
be paid under the LTCH PPS, a hospital must have a provider agreement 
with Medicare and must have an average Medicare inpatient LOS of 
greater than 25 days. Alternatively, Sec.  412.23(e)(2)(ii) states that 
for cost reporting periods beginning on or after August 5, 1997, a 
hospital that was first excluded from the PPS in 1986 and can 
demonstrate that at least 80 percent of its annual Medicare inpatient 
discharges in the 12-month cost reporting period ending in FY 1997 have 
a principal diagnosis that reflects a finding of neoplastic disease 
must have an average inpatient LOS for all patients, including both 
Medicare and non-Medicare inpatients, of greater than 20 days.
    Section 412.23(e)(3) provides that, subject to the provisions of 
paragraphs (e)(3)(ii) through (e)(3)(iv) of this section, the average 
Medicare inpatient LOS, specified under Sec.  412.23(e)(2)(i) is 
calculated by dividing the total number of covered and noncovered days 
of stay for Medicare inpatients (less leave or pass days) by the number 
of total Medicare discharges for the hospital's most recent complete 
cost reporting period. Section 412.23 also provides that subject to the 
provisions of paragraphs (e)(3)(ii) through (e)(3)(iv) of this section, 
the average inpatient LOS specified under Sec.  412.23(e)(2)(ii) is 
calculated by dividing the total number of days for all patients, 
including both Medicare and non-Medicare inpatients (less leave or pass 
days) by the number of total discharges for the hospital's most recent 
complete cost reporting period.
    In the RY 2005 LTCH PPS final rule (69 FR 25674), we specified the 
procedure for calculating a hospital's inpatient average length of stay 
(ALOS) for purposes of classification as a LTCH. That is, if a 
patient's stay includes days of care furnished during two or more 
separate consecutive cost reporting periods, the total days of a 
patient's stay would be reported in the cost reporting period during 
which the patient is discharged (69 FR 25705). Therefore, we revised 
Sec.  412.23(e)(3)(ii) to specify that, effective for cost reporting 
periods beginning on or after July 1, 2004, in calculating a hospital's 
ALOS, if the days of an inpatient stay involve days of care furnished 
during two or more separate consecutive cost reporting periods, the 
total number of days of the stay are considered to have occurred in

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the cost reporting period during which the inpatient was discharged.
    Fiscal intermediaries (FIs) verify that LTCHs meet the ALOS 
requirements. We note that the inpatient days of a patient who is 
admitted to a LTCH without any remaining Medicare days of coverage, 
regardless of the fact that the patient is a Medicare beneficiary, will 
not be included in the above calculation. Because Medicare would not be 
paying for any of the patient's treatment, data on the patient's stay 
would not be included in the Medicare claims processing systems. In 
order for both covered and noncovered days of a LTCH hospitalization to 
be included, a patient admitted to the LTCH must have at least 1 
remaining benefit day (68 FR 34123).
    The FI's determination of whether or not a hospital qualifies as an 
LTCH is based on the hospital's discharge data from the hospital's most 
recent complete cost reporting period as specified in Sec.  
412.23(e)(3) and is effective at the start of the hospital's next cost 
reporting period as specified in Sec.  412.22(d). However, if the 
hospital does not meet the ALOS requirement as specified in Sec.  
412.23(e)(2)(i) or (ii), the hospital may provide the FI with data 
indicating a change in the ALOS by the same method for the period of at 
least 5 months of the immediately preceding 6-month period (69 FR 
25676). Our interpretation of Sec.  412.23(e)(3) was to allow hospitals 
to submit data using a period of at least 5 months of the most recent 
data from the immediately preceding 6-month period.
    As we stated in the FY 2004 Hospital Inpatient Prospective Payment 
System (IPPS) final rule, published in the August 1, 2003, Federal 
Register, prior to the implementation of the LTCH PPS, we did rely on 
data from the most recently submitted cost report for purposes of 
calculating the ALOS (68 FR 45464). The calculation to determine 
whether an acute care hospital qualifies for LTCH status was based on 
total days and discharges for LTCH inpatients. However, with the 
implementation of the LTCH PPS, for the ALOS specified under Sec.  
412.23(e)(2)(i), we revised Sec.  412.23(e)(3)(i) to only count total 
days and discharges for Medicare inpatients (67 FR 55970 through 
55974). In addition, the ALOS specified under Sec.  412.23(e)(2)(ii) is 
calculated by dividing the total number of days for all patients, 
including both Medicare and non-Medicare inpatients (less leave or pass 
days) by the number of total discharges for the hospital's most recent 
complete cost reporting period. As we discussed in the FY 2004 IPPS 
final rule, we are unable to capture the necessary data from our 
existing cost reporting forms (68 FR 45464). Therefore, we notified FIs 
and LTCHs that until the cost reporting forms are revised, for purposes 
of calculating the ALOS, we will be relying upon census data extracted 
from Medicare Provider Analysis and Review (MedPAR) files that reflect 
each LTCH's cost reporting period (68 FR 45464). Requirements for 
hospitals seeking classification as LTCHs that have undergone a change 
in ownership, as described in Sec.  489.18, are set forth in Sec.  
412.23(e)(3)(iv).
2. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c), and therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of the Social 
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1) or 
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject 
to the rate-of-increase test at section 1814(b) of the Act).
     Nonparticipating hospitals furnishing emergency services 
to Medicare beneficiaries.

C. Transition Period for Implementation of the LTCH PPS

    In the August 30, 2002, final rule (67 FR 55954), we provided for a 
5-year transition period. During this 5-year transition period, a 
LTCH's total payment under the PPS was based on an increasing 
percentage of the Federal rate with a corresponding decrease in the 
percentage of the LTCH PPS payment that is based on reasonable cost 
concepts. However, effective for cost reporting periods beginning on or 
after October 1, 2006, total LTCH PPS payments are based on 100 percent 
of the Federal rate.

D. Limitation on Charges to Beneficiaries

    In the August 30, 2002, final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH PPS (67 FR 55974 
through 55975). In the RY 2005 LTCH PPS final rule (69 FR 25676), we 
clarified that the discussion of beneficiary liability in the August 
30, 2002, final rule was not meant to establish rates or payments for, 
or define Medicare-eligible expenses. Under Sec.  412.507, if the 
Medicare payment to the LTCH is the full LTC-DRG payment amount, as 
consistent with other established hospital prospective payment systems, 
a LTCH may not bill a Medicare beneficiary for more than the deductible 
and coinsurance amounts as specified under Sec.  409.82, Sec.  409.83, 
and Sec.  409.87 and for items and services as specified under Sec.  
489.30(a). However, under the LTCH PPS, Medicare will only pay for days 
for which the beneficiary has coverage until the SSO threshold is 
exceeded. Therefore, if the Medicare payment was for a SSO case (Sec.  
412.529) that was less than the full LTC-DRG payment amount because the 
beneficiary had insufficient remaining Medicare days, the LTCH could 
also charge the beneficiary for services delivered on those uncovered 
days (Sec.  412.507).

E. Administrative Simplification Compliance Act (ASCA) and Health 
Insurance Portability and Accountability Act (HIPAA) Compliance

    Claims submitted to Medicare must comply with both the 
Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105), 
and Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
(Pub. L. 104-191). Section 3 of the ASCA requires that the Medicare 
Program deny payment under Part A or Part B for any expenses incurred 
for items or services ``for which a claim is submitted other than in an 
electronic form specified by the Secretary.'' Section 1862(h) of the 
Act (as added by section 3(a) of the ASCA) provides that the Secretary 
shall waive such denial in two specific types of cases and may also 
waive such denial ``in such unusual cases as the Secretary finds 
appropriate'' (68 FR 48805). Section 3 of the ASCA operates in the 
context of the HIPAA regulations, which include, among other 
provisions, the transactions and code sets standards requirements 
codified as 45 CFR parts 160 and 162, subparts A and I through R 
(generally known as the Transactions Rule). The Transactions Rule 
requires covered entities, including covered health care providers, to 
conduct certain electronic healthcare transactions according to the 
applicable transactions and code sets standards.

II. Summary of the Provisions of This Final Rule

    The RY 2009 proposed rule appeared in the Federal Register (73 FR 
5342) on January 29, 2008. We received 18 timely items of 
correspondence on the proposed rule that we respond to in the 
appropriate sections of this final rule. We also received one comment 
that

[[Page 26792]]

addressed our policy on satellites of LTCHs that is beyond the scope of 
this regulation. Also beyond the scope of this regulation was a comment 
directed to our interpretation of the ``25 percent threshold policy'' 
revisions, one of the requirements specified in 114 of the MMSEA, 
provisions of which will be addressed in a future rulemaking.
    In this final rule, we are revising the LTCH PPS payment rate 
update cycle and making other policy changes and clarifications. The 
following is a summary of the major areas that we are addressing in 
this final rule.
    In section III. of this final rule, we discuss the LTCH PPS patient 
classification and the relative weights which are linked to the annual 
adjustments of the acute care hospital inpatient DRG system, and are 
based on the annual revisions to the International Classification of 
Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) codes 
effective each October 1. In this section, we also summarize the 
severity adjusted MS-LTC-DRGs and the development of the relative 
weights for FY 2008 as established in the FY 2008 IPPS final rule with 
comment period as well as the proposed update to the MS-LTC-DRGs and 
relative weights for FY 2009 presented in the FY 2009 IPPS proposed 
rule.
    In section IV.B. of this final rule, we are extending the rate year 
cycle for RY 2009 to a 15-month period, from July 1, 2008 through 
September 30, 2009. We will continue to have an update to the MS-LTC-
DRG classifications and weights effective for October 1, 2008. We are 
consolidating the annual update to the payment rates and the update of 
the MS-LTC classifications and weights beginning October 1, 2009.
    As discussed in section IV.E.2. of this final rule, we are 
establishing a 2.7 percent update to the LTCH PPS Federal rate for the 
2009 LTCH PPS rate year based on the most recent market basket estimate 
for the 15-month 2009 LTCH PPS rate year and an adjustment to account 
for improvements in coding and documentation. Also in section IV. of 
this final rule, we discuss the prospective payment rate for RY 2009.
    In section IV. D. of this final rule, we discuss the possible one-
time adjustment to the Federal payment rate under Sec.  412.523(d)(3). 
Consistent with section 114(c)(4) of MMSEA, we did not propose any 
adjustment under Sec.  412.523(d)(3). However, at this time, we are 
revising the regulations to clarify the objectives of the possible one-
time adjustment, to more precisely reflect the methodology, and to 
reflect the requirements of section 114(c)(4) of the MMSEA to the 
regulatory text.
    In section V. of this final rule, we discuss the updates to the 
payment rates, including the revisions to the wage index, the labor-
related share, the cost-of-living adjustment (COLA) factors, and the 
outlier threshold, for the 2009 LTCH PPS rate year.
    In section VI. of this final rule, we discuss our on-going 
monitoring protocols under the LTCH PPS.
    In section VIII. of this final rule, we discuss Research Triangle 
Institute's (RTI) analysis relating to the development of LTCH patient-
and facility-level criteria.
    In section IX. of this final rule, we are finalizing the revision 
to the effective date of cost reporting periods for electronic 
submission of cost reports for certain entities.
    In section XI. of this final rule, we analyze the impact of the 
changes established in this final rule on Medicare expenditures, 
Medicare-participating LTCHs, and Medicare beneficiaries.

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

A. Background

    Section 123 of the BBRA requires that the Secretary implement a PPS 
for LTCHs (that is, a per-discharge system with a DRG-based patient 
classification system reflecting the differences in patient resources 
and costs). Section 307(b)(1) of the BIPA modified the requirements of 
section 123 of the BBRA by requiring that the Secretary examine ``the 
feasibility and the impact of basing payment under such a system (the 
LTCH PPS) on the use of existing (or refined) hospital DRGs that have 
been modified to account for different resource use of LTCH patients, 
as well as the use of the most recently available hospital discharge 
data.''
    When the LTCH PPS was implemented for cost reporting periods 
beginning on or after October 1, 2002, we adopted the same DRG patient 
classification system (that is, the CMS DRGs) that was utilized at that 
time under the hospital inpatient prospective payment system (IPPS). As 
a component of the LTCH PPS, we refer to the patient classification 
system as the ``LTC-DRGs.'' As discussed in greater detail below, 
although the patient classification system used under both the LTCH PPS 
and the IPPS are the same, the relative weights are different. The 
established relative weight methodology and data used under the LTCH 
PPS result in LTC-DRG relative weights that reflect ``the different 
resource use of long-term care hospital patients consistent with the 
statute.''
    As part of our efforts to better recognize severity of illness 
among patients, in the FY 2008 IPPS final rule with comment period (72 
FR 47130), the Medicare Severity diagnosis related groups (MS-DRGs) and 
the Medicare Severity long-term care diagnosis related groups (MS-LTC-
DRGs) were adopted for the IPPS and the LTCH PPS, respectively, 
effective October 1, 2007 (FY 2008). For a full description of the 
development and implementation of the MS-DRGs and MS-LTC-DRGs, see the 
FY 2008 IPPS final rule with comment period (72 FR 47141 through 47175 
and 47277 through 47299). (We note that in that same final rule, we 
revised the regulations at Sec.  412.503 to specify that for LTCH 
discharges occurring on or after October 1, 2007, when applying the 
provisions of this subpart for policy descriptions and payment 
calculations, all references to LTC-DRGs would be considered a 
reference to MS-LTC-DRGs. For the remainder of this section, we present 
the discussion in terms of the current MS-LTC-DRG patient 
classification unless specifically referring to the previous LTC-DRG 
patient classification system (that was in effect before October 1, 
2007).) We believe the MS-DRGs (and by extension, the MS-LTC-DRGs) 
represent a substantial improvement over the previous CMS DRGs in their 
ability to differentiate cases based on severity of illness and 
resource consumption.
    The MS-DRGs represent an increase in the number of DRGs by 207 
(that is, from 538 to 745) (72 FR 47171). In addition to improving the 
DRG system's recognition of severity of illness, we believe the MS-DRGs 
are responsive to the public comments that were made on the FY 2007 
IPPS proposed rule with respect to how we should undertake further DRG 
reform. The MS-DRGs use the CMS DRGs as the starting point for revising 
the DRG system to better recognize resource complexity and severity of 
illness. We have generally retained all of the refinements and 
improvements that have been made to the base DRGs over the years that 
recognize the significant advancements in medical technology and 
changes to medical practice.
    In accordance with section 123 of the BBRA as amended by section 
307(b)(1) of the BIPA and Sec.  412.515, we use information derived 
from LTCH PPS patient records to classify LTCH discharges into distinct 
MS-LTC-DRGs based on clinical characteristics and estimated resource 
needs. As stated above, the MS-LTC-DRGs used as the patient 
classification component of the

[[Page 26793]]

LTCH PPS correspond to the hospital inpatient MS-DRGs in the IPPS. We 
assign an appropriate weight to the MS-LTC-DRGs to account for the 
difference in resource use by patients exhibiting the case complexity 
and multiple medical problems characteristic of LTCHs.
    In a departure from the IPPS, we use low-volume MS-LTC-DRGs (less 
than 25 LTCH cases) in determining the MS-LTC-DRG relative weights, 
since LTCHs do not typically treat the full range of diagnoses as do 
acute care hospitals. To manage the large number of low-volume MS-LTC-
DRGs (all MS-LTC-DRGs with fewer than 25 LTCH cases), for purposes of 
determining the relative weights, we group low-volume MS-LTC-DRGs into 
5 quintiles based on average charge per discharge. (A detailed 
discussion of the application of the Lewin Group ``quintile'' model 
that was used to develop the LTC-DRGs appears in the August 30, 2002, 
LTCH PPS final rule (67 FR 55978).) We also account for adjustments to 
payments for short-stay outlier (SSO) cases (that is, cases where the 
covered length of stay (LOS) at the LTCH is less than or equal to five-
sixths of the geometric ALOS for the MS-LTC-DRG). Furthermore, we make 
adjustments to account for nonmonotonically increasing weights, when 
necessary (as described below in this section). That is, theoretically, 
cases under the MS LTC DRG system that are more severe require greater 
expenditure of medical care resources and will result in higher average 
charges. Therefore, in the three severity levels, weights should 
increase monotonically with severity, from the lowest to highest 
severity level.

B. Patient Classifications Into MS-LTC-DRGs

    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge; that payment varies by 
the MS-LTC-DRG to which a beneficiary's stay is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis.
     Up to eight additional diagnoses.
     Up to six procedures performed.
     Age.
     Sex.
     Discharge status of the patient.
    Upon the discharge of the patient from a LTCH, the LTCH must assign 
appropriate diagnosis and procedure codes from the most current version 
of the International Classification of Diseases, Ninth Revision, 
Clinical Modification (ICD-9-CM). HIPAA Transactions and Code Sets 
Standards regulations at 45 CFR parts 160 and 162 require that no later 
than October 16, 2003, all covered entities must comply with the 
applicable requirements of subparts A and I through R of part 162. 
Among other requirements, those provisions direct covered entities to 
use the ASC X12N 837 Health Care Claim: Institutional, Volumes 1 and 2, 
version 4010, and the applicable standard medical data code sets for 
the institutional health care claim or equivalent encounter information 
transaction (see 45 CFR 162.1002 and 45 CFR 162.1102). For additional 
information on the ICD-9-CM Coding System, refer to the FY 2008 IPPS 
final rule with comment period (72 FR 47241 through 47243 and 47277 
through 47281). We also refer readers to the detailed discussion on 
correct coding practices in the August 30, 2002, LTCH PPS final rule 
(67 FR 55981 through 55983). Additional coding instructions and 
examples are published in the Coding Clinic for ICD-9-CM.
    Medicare contractors (that is, fiscal intermediaries (FIs), now 
called Medicare Administrative Contractors (MACs)) enter the clinical 
and demographic information into their claims processing systems and 
subject this information to a series of automated screening processes 
called the Medicare Code Editor (MCE). These screens are designed to 
identify cases that require further review before assignment into a MS-
LTC-DRG can be made. During this process, the following types of cases 
are selected for further development:
     Cases that are improperly coded. (For example, diagnoses 
are shown that are inappropriate, given the sex of the patient. Code 
68.69, Other and unspecified radical abdominal hysterectomy, would be 
an inappropriate code for a male.)
     Cases including surgical procedures not covered under 
Medicare. (For example, organ transplant in a nonapproved transplant 
center.)
     Cases requiring more information. (For example, ICD-9-CM 
codes are required to be entered at their highest level of specificity. 
There are valid 3-digit, 4-digit, and 5-digit codes. That is, code 262, 
Other severe protein-calorie malnutrition, contains all appropriate 
digits, but if it is reported with either fewer or more than 3 digits, 
the claim will be rejected by the MCE as invalid.)
    After screening through the MCE, each claim is classified into the 
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software. The 
Medicare GROUPER software, which is used under the LTCH PPS, is 
specialized computer software, and is the same GROUPER software program 
used under the IPPS. The GROUPER software was developed as a means of 
classifying each case into a MS-LTC-DRG on the basis of diagnosis and 
procedure codes and other demographic information (age, sex, and 
discharge status). Following the MS-LTC-DRG assignment, the Medicare 
contractor (FI or MAC) determines the prospective payment amount by 
using the Medicare PRICER program, which accounts for hospital-specific 
adjustments. Under the LTCH PPS, we provide an opportunity for the LTCH 
to review the MS-LTC-DRG assignments made by the Medicare contractor 
and to submit additional information within a specified timeframe as 
specified in Sec.  412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the DRG weights and 
to classify current cases for purposes of determining payment. The 
records for all Medicare hospital inpatient discharges are maintained 
in the MedPAR file. The data in this file are used to evaluate possible 
MS-DRG classification changes and to recalibrate the MS-DRG and MS-LTC-
DRG relative weights during CMS' annual update under both the IPPS 
(Sec.  412.60(e)) and the LTCH PPS (Sec.  412.517), respectively. As 
discussed in greater detail in section III.D. of this preamble, with 
the implementation of section 503(a) of the MMA, there is the 
possibility that one feature of the GROUPER software program may be 
updated twice during a Federal FY (FFY) (October 1 and April 1) as 
required by the statute for the IPPS (69 FR 48954 through 48957). The 
use of the ICD-9-CM code set is also compliant with the current 
requirements of the Transactions and Code Sets Standards regulations at 
45 CFR parts 160 and 162, published in accordance with HIPAA.

C. Organization of the MS-LTC-DRGs

    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted above in 
this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although they are structurally identical to the DRGs used under the 
IPPS. The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The

[[Page 26794]]

GROUPER software program does not recognize all ICD-9-CM procedure 
codes as procedures affecting DRG assignment, that is, procedures which 
are not surgical (for example, EKG), or minor surgical procedures (for 
example, 86.11, Biopsy of skin and subcutaneous tissue).
    In developing Version 25.0 of the GROUPER program (the FY 2008 MS-
DRGs), the diagnoses comprising the CC list were completely redefined. 
The revised CC list is primarily comprised of significant acute 
disease, acute exacerbations of significant chronic diseases, advanced 
or end stage chronic diseases, and chronic diseases associated with 
extensive debility. In general, most chronic diseases were not included 
on the revised CC list. For a patient with a chronic disease, a 
significant acute manifestation of the chronic disease was required to 
be present and coded for the patient to be assigned a CC.
    In addition to the revision of the CC list, each CC was also 
categorized as a major CC (MCC) or a CC based on relative resource use. 
Approximately 12 percent of all diagnoses codes were classified as a 
major CC (MCC), 24 percent as a CC, and 64 percent as a non CC. 
Diagnoses closely associated with mortality (ventricular fibrillation, 
cardiac arrest, shock, and respiratory arrest) were assigned as an MCC 
if the patient lived but as a non CC if the patient died.
    The MCC, CC, and non CC categorization was used to subdivide the 
surgical and medical DRGs into up to three levels, with a case being 
assigned to the most resource intensive level (for example, a case with 
two secondary diagnoses that are categorized as an MCC and a CC is 
assigned to the MCC level). To create the MS-DRGs (and by extension, 
the MS-LTC-DRGs) individual DRGs were subdivided into three, two, or 
one level, depending on the CC impact on resources used for those 
cases.
    As noted above in this section, further information on the 
development and implementation of the MS-DRGs and MS-LTC-DRGs can be 
found in the FY 2008 IPPS final rule with comment period (72 FR 47138 
through 47175 and 47277 through 47299).

D. Method for Updating the MS-LTC-DRG Classifications and Relative 
Weights

1. Background
    Under the LTCH PPS, relative weights for each MS-LTC-DRG are a 
primary element used to account for the variations in cost per 
discharge and resource utilization among the payment groups (that is, 
the MS-LTC-DRGs). To ensure that Medicare patients classified to each 
MS-LTC-DRG have access to an appropriate level of services and to 
encourage efficiency, each year based on the best available data, we 
calculate a relative weight for each MS-LTC-DRG that represents the 
resources needed by an average inpatient LTCH case in that MS-LTC-DRG. 
For example, cases in a MS-LTC-DRG with a relative weight of 2 will, on 
average, cost twice as much as cases in a MS-LTC-DRG with a relative 
weight of 1. Under Sec.  412.517, the MS-LTC-DRG classifications and 
weighting factors (that is, relative weights) are adjusted annually to 
reflect changes in factors affecting the relative use of LTCH 
resources, including treatment patterns, technology and number of 
discharges.
    In the June 6, 2003 LTCH PPS final rule (68 FR 34122 through 
34125), we changed the LTCH PPS annual payment rate update cycle to be 
effective July 1 through June 30 instead of October 1 through September 
30. In addition, because the patient classification system utilized 
under the LTCH PPS is the same DRG system that is used under the IPPS, 
in that same final rule, we explained that the annual update of the 
LTC-DRG classifications and relative weights will continue to remain 
linked to the annual reclassification and recalibration of the CMS DRGs 
used under the IPPS (as is the case with the MS-DRGs effective for 
discharges occurring on or after October 1, 2007 (see Sec.  412.503)). 
Therefore, we specified that we will continue to update the LTC-DRG 
classifications and relative weights to be effective for discharges 
occurring on or after October 1 through September 30 each year. We 
further stated at that time that we will publish the annual proposed 
and final update of the LTC-DRGs in the same notice as the proposed and 
final update for the IPPS (69 FR 34125). (We note that in section IV.B. 
of this preamble, we are proposing to revise Sec.  412.535 in order to 
consolidate the annual July 1 and October 1 LTCH PPS update cycles, so 
that beginning with FY 2010, both the annual update to the standard 
Federal rate (and other rate and policy changes) and the annual update 
to the MS-LTC-DRGs would be presented in a single Federal Register 
publication to be effective on October 1 each year.) Under existing 
Sec.  412.535(b), the FY 2008 update of the LTCH PPS patient 
classification system and relative weights was presented in the FY 2008 
IPPS final rule with comment (72 FR 47277 through 47299). For the 
reader's benefit, we are providing a summary of the discussion 
presented in that final rule with comment in section III.D.2. of this 
preamble.
    For FY 2008, the MS-LTC-DRG classifications and relative weights 
were updated based on LTCH data from the FY 2006 MedPAR file, which 
contained hospital bills data from the March 2007 update. The MS-LTC-
DRG patient classification system for FY 2008 consists of 745 DRGs that 
formed the basis of the Version 25.0 GROUPER program utilized under the 
LTCH PPS. The 745 MS-LTC-DRGs included two ``error DRGs.'' As in the 
IPPS, we included two error DRGs in which cases that cannot be assigned 
to valid DRGs will be grouped. These two error DRGs are MS-LTC-DRG 998 
(Principal Diagnosis Invalid as a Discharge Diagnosis) and MS-LTC-DRG 
999 (Ungroupable). The other 743 MS-LTC-DRGs are the same DRGs used in 
the IPPS GROUPER program for FY 2008 (Version 25.0).
    In the past, the annual update to the CMS DRGs was based on the 
annual revisions to the ICD-9-CM codes and was effective each October 
1. The ICD-9-CM coding update process was revised as discussed in 
greater detail in the FY 2005 IPPS final rule (69 FR 48953 through 
48957). Specifically, section 503(a) of the MMA includes a requirement 
for updating diagnosis and procedure codes twice a year instead of the 
former process of annual updates on October 1 of each year. This 
requirement is included as part of the amendments to the Act relating 
to recognition of new medical technology under the IPPS. (For 
additional information on this provision, including its implementation 
and its impact on the LTCH PPS, refer to the FY 2005 IPPS final rule 
(69 FR 48953 through 48957) and the RY 2006 LTCH PPS final rule (70 FR 
24172 through 24177).) As noted above in this section, with the 
implementation of section 503(a) of the MMA, there is the possibility 
that one feature of the GROUPER software program may be updated twice 
during a FFY (October 1 and April 1) as required by the statute for the 
IPPS. Specifically, diagnosis and procedure codes for new medical 
technology may be created and added to existing DRGs in the middle of 
the FFY on April 1. No new MS-LTC-DRGs will be created or deleted. 
Consistent with our current practice, any changes to the MS-DRGs or 
relative weights will be made at the beginning of the next FFY (October 
1). Therefore, there will not be any impact on MS-LTC-DRG payments 
under the LTCH PPS until the following October 1 (although the new ICD-
9-CM diagnosis

[[Page 26795]]

and procedure codes would be recognized April 1).
    As we explained in the FY 2008 IPPS final rule with comment period 
(72 FR 47277), annual changes to the ICD-9-CM codes historically were 
effective for discharges occurring on or after October 1 each year. 
Thus, the manual and electronic versions of the GROUPER software, which 
are based on the ICD-9-CM codes, were also revised annually and 
effective for discharges occurring on or after October 1 each year. The 
patient classification system used under the LTCH PPS (MS-LTC-DRGs) is 
the same DRG patient classification system used under the IPPS, which 
historically had been updated annually and was effective for discharges 
occurring on or after October 1 through September 30 each year. We have 
also explained that since we do not publish a mid-year IPPS rule, we 
will assign any new diagnosis or procedure codes implemented on April 1 
to the same DRG in which its predecessor code was assigned, so that 
there will be no impact on the DRG assignments until the following 
October 1. Any coding updates will be available through the Web sites 
provided in section II.G.10. of the preamble of the FY 2008 IPPS final 
rule with comment period (72 FR 47241 through 47243) and through the 
Coding Clinic for ICD-9-CM. Publishers and software vendors currently 
obtain code changes through these sources to update their code books 
and software system. If new codes are implemented on April 1, revised 
code books and software systems, including the GROUPER software 
program, will be necessary because we must use current ICD-9-CM codes. 
Therefore, for purposes of the LTCH PPS, because each ICD-9-CM code 
must be included in the GROUPER algorithm to classify each case into a 
MS-LTC-DRG, the GROUPER software program used under the LTCH PPS would 
need to be revised to accommodate any new codes.
    At the September 2007 ICD-9-CM C&M Committee meeting, there were no 
compelling requests for an April 1, 2008 implementation of new ICD-9-CM 
codes, and therefore, we expect that the next update to the ICD-9-CM 
coding system will not occur until October 1, 2008 (FY 2009). 
Therefore, we expect that the ICD-9-CM coding set implemented on 
October 1, 2007, will continue through September 30, 2008 (FY 2008). 
The next update to the MS-LTC-DRGs and relative weights for FY 2009 
will be presented in the FY 2009 IPPS proposed and final rules.
2. FY 2008 MS-LTC-DRG Relative Weights
    In accordance with Sec.  412.523(c), we adjust the LTCH PPS 
standard Federal rate by the MS-LTC-DRG relative weights in determining 
payment to LTCHs for each case. Relative weights for each MS-LTC-DRG 
are a primary element used to account for the variations in cost per 
discharge and resource utilization among the payment groups as 
described in Sec.  412.515. To ensure that Medicare patients who are 
classified to each MS-LTC-DRG have access to services and to encourage 
efficiency, we calculate a relative weight for each MS-LTC-DRG that 
represents the resources needed by an average inpatient LTCH case in 
that MS-LTC-DRG. For example, cases in a MS-LTC-DRG with a relative 
weight of 2 will, on average, cost twice as much as cases in a MS-LTC-
DRG with a weight of 1.
    As we discussed in the FY 2008 IPPS final rule with comment period 
(72 FR 47282), the MS-LTC-DRG relative weights effective under the LTCH 
PPS for Federal FY 2008 were calculated using the March 2007 update of 
FY 2006 MedPAR data which contains hospital bills received through 
March 31, 2007, and Version 25.0 of the GROUPER software.
    LTCHs often specialize in certain areas, such as ventilator-
dependent patients and rehabilitation or wound care. Some case types 
(DRGs) may be treated, to a large extent, in hospitals that have 
relatively high or relatively low charges. Distribution of cases with 
relatively high (or low) charges in specific MS-LTC-DRGs has the 
potential to inappropriately distort the measure of average charges. To 
account for the fact that cases may not be randomly distributed across 
LTCHs, we use a hospital-specific relative value (HSRV) method to 
calculate relative weights. We believe this method removes this 
hospital-specific source of bias in measuring average charges. 
Specifically, we reduce the impact of the variation in charges across 
providers on any particular MS-LTC-DRG relative weight by converting 
each LTCH's charge for a case to a relative value based on that LTCH's 
average charge. (See the FY 2008 IPPS final rule with comment period 
for further information on the application of the HSRV methodology 
under the LTCH PPS (72 FR 47282).)
    To account for MS-LTC-DRGs with low volume (that is, with fewer 
than 25 LTCH cases), we grouped those ``low volume'' MS-LTC-DRGs into 1 
of 5 categories (quintiles) based on average charges for the purposes 
of determining relative weights. Each of the low volume MS-LTC-DRGs 
grouped to a specific quintile received the same relative weight and 
ALOS using the formula applied to the regular MS-LTC-DRGs (25 or more 
cases). (See the FY 2008 IPPS final rule with comment period for 
further explanation of the development and composition of each of the 5 
low volume quintiles for FY 2008 (72 FR 47283 through 47288).)
    After grouping the cases in the appropriate MS-LTC-DRG, generally, 
we calculated the relative weights by first removing statistical 
outliers and cases with a LOS of 7 days or less. Next, we adjusted the 
number of cases remaining in each MS-LTC-DRG for the effect of SSO 
cases under Sec.  412.529. The short-stay adjusted discharges and 
corresponding charges were used to calculate ``relative adjusted 
weights'' in each MS-LTC-DRG using the HSRV method. In determining the 
FY 2008 MS-LTC-DRG relative weights, we also made adjustments, as 
necessary, to adjust for nonmonotonicity for the severity levels within 
a specific base MS-LTC-DRG. (Refer to the FY 2008 IPPS final rule with 
comment period for further information on the treatment of severity 
levels and adjustments for nonmonotonically increasing relative weights 
for FY 2008 (72 FR 47282 through 47283 and 47293 through 47295).) 
Furthermore, we determined FY 2008 MS-LTC-DRG relative weights for the 
185 MS-LTC-DRGs for which there were no LTCH cases in the database 
(that is, LTCH claims from the FY 2006 LTCH MedPAR files). (A list of 
the FY 2008 ``no-volume'' MS-LTC-DRGs and further explanation of their 
FY 2008 relative weight assignment can be found in the FY 2008 IPPS 
final rule with comment period (72 FR 47289 through 47293).)
    In adopting the MS-LTC-DRGs beginning in FY 2008, we established a 
2-year transition. Specifically, for FY 2008, the first year of the 
transition, 50 percent of the relative weight for a MS-LTC-DRG is based 
on the average LTC-DRG relative weight under Version 24.0 of the LTC-
DRG GROUPER. The remaining 50 percent of the relative weight is based 
on the MS-LTC-DRG relative weight under Version 25.0 of the MS-LTC-DRG 
GROUPER. (See the FY 2008 IPPS final rule with comment period (72 FR 
47295) for additional details on the methodology used to determine the 
transition blended MS-LTC-DRG relative weights for FY 2008.)
    In the RY 2008 LTCH PPS final rule (72 FR 26882), under the broad 
authority conferred upon the Secretary under section 123 of Pub. L. 
106-113 as amended by section 307(b) of Pub. L.

[[Page 26796]]

106-554 to develop the LTCH PPS, we established that beginning with the 
update for FY 2008, the annual update to the MS-LTC-DRG classifications 
and relative weights will be done in a budget neutral manner such that 
estimated aggregate LTCH PPS payments would be unaffected, that is, 
would be neither greater than nor less than the estimated aggregate 
LTCH PPS payments that would have been made without the MS-LTC-DRG 
classification and relative weight changes. Historically, we had not 
updated the LTC-DRGs in a budget neutral manner because we believed 
that past fluctuations in the relative weights were primarily due to 
changes in LTCH coding practices rather than changes in patient 
severity. In light of the most recently available LTCH claims data at 
that time, which indicated that LTCH claims data no longer appeared to 
significantly reflect changes in LTCH coding practices in response to 
the implementation of the LTCH PPS, we believed that, beginning with FY 
2008, it is appropriate to update the MS-LTC-DRGs in a budget neutral 
manner (that is, so that estimated aggregate LTCH PPS payments will 
neither increase nor decrease). Accordingly, in that same final rule 
with comment period, we established under Sec.  412.517(b) that the 
annual update to the MS-LTC-DRG classifications and relative weights be 
done in a budget neutral manner. (As noted above in section III.A. of 
this preamble, we revised the regulations at Sec.  412.503 to specify 
that ``MS-LTC-DRG'' is used in place of ``LTC-DRG'' for discharges 
occurring on or after October 1, 2007.) Consistent with that provision, 
we updated the MS-LTC-DRG classifications and relative weights for FY 
2008 based on the most recent available data and included a budget 
neutrality adjustment. For further details on the methodology and 
calculation of the FY 2008 MS-LTC-DRG budget neutrality factor, refer 
to the FY 2008 IPPS final rule with comment period (72 FR 47295 through 
47296).
    Table 11 of the Addendum to the FY 2008 IPPS final rule with 
comment period lists the MS-LTC-DRGs and their respective transition 
blended budget neutral relative weights, geometric mean LOS, ``short-
stay outlier threshold'' (that is, five-sixths of the geometric mean 
LOS), and the ``IPPS Comparable Threshold'' (that is, the IPPS 
geometric average length of stay plus one standard deviation) for each 
MS-LTC-DRG for FY 2008 (see (72 FR 48143 through 48157), and the 
technical correction made in the October 10, 2007 correction notice (72 
FR 57733), which has been reprinted in Table 3 of the Addendum of this 
final rule for convenience).
    As we noted previously in this section, there were no new ICD-9-CM 
code requests for an April 1, 2008 update. Therefore, Version 25.0 of 
the MS-DRG GROUPER software established in the FY 2008 IPPS final rule 
with comment period will continue to be effective until October 1, 
2008. Moreover, the MS-LTC-DRGs and relative weights for FY 2008 
established in Table 11 of that same IPPS final rule with comment 
period (78 FR 48143 through 48157) will continue to be effective until 
October 1, 2008 (just as they would have been even if there had been 
any new ICD-9-CM code requests for an April 1, 2008 update). We note 
that Table 11 was corrected in the FY 2008 IPPS correction notice that 
appeared in the October 10, 2007 Federal Register (72 FR 57733) and is 
hereinafter referred to as the second FY 2008 IPPS correction notice. 
Accordingly, Table 3 in the Addendum of this final rule lists the MS-
LTC-DRGs and their respective relative weights, geometric ALOS and 
``Short-Stay Outlier Threshold'' that we will continue to use for the 
period of July 1, 2008 through September 30, 2009. (As noted above, 
this table is the same as Table 11 of the Addendum to the FY 2008 IPPS 
final rule with comment period, including the technical correction made 
in the second FY 2008 IPPS correction notice (72 FR 57733), which has 
been reprinted in Table 3 of the Addendum of this final rule for the 
reader's convenience.)
    The next proposed update to the ICD-9-CM coding system was 
presented in the FY 2009 IPPS proposed rule (and there were no April 1, 
2008 updates to the ICD-9-CM coding system). In addition, the proposed 
MS-DRGs and GROUPER for FY 2009 that would be used for the IPPS and the 
LTCH PPS, effective October 1, 2008, and the proposed update to the MS-
LTC-DRG relative weights for FY 2009 were presented in the recently 
published IPPS FY 2009 proposed rule (see 73 FR 23590 through 23608). 
The proposed MS-LTC-DRGs and their respective proposed relative 
weights, geometric ALOS and ``Short-Stay Outlier Threshold'' that would 
be effective October 1, 2008 through September 30, 2009 are presented 
in Table 11 to the Addendum of the FY 2009 IPPS proposed rule (73 FR 
23891 through 23905).

IV. Changes to the LTCH PPS Payment Rates and Other Changes for the 
2009 LTCH PPS Rate Year

A. Overview of the Development of the Payment Rates

    The LTCH PPS was effective beginning with a LTCH's first cost 
reporting period beginning on or after October 1, 2002. Effective with 
that cost reporting period, LTCHs are paid, during a 5-year transition 
period, a total LTCH prospective payment that is comprised of an 
increasing proportion of the LTCH PPS Federal rate and a decreasing 
proportion based on reasonable cost-based principles, unless the 
hospital makes a one-time election to receive payment based on 100 
percent of the Federal rate, as specified in Sec.  412.533. New LTCHs 
(as defined at Sec.  412.23(e)(4)) are paid based on 100 percent of the 
Federal rate, with no phase-in transition payments.
    The basic methodology for determining LTCH PPS Federal prospective 
payment rates is set forth at Sec.  412.515 through Sec.  412.536. In 
this section, we discuss the factors that would be used to update the 
LTCH PPS standard Federal rate for the 2009 LTCH PPS rate year that 
would be effective for LTCH discharges occurring on or after July 1, 
2008 through September 30, 2009. When we implemented the LTCH PPS in 
the August 30, 2002 LTCH PPS final rule (67 FR 56029 through 56031), we 
computed the LTCH PPS standard Federal payment rate for FY 2003 by 
updating the latest available (FY 1998 or FY 1999) Medicare inpatient 
operating and capital cost data, using the excluded hospital market 
basket.
    Section 123(a)(1) of the BBRA requires that the PPS developed for 
LTCHs be budget neutral for the initial year of implementation. 
Therefore, in calculating the standard Federal rate under Sec.  
412.523(d)(2), we set total estimated LTCH PPS payments equal to 
estimated payments that would have been made under the reasonable cost-
based payment methodology had the LTCH PPS not been implemented. 
Section 307(a)(2) of the BIPA specified that the increases to the 
target amounts and the cap on the target amounts for LTCHs for FY 2002 
provided for by section 307(a)(1) of the BIPA shall not be considered 
in the development and implementation of the LTCH PPS. Section 
307(a)(2) of the BIPA also specified that enhanced bonus payments for 
LTCHs provided for by section 122 of BBRA were not to be taken into 
account in the development and implementation of the LTCH PPS.
    Furthermore, as specified at Sec.  412.523(d)(1), the initial 
standard

[[Page 26797]]

Federal rate was reduced by an adjustment factor to account for the 
estimated proportion of outlier payments under the LTCH PPS to total 
estimated LTCH PPS payments (8 percent). For further details on the 
development of the FY 2003 standard Federal rate, see the August 30, 
2002 LTCH PPS final rule (67 FR 56027 through 56037), and for 
subsequent updates to the LTCH PPS Federal rate, refer to the following 
final rules: RY 2004 LTCH PPS final rule (68 FR 34134 through 34140), 
RY 2005 LTCH PPS final rule (69 FR 25682 through 25684), RY 2006 LTCH 
PPS final rule (70 FR 24179 through 24180), RY 2007 LTCH PPS final rule 
(71 FR 27819 through 27827), and RY 2008 LTCH PPS final rule (72 FR 
26870 through 27029).

B. Consolidation of the Annual Updates for Payment and MS-LTC-DRG 
Relative Weights to One Annual Update

    In the August 30, 2002 final rule implementing the LTCH PPS, we 
established a schedule at Sec.  412.535 for publishing information 
pertaining to the LTCH PPS. That schedule set a publication date of 
``on or before August 1 prior to the beginning of each Federal Fiscal 
Year (FFY),'' which coincided with the statutorily mandated publication 
schedule for the IPPS (67 FR 55954). In the June 6, 2003 LTCH PPS final 
rule, we revised this schedule in Sec.  412.535 to provide that

    ``(a) Information on the unadjusted Federal payment rates and a 
description of the methodology and data used to calculate the 
payment rates are published on or before May 1 prior to the start of 
each long-term care hospital prospective payment system rate year 
which begins July 1, unless for good cause it is published after May 
1, but before June 1.
    (b) Information on the LTC-DRG classification and associated 
weighting factors is published on or before August 1 prior to the 
beginning of each Federal fiscal year.''

    At the time, we explained that the LTC-DRG patient classifications 
used by the LTCH PPS for FY 2003 are based directly on the same version 
of DRGs used by the IPPS, that is, Grouper 20 (68 FR 34126). As 
discussed above in section III of this final rule, effective for LTCH 
PPS discharges occurring on or after October 1, 2007, all references to 
LTC-DRGs and DRGs in the existing regulations are understood to 
represent MS-LTC-DRGs. This is addressed in the regulations at Sec.  
412.503. Therefore, we did not make any changes to the timing for the 
annual update for LTC-DRG classifications and relative weights. The 
annual update to the DRG classifications and relative weights continues 
to be published on a FFY cycle, as is the update of the acute care 
hospital IPPS DRG system. In changing the payment rate update schedule 
for the LTCH PPS, it was our intent to avoid concurrent publications of 
the annual updates for these two significant payment systems for 
purposes of administrative feasibility and efficiency. With this in 
mind, we changed the effective date for the annual update of the LTCH 
PPS payment rate from October 1 to July 1 of each year beginning with 
July 1, 2003. We believed this change would help use our limited 
resources effectively and facilitate a timely publication of both the 
IPPS and LTCH PPS proposed and final rules. Thus, currently the annual 
update of the LTCH PPS Federal rates does not coincide with the start 
of the FFY, but rather, are effective prior to the Federal FY.
    In the RY 2009 LTCH PPS proposed rule (73 FR 5351 through 5352), we 
proposed a change to the current schedule for the annual updates of the 
LTCH PPS Federal payment rates to consolidate the rulemaking cycle for 
the annual update of the LTCH PPS. Under our proposed policy, the 
annual update to the LTCH PPS Federal payment rates along with the 
description of the methodology and data used to calculate these payment 
rates, and the annual updating of the MS-LTC-DRG classifications and 
associated weighting factors for LTCHs would occur on the same schedule 
and appear in the same publication. Therefore, under our proposed 
policy, the updates to the rates and the weights would both be 
effective on October 1 (on a Federal fiscal year schedule). 
Consequently, under this proposal the annual updates to the LTCH PPS 
Federal rates would no longer be published with a July 1 effective 
date.
    We received several comments on our proposal to consolidate the 
annual payment rate and MS-LTC-DRG update schedules of the LTCH PPS to 
an October 1 through September 30 cycle, which are summarized below.
    Comment: A large number of commenters, including MedPAC, agree with 
and strongly support our proposal to consolidate the LTCH rulemaking 
cycle to a single, annual rulemaking that corresponds with the IPPS 
annual update effective October 1 each year. In addition, many of these 
same commenters endorsed our proposal to extend the 2009 rate year by 3 
months, allowing for a 15-month rate period (July 1, 2008 through 
September 30, 2009), rather than having a 3-month period followed by a 
12-month rate year to transition from a July 1 to an October 1 update 
cycle. Commenters considered this proposal to be a reasonable one, and 
that a 15-month rate year would create an appropriate transition to an 
October 1 update by allowing for stability in the LTCH PPS payment 
rates. Commenters noted that a 3-month rate year followed by a 12-month 
rate year would be unduly burdensome. We received no comments in 
opposition to our proposal to consolidate the LTCH rulemaking cycles. 
However, we received many comments on our proposed update to the 
Federal rate for the 15-month RY 2009. One commenter suggested that CMS 
should include an inflationary update to address the 3 additional 
months.
    Although supportive of the proposal to consolidate the LTCH 
rulemaking cycles to be effective October 1, two commenters expressed 
concern that CMS had not provided a description of how this combined 
rulemaking would be accomplished. Other commenters believe that there 
could be confusion between LTCH PPS payment policy changes and IPPS 
payment policy changes if the annual rulemaking for the LTCH PPS were 
to be combined with the annual IPPS rulemaking. Consequently, these 
commenters recommended that the LTCH PPS rule be issued either 
separately from the IPPS rule or as a separate component within the 
IPPS rule to allow for easier accessibility and the ability to more 
accurately assess policy impacts on the LTCH PPS.
    Response: We appreciate the positive responses to our proposal to 
consolidate the annual July 1 update for payment rates and the October 
1 update for MS-LTC-DRG weights to a single annual update effective 
October 1, as well as the positive responses with regard to our 
proposal to extend the 2009 rate year for another 3 months; that is, 
from July 1, 2008 to September 30, 2009. We are finalizing these 
provisions in this final rule.
    In response to several commenters' concerns that we had not 
provided sufficient details concerning the consolidation; that is, the 
manner in which we actually plan to produce the documents for the 
annual rulemaking for the LTCH PPS relative to the annual IPPS 
rulemaking, we are continuing to evaluate the commenters' suggestions 
concerning whether the LTCH PPS proposed and final rules should be 
included as part of the proposed and final IPPS publications or whether 
it would be more appropriate for there to be two separate 
publications--one for the proposed and final IPPS rules and the other 
for the proposed and final LTCH PPS rules. Any decision that we make 
must take into consideration many

[[Page 26798]]

factors, including administrative feasibility and budgetary impact, 
that would affect the development and production of the annual 
rulemaking for the LTCH PPS and the IPPS. We do want to emphasize, 
however, that if the decision is made to produce the LTCH PPS 
rulemaking and the IPPS rulemaking in the same ``package,'' we would 
make every effort to clearly identify the LTCH PPS sections and 
differentiate those from the sections that only deal with the IPPS to 
avoid any confusion between LTCH PPS payment policy changes and IPPS 
payment policy changes. (We note that each of our regulations includes 
a title and a summary of its contents so the public can easily identify 
the material that applicable to LTCHs, including any material in a 
combined IPPS/LTCH PPS package. We also note that presently we publish 
the annual update to the MS-LTC-DRG classifications and relative 
weights as well as other payment policy changes to excluded IPPS 
hospitals (such as HwHs) in the IPPS proposed and final rules with no 
discernible confusion on the part of the public. Therefore, we believe 
the public would be able to easily recognize those portions of a 
combined package that pertain to the LTCH PPS.
    In response to the commenter who suggested that we include an 
inflationary update to address the 3 additional months for purposes of 
the consolidation, we would note that this issue is discussed in the 
summary of the comments and responses on the proposed 15-month RY 2009 
market basket estimate in section IV.C. of the preamble of this final 
rule. The summary of the comments and responses on our proposed update 
to the Federal rate for the 15-month RY 2009 can be found in section 
IV.E.2. of this preamble.
    After reviewing the public comments, we are finalizing our proposal 
to change the current schedule for the annual updates of the LTCH PPS 
Federal payment rates in this final rule. We are consolidating the 
rulemaking cycle for the annual update of the LTCH PPS Federal payment 
rates and description of the methodology and data used to calculate 
these payment rates, with the annual updating of the MS-LTC-DRG 
classifications and associated weighting factors for LTCHs so that the 
updates to the rates and the weights would both be effective on October 
1 each Federal fiscal year. Under this change, the annual updates to 
the LTCH PPS Federal rates would no longer be published with a July 1 
effective date.
    We believe that it is important to note that our revision to the 
existing rulemaking cycle is a result of comments on prior rules, as 
well as recent input from the LTCH industry, as well as consideration 
of our resources. After further consideration of those comments and 
concerns, we agree that having the effective date of the annual update 
of the LTCH PPS Federal payment rates on July 1 of each year while 
retaining the October 1 effective date for updating LTC-DRG 
classifications and weights has proved both burdensome and time-
consuming for all parties involved. We are aware that a consolidated 
update that we are finalizing will be resource intensive, but it will 
eliminate some duplicative resource use. For example, some of our 
resources used for the payment simulations that are used to estimate 
LTCH PPS payments for purposes of the respective impact analyses are 
duplicated for the annual LTCH PPS rate update and the annual MS-LTC-
DRG update. Furthermore, the data used for LTCH PPS payment rate update 
impact analysis are also used in the annual MS-LTC-DRG. This 
consolidation of the rulemaking cycle will allow us to use the same 
information simultaneously for both these analyses. Moreover, we 
understand the concern that there are increased costs involved in 
updating the billing systems of LTCHs to accommodate two separate 
updates, one for the Federal rate and one for the DRG weights, in the 
same cost reporting period. We also considered the possibility that two 
separate updates could increase the potential for calculating payment 
errors under the LTCH PPS.
    In order to revise the payment rate update to an October 1 through 
September 30 period, as proposed, we will extend the 2009 rate period 
to September 30, 2009 such that RY 2009 will be 15 months. This 15-
month rate period will extend from July 1, 2008 through September 30, 
2009. We believe that the additional 3 months to RY 2009 (July, August, 
and September) will provide for a smooth transition to a consolidated 
annual update for both the LTCH PPS payment rates and the LTCH PPS MS-
LTC-DRG classifications and weighting factors. (When we developed this 
proposed policy, we considered the alternative of revising the payment 
rate update to an October 1 through September 30 period by shortening 
RY 2009 such that it would only be 3 months (that is, July 1, 2008 
through September 30, 2008). We decided that this option would prove to 
be both burdensome and time consuming resulting in two payment rate 
changes within a very short (3-month) period of time.)
    After the 2009 rate period, the rate period for the LTCH PPS 
payment rate and other policy changes will be October 1 through 
September 30, and the annual update to the MS-LTC-DRG classifications 
and relative weights will continue to be effective on October 1. The 
October through September rate period will first begin on October 1, 
2009, therefore, the next update to the LTCH PPS Federal rates after 
the 15-month RY 2009 will be for RY 2010. We note that, once the annual 
LTCH PPS rate update cycle moves to October 1 effective October 1, 
2009, the LTCH PPS rate year will coincide with Federal FY beginning in 
2010.
    In this final rule, we are finalizing our proposed revisions to 
Sec.  412.503 to redefine the LTCH PPS' rate year to mean October 1 
through September 30, rather than from July 1 through June 30. We are 
also revising Sec.  412.535 to reflect the change to the annual payment 
rate update cycle described above. The discussion of the 15-month 
market basket update for the 2009 rate year can be found below in 
sections IV.C.2.of this final rule.

C. LTCH PPS Market Basket

1. Overview of the Rehabilitation, Psychiatric and Long-Term Care (RPL) 
Market Basket
    Historically, the Medicare program has used a market basket to 
account for price increases in the services furnished by providers. The 
market basket used for the LTCH PPS includes both operating and 
capital-related costs of LTCHs because the LTCH PPS uses a single 
payment rate for both operating and capital-related costs. The 
development of the initial LTCH PPS standard Federal rate for FY 2003, 
using the excluded hospital with capital market basket, is discussed in 
further detail in the August 30, 2002 LTCH PPS final rule (67 FR 56027 
through 56033).
    In the August 30, 2002 final rule (67 FR 56016 through 56017 and 
56030), which implemented the LTCH PPS, we established the use of the 
excluded hospital with capital market basket as the LTCH PPS market 
basket. The excluded hospital with capital market basket was also used 
to update the limits on LTCHs' operating costs for inflation under the 
TEFRA reasonable cost-based payment system. We explained that we 
believe the use of the excluded hospital with capital market basket to 
update LTCHs' costs for inflation was appropriate because the excluded 
hospital market basket (with a capital component) measures price

[[Page 26799]]

increases of the services furnished by excluded hospitals, including 
LTCHs. For further details on the development of the excluded hospital 
with capital market basket, see the RY 2004 LTCH PPS final rule (68 FR 
34134 through 34137).
    In the RY 2007 LTCH PPS final rule (71 FR 27810), we noted that 
based on our research, we did not develop a market basket specific to 
LTCH services. We are still unable to create a separate market basket 
specifically for LTCHs due to the small number of facilities and the 
limited amount of data that is reported (for instance, only 
approximately 15 percent of LTCHs reported contract labor cost data for 
2002). In that same final rule, under the broad authority conferred 
upon the Secretary by section 123 of the BBRA as amended by section 
307(b) of the BIPA, we adopted the RPL market basket as the appropriate 
market basket of goods and services under the LTCH PPS for discharges 
occurring on or after July 1, 2006. Specifically, beginning with the 
2007 LTCH PPS rate year, for the LTCH PPS, we adopted the use of the 
RPL market basket which is based on FY 2002 cost report data. We choose 
to use the FY 2002 Medicare cost report data because it was the most 
recent, relatively complete cost data for inpatient rehabilitation 
facilities (IRFs), inpatient psychiatric facilities (IPFs), and LTCHs 
available at the time of rebasing.
    The RPL market basket is determined based on the operating and 
capital costs of IRFs, IPFs and LTCHs. All IRFs are currently paid 
under the IRF PPS Federal payment rate, all LTCHs are currently paid 
100 percent of the standard Federal rate under the LTCH PPS, and most 
IPFs are transitioning to payment based on 100 percent of the Federal 
per diem payment amount under the IPF PPS. Payments to IPFs will be 
based exclusively on 100 percent of the Federal rate for cost reporting 
periods beginning on or after January 1, 2008. As we explained in that 
same final rule, we believe a market basket based on the data of IRFs, 
IPFs and LTCHs is appropriate to use under the LTCH PPS since it is the 
best available data that reflects the cost structures of LTCHs.
    For further details on the development of the RPL market basket, 
including the methodology for determining the operating and capital 
portions of the RPL market basket, see the RY 2007 LTCH PPS final rule 
(71 FR 27810 through 27817).
2. Market Basket Estimate for the 2009 LTCH PPS Rate Year
    As discussed in greater detail above in this section, for the 2009 
LTCH PPS rate year, we are consolidating the current LTCH PPS rate year 
(payment rates and other policy changes) update and fiscal year MS-LTC-
DRG update into one annual update cycle. Therefore, the next payment 
rate update cycle would be effective July 1, 2008 through September 30, 
2009 extending the next rate year update by 3 months representing a 15-
month period for the RY 2009 rate. Accordingly, for the 2009 LTCH PPS 
rate year, we proposed to use a 15-month (that is, July 1, 2008 through 
September 30, 2009) estimate of the RPL market basket based on the best 
available data.
    Consistent with our historical practice, we estimate the RPL market 
basket update based on Global Insight, Inc.'s forecast using the most 
recent available data. Global Insight, Inc. is a nationally recognized 
economic and financial forecasting firm that contracts with CMS to 
forecast the components of CMS' market baskets. To determine a 15-month 
market basket update for RY 2009, as we discussed in the proposed rule, 
we calculate the 5-quarter moving average index level for July 1, 2008 
through September 30, 2009 and the 4-quarter moving average index level 
for July 1, 2007 through June 30, 2008. The percent change in these two 
values represents the 15-month market basket update.
    In the RY 2009 proposed rule (73 FR 5352), based on Global 
Insight's 4th quarter 2007 forecast with history through the 3rd 
quarter of 2007, we proposed a 15-month market basket estimate of 3.5 
percent for the proposed 15-month 2009 LTCH PPS rate year. In that same 
proposed rule, we also proposed that if more recent data were 
available, we would use it to determine the RY 2009 market basket 
update in the final rule. Consistent with our historical practice to 
use the most recent estimate of the RPL market basket available for the 
final rule, the most recent estimate of the RPL market basket for July 
1, 2008 through September 30, 2009, based on Global Insight's 1st 
quarter 2008 forecast with history through the 4th quarter of 2007, is 
3.6 percent. As we proposed and as noted above, we determine this 15-
month market basket update by calculating the 5-quarter moving average 
index level for July 1, 2008 through September 30, 2009 and the 4-
quarter moving average index level for July 1, 2007 through June 30, 
2008. The percent change in these two values represents the 15-month 
market basket update for RY 2009. We note that, based on the most 
recent available data, if we were not consolidating the two annual LTCH 
PPS payment system updates by extending the 2009 LTCH PPS rate year by 
3 months, the market basket estimate for a 12-month RY 2009 is 3.2 
percent, based on the most recent estimate of the 12-month RPL market 
basket for July 1, 2008 through June 30, 2009. We determined this 12-
month market basket estimate based on the method stated in the proposed 
rule (see 73 FR 5353).
    Comment: We received one comment on the 15-month market basket 
estimate for RY 2009 that we presented in the proposed rule, which 
suggested that the proposed market basket update for RY 2009 does not 
include an inflationary update factor to address the additional 3 
months that would result from the proposal to extend the 2009 rate year 
through September 30, 2009.
    Response: We disagree with the comment that the proposed market 
basket update of 3.5 percent does not reflect the entire 15-month 
period. The proposed RY 2009 3.5 percent market basket estimate as well 
as the RY 2009 3.6 percent market basket estimate we are establishing 
in this final rule as based on the forecasted increase in the LTCH PPS 
market basket (that is, the RPL market basket) to account for projected 
inflation for the entire 15-month RY 2009, which includes the 
additional 3 months that results from extending RY 2009 to move the 
annual rate update period from July 1 to October 1. As discussed in the 
proposed rule (73 FR 5352) and as reiterated above, we determined the 
15-month market basket by calculating two average index levels: (1) the 
5-quarter moving average index level for July 1, 2008 through September 
30, 2009; and (2) the 4-quarter moving average index level for July 1, 
2007 through June 30, 2008. The percent change in these two values 
represents the 15-month market basket estimate. By including the 3-
month period of July 1, 2009 through September 30, 2009 in the first 
average index level calculated, we are capturing inflationary pressures 
for these 3 months. In comparison, if we were calculating only a 12-
month market basket estimate for the period July 1, 2008 through June 
30, 2009, we instead would calculate the 4-quarter moving average index 
level for July 1, 2008 through June 30, 2009 and the 4-quarter moving 
average index level for July 1, 2007 through June 30, 2008. The percent 
change in these two values represents the 12-month market basket 
estimate. Therefore, after our review of the public comments, we are 
finalizing the 15-month RPL market basket update of 3.6

[[Page 26800]]

percent for RY 2009, based on Global Insight's 1st quarter 2008 
forecast. The update to the standard Federal rate for RY 2009 is 
discussed below in section IV.E. of this preamble.

D. One-time Prospective Adjustment to the Standard Federal Rate

    As we discussed in the August 30, 2002 LTCH PPS final rule (67 FR 
56027), consistent with the statutory requirement for budget neutrality 
in section 123(a)(1) of the BBRA, we estimated aggregate payments under 
the LTCH PPS for FY 2003 to be equal to the estimated aggregate 
payments that would be made if the LTCH PPS were not implemented. Our 
methodology for estimating payments for purposes of the budget 
neutrality calculations used the best available data at the time and 
necessarily reflected several assumptions including costs, inflation 
factors and intensity of services provided. In conducting our budget 
neutrality calculations, we took into account the statutory requirement 
that certain statutory provisions that affect the level of payments to 
LTCHs in years prior to the implementation of the LTCH PPS shall not be 
taken into account in the development and implementation of the LTCH 
PPS. Specifically, section 307(a)(2) of the BIPA requires that the 
increases to the target amounts and the increases to the cap on the 
target amounts for LTCHs provided for by section 307(a)(1) of the BIPA 
(as set forth in section 1886(b)(3)(J) of the Act) and the enhanced 
bonus payments for LTCHs provided for by section 122 of the BBRA (as 
set forth in section 1886(b)(2)(E) of the Act) are not to be taken into 
account in the development and implementation of the LTCH PPS.
    We have been monitoring payment data in order to evaluate whether 
there is a significant difference between the payments estimated on the 
basis of the data available at the time of the August 30, 2002 LTCH PPS 
final rule (67 FR 56027 through 56037) and payment estimates based on 
more complete data that have become available since that time. We 
indicated from the inception of the LTCH PPS that it was possible for 
the aggregate amount of actual payments in FY 2003 to be significantly 
higher or lower than the estimates on which the budget neutrality 
calculations were based to the extent that later, more complete data 
differ significantly from the data that were available at the time of 
the original calculations.
    Section 123(a)(1) of the BBRA, as amended by section 307(b) of 
BIPA, provides broad authority to the Secretary in developing the LTCH 
PPS, including the authority for establishing appropriate adjustments. 
Under this broad authority to make appropriate adjustments, we provided 
in Sec.  412.523(d)(3) of the regulations, for the possibility of 
making a one-time prospective adjustment to the LTCH PPS rates by July 
1, 2008, so that the effect of any significant difference between 
actual payments and estimated payments for the first year of the LTCH 
PPS would not be perpetuated in the LTCH PPS rates for future years.
    In the RY 2009 LTCH PPS proposed rule (72 FR 5353), based on the 
best available data at that time, we estimated that total Medicare 
program payments for LTCH services over the next 5 LTCH PPS rate years 
would be $4.67 billion for the 2009 LTCH PPS rate year; $4.82 billion 
for the 2010 LTCH PPS rate year; $5.06 billion for the 2011 LTCH PPS 
rate year; $5.36 billion for the 2012 LTCH PPS rate year; and $5.73 
billion for the 2013 LTCH PPS rate year.
    In this final rule, consistent with the methodology established in 
the August 30, 2002 final rule (67 FR 56036), and based on the most 
recent available data, for the readers benefit, we are providing an 
estimate of total Medicare program payments for LTCH services for the 
next 5 LTCH PPS rate years in Table I. These estimates take into 
account the effects of changes as a result of the recent Medicare, 
Medicaid, and SCHIP Extension Act of 2007.

                                 Table I
------------------------------------------------------------------------
                                                             Estimated
                   LTCH PPS rate year                      payments  ($
                                                           in billions)
------------------------------------------------------------------------
2009....................................................            4.78
2010....................................................            4.99
2011....................................................            5.14
2012....................................................            5.36
2013....................................................            5.67
------------------------------------------------------------------------

    In accordance with the methodology established in the August 30, 
2002 LTCH PPS final rule (67 FR 56027 through 56037), these estimates 
are based on the most recent available data. These estimates are also 
based on our estimate of LTCH PPS rate year payments to LTCHs using 
CMS' Office of the Actuary's (OACT) most recent estimate of the RPL 
market basket, which is based on information from Global Insight, Inc., 
of 3.2 percent for the 2009 LTCH PPS rate year, 2.9 percent for the 
2010 LTCH PPS rate year, 3.0 percent for the 2011 LTCH PPS rate year, 
and 3.2 percent for the 2012 and 2013 LTCH PPS rate years. We note that 
while the provisions in the MMSEA are current law and OACT develops its 
spending projections based on existing policy, changes that are being 
adopted in this final rule, are not considered to be existing policy 
and therefore, are not shown in Table I. We also considered OACT's most 
recent projections of changes in Medicare beneficiary enrollment of -
0.3 percent in the 2009 LTCH PPS rate year, 0.2 percent in the 2010 
LTCH PPS rate year, 0.5 percent in the 2011 LTCH PPS rate year, 1.5 
percent in the 2012 LTCH PPS rate year and, 2.5 percent in the 2013 
LTCH PPS rate year. It is important to note that, while we provide 
these estimates of future payments under the LTCH PPS in order to 
provide the public with a projected estimate of payments to LTCHs, 
these estimates will be neither the basis for determining whether the 
one-time budget neutrality adjustment available under Sec.  
412.523(d)(3) of the regulations should be proposed, nor are these 
estimates the basis for any of the policy changes adopted in this final 
rule. It is also important to note that any proposal regarding the one-
time budget neutrality adjustment would be based solely on the data 
that would be available at the time of the proposal, rather than on 
projections of payments under LTCH PPS for future years.
    In the August 30, 2002 LTCH PPS final rule implementing the LTCH 
PPS (67 FR 55954), we set forth the implementing regulations, based 
upon the broad authority granted to the Secretary, under section 123 of 
the BBRA (as amended by section 307(b) of the BIPA). Section 123(a)(1) 
of the BBRA required that the system ``maintain budget neutrality.'' 
The statute requires the LTCH PPS to be budget neutral in FY 2003, so 
that estimated aggregate payments under the LTCH PPS for FY 2003 should 
be equal to the estimated aggregate payments that would be made if the 
LTCH PPS were not implemented for FY 2003. The methodology for 
determining the LTCH PPS standard Federal rate for FY 2003 that would 
``maintain budget neutrality'' is described in considerable detail in 
the August 30, 2002 final rule (67 FR 56027 through 56037). As we 
discussed previously in this section, our methodology for estimating 
payments for the purposes of budget neutrality calculations used the 
best available data, and necessarily reflected assumptions in 
estimating aggregate payments that would be made if the LTCH PPS was 
not implemented. In the August 30, 2002 final rule, we also stated our 
intention to monitor LTCH PPS payment data to evaluate whether later 
data varied significantly from the data available at the time of the 
original budget neutrality calculations (for example, data related to 
inflation

[[Page 26801]]

factors, intensity of services provided, or behavioral response to the 
implementation of the LTCH PPS). To the extent the later data 
significantly differ from the data employed in the original 
calculations, the aggregate amount of payments during FY 2003 based on 
later data may be higher or lower than the estimates upon which the 
budget neutrality calculations were based. In that same final rule, the 
Secretary exercised his broad authority in establishing the LTCH PPS 
and provided for the possibility of a one-time prospective adjustment 
to the LTCH PPS rates by October 1, 2006, in Sec.  412.523(d)(3). This 
deadline was revised to July 1, 2008, in the RY 2007 LTCH PPS final 
rule. As we discussed in the RY 2007 LTCH PPS final rule (71 FR 27842 
through 27844), because the LTCH PPS was only recently implemented, 
sufficient new data had not yet been generated that would enable us to 
conduct a comprehensive reevaluation of our budget neutrality 
calculations. Therefore, in that same final rule, we did not implement 
the one-time adjustment provided under Sec.  412.523(d)(3) so that the 
effect of any significant difference between actual payments and 
estimated payments for the first year of the LTCH PPS would not be 
perpetuated in the PPS rates for future years. However, we stated that 
we would continue to collect and interpret new data as it became 
available in order to determine whether we should propose such an 
adjustment in the future. Therefore, we revised Sec.  412.523(d)(3) by 
changing the original October 1, 2006 deadline (established in the 
August 30, 2002 final rule that implemented the LTCH PPS) to July 1, 
2008, to postpone the possible one-time adjustment due to the time lag 
in the availability of Medicare data upon which a proposed adjustment 
would be based. We noted that there is a lag time between the 
submission of claims data and cost report data, and the availability of 
that data in the MedPAR files and HCRIS, respectively. As also 
explained in that same final rule, we believed that postponing the 
deadline of the possible one-time prospective adjustment to the LTCH 
PPS rates provided for in Sec.  412.523(d)(3) to July 1, 2008, would 
allow our decisions regarding a possible adjustment to be based on more 
complete and up-to-date data. It should be noted that, in the years 
following the initial implementation of the LTCH PPS, we have already 
adopted some revised policies and adjustments to LTCH PPS payment 
levels. However, none of these revised policies and payment adjustments 
have addressed the intended purpose of the adjustment allowed under 
Sec.  412.523(d)(3) of the regulations, to ensure that any significant 
difference between the original estimates and calculations based on 
more recent data are not perpetuated in the LTCH PPS rates for future 
years. For example, the adjustments that we have made to account for 
coding changes in excess of real severity increases in RY 2007 and RY 
2008 were made to account for changes in coding behavior in the years 
following the implementation of the LTCH PPS, and not to address any 
issue regarding the budget neutrality calculations that were used to 
establish the base rate for the LTCH PPS.
    Section 114(c)(4) of MMSEA provides that the ``Secretary shall not, 
for the 3-year period beginning on the date of the enactment of this 
Act, make the one-time prospective adjustment to long-term care 
hospital prospective payment rates provided for in Sec.  412.523(d)(3) 
of title 42, Code of Federal Regulations, or any similar provision.'' 
That provision delays the effective date of any one-time budget 
neutrality adjustment until no earlier than December 29, 2010. 
Therefore, we proposed to revise Sec.  412.523(d)(3) of the regulations 
to conform with this requirement.
    Comment: Several commenters supported the proposed change in Sec.  
412.523(d)(3) of regulations to conform with the requirements of 
section 114(c)(4) of MMSEA, delaying the effective date of any one-time 
budget neutrality adjustment until no earlier than December 29, 2010. A 
few commenter disagreed with the proposed change to Sec.  412.523(d)(3) 
because it did not include a specific date after which time CMS would 
no longer be able to implement a one-time budget neutrality as is 
currently specified in the regulations (that is, July 1, 2008). These 
commenters believe that the lack of an ``end date'' in the proposed 
change to Sec.  412.523(d)(3) leaves LTCHs in a perpetual state of 
uncertainty, and therefore, recommend that CMS should specify in the 
regulations a reasonable date beyond which this adjustment can be made.
    Response: We appreciate the commenters support of the proposed 
change in Sec.  412.523(d)(3) to conform with the requirements of 
section 114(c)(4) of MMSEA, delaying the effective date of any one-time 
budget neutrality adjustment until no earlier than December 29, 2010. 
We understand commenters' concerns and agree that it is reasonable to 
include a date by which the one-time budget neutrality adjustment must 
be implemented in order to provide predictability in LTCH PPS payments. 
In taking into account the statutory requirement that any one-time 
budget neutrality adjustment can be effective no earlier than December 
29, 2010, and that annual updates to the LTCH PPS will be effective 
October 1 each year (beginning October 1, 2009, as discussed above in 
section IV.B. of this preamble), we believe that October 1, 2012 would 
allow us sufficient time after the statutorily required 3-year delay to 
develop, propose and finalize any one-time budget neutrality 
adjustment. Therefore, we are revising the regulations at Sec.  
412.523(d)(3) to delay the effective date of any one-time budget 
neutrality adjustment so that any such adjustment would be made no 
earlier than December 29, 2010, and no later than October 1, 2012. We 
believe that this date will allow adequate time to consider any 
additional comments that may arise after the MMSEA 3-year delay 
concerning the potential methodology we presented in the RY 2009 
proposed rule without postponing indefinitely into the future any 
proposal for making an adjustment.
    Prior to the enactment of the MMSEA, we had developed a methodology 
for evaluating whether to propose a one-time budget neutrality 
adjustment under Sec.  412.523(d)(3) of the regulations. In order to 
inform the public of our thinking, and to stimulate comments for our 
consideration during the 3-year delay in implementing any one-time 
budget neutrality adjustment under the law referenced above, we 
discussed our analysis and its results in the proposed rule (73 FR 5356 
through 5360). Evaluating the appropriateness of a possible future 
proposal for a one-time prospective adjustment under Sec.  
412.523(d)(3) required a thorough review of the relevant LTCH data, as 
we discussed in the proposed rule. When we established the FY 2003 
standard Federal rate in a budget neutral manner, we used the most 
recent LTCH cost data available at that time (that is, FY 1999 data), 
and trended that data forward to estimate what Medicare would have paid 
to LTCHs in FY 2003 under the TEFRA payment system if the PPS were not 
implemented for FY 2003 (67 FR 56033). We subsequently conducted a 
thorough review of the most recent relevant data and discussed those 
findings in the RY 2009 proposed rule. At the time we drafted the 
proposed rule, cost data from FY 2002, representing the final year 
LTCHs were paid under the TEFRA payment system, had become available. 
The cost report data for FY 2002 is comprised of a high proportion of 
settled and audited cost reports submitted by LTCHs. We also

[[Page 26802]]

have acquired payment data on the first year of the LTCH PPS (that is, 
FY 2003). On the basis of our review of these data sources, we 
developed a potential methodology for determining whether the one-time 
adjustment available under Sec.  412.523(d)(3) of the regulations 
should be proposed. On the basis of this methodology, we also presented 
a potential method for computing an adjustment, if appropriate. 
Employing that methodology, our analysis indicated that a permanent 
budget neutrality adjustment factor of 0.9625 to the LTCH PPS standard 
Federal rate could be warranted. Consistent with the requirements of 
section 114(c)(4) of the recently enacted MMSEA, we did not propose any 
adjustment for the upcoming rate year. However, we invited public 
comment on the analysis which we presented in the proposed rule. We 
noted that we would consider these comments if and when we decide to 
propose an actual adjustment. We also noted that in the final rule, we 
would respond to any comments on the proposed changes to Sec.  
412.523(d)(3) of the regulations that would: (1) Specify the 
methodology for the one-time budget neutrality adjustment; and (2) 
implement the requirements of section 114(c)(4) of Pub. L. 110-173, in 
the final rule.
    In order to determine whether a one-time budget neutrality 
adjustment could be warranted, it is necessary to estimate both 
aggregate payments under the LTCH PPS for FY 2003 and the estimated 
aggregate payments that would have been made under the TEFRA system in 
FY 2003 if the LTCH PPS were not implemented. While we know actual 
TEFRA payments to LTCHs for FY 2002, the last year of payment under 
that methodology, it is necessary to estimate what TEFRA payments would 
have been in FY 2003 if the new LTCH PPS had not been implemented. In 
developing the methodology for evaluating a one-time adjustment that we 
presented in the proposed rule, we considered whether we should employ 
actual FY 2003 costs to calculate estimated TEFRA payments for FY 2003 
or employ costs for FY 2002 trended forward to FY 2003 as the basis for 
the calculation. We noted that basing the estimate on actual FY 2003 
costs would avoid the need to employ any factor to update costs from FY 
2002 to FY 2003. However, since FY 2003 was the first year of payment 
under the LTCH PPS, the cost experience of LTCHs in that year would 
reflect their response to the incentives provided by the new payment 
system, instead of reflecting behavior under the reasonable cost 
payment system. Indeed, implementation of an LTCH PPS should directly 
affect the behavior of LTCHs, and therefore, the level of costs in 
LTCHs. One of the incentives of a PPS is to improve efficiency in the 
delivery of care, which generally results in decreased cost per 
discharge. For this reason, employing FY 2003 costs directly could be a 
poor basis for estimating payments that ``would have been made if the 
LTCH PPS were not implemented.'' We indicated in the proposed rule that 
trending forward for 1 year the costs incurred under the last year of 
the TEFRA payment system poses a smaller prospect for distortion than 
using costs incurred during the subsequent year, when the incentives 
faced by LTCHs to reduce costs could have had a significant effect. 
Therefore, we indicated that we believed it may be preferable to base 
our calculation of the estimated aggregate payments that would have 
been made if the LTCH PPS were not implemented (that is, estimated FY 
2003 TEFRA payments) on FY 2002 costs, trended forward to FY 2003 using 
the excluded hospital with capital market basket. And we noted in this 
context that some representatives of LTCHs had expressed concern that 
employing FY 2003 costs directly would provide a poor basis upon which 
to estimate payments that ``would have been made if the LTCH PPS were 
not implemented'' for precisely the reasons we have just discussed. We 
also noted that basing the estimate of FY 2003 TEFRA payments on FY 
2002 costs trended forward should satisfy these concerns.
    In determining whether a one-time budget neutrality adjustment 
could be warranted, we believe the estimate of the payments that would 
have been made in FY 2003 under the TEFRA methodology should be 
compared to estimated payments under the new LTCH PPS in FY 2003. The 
most direct way to determine payments under the new LTCH PPS, of 
course, is simply to aggregate the actual payments calculated under the 
LTCH PPS methodology for the discharges that occurred during the first 
year of the LTCH PPS (FY 2003). However, that approach raises an issue 
of consistency in the use of data. The discharges for which we paid 
under the LTCH PPS during FY 2003 are obviously not the same as the 
discharges for which costs were incurred during the last year of 
payment under the TEFRA methodology, FY 2002. For the reasons that we 
have just discussed, we stated in the proposed rule that we believed 
that the best way to estimate the TEFRA payments that would have been 
made to LTCHs during FY 2003 is to use inflated FY 2002 costs as a 
proxy for FY 2003 costs. Comparing actual FY 2003 LTCH PPS payments to 
FY 2003 TEFRA payments estimated on the basis of FY 2002 discharges 
would amount to a comparison between payments related to two different 
sets of discharges, potentially skewing the results. Therefore 
consistency suggests that, rather than comparing TEFRA payments based 
on FY 2002 costs updated to FY 2003, to aggregate LTCH PPS payments for 
discharges that actually occurred in FY 2003, it would be preferable to 
compare estimated TEFRA payments based on updated FY 2002 costs to the 
estimated payments that would have been made under LTCH PPS methodology 
in FY 2003 for those same FY 2002 discharges. In other words, we 
believe that the best approach would be to compare--
     Estimated aggregate FY 2003 TEFRA payments calculated on 
the basis of FY 2002 costs updated to FY 2003; to
     Estimated aggregate payments that would have been made in 
FY 2003 under the LTCH PPS methodology, by applying the FY 2003 LTCH 
payment rules to the discharges that occurred in FY 2002.
    In this way, we would ensure that we are comparing the estimated FY 
2003 TEFRA payments, which are based on updated costs incurred for FY 
2002 discharges to the estimated PPS payments that would have been made 
for those same FY 2002 discharges under the new LTCH PPS payment 
methodology.
    Therefore, in the absence of the MMSEA, we stated in the proposed 
rule that we would have proposed to employ the general methodology we 
have just described to determine: (1) Whether the one-time adjustment 
available under Sec.  412.523(d)(3) of the regulations should be 
proposed for RY 2009, and (2) if such adjustment should be proposed, 
the actual proposed adjustment factor. In the proposed rule, we did 
propose to revise the current language of Sec.  412.523(d)(3) of the 
regulations to conform more accurately reflect the purpose of providing 
for a possible one-time budget neutrality adjustment. At the time of 
the final LTCH PPS rule in 2002, we described the nature of the one-
time adjustment in very general terms. Specifically, that section 
currently provides the following:

    The Secretary reviews payments under this prospective payment 
system and may make a one-time prospective adjustment to the long-
term care hospital prospective payment system rates on or before 
July 1, 2008 so that

[[Page 26803]]

the effect of any significant difference between actual payments and 
estimated payments for the first year of the long term care hospital 
prospective payment system is not perpetuated in the prospective 
payment rates for future years.

    As we stated in the proposed rule, our policy objective in 
providing for this one-time budget neutrality adjustment has always 
been to ensure that computations based on the earlier, necessarily 
limited (but at that time best available) data available at the 
inception of the LTCH PPS would not be built permanently into the rates 
if data available at a later date could provide more accurate results. 
Prior to the thorough analysis we conducted in preparation for the RY 
2009 proposed rule, we had believed that the appropriate method for 
meeting this policy objective involved comparing actual payment data 
from the first year of payment under the LTCH PPS to our earlier 
estimate of payments in the first year of the LTCH PPS. As we have just 
discussed, we determined that the most appropriate methodology for 
evaluating an adjustment to the original budget neutrality adjustment 
did not involve comparing the payments estimated in the original 
calculations against the ``actual payments * * * for the first year,'' 
strictly speaking. Rather, as we discussed in the proposed rule, we 
believe that it is more appropriate to compare payments in the first 
year under the LTCH PPS to what payments would have been under the 
prior TEFRA rules for that year based on the best available data. As a 
result, under the broad authority of section 123 of the BBRA, as 
amended by section 307(b) of BIPA, to make appropriate adjustments to 
the LTCH PPS, we proposed to revise Sec.  412.523(d)(3) of the 
regulations. Furthermore, as discussed in the proposed rule, 
considerations of consistency and other factors suggest that the most 
appropriate comparison would employ an estimate of FY 2003 LTCH PPS 
payments based on discharges from FY 2002. The cost incurred by LTCHs 
for those discharges would also be the basis for the best estimate of 
what would have been paid in FY 2003 under the TEFRA system. As we have 
discussed previously, we also proposed to revise that section of the 
regulations to correspond with the requirements of section 114(c)(4) of 
the Medicare, Medicaid, and SCHIP Extension Act of 2007. Specifically, 
we proposed to revise Sec.  412.523(d)(3) of the regulations to read as 
follows:

    The Secretary reviews payments under this prospective payment 
system and may make a one-time prospective adjustment to the long-
term care hospital prospective payment system rates no earlier than 
December 29, 2010, so that the effect of any significant difference 
between the data used in the original computations and more recent 
data to determine budget neutrality is not perpetuated in the 
prospective payment rates for future years.

    Comment: One commenter objected to the proposed change in the 
regulation on the grounds that it does not truly reflect the 
methodology we discussed more clearly, especially since the proposed 
text of the regulation makes no mention of FY 2003, the first year of 
payments under the LTCH PPS. The commenter further objected that the 
phrases ``data used in the original computations'' and ``more recent 
data to determine budget neutrality'' in the proposed regulation text 
are imprecise.
    Response: We do not agree that the phrases ``data used in the 
original computations'' and ``more recent data to determine budget 
neutrality'' in the proposed regulation text are imprecise. The 
meanings of these terms are fully explained in the detailed account 
presented in the preamble to the proposed rule (73 FR 5354 through 
5360) of the methodology that we could employ in a proposal. We also 
clearly indicated in the preamble text that if we had proposed a one-
time adjustment in the RY 2009 proposed rule, we would have used more 
recent data to estimate budget neutrality for the first year of the 
LTCH PPS, FY 2003. As we have also discussed, we indicated that we 
believe it is appropriate to use certain data elements from FY 2002, 
specifically FY 2002 TEFRA costs and FY 2002 LTCH discharges, as the 
most effective and consistent way to estimate budget neutrality for FY 
2003 while avoiding the potentially distorting effects of factors such 
as behavioral changes in the first year of the new payment system. 
However, we often avoid specifying precise data elements and other 
details of methodology in regulations text, and instead provide for the 
regulations to reflect in general but accurate terms the methodology to 
be employed. (Instead, we typically include a discussion of specific 
data elements and complex details of our methodology in the preamble 
where we can flesh out in greater detail the nuances of our policies.) 
The current regulations text is not consistent with the methodology we 
had developed as the best means to evaluate whether to propose an 
adjustment. Our proposed regulation text captured the concepts in 
general, but more accurate, terms. In response to this comment we are, 
however, revising the proposed regulation text to specify that the 
estimates of budget neutrality do indeed pertain to FY 2003, the first 
year of the LTCH PPS. As also discussed above, we are also revising the 
proposed regulations text to include a specific end date after which 
CMS would no longer consider implementing a one-time budget neutrality 
adjustment (that is, on or before October 1, 2012). In addition, the 
structure of the regulations text we are finalizing would work if we 
ultimately proposed to use FY 2002 data to estimate FY 2003 payments or 
if we would propose to use FY 2003 data. The final regulation text that 
we are adopting in this final rule will therefore read:

    The Secretary reviews payments under this prospective payment 
system and may make a one-time prospective adjustment to the long-
term care hospital prospective payment system rates no earlier than 
December 29, 2010 and by no later than October 1, 2012, so that the 
effect of any significant difference between the data used in the 
original computations of budget neutrality for FY 2003 and more 
recent data to determine budget neutrality for FY 2003 is not 
perpetuated in the prospective payment rates for future years.

    Comment: Two commenters alleged that we had failed to provide data 
supporting the proposal of making a one-time prospective adjustment to 
the LTCH rates no earlier than December 29, 2010. The commenters added 
that, without the ability to review the applicable data, the public 
cannot provide meaningful comment on this aspect of the proposed rule.
    Response: We did not actually propose to make a one-time 
prospective adjustment to the LTCH rates under Sec.  412.523(d)(3) in 
the proposed rule. As noted above, in the proposed rule we presented a 
potential methodology for determining whether the one-time adjustment 
available under Sec.  412.523(d)(3), could be warranted if we presented 
our analysis based on employing that method, and invited public comment 
on that analysis indicating that we would take such comments into 
account ``if and when we decide to propose an actual adjustment'' (see 
73 FR 5354 and 5360). We did, however, propose to revise the 
regulations to provide that such an adjustment will not be made prior 
to December 29, 2010, as required by the MMSEA. We also described the 
potential methodology that we had developed prior to the passage of the 
MMSEA and revised the regulations text to be more consistent with the 
purpose of a one-time budget neutrality adjustment.
    We do not agree that the data we used in developing our estimate of 
a potential adjustment presented in the proposed

[[Page 26804]]

rule has been unavailable to commenters. We clearly identified our data 
sources in the proposed rule, for example, cost report data from the 
Hospital Cost Reporting Information System for FYs 1999 through 2003, 
and FY 2002 LTCH MedPAR data (see 73 FR 5357 and 5359). We also 
described in great detail how we employed those data, including 
assumptions and adjustments that were necessary in developing a 
reasonable estimate. These data are readily available through our 
standard data request procedures that can be obtained by communication 
with our Office of Information Services (OIS). Information about 
obtaining MedPAR files and other Medicare data files is posted on the 
CMS Web page at: http://www.cms.hhs.gov/FilesForOrderGenInfo/. 
Furthermore, we point out that other commenters were able to employ 
these and similar data sources to comment on the methodology that we 
discussed (in fact, one commenter commissioned an entire report on the 
``Assessment of the Proposed One-time Adjustment for Long Term Care 
Hospitals''). Therefore, we disagree that the public lack the necessary 
data to provide meaningful comment on that informational aspect of the 
proposed rule.
    Our revision to Sec.  412.523(d)(3) of the regulations would 
continue to provide that the Secretary may make a one-time adjustment 
to the LTCH PPS rates in order to ensure that any ``significant'' 
difference is not perpetuated in the LTCH PPS rates for future years. 
The regulation does not specifically define what constitutes a 
significant difference for this purpose. In the absence of section 
114(c)(4) of the MMSEA, we would have proposed to consider as 
``significant'' any difference greater than or equal to a 0.25 
percentage point difference between the original budget neutrality 
calculations and budget neutrality calculations based on the more 
recent data now available. This threshold avoids making an adjustment 
to account for very minor deviations between earlier and later 
estimates of budget neutrality. It is also consistent with thresholds 
that we have employed for similar purposes in prospective payment 
systems. For example, under the capital IPPS, we make a forecast error 
correction in the framework used to update the capital Federal rate if 
a previous forecast of input prices varies by at least a 0.25 
percentage point from actual input price changes (72 FR 47425). We do 
not believe that we should treat differences greater than or equal to 
0.25 percent as not ``significant,'' since the effect of any difference 
will be magnified as the rates are updated each year.
    As discussed previously, absent the requirement of section 
114(c)(4) of the Medicare, Medicaid and SCHIP Extension Act of 2007, we 
would have proposed to use FY 2002 LTCH costs as a basis for estimating 
FY 2003 LTCH TEFRA payments in evaluating whether to propose a one-time 
prospective adjustment under Sec.  412.523(d)(3). We also would have 
proposed to update the FY 2002 costs for inflation to FY 2003 by our 
Office of the Actuary's current estimate of the actual increase in the 
excluded hospital market basket from FY 2002 to FY 2003 of 4.2 percent. 
This updated amount would serve as the proxy for actual FY 2003 TEFRA 
costs in the proposed budget neutrality computation for purposes of 
Sec.  412.523(d)(3). We estimated FY 2003 LTCH TEFRA payments using a 
methodology that is similar in concept to the methodology we used to 
estimate FY 2003 LTCH total payments under the TEFRA system when we 
determined the initial standard Federal rate in the August 30, 2002 
final rule (67 FR 56030 through 56033). We also made modifications to 
the methodology we initially used to estimate FY 2003 LTCH TEFRA 
payments because we are using data from a later period, as discussed in 
greater detail below. In general, we estimated total payments under the 
TEFRA payment system using the following steps:
     Estimate each LTCH's payment per discharge for inpatient 
operating costs under the TEFRA system for FY 2003;
     Estimate each LTCH's payment per discharge for capital-
related costs for FY 2003; and
     Sum each LTCH's estimated operating and capital payment 
per case to determine its estimated total FY 2003 TEFRA payment system 
payment per discharge. In the proposed rule, we discussed each of these 
steps in detail (73 FR 5356-5359).
    Once we have estimated total TEFRA payments as the sum of each 
LTCH's estimated operating and capital payment per case, it is also 
necessary to estimate FY 2003 payments under the LTCH PPS. We also 
discussed the method for making this estimate in the proposed rule (73 
FR 5359 through 5360). As the discussion in the proposed rule 
indicated, our analysis suggests that an adjustment of 3.75 percent to 
the standard Federal rate may have been warranted. We expect to address 
the issue again when it is closer to the time section 114(c)(4) of the 
MMSEA permits us to implement a one-time adjustment under Sec.  
412.523(d)(3). In the meantime, we received a number of comments on the 
methodology that we have described. We also received a number of 
comments addressing the merits of implementing any one-time budget 
neutrality adjustment. As we stated in the proposed rule (73 FR 5360), 
we will take these comments into account prior to proceeding with any 
proposal for a one-time budget neutrality adjustment on or after 
December 29, 2010, and we will consider them at the time when we 
develop such a proposal.

E. Standard Federal Rate for the 2008 LTCH PPS Rate Year

1. Background
    At Sec.  412.523(c)(3)(ii) of the regulations, for LTCH PPS rate 
years beginning RY 2004 through RY 2006, we updated the standard 
Federal rate by a rate increase factor to adjust for the most recent 
estimate of the increases in prices of an appropriate market basket of 
goods and services for LTCHs. We established the policy of annually 
updating the standard Federal rate because at that time we believed 
that was the most appropriate method for updating the LTCH PPS standard 
Federal rate annually for years after FY 2003. When we moved the date 
of the annual update of the LTCH PPS from October 1 to July 1 in the RY 
2004 LTCH PPS final rule (68 FR 34138), we revised Sec.  412.523(c)(3) 
to specify that for LTCH PPS rate years beginning on or after July 1, 
2003, the annual update to the standard Federal rate for the LTCH PPS 
would be equal to the previous rate year's Federal rate updated by the 
most recent estimate of increases in the appropriate market basket of 
goods and services included in covered inpatient LTCH services. At that 
time, we believed that was the most appropriate method for updating the 
LTCH PPS standard Federal rate annually for years after RY 2004.
    In the RY 2007 LTCH PPS final rule (71 FR 27818), we explained that 
rather than solely using the most recent estimate of the LTCH PPS 
market basket as the basis of the update factor for the Federal rate 
for RY 2007, we believed that based on our ongoing monitoring activity, 
it was appropriate to adjust the Federal rate to account for the 
changes in coding practices (rather than patient severity). We 
established at Sec.  412.523(c)(3)(iii) of the regulations that the 
update to the standard Federal rate for the 2007 LTCH PPS rate year was 
zero percent. This was based on the most recent estimate of the LTCH 
PPS market basket at the time which was offset by an adjustment to 
account for changes in case-mix in prior periods

[[Page 26805]]

due to changes in coding practices rather than increased patient 
severity in FY 2004. Therefore, effective from July 1, 2006 through 
June 30, 2007, the standard rate was $38,086.04 (71 FR 27818).
    For the following year, we also considered changes in coding 
practices rather than patient severity in establishing the update to 
the Federal rate for the 2008 LTCH PPS rate year. In the RY 2008 final 
rule (72 FR 26887 through 27890), we adjusted the Federal rate based on 
the most recent estimate of market basket (3.2 percent) and an 
adjustment to account for changes in coding practices (2.49 percent) in 
FY 2005. Accordingly, we established at Sec.  412.523(c)(3)(iv) that 
the update to the standard Federal rate for RY 2008 was 0.71 percent. 
Consequently, in the RY 2008 final rule, we established the LTCH PPS 
standard Federal rate, effective from July 1, 2007 through June 30, 
2008, of $38,356.45 (see 72 FR 26890).
    In the RY 2009 proposed rule, we mentioned that the newly enacted 
MMSEA contained a provision addressing the standard Federal rate for RY 
2008 (73 FR 5360 through 5362). Specifically, section 114(e)(1) of Pub. 
L. 110-173 adds a new subsection 1886(m)(2) of the Act, which provides 
that the base rate for RY 2008 ``shall be the same as the base rate for 
hospital discharges occurring during the rate year ending in 2007.'' In 
addition, section 114(e)(2) of Pub. L. 110-173 indicates that section 
1886(m)(2) of the Act ``shall not apply to discharges occurring on or 
after July 1, 2007, and before April 1, 2008'' (that is, the first 9 
months of RY 2008). We noted that the statute uses the term ``base 
rate,'' which is an undefined term in both section 1886(m) of the Act 
and in 42 CFR Part 412, subpart O. As we explained in the LTCH PPS RY 
2009 proposed rule (73 FR 5361), we are interpreting that term to be 
the standard Federal rate because we believe Congress meant to 
eliminate the 0.71 percent update from the RY 2008 standard Federal 
rate. Under this interpretation, the standard Federal rate for RY 2008 
would be the same as the standard Federal rate for RY 2007, that is, 
the 0.71 percent update finalized in the RY 2008 LTCH PPS final rule 
would be reversed. Therefore, we believe that the term ``base rate'' 
used in section 114(e)(1) of MMSEA refers to the standard Federal rate. 
In subsequent sections of this preamble, we are using the term 
``standard Federal rate'' instead of ``base rate'' when referencing the 
provision in section 114(e)(1) of MMSEA in order to avoid further 
confusion.
    Furthermore, we believe section 114(e) of the MMSEA specifically 
revises the standard Federal rate for RY 2008. Specifically, section 
114(e)(1) of MMSEA provides that under the new section 1886(m)(2) to 
the Act, the standard Federal rate for RY 2008 shall be the same as the 
standard Federal rate for RY 2007. The standard Federal rate for RY 
2007 was $38,086.04 (71 FR 27818). Section 114(e)(2) of MMSEA delays 
the application of the revised standard Federal rate of section 
114(e)(1). Specifically, section 114(e)(2) of the MMSEA states that the 
revised standard Federal rate of section 114(e)(1) ``shall not apply to 
discharges occurring on or after July 1, 2007, and before April 1, 
2008.'' Therefore, under the above interpretation, we believe it is 
appropriate that LTCH payments for discharges occurring on or after 
July 1, 2007 through March 31, 2008, will continue to include an 
adjustment of 0.71 percent which was included in the standard Federal 
rate that was in effect when the MMSEA was enacted on December 29, 
2007. Also, we believe it is appropriate for discharges occurring on or 
after April 1, 2008 through June 30, 2008, to be paid based on the 
revised RY 2008 standard Federal rate of $38,086.04, while payments for 
discharges occurring from July 1, 2007 through March 31, 2008 will be 
determined based on the rate that had been used prior to the enactment 
of the MMSEA ($38,356.45).
2. Standard Federal Rate for the 2009 LTCH PPS Rate Year
    As discussed above, the MMSEA revises the standard Federal rate for 
RY 2008 to $38,086.04 (the same as the standard Federal rate for 2007) 
while specifying that this rate ``shall not apply to discharges 
occurring on or after July 1, 2007, and before April 1, 2008'' (that 
is, the first 9 months of RY 2008). In the proposed rule, consistent 
with our historical practice, we proposed to update the standard 
Federal rate from the previous year (that is, the standard Federal rate 
for RY 2008, which the MMSEA has revised to $38,086.04) to determine 
the standard Federal rate for RY 2009. Under the broad authority 
conferred upon the Secretary by section 123 of the BBRA as amended by 
section 307(b) of the BIPA, we proposed an annual update to the 
standard Federal rate for the 15-month 2009 rate year based on the most 
recent LTCH PPS market basket estimate of 3.5 percent (based on the 
best available data at that time) and an adjustment of 0.9 percent to 
account for the increase in case-mix in a prior period (FY 2006) that 
resulted from changes in coding practices rather than an increase in 
patient severity.
    As we discussed in greater detail in the RY 2007 and RY 2008 LTCH 
PPS final rules (71 FR 27819 through 27827 and 72 FR 26887 through 
26890, respectively), while we continue to believe that an update to 
the LTCH PPS standard Federal rate should be based on the most recent 
estimate of the LTCH PPS market basket, we believe it is appropriate 
that the standard Federal rate be offset by an adjustment to account 
for any changes in coding practices that do not reflect increased 
patient severity. Such an adjustment protects the integrity of the 
Medicare Trust Funds by ensuring that the LTCH PPS payment rates better 
reflect the true costs of treating LTCH patients (71 FR 27819 through 
27827).
    We continue to believe that an update to the LTCH PPS standard 
Federal rate year should be based on the most recent estimate of the 
LTCH PPS market basket, and, if appropriate, an adjustment to account 
for changes in coding practices that do not reflect increased patient 
severity. Furthermore, as we discussed in the RY 2009 proposed rule (73 
FR 5362), we did not finalize the proposed case-mix budget neutrality 
factor for the adoption of the severity adjusted MS-LTC-DRG patient 
classification system to the FY 2008 MS-LTC-DRG relative weights in the 
FY 2008 IPPS final rule. Rather, we noted that consistent with past 
LTCH payment policy, we would continue to monitor LTCHs and we could 
propose to make adjustments when updating the standard Federal rate in 
the future, to account for improvements in coding and documentation 
that do not reflect any real changes in case mix during these years 
that we are implementing MS-LTC-DRGs
    As we discussed in the RY 2009 proposed rule, in determining the 
proposed update to the standard Federal rate for the 2009 LTCH PPS rate 
year, we performed a case-mix index (CMI) analysis using the most 
recent available LTCH claims data (FY 2006 MedPAR files) and estimated 
the observed CMI change for FY 2006 to be 1.9 percent (based on the 
most recent available LTCH case-mix data from FY 2005 compared to FY 
2006). As discussed in the RY 2009 proposed rule (73 FR 5362), we 
continue to believe it is appropriate to utilize the estimate of real 
CMI increase of 1.0 percent, based on the well-established RAND study 
referred to in the RY 2008 final rule, as the proxy for the portion of 
the observed 1.9 percent CMI increase from FY 2005 to FY 2006 that 
represents real CMI changes for use in determining the RY

[[Page 26806]]

2009 Federal rate update. Accordingly, we proposed that 0.9 percent 
(1.9 - 1.0 = 0.9) of the observed 1.9 percent CMI increase from FY 2005 
to FY 2006 reflects CMI increase that is due to changes in coding 
practices rather than patient severity.
    The following is a summary of the comments received and our 
responses.
    Comment: A number of commenters disputed CMS' interpretation of the 
MMSEA provision in section 114(e)(1) which specifies that ``for 
discharges occurring during the rate year ending in 2008 for a 
hospital, the base rate for such discharges for the hospital shall be 
the same as the base rate for discharges for the hospital occurring 
during the rate year ending in 2007.'' That is, while CMS believes 
Congress intended to revise the standard Federal rate for RY 2008 to be 
the same as the standard Federal rate for RY 2007, a number of 
commenters asserted that the language in this provision indicates that 
the RY 2007 standard Federal rate is to be applied only to ``discharges 
occurring during the rate year ending in 2008.'' Furthermore, the 
commenters believed section 114(e)(2) of the MMSEA limits the 
application of the ``lower'' rate specified in section 114(e)(1) such 
that this ``lower'' rate does not apply to ``discharges occurring on or 
after July 1, 2007, and before April 1, 2008'' thereby limiting the 
application of this ``lower'' rate to just 3-months of RY 2008. That 
is, the commenters stated that the language Congress used neither 
explicitly revises the RY 2008 standard Federal rate, nor does it 
otherwise specifically grant CMS the authority to update the RY 2009 
standard Federal rate based on the rate specified in this provision of 
the MMSEA. One commenter stated: ``There is no basis to assume that 
Congress seeks to reduce LTCH payments for years to come through 
Section 114(e)(2). The three-month freeze on the standard rate is a 
distinct act of Congress that should not be applied beyond the end of 
RY 2008.'' Several commenters characterized CMS' proposal to update the 
RY 2008 standard Federal rate based on the MMSEA revised rate of 
$38,086.04 as ``arbitrary and capricious.'' The commenters also 
believed implementation of the proposed update on the lower rate of 
$38,086.04 would produce a ``retroactive effect'' and is tantamount to 
``retroactive rule making.''
    Commenters protested the proposed RY 2009 update on the grounds 
that since ``CMS actually provided no increase in the Federal rate for 
RY 2007, and now proposes to ignore any update for RY 2008, the newly 
proposed 2.6 percent increase to the RY 2009 rate is actually an 
increase to the standard Federal rate that was in effect on July 1, 
2006, a full two years prior to the beginning of RY 2009.'' 
Furthermore, the commenters urged CMS to apply the full market basket 
to a higher rate, that is, the RY 2008 standard Federal rate that had 
been finalized in the RY 2008 final rule ($38,356.45), rather than to 
the MMSEA revised RY 2008 standard Federal rate of $38,086.04.
    Response: We disagree with the commenters that updating the RY 2008 
standard Federal rate based on the MMSEA revised RY 2008 standard 
Federal rate of $38,086.04 is ``arbitrary and capricious.'' For the 
reasons discussed in detail below, we continue to believe that our 
proposed (and final) approach for calculating the RY 2009 standard 
Federal rate is appropriate, and consistent with a plain reading of the 
statute, Congressional intent, and our historic methodology for 
calculating the standard Federal rate.
    Section 114(e)(1) of MMSEA adds section 1886(m)(2) to the Act which 
specifies the standard Federal rate for RY 2008. Specifically, section 
1886(m)(2) provides that ``for discharges occurring during the rate 
year ending in 2008 for a hospital, the base rate for such discharges 
for the hospital shall be the same as the base rate for discharges for 
the hospital occurring during the rate year ending in 2007.'' Section 
1886(m)(2) of the Act on its face explicitly provides for a single 
revised RY 2008 standard Federal rate. With respect to section 
114(e)(2) of MMSEA, this section provides that section 1886(m)(2) of 
the Act shall not apply to discharges occurring on or after July 1, 
2007 and before April 1, 2008. When read in conjunction, we believe 
sections 1886(m)(2) of the Act and 114(e)(2) of MMSEA provide that the 
revised RY 2008 standard Federal rate (which is the same as the RY 2007 
standard Federal rate) is the standard Federal rate for all of RY 2008; 
however, for payment purposes, discharges occurring on or after July 1, 
2007, and before April 1, 2008 simply will not be paid based on that 
revised RY 2008 standard Federal rate.
    In contrast to the commenters' belief that section 114(e)(2) limits 
the reduced standard Federal rate in section 1886(m)(2) to a 3-month 
period (that is, the part of RY 2008 not included in ``on or after July 
1, 2007, and before April 1, 2008''), this section actually provides 
that the standard Federal rate specified in section 1886(m)(2) ``shall 
not apply to discharges occurring on or after July 1, 2007, and before 
April 1, 2008.'' To the extent the MMSEA directs the revised standard 
Federal rate in section 1886(m)(2) shall not apply during a specified 
period, it also necessarily means that the standard Federal rate in 
section 1886(m)(2) would otherwise apply for the entire RY 2008. We 
note that to the extent Congress intended to only revise the standard 
Federal rate for the last 3 months of RY 2008, it could have easily 
drafted Sec.  1886(m)(2) to state this. Moreover, Congress could have 
amended the Act to provide for two separate standard Federal rates for 
RY 2008, just as it has similarly done in the past with updates. For 
example, in at least one other PPS (for example, home health), Congress 
split the updates during a single year and revised the statute in a 
manner to specifically provide for the split updates. Therefore, 
contrary to the commenters' assertion, we believe a plain reading of 
the statute indicates that Congress intended that the standard Federal 
rate for the long-term care hospital prospective payment system rate 
year beginning July 1, 2007 and ending June 30, 2008 (that is, RY 2008) 
is the same as the standard Federal rate for the previous long-term 
care hospital prospective payment system rate year updated by zero 
percent (that is, the same as the standard Federal rate for RY 2007).
    In addition, Congress is aware that we determine the standard 
Federal rate for a given year by taking the standard Federal rate from 
the previous year and updating it. Since Congress did not expressly 
direct us to deviate from that historical practice, the natural 
presumption is that we would take the revised RY 2008 standard Federal 
rate specified in section 1886(m)(2) and update it in order to 
calculate the RY 2009 standard Federal rate. Furthermore, since our 
proposed calculation of the RY 2009 standard Federal rate is consistent 
with our long-standing practice of calculating the standard Federal 
rate, we do not believe that our methodology for calculating the RY 
2009 standard Federal rate is arbitrary or capricious. In response to 
the comment that the MMSEA did not specifically grant CMS the authority 
to update the RY 2009 standard Federal rate based on the revised RY 
2008 standard Federal rate specified in the MMSEA, we note that such a 
grant was unnecessary. This is because Congress had already conferred 
broad discretionary authority to the Secretary under section 307(b)(1) 
of Public Law 106-554 (also referenced under new 1886(m)(1) of the Act) 
to provide for appropriate adjustment to the LTCH PPS, including 
updates.
    We also disagree with commenters that the proposed RY 2009 standard

[[Page 26807]]

Federal rate would produce a retroactive effect and is tantamount to 
retroactive rulemaking. We note that the RY 2009 standard Federal rate 
will be prospectively applied to discharges beginning on July 1, 2008. 
That is, while our update for RY 2009 removed the benefit of the RY 
2008 update of 0.71 percent that had been finalized in the RY 2008 
final rule, it can hardly be considered to have a ``retroactive 
effect'' since the proposed (and final) update will not result in 
recoupment of any payments made for RY 2008.
    Comment: Commenters also disagreed with the magnitude of the 
proposed 0.9 percent adjustment to account for coding and documentation 
changes that occurred between FY 2005 and FY 2006 that did not reflect 
increased patient severity. Specifically, with respect to our 
calculation of the apparent increase in case-mix (apparent increase 
equals observed increase minus real increase), some commenters 
disagreed with our use of 1 percent as a proxy for the real increase in 
case-mix for LTCHs based on a study of acute-care hospitals conducted 
by RAND using data from 1987 to 1988. Several commenters stated that 
data from the RAND study do not provide sufficient justification for 
the adjustment and that more current, relevant data are required for 
sufficient justification. Specifically, several commenters stated that 
the 20 year old RAND study was not a valid source of information on 
real case-mix growth in LTCHs because the study focused on short-term 
acute-care hospitals, and that data from the RAND study is outdated and 
should not be relied upon. Some commenters stated that due to the age 
of the RAND study, it would not capture real case-mix growth that may 
have occurred in the intervening period as a result of changes in 
health care delivery patterns, increases in the prevalence of chronic 
conditions, or changes in the specialty mix of LTCHs. Specifically, 
they stated that there are legitimate reasons to support that ``real'' 
case-mix has indeed increased above the level estimated by the RAND 
study in the ensuing years. For example, they believe that factors such 
as longer life expectancy of beneficiaries, the migration of less sick 
and younger Medicare beneficiaries to Medicare Advantage, changes in 
the specialty mix of LTCHs, and generally, increasing proportions of 
beneficiaries that are suffering from multiple chronic diseases, all 
would contribute to a higher ``real'' case-mix than the estimate 
provided by the RAND study. In addition, one commenter believed that 
use of the RAND data was not consistent with CMS audit requirements 
concerning hospitals' use of data from a contemporaneous time period 
for cost allocation. In addition, instead of relying on an estimate of 
real case-mix growth from the RAND study, some commenters believed that 
CMS should assume that all observed case-mix growth is real or should 
use observed case-mix growth adjusted to remove any providers with 
atypical case-mix changes as a proxy for real case-mix growth.
    MedPAC in its comments on the proposed rule stated that it believes 
CMS is justified in making adjustments to payments to take into account 
case-mix increases resulting from changes in coding practices. However, 
MedPAC expressed concern that it was difficult to know whether the RAND 
study findings reflected current growth in real case-mix for LTCHs, and 
urged CMS to pursue more up-to-date information for future adjustments. 
In their comments, MedPAC also noted that in their March 2008 report 
they had recommended a lower update than the one CMS had proposed even 
after the adjustment for the apparent increase in case-mix.
    Response: In the RY 2009 proposed rule, consistent with our 
previous methodology, we proposed to use the RAND study estimate of 1 
percent as the proxy for the real case-mix change to determine the 
``apparent'' case-mix change (which based on FY 2006 LTCH claims data 
is 0.9 percent). While the case-mix parameters from the RAND study are 
based on IPPS data for acute-care hospitals, we believe they are an 
appropriate proxy for real case-mix growth in LTCHs due to similarities 
between LTCHs and acute-care hospitals. The types of patients treated 
by LTCHs are similar to the types of patients treated in IPPS acute-
care hospital step-down units. As described in more detail in the RY 
2009 LTCH PPS proposed rule (73 FR 5374 to 5376), we contracted with 
Research Triangle Institute, International (RTI) for a study evaluating 
the feasibility of developing patient and facility level 
characteristics for LTCHs that could distinguish LTCH patients from 
those treated in other hospitals. Results from the RTI study, including 
findings from technical expert panels, indicate that patients treated 
in LTCHs and IPPS acute-care hospital step-down units are very similar. 
In addition, as we have discussed in many previous LTCH PPS proposed 
and final rules, acute-care hospitals paid under the IPPS and LTCHs 
paid under the LTCH PPS have much in common. Hospitals paid under both 
systems are required to meet the same certification criteria set forth 
in section 1861(e) of the Act to participate as a hospital in the 
Medicare program. LTCHs are certified as acute-care hospitals but are 
classified as LTCHs for payment purposes solely because such hospitals 
generally have an inpatient ALOS of greater than 25 days (as set forth 
in section 1886(d)(1)(B)(iv)(I) of the Act). Furthermore, the LTCH PPS 
uses the same patient classification system that is used under the 
IPPS. Although there have been some modifications over time, the CMS-
DRG system in place in IPPS hospitals during the time of the RAND study 
is generally the same base DRG system used in LTCHs between 2005 and 
2006. In addition, several LTCH PPS payment policies, such as the area 
wage adjustment (Sec.  412.525(c)), COLA for Alaska and Hawaii (Sec.  
412.525(b)), and high cost outlier (HCO) policy (Sec.  412.525(a)) are 
modeled after similar IPPS policies. In summary, due to the 
similarities between LTCH hospitals and acute-care hospitals, including 
similarity in the patients treated by LTCHs and acute-care step-down 
units, we believe it is appropriate to use the RAND study of real case-
mix growth in acute-care hospitals as a proxy for real case-mix growth 
in LTCHs.
    Furthermore, although the data in the RAND study are not new, we 
continue to believe it is the best information available at this time 
to provide a proxy for real case-mix growth in LTCHs throughout this 
response. The methodology used by the RAND study to identify the real 
increase versus apparent increase in case-mix was very rigorous, 
involving chart abstraction data, claims data, and sophisticated 
statistical analyses. In the RY 2008 LTCH PPS proposed rule, we 
solicited comments on other data sources that could be used to 
determine a proxy for real LTCH PPS case-mix change besides the RAND 
study. While some commenters on the RY 2008 and RY 2009 proposed rules 
stated that we should assume all case-mix growth is real or we should 
use the observed case-mix increase adjusted to eliminate any provider 
with atypical case-mix changes as a proxy for real case-mix growth, the 
commenters did not provide any data justifying these assertions and we 
did not receive any comments providing an alternative data source on 
real case-mix growth for LTCHs. With regard to the comments that the 
RAND study would not reflect real case-mix growth that may have 
occurred in the time period after the RAND study (for example due to 
changes in health care delivery patterns, increases in the prevalence 
of chronic conditions, aging of the

[[Page 26808]]

population, or changes in the specialty mix of LTCHs), we note that 
before, during, and after the time period examined by the RAND study, 
there are likely to be various factors driving real increases in case-
mix. At this time, we are not aware of any data demonstrating that the 
factors contributing to increased case-mix in the time period after the 
RAND study would lead to faster growth in real case-mix between FY 2005 
and FY 2006 than the factors contributing to real case-mix growth in 
the time period examined by the RAND study (FY 1987 to FY 1988). 
Accordingly, we continue to believe that it is appropriate to use the 
RAND study, which was based on rigorous analytical and statistical 
methods, as a proxy for real case-mix growth in LTCHs in this RY 2009 
LTCH PPS final rule, as we did in the RY 2008 final rule.
    With respect to the comment that use of the RAND data is not 
consistent with CMS requirements for hospitals to use contemporaneous 
data for cost allocation as part of the cost reporting process, the 
timeframes applicable to hospitals for compiling their cost report data 
are not relevant to the timeframes used to establish the LTCH PPS 
payment rates and the update to the LTCH PPS Federal rate. Although CMS 
uses hospitals' cost reporting data as part of its calculation of the 
LTCH PPS rates, the hospital cost reporting process and the process CMS 
uses to establish PPS rates are separate processes, governed by 
different requirements. The LTCH PPS is a per discharge payment system 
based on prospectively set rates. To establish payment rates, we use 
the most recently available claims data and cost report data; however, 
like other prospective payment systems, there are time lags in the data 
available to establish the prospective payment rates. Typically, the 
LTCH PPS payment rates are established based on claims data from 2 
years prior and cost report data from 3 to 4 years prior. We also 
consistently use the most recent available data to determine the 
appropriate annual update factor. Accordingly, for this final rule we 
used the most recent available data, including the most recent estimate 
of the RPL market basket for July 1, 2008 through September 30, 2009 
and the case-mix data from FY 2006, to establish the 2.7 percent update 
factor for RY 2009. Furthermore, as discussed above, we believe the 
RAND study represents the best information on real case-mix increases 
available at this time.
    For all of the reasons discussed previously, we believe it is 
appropriate in calculating the RY 2009 update to continue to use 1 
percent as a proxy for real case-mix growth in LTCHs based on the RAND 
study, as we did for the RY 2008 update. Accordingly, since the 
observed CMI change for FY 2006 is estimated at 1.9 percent (based on 
the most recent available LTCH case-mix data from FY 2006 as compared 
to FY 2005), accounting for the real CMI change of 1.0 percent, we 
estimate that 0.9 percent (1.9 - 1.0 = 0.9) of that increase reflects 
CMI increase that is due to changes in coding practices (rather than 
patient severity).
    Finally, we agree with MedPAC that it would be beneficial to pursue 
more recent information on real case-mix growth in LTCHs for the 
future, particularly since we recently changed patient classification 
systems. As discussed in the FY 2009 IPPS proposed rule (73 FR 23541 
and 23542), we are currently developing plans to evaluate case-mix 
growth in acute-care IPPS hospitals under the MS-DRG system. In 
conjunction with these efforts, we intend to examine case-mix growth in 
LTCHs under the MS-LTC-DRG system and re-examine the issue of real 
case-mix growth in LTCHs.
    Comment: Some commenters stated that it is inappropriate to use the 
lower end (1.0 percent) of the range of real case-mix growth (1.0 
percent to 1.4 percent) from the RAND study. These commenters indicated 
that consistency with the IPPS policy was not sufficient justification 
for adopting 1 percent, rather than 1.4 percent, as a proxy.
    Response: As discussed in more detail above, LTCH hospitals paid 
under the LTCH PPS have much in common with acute care hospitals paid 
under the IPPS, including being required to meet the same Medicare 
certification criteria, being paid under the same patient 
classification system, and having several LTCH PPS payment policies 
modeled after similar IPPS policies. In addition, as discussed 
previously, results from RTI's research indicates that patients treated 
by LTCHs are very similar to patients treated in IPPS acute care 
hospital step down units. In the RY 2008 final rule we adopted the more 
conservative 1.0 percent (rather than the 1.4 percent) as a proxy for 
real CMI growth because it is consistent with what is used under the 
IPPS and we believed the similarities between LTCHs and acute care 
hospitals are significant as explained previously. For a more detailed 
discussion on the 1.0 percent for real CMI increase utilized in the 
IPPS, see the FY 2007 IPPS final rule (71 FR 48156 through 48158), and 
the FY 1994 IPPS proposed rule (58 FR 30444). In the RY 2008 proposed 
rule, we solicited comments on other data sources that could be used to 
determine a proxy for real LTCH PPS case-mix change besides the RAND 
study. While, as discussed above, some commenters on the RY 2008 and RY 
2009 proposed rules asserted that we should assume real case-mix is 
equal to observed case-mix or we should use the observed case-mix 
increase adjusted to eliminate any provider with atypical case-mix 
changes as a proxy for the real case-mix increase, the commenters did 
not provide any data justifying these assertions and, we did not 
receive any comments providing an alternative data source on real case-
mix growth for LTCHs. Lacking any data to the contrary and for the 
reasons discussed above and in the previous responses, we continue to 
believe that similarities between LTCHs and acute care hospitals 
justify using the same proxy from the RAND study for real case-mix 
growth. Thus, as proposed, we are adopting the 1.0 percent proxy for 
real case-mix growth for LTCHs that is currently used under the IPPS 
for acute care hospitals.
    Comment: Some commenters stated that there was little potential for 
the case-mix of LTCHs to increase as a result of changes in coding 
practices. Some commenters believed that in establishing a policy of 
annually updating the LTC-DRGs (now the MS-LTC-DRGs) and relative 
weights in a budget neutral manner, the RY 2008 LTCH PPS final rule and 
FY 2008 IPPS final rule indicated that growth in apparent case-mix was 
no longer a concern, and thus these commenters believed there is no 
reason for an adjustment for an apparent increase in case-mix in RY 
2009. These commenters stated that CMS' continued use of an adjustment 
for ``apparent'' case-mix increases is inconsistent with CMS' rationale 
in implementing budget neutral MS-LTC-DRG relative weights.
    Other commenters stated that most LTCH patients fall into high 
case-mix payment categories already or are paid outside of the LTCH 
payment system due to outlier status, and thus any case-mix changes are 
more likely to be real than the result of coding improvements. A few 
commenters also questioned the need for an adjustment for apparent 
increases in case-mix with the adoption of MS-LTC-DRGs, and asked how 
could `` * * * behavioral offset [of 0.9 percent] be suggested when the 
new system [that is, the MS-LTC-DRGs] was specifically designed to 
stratify acuity across DRGs?''
    Response: In response to the commenters that question why we have 
proposed, at this time, a 0.9 percent adjustment to account for case-
mix changes due to improved documentation and coding that are not

[[Page 26809]]

due to increased patient acuity, when we have just adopted the MS-LTC-
DRGs, we note that the proposed 0.9 percent adjustment is to account 
for case-mix changes in coding that occurred in FY 2006, a year prior 
to the adoption of the MS-LTC-DRGs. With respect to the comments 
asserting that there is little potential for apparent case-mix 
increases because most LTCH patients fall into high case-mix payment 
categories or receive outlier payments, we disagree. While in FY 2006 
the potential for apparent increases in case-mix due to shifts within 
base DRGs may have been limited to the extent that a substantial 
portion of LTCH patients were already in an LTC-DRG with a CC rather 
than an LTC-DRG without a CC, we believe there was still potential for 
apparent increases in case-mix due to shifts across base DRGs. In 
addition, only a small portion of LTCH PPS cases receive high cost 
outlier payments, and thus we believe the existence of high cost 
outliers has little impact on the potential for apparent case-mix 
increases.
    We also disagree with comments suggesting that our proposal to 
adjust for apparent CMI growth is inconsistent with CMS' rationale for 
implementing the MS-LTC-DRG relative weights in a budget neutral 
manner. Specifically, in the RY 2008 LTCH PPS proposed and final rules, 
we explained that we considered whether to establish a policy of making 
annual changes to the LTC-DRG classifications and recalibrating the 
LTC-DRG relative weights in a budget neutral manner. Previously, we had 
not implemented the annual changes to the LTC-DRG classifications and 
the recalibration of the LTC-DRG relative weights in a budget neutral 
manner because we believed that past fluctuations in the LTC-DRG 
relative weights were primarily due to changes in LTCH coding practices 
and we believed that changes in the LTCH PPS payment rates, including 
the LTCH relative weights, should accurately reflect changes in LTCHs' 
true cost of care. Therefore, prior to RY 2008, we did not update the 
LTC-DRGs in a budget neutral manner because we did not want to build 
apparent CMI changes permanently into the LTCH PPS payment rates. In 
the RY 2008 LTCH PPS final rule, we stated that an analysis of the most 
recent available LTCH claims data show a steady decrease in the 
observed growth in the case-mix index from year to year since FY 2003 
(the observed case-mix change between FY 2003 and FY 2004 is 6.75 
percent, between FY 2004 and FY 2005 is 3.49 percent, and between FY 
2005 and FY 2006 is estimated to be 1.9 percent). With the substantial 
decline in observed case-mix growth between FY 2004 and FY 2006 noted 
above, we indicated that we believed the most recent available LTCH 
claims data (FY 2006) supports our belief that observed case-mix growth 
was now primarily the result of real increases and that changes in LTCH 
coding practices that resulted in fluctuations in the LTC-DRG relative 
weights appeared to be stabilizing. Therefore, we believe it 
appropriate to establish a policy of making annual changes to the LTC--
DRG classifications and recalibrating the LTC--DRG relative weights in 
a budget neutral manner since budget neutrality would provide stability 
and predictability in LTCH PPS payments.
    While we believed apparent case-mix growth declined substantially 
between FY 2004 and FY 2006, the RY 2008 LTCH PPS final rule reflects 
our belief that apparent CMI growth has not been eliminated entirely. 
We weighed the benefits of predictability and stability of payment 
against the fact that claims data reflect changes due to apparent CMI 
growth. As a result, we believed that the advantages of budget 
neutrality discussed previously outweighed any disadvantages such as 
the potential for fluctuations in the relative weights from apparent 
increases in case-mix. Furthermore, the adoption of budget neutral MS-
LTC-DRG relative weights does not preclude the need for CMS to adjust 
for any apparent case-mix increase that CMS identifies through our 
ongoing monitoring of the LTCH payment system. While we would not 
expect the growth in apparent case-mix in FY 2006 to be as large as 
observed in the early years of the LTCH PPS, since hospitals have had 
more experience under this DRG-based payment system, we have no reason 
to believe that the potential for apparent case-mix growth has been 
eliminated entirely since with any DRG system there can be potential 
for apparent changes in case-mix. Consequently, we continue to believe 
it is appropriate to calculate the observed increase in case-mix, and 
identify the portion that is the result of an apparent increase, in 
order to prevent payment increases that do not reflect real increases 
in the severity of illness.
    In addition, we believe that the adoption of the MS-LTC-DRGs in FY 
2008, which better take into account severity of illness in Medicare 
payment rates, is likely to encourage LTCHs to improve their 
documentation and coding of patient diagnoses and is likely to result 
in further apparent increases in case-mix in the future, as discussed 
in more detail in the FY 2008 IPPS final rule (72 FR 47297 to 47298). 
As discussed in the FY 2008 IPPS final rule (72 FR 47298 through 
47299), since we have established this mechanism to adjust LTCH 
payments to account for the effect of changes in coding and 
documentation in a prior period which is based on actual LTCH data, we 
would continue to monitor the LTCH payment system and should we detect 
an ``apparent'' case-mix increase due to the adoption of the MS-LTC-DRG 
classification system, we would propose appropriate adjustments to 
account for that case-mix increase that is not due to increased patient 
severity. Also, as discussed in the FY 2008 IPPS final rule, if CMS is 
able to estimate an appropriate adjustment factor applicable to LTCHs, 
CMS would propose an adjustment factor to LTCHs to account 
prospectively for coding and documentation changes.
    Comment: Some commenters believe CMS has strayed from the basic 
purpose of the market basket update which is to account for the 
expected increase in prices for the upcoming year. The commenters 
portrayed the proposed 2.6 percent update factor for RY 2009 as an 
``inappropriate'' and ``unwarranted'' reduced market basket update and 
has questioned CMS' authority to implement anything other than the full 
RPL market basket update to account for price inflation. The commenter 
further contends that CMS' reasoning for reducing the market basket 
update to account for ``apparent'' case mix increase in a previous 
period is not a factor that has anything to do with the function of the 
market basket. Instead of finalizing the update as proposed in the RY 
2009 proposed rule, the majority of commenters strongly recommended 
that CMS apply an update based solely on the most recent estimate of 
the RPL market basket without an adjustment for case mix changes that 
are not due to increased patient severity. In contrast, MedPAC 
reiterated its recommendation included in its March 2008 Report to the 
Congress, suggesting the Secretary consider a lower update factor (than 
the 2.6 percent that was proposed).
    Response: Section 123 of the BBRA, as amended by section 307(b) of 
the BIPA, provides that the Secretary may specify appropriate 
adjustments to the long-term care hospital payment system, including 
updates. This broad discretionary authority includes our ability to 
make adjustments in determining the annual update to the Federal rate 
for case-mix changes resulting from coding changes that do not reflect 
real change in case-mix regardless of whether such adjustment is for 
anticipated case-mix changes or

[[Page 26810]]

case-mix changes that occurred in a previous time period. We note that 
in previous years, we have determined the annual update to the LTCH PPS 
standard Federal rate based on two elements: (1) A positive adjustment 
to account for the LTCH PPS market basket estimate in full, and (2) a 
negative adjustment to account for case-mix changes in a prior period 
that were not due to increased patient severity. Specifically, the 
adjustments for coding and documentation changes implemented in the RY 
2007 and RY 2008 final rules were based on actual LTCH case-mix data 
from FY 2004 and FY 2005, respectively (71 FR 27820 through 27822 and 
72 FR 26887 through 26890). Based upon a CMI analysis using the most 
recent available LTCH claims data (FY 2006 MedPAR files), we continue 
to believe that within the observed case-mix change for FY 2006, there 
remains some portion of ``apparent'' case-mix change.
    As stated above, and as we discussed in the proposed rule, our 
proposed update for RY 2009 included the full increase of the 15-month 
RPL market basket estimate based on the best available data at the time 
(which was 3.5 percent). Therefore, our proposed (and final) update 
factor does account for the expected increase in prices for the 
upcoming year (RY 2009). However, the full market basket increase is 
not the only factor used in determining the proposed update for RY 
2009. As discussed above, consistent with our historical practice and 
the Secretary's broad discretionary authority to determine appropriate 
updates under the LTCH PPS, in addition to proposing to use the most 
recent estimate of the full RPL market basket increase, we proposed an 
adjustment to account for case-mix changes that were not due to 
increased patient severity from a prior period in determining the 
proposed update for RY 2009.
    In this final rule, as we proposed, we are using the most recent 
available 15-month RPL market basket estimate, which for the final rule 
is 3.6 percent as discussed above in section IV.C. of this preamble. As 
also discussed in this section, we are finalizing the proposed -0.9 
percent adjustment to account for the increase in case-mix in the prior 
period (FY 2006) that resulted from changes in coding practices rather 
than increased patient severity. Therefore, in this final rule, to 
update the standard Federal rate for RY 2009 in accordance with our 
established process, we are finalizing an update factor of 2.7 percent 
which is calculated based on two elements: (1) A positive adjustment of 
3.6 percent to account for the most recent RPL market basket estimate 
in full, and (2) a negative adjustment of 0.9 percent to account for 
case-mix changes that were not due to increased patient severity. We 
note that in commenting on the proposed rule, MedPAC reiterated its 
recommendation included in its March 2008 Report to the Congress, 
suggesting the Secretary consider a lower update for LTCHs for RY 2009. 
In the March 2008 Report to Congress (page 231), the Commission 
recommended that the Secretary update LTCH payments by the LTCH PPS 
market basket index (that is, the RPL Market basket) less the 
Commission's adjustment for productivity growth (1.5 percent). Under 
the market basket estimates available at that time, MedPAC's 
recommendation would be to update the LTCH PPS payment rates by 1.6 
percent.
    Comment: Some commenters believed there is no regulatory basis for 
CMS to adjust the market basket update to account for the apparent 
increase in case-mix for a previous year and that such an adjustment is 
inconsistent with the purpose of a market basket adjustment. One 
commenter also stated that making a case-mix adjustment to future 
payments to account for past payments violates the philosophy of a 
prospective payment system, and is inconsistent with other policies 
such as not correcting the market basket when the final data on the 
market basket for a specific time period turns out to be different from 
the estimate used as the basis of the update. Another commenter 
believed that it was inappropriate to make an adjustment for the 
apparent increase in case-mix that occurred during the 12 months from 
FY 2005 to FY 2006 when the final rule is covering a 15-month rate 
year.
    Response: Section 123 of the BBRA as amended by section 307(b) of 
the BIPA conferred upon the Secretary broad discretion to determine the 
standard rate and make appropriate adjustments to the system. We note 
that while Sec.  412.523(c)(3) specifies the update to the standard 
Federal rate for each year since the implementation of the LTCH PPS in 
FY 2003 (that is, RYs 2004 through RY 2008), neither the statute nor 
the current regulations specifically require that the Secretary 
automatically apply a market basket increase to prospective years 
although we have done this in prior years, and are doing so in this 
final rule.
    As we discussed in greater detail in the RY 2007 LTCH PPS final 
rule (71 FR 27819 through 27827), while we continue to believe that an 
update to the LTCH PPS Federal rate year should be based on the most 
recent estimate of the LTCH PPS market basket, we believe it 
appropriate that the rate update also reflect an adjustment to account 
for changes in coding practices that do not reflect increased patient 
severity. Such an adjustment protects the integrity of the Medicare 
Trust Funds by ensuring that the LTCH PPS payment rates better reflect 
the true costs of treating LTCH patients (71 FR 27798 through 27820). 
Therefore, in determining the RY 2009 update to the LTCH PPS Federal 
rate, we believe it is appropriate to apply an adjustment to eliminate 
the effect of coding or classification changes in a prior period (FY 
2006) that do not reflect real changes in LTCHs' case-mix, for the 
reasons discussed above. As was the case when we determined the RY 2007 
and RY 2008 update factors, this adjustment is necessary to account for 
improved coding (rather than increased patient severity) in prior 
years.
    In addition, we do not agree with the comment that this adjustment 
is inconsistent with the philosophy of prospective payment system. This 
adjustment does not alter the fundamental aspect of the LTCH PPS, which 
is to make payment for a DRG based on a predetermined, fixed amount. 
Furthermore, the adjustment, while based on retrospective analysis of 
claims data, is applied prospectively to the LTCH PPS rates. Also, with 
respect to the commenter's concern that the adjustment for apparent 
increases in case-mix that occurred in a prior period is different from 
policies in other areas such as not adjusting the payment rates to 
reflect retrospective revisions to the market basket estimates, we note 
that there are numerous principles that we try to balance 
simultaneously when making policy decisions. Among these principles are 
appropriate payment, predictability, averaging, beneficiary access to 
appropriate care, and equity. With regard to the adjustment for the 
apparent increase in case-mix, given the potential for apparent 
increases in case-mix to lead to substantial inappropriate increases in 
payments over time without a corresponding increase in the severity of 
illness (or costs), we believe on balance it is in the best interest of 
the Medicare trust fund to make such an adjustment. With regard to an 
adjustment for revisions in the market basket estimates, given the 
typically small size of these market basket revisions, in the interest 
of predictable payments we have not made such an adjustment.
    With respect to the appropriateness of applying the adjustment to a 
15-month rate year, the adjustment is included permanently in the rate 
and thus the result would be the same regardless of

[[Page 26811]]

whether RY 2009 is a 12-month or 15-month rate year. This is because 
the adjustments that we have made in prior years (that is, in RYs 2007 
and 2008) and the adjustment we are making this year (in RY 2009) are 
cumulative.
    Therefore, in this final rule, under the broad authority conferred 
upon the Secretary by section 123 of the BBRA as amended by section 
307(b) of the BIPA to include appropriate adjustments, including 
updates, in the establishment of the LTCH PPS, we are revising Sec.  
412.523(c)(3), to specify that, for discharges occurring on or after 
July 1, 2008 and on or before September 30, 2009, the standard Federal 
rate for RY 2008 will be updated by 2.7 percent, which is based on the 
most recent market basket estimate (3.6 percent) and an adjustment for 
the apparent increase in case-mix (0.9 percent) due to changes in 
coding practice rather than an increase in patient severity, as 
discussed in more detail subsequently. We note that the 2.7 percent 
update for RY 2009 that we are establishing in this final rule is 
higher than the 1.6 percent update recommended by MedPAC in their March 
2008 report. While MedPAC's update recommendation was based on a 12-
month rate year, we believe that if MedPAC were to revise its update 
recommendation for a 15-month rate year, its recommended update would 
still in all likelihood be lower than the update being adopted in this 
final rule due to the formula MedPAC used to calculate its update 
recommendation (that is, the market basket increase minus MedPAC's 1.5 
percent estimate of productivity growth).
    Comment: Commenters claim that the cumulative effect of our changes 
to the LTCH PPS over the last few years has reduced LTCH margins 
significantly. Some commenters asserted that high profit margins had 
been one justification given in prior years' regulations for the 
adjustment in the update to account for case-mix increases that 
reflected changes in coding practices. The commenters pointed to the 
MedPAC March 2008 report which estimated negative margins of between -
1.4 percent to -0.4 percent in 2008, and these commenters stated that 
an adjustment for the apparent increase in case-mix is not appropriate 
this year given the estimated negative margins.
    Response: OACT's most recent estimate of LTCH inpatient Medicare 
margins is for FY 2006 (9.9 percent). While the 2006 margins appear to 
be substantial, we believe the 2006 margin estimates are unlikely to 
reflect the impact of the payment system changes that have occurred 
over the last two years, in particular those occurring in RY 2007 and 
RY 2008. Making estimates of the impact of recent payment system 
changes such as recalibrating the relative weights in 2007, adjusting 
for coding improvements, reducing aggregate payments for outliers, 
making changes to reimbursement for patients with the shortest length 
of stay (that is, short-stay outliers), and the ``25 percent rule.'' 
MedPAC projected that margins will be between -1.4 percent and -0.4 
percent for FY 2008. Given this analysis, MedPAC indicated in its March 
2008 report that ``LTCHs may not be able to accommodate growth in the 
cost of caring for Medicare beneficiaries in 2009 without an increase 
in the base rate.'' However, MedPAC's March 2008 report recommended an 
update of 1.6 percent for RY 2009 based on the market basket adjusted 
for MedPAC's estimate of productivity growth. The update that we are 
adopting in this final rule of 2.7 percent (which includes the 0.9 
percent adjustment for the apparent increase in case-mix) is higher 
than the update proposed in the RY 2009 LTCH PPS proposed rule (2.6 
percent) and higher than the update recommended by MedPAC in its March 
2008 report (1.6 percent). As noted previously, while the update 
recommended by MedPAC was based on a 12-month rate year, we believe 
that if MedPAC were to revise its update recommendation for a 15-month 
rate year, it would still in all likelihood be lower than the update 
being adopted in this final rule, Therefore, we do not believe it can 
be concluded from MedPAC's margin projections and update recommendation 
that the 2.7 percent update established in this final rule, which is 
based on the most recent estimate of the market basket increase and an 
adjustment for the apparent increase in case-mix, is inadequate since 
MedPACs update recommendation (which was issued contemporaneously with 
their margin analysis) is lower than the 2.7 percent update established 
in this final rule. Furthermore, we note that most of the reductions 
cited by the commenters and considered by MedPAC in their margin 
analysis were implemented by CMS in RY 2007 and RY 2008 and were 
reversed (for three years) by section 114 of the MMSEA. Therefore, we 
expect margins would be higher than projected taking into account these 
changes.
    As more data become available, we intend to continue to monitor 
LTCHs' margins. In the past, we have observed that LTCHs have adapted 
to our regulatory changes by modifying their business model to maximize 
profitability while operating under the new changes. For example, when 
we implemented the 25 percent (or applicable percentage) threshold 
payment adjustment in FY 2005 for co-located LTCHs and satellites, we 
are aware that LTCHs shifted emphasis from developing co-located 
facilities to developing freestanding LTCHs. Thus, we believe LTCHs are 
likely to continue to respond to the payment changes in ways that 
mitigate the impact on their profitability.
    Comment: One commenter recommended that CMS provide a full market 
basket update for all cases that are not paid on a full MS-LTC-DRG 
basis such as cases paid under the short stay outlier (SSO) policy or 
the 25 percent rule, stating that hospitals have no ``practical 
opportunity for upcoding'' such cases.
    Response: Even for cases that will be paid on a full MS-LTC-DRG 
basis in RY 2009, we are providing a full market basket adjustment (3.6 
percent), which is combined with an adjustment for the apparent 
increase in case-mix in a prior period (-0.9 percent), to yield a 
combined update of 2.7 percent. With respect to cases that are not paid 
on a full MS-LTC-DRG basis, we believe it is appropriate to apply the 
adjustment for apparent case-mix, where applicable, for several 
reasons. Under current law, SSO cases are paid the lower of 100 percent 
of estimated costs of the case; 120 percent of the MS-LTC-DRG per diem 
multiplied by the covered LOS of the case; the Federal prospective 
payment for the MS-LTC-DRG; or a blend of 120% of the LTC-DRG per diem 
amount and an amount that is comparable to what the case would be paid 
under the IPPS (computed as a per diem). The majority of SSO cases are 
not impacted by the market basket update or the adjustment for the 
apparent increase in case-mix because they are paid based on the 
estimated cost of the case which is determined by multiplying the 
covered charges for the case by the LTCH's CCR. For those SSO cases 
paid under the other payment options, we believe it is appropriate to 
apply the adjustment for the apparent increase in case-mix. The purpose 
of doing so is to adjust for apparent increases in case-mix that 
occurred under the LTCH PPS in a prior period (FY 2006). Whether there 
is potential for future apparent increases in case-mix in RY 2009 for 
these cases is not relevant to this adjustment because this adjustment 
is for a prior period. Nevertheless, we disagree with the commenter's 
assertion that there is no potential for an apparent increase in case-
mix for SSO cases paid under the 2nd and 4th options in the SSO payment 
formula described above because these options are based on

[[Page 26812]]

DRGs. The payment amount for those cases is dependent on the MS-LTC-DRG 
to which the patient is assigned. In other words, the MS-LTC-DRG per 
diem amount, which is a component of the 2nd and 4th options in the SSO 
payment formula as described above, is computed based on the MS-LTC-DRG 
to which the case is grouped. Similarly, with respect to the 25 percent 
rule, notwithstanding the changes made to it by MMSEA, the payment 
amounts calculated under this policy are dependent upon the MS-LTC-DRG 
to which the case is assigned. As with any DRG system there is 
potential for apparent changes in case-mix because there can be shifts 
within or across base DRGs. Accordingly, for the reasons discussed 
above, we are not adopting the commenter's suggestion to apply the full 
market basket update without an adjustment for the apparent increase in 
case-mix that occurred in FY 2006 to all cases that are not paid on a 
full MS-LTC-DRG basis.
    In summary, as we proposed, we are establishing an update to the 
standard Federal Rate for RY 2009 based on the most recent estimate of 
the full LTCH PPS market basket estimate which went up to 3.6 percent 
(as discussed above in section IV.C.2. of this preamble) and an 
adjustment to account for the increase in case-mix in the prior period 
(FY 2006) that resulted from changes in coding practices of -0.9 
percent. Therefore, the update factor to the standard Federal rate for 
RY 2009 is 2.7 percent (3.6-0.9 = 2.7). That is, under the broad 
authority conferred upon the Secretary under the BBRA and the BIPA, we 
specify under Sec.  412.523(c)(3)(v), that, for discharges occurring on 
or after July 1, 2008, and on or before September 30, 2009, the 
standard Federal rate from the previous year would be updated by 2.7 
percent. In determining the standard Federal rate for RY 2009, we 
applied the 2.7 percent update to the RY 2008 standard Federal rate of 
$38,086.04, which is the same standard Federal rate applicable for 
discharges occurring during RY 2007, consistent with section 1886(m)(2) 
of the Act. Consequently, we are establishing a standard Federal rate 
for RY 2009 of $39,114.36, which will be effective for LTCH discharges 
occurring on or after July 1, 2008, and through September 30, 2009. We 
note that the President's FY 2009 budget proposal includes the 
provision that would provide for a zero percent update to the Federal 
rate for 2009 through 2011, and then would reduce the market basket 
update to the Federal rate by 0.65 percent in each year thereafter.

F. Calculation of LTCH Prospective Payments for the 2009 LTCH PPS Rate 
Year

1. Adjustment for Area Wage Levels
a. Background
    Under the authority of section 123 of the BBRA as amended by 
section 307(b) of the BIPA, we established an adjustment to the LTCH 
PPS Federal rate to account for differences in LTCH area wage levels at 
Sec.  412.525(c). The labor-related share of the LTCH PPS Federal rate, 
currently estimated by the FY 2002-based RPL market basket (as 
discussed in greater detail in section IV.C.1. of this preamble), is 
adjusted to account for geographic differences in area wage levels by 
applying the applicable LTCH PPS wage index. The applicable LTCH PPS 
wage index is computed using wage data from inpatient acute care 
hospitals without regard to reclassification under sections 1886(d)(8) 
or 1886(d)(10) of the Act.
    As we discussed in the August 30, 2002, LTCH PPS final rule (67 FR 
56015), when the LTCH PPS was implemented, we established a 5-year 
transition to the full wage adjustment. The wage index adjustment was 
completely phased-in beginning with cost reporting periods beginning in 
FY 2007. Therefore, for cost reporting periods beginning on or after 
October 1, 2006, the applicable LTCH wage index values are the full 
(five-fifths) LTCH PPS wage index values calculated based on acute-care 
hospital inpatient wage index data without taking into account 
geographic reclassification under sections 1886(d)(8) and (d)(10) of 
the Act. For additional information on the phase-in of the wage index 
adjustment under the LTCH PPS, refer to the August 30, 2002, LTCH PPS 
final rule (67 FR 56017 through 56019) and the RY 2008 LTCH PPS final 
rule (72 FR 26891).
b. Updates to the Geographic Classifications/Labor Market Area 
Definitions
(1) Background
    As discussed in the August 30, 2002, LTCH PPS final rule, which 
implemented the LTCH PPS (67 FR 56015 through 56019), in establishing 
an adjustment for area wage levels under Sec.  412.525(c), the labor-
related portion of a LTCH's Federal prospective payment is adjusted by 
using an appropriate wage index based on the labor market area in which 
the LTCH is located. In the RY 2006 LTCH PPS final rule (70 FR 24184 
through 24185), in regulations at Sec.  412.525(c), we revised the 
labor market area definitions used under the LTCH PPS effective for 
discharges occurring on or after July 1, 2005, based on the Office of 
Management and Budget's (OMB's) Core Based Statistical Area (CBSA) 
designations based on 2000 Census data. We made this revision because 
we believe that those new CBSA-based labor market area definitions will 
ensure that the LTCH PPS wage index adjustment most appropriately 
accounts for and reflects the relative hospital wage levels in the 
geographic area of the hospital as compared to the national average 
hospital wage level. As set forth in existing Sec.  412.525(c)(2), a 
LTCH's wage index is determined based on the location of the LTCH in an 
urban or rural area as defined in Sec.  412.64(b)(1)(ii)(A) through 
(C). An urban area under the LTCH PPS is currently defined at Sec.  
412.64(b)(1)(ii)(A) and (B). Under Sec.  412.64(b)(1)(ii)(C), a rural 
area is defined as any area outside of an urban area.
    We note that these are the same CBSA-based designations implemented 
for acute care hospitals under the IPPS at Sec.  412.64(b) effective 
October 1, 2004, (69 FR 49026 through 49034). For further discussion of 
the labor market area (geographic classification) definitions currently 
used under the LTCH PPS, see the RY 2006 LTCH PPS final rule (70 FR 
24182 through 24191).
(2) Update to the CBSA-Based Labor Market Area Definitions
    On December 18, 2006, OMB announced the inclusion of two new CBSAs 
and the revision of designations for six areas (OMB Bulletin No. 07-
01). This OMB bulletin is available on the OMB Web site at http://www.whitehouse.gov/omb/bulletins/fy2007/b07-01.pdf. The two new CBSAs 
outlined in this bulletin are as follows:
     Lake Havasu-Kingman, Arizona (CBSA code 29420). This CBSA 
comes from Mohave County, Arizona.
     Palm Coast, Florida (CBSA code 37380). This CBSA comes 
from Flager County, Florida.
    The six revised CBSA designations outlined in this bulletin are as 
follows:
     Mauldin, South Carolina, and Easley, South Carolina, 
qualify as new principal cities of the Greenville-Mauldin-Easley, South 
Carolina CBSA (CBSA code 24860).
     Conway, Arkansas, qualifies as a new principal city of the 
Little Rock-North Little Rock-Conway, Arkansas CBSA (CBSA code 30780).
     Goleta, California, qualifies as a new principal city of 
the Santa Barbara-Santa Maria-Goleta, California CBSA (CBSA code 
42060).
     Franklin, Tennessee, qualifies as a new principal city of 
the Nashville-

[[Page 26813]]

Davidson-Murfreesboro-Franklin, Tennessee CBSA (CBSA code 34980).
     Fort Pierce, Florida, no longer qualifies as a principal 
city of the Port St. Lucie-Fort Pierce, Florida CBSA; the new 
designation is Port St. Lucie, Florida CBSA (CBSA code 38940).
     Essex County, Massachusetts Metropolitan Division, was 
renamed as the Peabody, Massachusetts Metropolitan Division, which 
changed the CBSA code from 21604 to 37764.
    We note that these six revised CBSA designations made in OMB 
Bulletin No. 07-01 do not change the composition (constituent counties) 
of the affected CBSAs; they only revise the CBSA titles (and the CBSA 
code for the CBSA that consists of Essex County, MA).
    We noted in the RY 2009 LTCH PPS proposed rule that we are 
currently not aware of any LTCHs located in the two new proposed CBSAs 
(that is, proposed CBSA 29420 and proposed CBSA 37380), and the six 
proposed revisions to the CBSA designations would only revise the CBSA 
titles (and the CBSA code for the CBSA that consists of Essex Co., MA). 
We also noted that these proposed revisions to the CBSA-based 
designations were adopted under the IPPS effective beginning October 1, 
2007, (72 FR 47308 through 47309).
    We received no comments on the two new CBSAs and the revision of 
designations for six areas (based on OMB Bulletin No. 07-01) that were 
presented in the RY 2009 LTCH PPS proposed rule (73 FR 5363). In this 
final rule, under the broad authority conferred upon the Secretary by 
section 123 of the BBRA, as amended by section 307(b) of BIPA to 
determine appropriate adjustments under the LTCH PPS, as we proposed, 
we are applying these changes to the current CBSA-based labor market 
area definitions and geographic classifications used under the LTCH PPS 
effective for discharges occurring on or after July 1, 2008. We believe 
these revisions to the LTCH PPS CBSA-based labor market area 
definitions, which are based on the most recent available data, will 
ensure that the LTCH PPS wage index adjustment most appropriately 
accounts for and reflects the relative hospital wage levels in the 
geographic area of the hospital as compared to the national average 
hospital wage level. Accordingly, the RY 2009 LTCH PPS wage index 
values presented in Tables 1 and 2 in the Addendum of this final rule 
reflect the revisions to the CBSA-based labor market area definitions 
described above.
(3) Clarification of New England Deemed Counties
    As we did in the proposed rule, we are also taking this opportunity 
to address the change in the treatment of ``New England deemed 
counties'' (that is, those counties in New England listed in Sec.  
412.64(b)(1)(ii)(B) that were deemed to be parts of urban areas under 
section 601(g) of the Social Security Amendments of 1983) that was made 
in the FY 2008 IPPS final rule with comment period. These counties 
include the following: Litchfield County, Connecticut; York County, 
Maine; Sagadahoc County, Maine; Merrimack County, New Hampshire; and 
Newport County, Rhode Island. Of these five ``New England deemed 
counties,'' three (York County, Sagadahoc County, and Newport County) 
are also included in metropolitan statistical areas defined by OMB and 
are considered urban under both the current IPPS and LTCH PPS labor 
market area definitions in Sec.  412.64(b)(1)(ii)(A) (they will also be 
urban under the conforming changes to Sec.  412.503 that we are making 
in this final rule). The remaining two, Litchfield County and Merrimack 
County, are geographically located in areas that are considered rural 
under the current IPPS (and LTCH PPS) labor market area definitions 
(however, they have been previously deemed urban under the IPPS in 
certain circumstances as discussed below).
    In the FY 2008 IPPS final rule with comment period (72 FR 47337 
through 47338), Sec.  412.64(b)(1)(ii)(B) was revised such that the two 
``New England deemed counties'' that are still considered rural by OMB 
(Litchfield County, CT and Merrimack County, NH) are no longer 
considered urban effective for discharges occurring on or after October 
1, 2007, and therefore, are considered rural in accordance with Sec.  
412.64(b)(1)(ii)(C). However, for purposes of payment under the IPPS, 
acute-care hospitals located within those areas are treated as being 
reclassified to their deemed urban area effective for discharges 
occurring on or after October 1, 2007 (see 72 FR 47337 through 47338). 
(We note that the LTCH PPS does not provide for such geographic 
reclassification (67 FR 56019 through 56020)). Also in the FY 2008 IPPS 
final rule with comment period (72 FR 47338), we explained that we have 
limited this policy change for the ``New England deemed counties'' only 
to IPPS hospitals, and any change to non-IPPS provider wage indices 
would be addressed in the respective payment system rules. Accordingly, 
as stated above and as we did in the proposed rule, we are taking this 
opportunity to clarify the treatment of ``New England deemed counties'' 
under the LTCH PPS in this final rule.
    As discussed above, under existing Sec.  412.525(c)(2), a LTCH's 
wage index is determined based on the location of the LTCH in an urban 
or rural area as defined in Sec.  412.64(b)(1)(ii)(A) through (C). 
Under existing Sec.  412.525(c)(2), an urban area under the LTCH PPS is 
currently defined at Sec.  412.64(b)(1)(ii)(A) and (B), and a rural 
area is defined as any area outside of an urban area in Sec.  
412.64(b)(1)(ii)(C).
    Historical changes to the labor market area/geographic 
classifications and annual updates to the wage index values under the 
LTCH PPS have been made effective July 1 each year. When we established 
the most recent LTCH PPS payment rate update, effective for LTCH 
discharges occurring on or after July 1, 2007 through June 30, 2008, we 
considered the ``New England deemed counties'' (including Litchfield 
County, CT and Merrimack County, NH) as urban for RY 2008 (in 
accordance with the definitions of urban and rural stated in the RY 
2008 LTCH PPS final rule (72 FR 26891) and as evidenced by the 
inclusion of Litchfield County as one of the constituent counties of 
urban CBSA 25540 (Hartford-West Hartford-East Hartford, CT), and the 
inclusion of Merrimack county as one of the constituent counties of 
urban CBSA 31700 (Manchester-Nashua, NH)). (See 72 FR 27004 and 27008, 
respectively).
    As noted above, existing Sec.  412.525(c)(2) indicates that the 
terms ``rural'' and ``urban'' as areas are defined according to the 
definitions of those terms in Sec.  412.64(b)(1)(ii)(A) through (C). As 
Litchfield County, CT and Merrimack County, NH would be considered 
rural areas in accordance with our regulations at (Sec.  412.525(c)(2), 
these two counties will be ``rural'' under the LTCH PPS effective with 
the next update of the LTCH PPS payment rates, which will be July 1, 
2008 (Under the LTCH PPS effective for discharges on or after July 1, 
2008, Litchfield County, CT and Merrimack County, NH are not urban 
under Sec.  412.64(b)(1)(ii)(A-B) and therefore are rural under Sec.  
412.64(b)(1)(ii)(c) in the regulations). We note that Litchfield and 
Merrimack Counties will also be rural under our revision toSec.  
412.503, discussed in greater detail below, that incorporates the 
existing definitions of ``urban'' and ``rural'' areas. Therefore, 
Litchfield County, CT and Merrimack County, NH will be considered 
``rural'' effective for LTCH PPS discharges occurring on or after July 
1, 2008, and will no longer be

[[Page 26814]]

considered as being part of urban CBSA 25540 (Hartford-West Hartford-
East Hartford, CT) and urban CBSA 31700 (Manchester-Nashua, NH), 
respectively. We note that currently we are not aware of any LTCHs 
located in either Litchfield County, CT or Merrimack County, NH. We 
also note that this policy is consistent with our policy of not taking 
into account IPPS geographic reclassifications in determining payments 
under the LTCH PPS. In addition, as discussed above, in this section, 
effective for discharges on or after July 1, 2008, Sec.  
412.64(b)(1)(ii)(B) is no longer applicable under the LTCH PPS. We note 
that we received no comments on this clarification.
(4) Codification of the Definitions of Urban and Rural Under 42 CFR 
Part 412 Subpart O
    Under the current regulations at Sec.  412.525(c), the labor-
related portion of the LTCH PPS Federal rate is adjusted to account for 
geographical differences in the area wage levels using an appropriate 
wage index to reflect the relative level of hospital wages and wage-
related costs in the geographic area (that is, urban or rural area) of 
the hospital compared to the national average level of hospital wages 
and wage-related costs annually. Currently, the application of the wage 
index under existing Sec.  412.525(c)(2) is made on the basis of the 
location of the facility in an urban or rural area as defined in Sec.  
412.64(b)(1)(ii)(A) through (C) (in 42 CFR part 412 subpart D).
    In light of the regulatory construct discussed above where existing 
Sec.  412.525(c) indicated that the terms ``rural area'' and ``urban 
area'' as defined according to the definitions of those terms'' under 
the IPPS in 42 CFR part 412 subpart D, in the proposed rule, we 
explained that we believe it may be administratively simpler to have 
the LTCH PPS urban and rural labor market area definitions self-
contained in (Sec.  412.503) 42 CFR part 412 subpart O rather than 
cross-referring to the definitions of urban and rural in the IPPS 
regulations in 42 CFR part 412, subpart D. We also noted that this 
approach is similar to the change we made in Sec.  412.525(a) for high 
cost outliers and Sec.  412.529 for short-stay outliers in the FY 2007 
IPPS final rule when we embedded within Subpart O the regulatory 
provisions concerning the determination of cost-to-charge ratios (CCRs) 
and the reconciliation of outlier payments (71 FR 48115 through 48122). 
Therefore, in the proposed rule (72 FR 5364), under the broad authority 
of section 123 of the BBRA as amended by section 307(b) of BIPA we 
proposed to codify in Sec.  412.503 the definitions for ``urban area'' 
and ``rural area.'' We stated that the proposed definitions for ``urban 
area'' and ``rural area'' in Sec.  412.503 would incorporate the 
provisions of Sec.  412.62(f)(1)(ii) and (f)(1)(iii) as well as Sec.  
412.64(b)(1)(ii)(A) through (C) in the regulations. Furthermore, we 
also explained that the definition of ``urban area'' at Sec.  
412.64(b)(1)(ii)(B) is no longer applicable under the LTCH PPS 
effective for discharges occurring on or after July 1, 2008 (as 
explained above in section IV.F.1.b.3.), and therefore, the only 
remaining definition of ``urban area'' will be that of a Metropolitan 
Statistical Area (MSA) as defined by the Executive Office of Management 
and Budget. Thus, we omitted the language of Sec.  412.64(b)(1)(ii)(B) 
from the proposed definition of ``urban area'' that would be applicable 
to discharges occurring on or after July 1, 2008 in proposed Sec.  
412.503. We, however, included the language from Sec.  
412.64(b)(1)(ii)(A) in the proposed definition of ``urban area'' in the 
regulations that would be applicable to discharges occurring on or 
after July 1, 2008 in proposed Sec.  412.503. For the reason just 
described, we explained that the proposed definitions of ``urban'' and 
``rural'' that would be effective for discharges occurring on or after 
July 1, 2008 (in subparagraph (3) in both the proposed definition of 
``rural area'' and the proposed definition of ``urban area'') vary 
slightly from the wording in the current regulations at Sec.  
412.64(b)(1)(ii)(A) through (C); however, substantively the definitions 
are the same. We believe that the slight difference in the wording of 
proposed Sec.  412.503 more precisely conveys the treatment of New 
England deemed counties under the LTCH PPS, as discussed above. As a 
conforming change, we also proposed to replace the cross-references to 
Sec.  412.62(f)(1)(iii) and Sec.  412.64(b)(1)(ii)(A) through (C) of 
the regulations in existing Sec.  412.525(c) with references to the 
proposed definitions of ``urban area'' and ``rural area'' at Sec.  
412.503. Therefore, in the proposed rule, we also proposed to revise 
Sec.  412.525(c) to specify that the application of the LTCH PPS wage 
index would be made on the basis of the location of the LTCH in an 
urban or rural area as defined in proposed Sec.  412.503.
    We received no comments on our proposal to codify the definitions 
of urban and rural under 42 CFR part 412 subpart O in Sec.  412.503 or 
our proposal to replace the cross-references to the definitions of 
urban and rural set forth under 42 CFR part 412 subpart D in existing 
Sec.  412.525(c) with references to the proposed definitions of ``urban 
area'' and ``rural area'' at Sec.  412.503. Accordingly, in this final 
rule, under the broad authority of section 123 of the BBRA as amended 
by section 307(b) of BIPA, as proposed, we are codifying the 
definitions for ``urban area'' and ``rural area'' in Sec.  412.503 for 
the reasons discussed above. As proposed, the definitions for ``urban 
area'' and ``rural area'' in Sec.  412.503 incorporate the provisions 
of Sec.  412.62(f)(1)(ii) and (f)(1)(iii) as well as Sec.  
412.64(b)(1)(ii)(A) through (C). However, as discussed above, since the 
definition of ``urban area'' at Sec.  412.64(b)(1)(ii)(B) is no longer 
applicable under the LTCH PPS effective for discharges occurring on or 
after July 1, 2008, the only remaining definition of ``urban area'' 
will be that of a Metropolitan Statistical Area (MSA) as defined by the 
Executive Office of Management and Budget. Thus, we omitted the 
language of Sec.  412.64(b)(1)(ii)(B) from the definition of ``urban 
area'' that will be applicable to discharges occurring on or after July 
1, 2008 in Sec.  412.503. However, we included the language from Sec.  
412.64(b)(1)(ii)(A) in the definition of ``urban area'' that will be 
applicable to discharges occurring on or after July 1, 2008 in proposed 
Sec.  412.503.
    Additionally, as proposed, as a conforming change, we are revising 
existing Sec.  412.525(c) by replacing the cross-references to Sec.  
412.62(f)(1)(iii) and Sec.  412.64(b)(1)(ii)(A) through (C) with 
references to the newly added definitions of ``urban area'' and ``rural 
area'' at Sec.  412.503. Therefore, in this final rule, we are also 
revising Sec.  412.525(c) to specify that the application of the LTCH 
PPS wage index would be made on the basis of the location of the LTCH 
in an urban or rural area as defined in Sec.  412.503. As discussed in 
section VI.G.3. of this final rule, we are also making conforming 
changes to the regulations governing short-stay outlier payments (at 
Sec.  412.529) and the special payment provisions for co-located LTCHs 
(at Sec.  412.534) and free-standing LTCHs (at Sec.  412.536), which 
refer to the definition of urban and rural under the LTCH PPS. We note 
that, as proposed, this revision to Sec.  412.525(c) includes the 
deletion of existing subparagraphs (1) and (2) since the newly added 
definitions of ``urban area'' and ``rural area'' at Sec.  412.503 
contain the definitions for the respective time periods covered in 
existing Sec.  412.525(c)(1) and (2).

[[Page 26815]]

c. Labor-Related Share
    In the August 30, 2002 LTCH PPS final rule (67 FR 56016), we 
established a labor-related share of 72.885 percent based on the 
relative importance of the labor-related share of operating costs 
(wages and salaries, employee benefits, professional fees, postal 
services, and all other labor-intensive services) and capital costs of 
the excluded hospital with capital market basket based on FY 1992 data. 
We did not revise the labor-related share in RYs 2004 through 2006 
while we conducted further analysis to determine the most appropriate 
methodology and data for determining the labor-related share under the 
LTCH PPS (70 FR 24182). After our research into the labor-related share 
methodology was completed, we revised the labor-related share under the 
LTCH PPS in the RY 2007 final rule (71 FR 27829). Specifically, 
beginning in RY 2007, we established a labor-related share based on the 
relative importance of the labor-related share of operating costs 
(wages and salaries, employee benefits, professional fees, postal 
services, and all other labor-intensive services) and capital costs of 
the RPL market basket based on FY 2002 data, as it is the best 
available data that reflect the cost structure of LTCHs.
    Consistent with our historical practice, the labor-related share 
currently used under the LTCH PPS is determined by identifying the 
national average proportion of operating costs and capital costs that 
are related to, influenced by, or vary with the local labor market. 
Accordingly, in the RY 2008 LTCH PPS final rule (72 FR 26892), we 
updated the LTCH PPS labor-related share to 75.788 percent based on the 
relative importance of the labor-related share of operating costs 
(wages and salaries, employee benefits, professional fees, and all 
other labor-intensive services) and capital costs of the RPL market 
basket based on FY 2002 data from the first quarter of 2007 forecast.
    In the proposed rule (73 FR 5364 through 5366), under the broad 
authority conferred upon the Secretary by section 123 of the BBRA as 
amended by section 307(b) of the BIPA, consistent with our historical 
practice of determining the labor-related share, we proposed to revise 
the LTCH PPS labor-related share from 75.788 percent to 75.920 percent 
based on the sum of the relative importance of the labor-related share 
of operating costs (wages and salaries, employee benefits, professional 
fees, and all other labor-intensive services) and capital costs of the 
FY 2002-based RPL market basket from the fourth quarter of 2007 
forecast. Consistent with our proposal to consolidate the annual LTCH 
PPS updates by proposing to extend RY 2009 by 3 months, we proposed to 
use the 15-month RY 2009 RPL market basket to determine the proposed 
labor-related share for RY 2009. Furthermore, we proposed to use the FY 
2002-based RPL market basket costs based on data from the fourth 
quarter of 2007 forecast to determine the labor-related share for the 
LTCH PPS during RY 2009, that is, effective for discharges occurring on 
or after July 1, 2008 and through September 30, 2009, because at that 
time it was the most recent available data. We note that in the 
proposed rule, we inadvertently indicated the proposed labor related 
share would be effective occurring on or after July 1, 2008 and before 
September 30, 2009 (73 FR 5365), when we meant to say through September 
30, 2009 which is consistent with the time period for RY 2009. 
Consistent with our historical practice of using the best data 
available, we also proposed that if more recent data are available to 
determine the labor-related share of the RPL market basket, we would 
use it for determining the RY 2009 LTCH PPS labor-related share in the 
final rule.
    We received no comments on the proposed labor related share for RY 
2009. As discussed in section IV.C.2. of this preamble, we now have 
data from the 1st quarter of 2008 forecast (with history through the 
4th quarter of 2007) available for determining the labor-related share 
of the FY 2002-based RPL market basket. Based on this more recent data, 
in this final rule, under the broad authority conferred upon the 
Secretary by section 123 of the BBRA as amended by section 307(b) of 
the BIPA, consistent with our historical practice of determining the 
labor-related share by identifying the national average proportion of 
operating costs and capital costs that are related to, influenced by, 
or varies with the local labor market, we are revising the LTCH PPS 
labor-related share from 75.788 percent to 75.662 percent based on the 
sum of the relative importance of the labor-related share of operating 
costs (wages and salaries, employee benefits, professional fees, and 
all other labor-intensive services) and capital costs of the FY 2002-
based RPL market basket from the first quarter of 2008 forecast, as 
shown in Table II.
    In this final rule, for RY 2009, we are using the FY 2002-based RPL 
market basket costs based on data from the first quarter of 2008 
forecast to determine the labor-related share for the LTCH PPS for RY 
2009 effective for discharges occurring on or after July 1, 2008 and 
through September 30, 2009, as this is the most recent available data. 
The labor-related share for RY 2009 LTCH PPS continues to be determined 
as the sum of the relative importance of each labor-related cost 
category, and reflects the different rates of price change for these 
cost categories between the base year (FY 2002) and the (15-month) 2009 
LTCH PPS rate year. As discussed in greater detail above in section 
IV.B. of this final rule, we are moving the LTCH PPS annual payment 
rate year beginning July 1st to a rate year beginning October 1st and 
will have a 15-month rate year for 2009 that is, July 1, 2008 through 
September 30, 2009. Accordingly, we are using the 15-month RY 2009 RPL 
market basket, discussed above, to determine the labor-related share 
for RY 2009 in this final rule. Based on the most recent available 
data, the sum of the relative importance for the 2009 LTCH PPS rate 
year for operating costs (wages and salaries, employee benefits, 
professional fees, and labor-intensive services) will be 71.719, as 
shown in Table II. The portion of capital that is influenced by the 
local labor market for this final rule, as was proposed, is still 
estimated to be 46 percent, which is the same percentage used when we 
established the current labor-related share in the RY 2008 LTCH PPS 
final rule. Based on the most recent available data, the relative 
importance for capital will be 8.572 percent of the FY 2002-based RPL 
market basket for the 2009 LTCH PPS rate year. As proposed, we are 
multiplying the estimated portion of capital influenced by the local 
labor market (46 percent) by the relative importance for capital (8.572 
percent) to determine the labor-related share of capital for the 2009 
LTCH PPS rate year. The result is 3.943 percent (0.46 x 8.572 percent), 
which we add to the 71.719 percent for the operating cost amount to 
determine the total labor-related share for the 2009 LTCH PPS rate 
year. Thus, based on the latest available data, we are establishing a 
labor-related share of 75.662 percent (71.719 percent + 3.943 percent) 
under the LTCH PPS for the 2009 LTCH PPS rate year. As noted above in 
this section, the labor-related share in this final rule is determined 
using the same methodology as employed in calculating the current LTCH 
labor-related share (72 FR 26892) and the labor-related shares used 
under the IRF PPS and IPF PPS, which also use the RPL market basket.
    Table II shows the 2008 LTCH PPS rate year relative importance 
labor-related share of the FY 2002-based RPL market basket (established 
in the RY 2008 LTCH PPS final rule) and the 2009

[[Page 26816]]

LTCH PPS rate year relative importance labor-related share of the FY 
2002-based RPL market basket (established in this final rule).

 Table II.--RY 2008 Labor-Related Share Relative Importance and RY 2009
 Labor-Related Share Relative Importance of the FY 2002-Based RPL Market
                                 Basket
------------------------------------------------------------------------
                                              RY 2008         RY 2009
              Cost category                  relative        relative
                                           importance *     importance
------------------------------------------------------------------------
Wages and Salaries......................          52.588          52.663
Employee Benefits.......................          14.127          14.024
Professional fees.......................           2.907           2.895
All other labor intensive services **...           2.145           2.137
                                         -------------------------------
    Subtotal............................          71.767          71.719
Labor share of capital costs............           4.021           3.943
                                         -------------------------------
    Total Labor-related share...........          75.788         75.662
------------------------------------------------------------------------
* As established in the RY 2008 LTCH PPS final rule (72 FR 26892).
** Other labor intensive services includes landscaping services,
  services to buildings, detective and protective services, repair
  services, laundry services, advertising, auto parking and repairs,
  physical fitness facilities, and other government enterprises.

d. Wage Index Data
    Historically, under the LTCH PPS, we have established LTCH PPS wage 
index values calculated from acute care IPPS hospital wage data without 
taking into account geographic reclassification under sections 
1886(d)(8) and (d)(10) of the Act. As we discussed in the August 30, 
2002 LTCH PPS final rule (67 FR 56019), since hospitals that are 
excluded from the IPPS are not required to provide wage-related 
information on the Medicare cost report. Therefore, we would need to 
establish instructions for the collection of this LTCH data as well as 
develop some type of application and determination process before a 
geographic reclassification adjustment under the LTCH PPS could be 
implemented. Thus, the wage adjustment established under the LTCH PPS 
is based on a LTCH's actual location without regard to the urban or 
rural designation of any related or affiliated provider. Acute care 
hospital inpatient wage index data are also used to establish the wage 
index adjustment used in other Medicare PPSs, such as the IRF PPS, IPF 
PPS, HHA PPS, and SNF PPS.
    In the RY 2008 LTCH PPS final rule (72 FR 26893), we established 
LTCH PPS wage index values for the RY 2008 calculated from the same 
data collected from cost reports submitted by hospitals for cost 
reporting periods beginning during FY 2003 that was used to compute the 
FY 2007 acute care hospital inpatient wage index data without taking 
into account geographic reclassification under sections 1886(d)(8) and 
(d)(10) of the Act because that was the best available data at that 
time. The LTCH PPS wage index values applicable for discharges 
occurring on or after July 1, 2007 through June 30, 2008 are shown in 
Table I (for urban areas) and Table 2 (for rural areas) in the Addendum 
to the RY 2008 LTCH PPS final rule (72 FR 26996 through 27019).
    In the proposed rule (72 FR 5366), under the broad authority 
conferred upon the Secretary by section 123 of the BBRA, as amended by 
section 307(b) of BIPA, to determine appropriate adjustments under the 
LTCH PPS, we proposed to use the same data collected from cost reports 
submitted by hospitals for cost reporting periods beginning during FY 
2004 that was used to compute the FY 2008 acute care hospital inpatient 
wage index data without taking into account geographic reclassification 
under sections 1886(d)(8) and (d)(10) of the Act to determine the 
applicable wage index values under the LTCH PPS in RY 2009 because 
these data (FY 2004) are the most recent complete data available at 
that time. We proposed to continue to use IPPS wage data as a proxy to 
determine the proposed LTCH wage index values for RY 2009 because both 
LTCHs and acute-care hospitals are required to meet the same 
certification criteria set forth in section 1861(e) of the Act to 
participate as a hospital in the Medicare program and they both compete 
in the same labor markets, and therefore, experience similar wage-
related costs. We also noted that the IPPS wage data used to determine 
the proposed RY 2009 LTCH wage index values reflected our policy 
adopted under the IPPS beginning in FY 2008 that apportions the wage 
data for multi-campus hospitals' located in different labor market 
areas (CBSAs) to each CBSA where the campuses are located (For 
additional information see the FY 2008 IPPS final rule with comment (72 
FR 47317 through 47320)). We also explained that the proposed RY 2009 
LTCH PPS wage index values were computed consistent with the urban and 
rural geographic classifications (labor market areas) discussed in that 
same proposed rule and consistent with pre-reclassified IPPS wage index 
policy (that is, our historical policy of not taking into account IPPS 
geographic reclassifications in determining payments under the LTCH 
PPS). The proposed RY 2009 wage index values also reflected our 
proposals, (which are discussed below), to establish wage index values 
in urban and rural areas in which there are no IPPS wage data from 
which to compute a wage index value under our methodology described 
above. (Additional details on this proposal, which we are finalizing 
without modification in this final rule, are discussed below or can be 
found in the RY 2009 proposed rule (73 FR 5366).) We received no 
comments on our proposal to update the wage index values based on the 
most recent available data or our proposed methodology for computing 
the RY 2009 LTCH PPS wage index.
    In this final rule, under the broad authority conferred upon the 
Secretary by section 123 of the BBRA, as amended by section 307(b) of 
BIPA, to determine appropriate adjustments under the LTCH PPS, as 
proposed, we are using the same data (collected from cost reports 
submitted by hospitals for cost reporting periods beginning during FY 
2004) used to compute the FY 2008 acute care hospital inpatient wage 
index data without taking into account geographic reclassification 
under sections 1886(d)(8) and (d)(10) of the Act to determine the 
applicable wage index values under the LTCH PPS in RY

[[Page 26817]]

2009 because these data (FY 2004) are the most recent complete data. 
(For information on the data used to compute the FY 2008 IPPS wage 
index refer to the FY 2008 IPPS final rule with comment period (72 FR 
47308 through 47309, 47315)). As we explained in the proposed rule, we 
continue to use IPPS wage data as a proxy to determine the proposed 
LTCH wage index values for RY 2009 because both LTCHs and acute-care 
hospitals are required to meet the same certification criteria set 
forth in section 1861(e) of the Act to participate as a hospital in the 
Medicare program and they both compete in the same labor markets, and 
therefore, experience similar wage-related costs. As also discussed in 
the proposed rule, we note that the IPPS wage data used to determine 
the RY 2009 LTCH wage index values reflects our policy adopted under 
the IPPS beginning in FY 2008 that apportions the wage data for 
multicampus hospitals' located in different labor market areas (CBSAs) 
to each CBSA where the campuses are located (For additional information 
see the FY 2008 IPPS final rule with comment period (72 FR 47317 
through 47320)). For the RY 2009 LTCH PPS wage index, which is computed 
from IPPS wage data submitted by hospitals for cost reporting periods 
beginning in FY 2004 (just like comparable to the FY 2008 IPPS wage 
index), we allocated salaries and hours to the campuses of two 
multicampus hospitals with campuses that are located in different labor 
areas, one in Massachusetts and another in Illinois. Thus, the RY 2009 
LTCH PPS wage index values for the following CBSAs are affected by this 
policy: Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-Falls 
River, RI-MA (CBSA 39300), Chicago-Naperville-Joliet, IL (CBSA 16974) 
and Lake County-Kenosha County, IL-WI (CBSA 29404) (refer to Table 1 in 
the Addendum of this final rule). As proposed, the RY 2009 LTCH PPS 
wage index values presented in this final rule were computed consistent 
with the urban and rural geographic classifications (labor market 
areas) discussed above in section IV.F.1.b. of this final rule and 
consistent with pre-reclassified IPPS wage index policy, that is, our 
historical policy of not taking into account IPPS geographic 
reclassifications in determining payments under the LTCH PPS. 
Specifically, we note (as we did in the proposed rule) that the wage 
data of the IPPS hospitals located in Litchfield county, CT, and 
Merrimack county, NH, were included in the calculation of the RY 2009 
LTCH PPS statewide rural wage index values for Connecticut and New 
Hampshire, respectively (rather than urban CBSA 25540 (Hartford-West 
Hartford-East Hartford, CT) and urban CBSA 31700 (Manchester-Nashua, 
NH), respectively). In addition, the RY 2009 wage index reflects the 
policy, which is discussed in greater detail below, we are establishing 
to determine wage index values in urban and rural areas in which there 
are no IPPS wage data from which to compute a wage index value under 
our methodology described above. As noted above, the RY 2009 LTCH PPS 
wage index values in this final rule were computed from the same FY2004 
acute care hospital inpatient wage data that were used to compute the 
FY 2008 wage index currently used under the IPPS.
    Also, as proposed in the RY 2009 proposed rule (73 FR 5366 through 
5368), we are establishing a policy for determining LTCH PPS wage index 
values for labor market areas in which there is no IPPS hospital wage 
data from which to compute a wage index value under our methodology 
described above. In the RY 2009 proposed rule, we explained that 
currently, there are no LTCHs located in labor areas where there is no 
IPPS hospital wage data (or IPPS hospitals). However, we believed it 
was appropriate to establish a methodology for determining LTCH PPS 
wage index values for these areas in the event that in the future a 
LTCH should open in one of those areas. Thus, any LTCH that would open 
in an area in which there is no IPPS wage data for which to compute a 
wage index based on our established methodology would have a wage index 
value assigned to them for determining their LTCH PPS payments. 
Consistent with the proposed rule, in this final rule we are adopting 
the policy which provides that each year we will determine a wage index 
value for any area in which there is no IPPS wage data based on the 
methodologies described below. These policies for determining LTCH PPS 
wage index values for areas with no IPPS hospital wage data are 
consistent with the policies that have been established under other 
Medicare post-acute care PPSs, such as SNF and HHA, as well as the 
IPPS.
    Specifically, as proposed, we are establishing a policy for 
determining a LTCH PPS wage index value for urban CBSAs with no IPPS 
wage data by using an average of all of the urban areas within the 
State to serve as a reasonable proxy for determining the LTCH PPS wage 
index for an urban area without specific IPPS hospital wage index data. 
We believe that an average of all of the urban areas within the State 
would be a reasonable proxy for determining the LTCH PPS wage index for 
an urban area in the State with no wage data because it is based on 
pre-reclassified IPPS wage data, it is easy to evaluate, and it uses 
the most geographically similar relative wage-related costs data 
available. (Our rationale for using pre-reclassified IPPS wage data is 
discussed above in the beginning of this section.) As proposed, we are 
also establishing a policy for determining a LTCH PPS wage index value 
for rural areas with no IPPS wage data using the unweighted average of 
the wage indices from all of the CBSAs that are contiguous to the rural 
counties of the State to serve as a reasonable proxy in determining the 
LTCH PPS wage index for a rural area without specific IPPS hospital 
wage index data. For this purpose, as proposed, we are defining 
``contiguous'' as sharing a border. As explained, in the proposed rule, 
we are not able to apply an averaging in rural areas with no wage data 
similar to what we are doing for urban areas with no wage data because 
there is no rural hospital data available for averaging on a state-wide 
basis. We believe that using an unweighted average of the wage indices 
from all of the CBSAs that are contiguous to the rural counties of the 
State is a reasonable proxy for determining the wage index for rural 
areas in a State with no wage data because it is based on pre-
reclassified IPPS wage data, it is easy to evaluate, and it uses the 
most geographically similar relative wage-related costs data available. 
(Our rationale for using pre-reclassified IPPS wage data is discussed 
above in the beginning of this section.) In addition, as IPPS wage data 
is dynamic, it is possible that areas without IPPS wage data may vary 
in the future, and each year we would determine a wage index value for 
any area in which there is no IPPS wage data based on our 
methodologies. Additional details on our proposals on setting the LTCH 
PPS wage indices, which we are finalizing without modification in this 
final rule, are discussed below or can be found in the RY 2009 proposed 
rule (73 FR 5367).
    Comment: We received no comments opposing and a few comments in 
support of our proposed methodology for setting LTCH PPS wage indices 
for areas where there are no IPPS wage data. These commenters noted 
that although it would be unlikely that a LTCH would operate in an area 
without an acute care IPPS hospital to supply wage data, as IPPS 
hospitals are a common referral source, the commenters agreed that it 
is practical to prepare for this unlikely scenario, and

[[Page 26818]]

find our proposed methodology to be reasonable.
    Response: We appreciate the commenters' support of our proposals to 
establish LTCH PPS wage index values for areas where there are no IPPS 
wage data. As noted above, currently, there are no LTCHs located in 
labor areas where there is no IPPS hospital wage data (or IPPS 
hospitals), however, we believe it is appropriate to establish a 
methodology for determining LTCH PPS wage index values for these areas 
in the event that in the future a LTCH should open in one of those 
areas. Thus, any LTCH that would open in an area in which there is no 
IPPS wage data for which to compute a wage index based on our 
established methodology would have a wage index value assigned to them 
for determining their LTCH PPS payments.
    In this final rule, under the broad authority conferred upon the 
Secretary by section 123 of the BBRA as amended by section 307(b) of 
BIPA to determine appropriate adjustments under the LTCH PPS, we are 
finalizing our proposal to establish a policy for determining LTCH PPS 
wage index values for labor market areas in which there is no IPPS 
hospital wage data from which to compute a wage index value under our 
methodology described above. Under this policy, each year we would 
determine a wage index value for any area in which there is no IPPS 
wage data based on the methodologies described below. As IPPS hospitals 
may open or close at any time, the number of areas without any IPPS 
wage data may change from year to year, and even when an IPPS hospital 
does open in an area where there are currently no IPPS hospitals, 
because there is a lag-time between the time a hospital opens or 
becomes an IPPS provider and when the hospital's cost report wage data 
are available to include in calculating the area wage index (72 FR 
47323), we believe it is appropriate to establish a methodology for 
determining LTCH PPS wage index values for these areas, if necessary. 
We note that our policies for determining LTCH PPS wage index values 
for areas with no IPPS hospital wage data are consistent with the 
policies that have been established under other Medicare post-acute 
care PPSs, such as SNF and HHA, as well as the IPPS.
    The first situation for which we are establishing a policy for 
determining a LTCH PPS wage index value is for urban CBSAs with no IPPS 
wage data. Consistent with the policy established under other PPSs, 
such as the HHA (70 FR 40795 and 71 FR 65892 through 65893), as 
proposed, we are establishing a methodology of using an average of all 
of the urban areas within the State to serve as a reasonable proxy for 
determining the LTCH PPS wage index for an urban area without specific 
IPPS hospital wage index data. As we explained in the proposed rule, we 
believe that an average of all of the urban areas within the State 
would be a reasonable proxy for determining the LTCH PPS wage index for 
an urban area in the State with no wage data because it is based on 
pre-reclassified IPPS wage data, it is easy to evaluate, and it uses 
the most geographically similar relative wage-related costs data 
available.
    In this final rule, based on the FY 2004 IPPS wage data that we are 
using to determine the RY 2009 LTCH PPS wage index, which is discussed 
above, there is no IPPS wage data for the urban area of Hinesville-Fort 
Stewart, GA (CBSA 25980). (As we noted in the proposed rule, as IPPS 
wage data is dynamic, it is possible that urban areas without IPPS wage 
data will vary in the future.) Consistent with our policy for 
determining a LTCH PPS wage index value for urban areas with no IPPS 
wage data (discussed above), in this final rule, we calculated the wage 
index value for RY 2009 for CBSA 25980 as the average of the wage index 
values for all of the other urban areas within the State of Georgia 
(that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860, 17980, 19140, 
23580, 31420, 40660, 42340, 46660 and 47580) (refer to Table 1 of the 
Addendum of this final rule). (As noted above, there are currently no 
LTCHs located in CBSA 25980). As discussed in the proposed rule, we 
believe that this policy could be readily applied to other urban CBSAs 
(besides CBSA 25980) that lack IPPS wage data. However, as proposed, we 
may re-examine the application of this policy should a similar 
situation arise in the future.
    The other situation for which we are establishing a policy for 
determining a LTCH PPS wage index value is for rural areas with no IPPS 
wage data. Consistent with the policy established under other PPSs, 
such as the HHA (71 FR 65905 through 65906) and the IPPS (72 FR 47323 
through 47324), as proposed, we are establishing a policy of using the 
unweighted average of the wage indices from all of the CBSAs that are 
contiguous to the rural counties of the State to serve as a reasonable 
proxy in determining the LTCH PPS wage index for a rural area without 
specific IPPS hospital wage index data. For this purpose, we define 
``contiguous'' as sharing a border. As we explained in the proposed 
rule, we are not able to apply a similar averaging in rural areas with 
no wage data as we did above for urban areas with no wage data because 
there is no rural hospital data available for averaging on a state-wide 
basis. We believe that using an unweighted average of the wage indices 
from all of the CBSAs that are contiguous to the rural counties of the 
State is a reasonable proxy for determining the wage index for rural 
areas in a State with no wage data because it is based on pre-
reclassified IPPS wage data, it is easy to evaluate, and it uses the 
most geographically similar relative wage-related costs data available.
    In this final rule, based on the FY 2004 IPPS data that we are 
using to determine the RY 2009 LTCH PPS wage index, which is discussed 
above, rural Massachusetts (CBSA code 11) does not have any IPPS wage 
data. (As noted in the proposed rule, as IPPS wage data is dynamic, it 
is possible that rural areas without IPPS wage data will vary in the 
future.) Consistent with our policy for determining a LTCH PPS wage 
index value for rural areas with no IPPS hospital wage data (described 
above), in this final rule, we determined the wage index value for RY 
2009 for rural Massachusetts by computing the unweighted average of the 
wage indices from all of the CBSAs that are contiguous to the rural 
counties in that State. Specifically, in the case of Massachusetts, the 
entire rural area consists of Dukes and Nantucket counties. As 
discussed in our proposal, we determined that the borders of Dukes and 
Nantucket counties are ``contiguous'' with Barnstable County, MA, and 
Bristol County, MA. Therefore, the RY 2009 LTCH PPS wage index value 
for rural Massachusetts is computed as the unweighted average of the RY 
2009 wage indexes for Barnstable county and Bristol county (refer to 
Tables 1 and 2 of the Addendum of this final rule). (As noted above, 
there are currently no LTCHs located in rural Massachusetts.) We 
discussed in the proposed rule, we believe that this policy could be 
readily applied to other rural areas (besides Massachusetts) that lack 
IPPS wage data (possibly due to acute-care hospitals converting to a 
different provider type that does not submit the appropriate wage 
data). However, we may re-examine the application of this policy should 
a similar situation arise in the future.
    The RY 2009 LTCH wage index values that will be applicable for LTCH 
discharges occurring on or after July 1, 2008 through September 30, 
2009, are presented in Table 1 (for urban areas) and Table 2 (for rural 
areas) in the Addendum of this final rule. As

[[Page 26819]]

discussed in greater detail above in section IV.B. of this preamble, we 
are moving the LTCH PPS annual payment rate update cycle from July 1 to 
October 1 and will have a 15-month rate year for 2009 (that is, July 1, 
2008 through September 30, 2009). Therefore, as proposed, the next 
proposed update to the LTCH wage index values will be effective for 
discharges occurring on or after October 1, 2009 (FY 2010). In 
addition, as noted above, the wage index adjustment under the LTCH PPS 
was completely phased in beginning with cost reporting periods 
beginning in FY 2007 (that is, for cost reporting periods beginning on 
or after October 1, 2006). Therefore, for LTCH PPS discharges occurring 
during RY 2009, the labor related portion of the standard Federal rate 
is adjusted by the applicable full (five fifths) proposed RY 2009 LTCH 
PPS wage index value, which are shown in Tables 1 and 2 of the Addendum 
to this final rule).
2. Adjustment for Cost-of-Living in Alaska and Hawaii
    In the August 30, 2002 final rule (67 FR 56022), we established, 
under Sec.  412.525(b), a cost of living adjustment (COLA) for LTCHs 
located in Alaska and Hawaii to account for the higher costs incurred 
in those States. In the RY 2008 LTCH PPS final rule (72 FR 26894), for 
RY 2008, we established a COLA to payments for LTCHs located in Alaska 
and Hawaii by multiplying the standard Federal payment rate by the 
appropriate factor listed in Table III of that same final rule.
    Similarly, in the RY 2009 LTCH PPS proposed rule (73 FR 5368), 
under the broad authority conferred upon the Secretary by section 123 
of the BBRA as amended by section 307(b) of BIPA to determine 
appropriate adjustments under the LTCH PPS, for RY 2009 we proposed to 
apply a COLA to payments to LTCHs located in Alaska and Hawaii by 
multiplying the proposed standard Federal payment rate by the proposed 
factors listed below in Table III because they were the most recent 
available data at that time. These proposed factors were obtained from 
the U.S. Office of Personnel Management (OPM) and are currently also 
used under the IPPS (72 FR 47422). In addition, we proposed that if OPM 
releases revised COLA factors before March 1, 2008, we would use the 
revised factors for the development of LTCH PPS payments for RY 2009 
and publish those revised COLA factors in the final rule.
    We received no comments on our proposed COLA for LTCHs located in 
Alaska and Hawaii for RY 2009. We note that as of March 1, 2008, OPM 
did not revise the COLA factors we proposed for RY 2009 in the proposed 
rule. Accordingly, in this final rule, under the broad authority 
conferred upon the Secretary by section 123 of the BBRA as amended by 
section 307(b) of BIPA to determine appropriate adjustments under the 
LTCH PPS, in this final rule, as proposed, we are establishing that for 
RY 2009 we will make a COLA to payments to LTCHs located in Alaska and 
Hawaii by multiplying the standard Federal payment rate by the factors 
listed below in Table III because they are the most recent available 
data at this time.

   Table III.--Cost-of-Living Adjustment Factors for Alaska and Hawaii
                Hospitals for the 2009 LTCH PPS Rate Year
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile) radius by          1.24
     road....................................................
    City of Fairbanks and 80-kilometer (50-mile) radius by          1.24
     road....................................................
    City of Juneau and 80-kilometer (50-mile) radius by road.       1.24
    All other areas of Alaska................................       1.25
Hawaii:
    City and County of Honolulu..............................       1.25
    County of Hawaii.........................................       1.17
    County of Kauai..........................................       1.25
    County of Maui and County of Kalawao.....................       1.25
------------------------------------------------------------------------

3. Adjustment for High-Cost Outliers (HCOs)
a. Background
    Under the broad authority conferred upon the Secretary by section 
123 of the BBRA as amended by section 307(b) of BIPA, in the 
regulations at Sec.  412.525(a), we established an adjustment for 
additional payments for outlier cases that have extraordinarily high 
costs relative to the costs of most discharges. We refer to these cases 
as high cost outliers (HCOs). Providing additional payments for 
outliers strongly improves the accuracy of the LTCH PPS in determining 
resource costs at the patient and hospital level. These additional 
payments reduce the financial losses that would otherwise be incurred 
when treating patients who require more costly care and, therefore, 
reduce the incentives to underserve these patients. We set the outlier 
threshold before the beginning of the applicable rate year so that 
total estimated outlier payments are projected to equal 8 percent of 
total estimated payments under the LTCH PPS. Outlier payments under the 
LTCH PPS are determined consistent with the instructions issued for the 
IPPS outlier policy.
    Under Sec.  412.525(a) in the regulations (in conjunction with the 
revised definition of ``LTC-DRG'' at Sec.  412.503), we make outlier 
payments for any discharges if the estimated cost of a case exceeds the 
adjusted LTCH PPS payment for the MS-LTC-DRG plus a fixed-loss amount. 
Specifically, in accordance with Sec.  412.525(a)(3) (in conjunction 
with the revised definition of ``LTC-DRG'' at Sec.  412.503), we pay 
outlier cases 80 percent of the difference between the estimated cost 
of the patient case and the outlier threshold, which is the sum of the 
adjusted Federal prospective payment for the MS-LTC-DRG and the fixed-
loss amount. The fixed-loss amount is the amount used to limit the loss 
that a hospital will incur under the outlier policy for a case with 
unusually high costs. This results in Medicare and the LTCH sharing 
financial risk in the treatment of extraordinarily costly cases. Under 
the LTCH PPS HCO policy, the LTCH's loss is limited to the fixed-loss 
amount and a fixed percentage (currently 80 percent) of costs above the 
outlier threshold (MS-LTCDRG payment plus the fixed-loss amount). The 
fixed percentage of costs is called the marginal cost factor. We 
calculate the estimated cost of a case by multiplying the Medicare 
allowable covered charge by the overall hospital cost-to-charge ratio 
(CCR).
    Under the LTCH PPS, we determine a fixed-loss amount, that is, the 
maximum

[[Page 26820]]

loss that a LTCH can incur under the LTCH PPS for a case with unusually 
high costs before the LTCH will receive any additional payments. We 
calculate the fixed-loss amount by estimating aggregate payments with 
and without an outlier policy. The fixed-loss amount will result in 
estimated total outlier payments being projected to be equal to 8 
percent of projected total LTCH PPS payments. Currently, MedPAR claims 
data and CCRs based on data from the most recent provider specific file 
(PSF) (or from the applicable Statewide average CCR if a LTCH's CCR 
data are faulty or unavailable) are used to establish a fixed-loss 
threshold amount under the LTCH PPS.
b. Cost-to-Charge Ratios (CCRs)
    The following is a discussion of cost-to-charge ratios (CCRs) used 
in determining payments for high cost and short-stay outlier cases 
under the LTCH PPS, at Sec.  412.525(a) and Sec.  412.529, 
respectively. Although this section is specific to HCO cases, because 
CCRs and the policies and methodologies pertaining to them are used in 
determining payments for both high cost and short-stay outlier (SSO) 
cases (as explained below), we are discussing the determination of CCRs 
under the LTCH PPS for both of these type of cases simultaneously. In 
section IV.G. of this final rule, which discusses SSO cases, we refer 
the reader to this section of the preamble for a complete discussion on 
the determination of CCRs.
    In determining both HCO payments (at Sec.  412.525(a)) and SSO 
payments (at Sec.  412.529), we calculate the estimated cost of the 
case by multiplying the LTCH's overall CCR by the Medicare allowable 
charges for the case. In general, we use the LTCH's overall CCR, which 
is computed based on either the most recently settled cost report or 
the most recent tentatively settled cost report, whichever is from the 
latest cost reporting period, in accordance with Sec.  
412.525(a)(4)(iv)(B) and Sec.  412.529(c)(4)(iv)(B) for HCOs and SSOs, 
respectively. (We note that in some instances we use an alternative 
CCR, such as the statewide average CCR in accordance with the 
regulations at Sec.  412.525(a)(4)(iv)(C) and Sec.  
412.529(c)(4)(iv)(C), or a CCR that is specified by CMS or that is 
requested by the hospital under the provisions of the regulations at 
Sec.  412.525(a)(4)(iv)(A) and Sec.  412.529(c)(4)(iv)(A).) Under the 
LTCH PPS, a single prospective payment per discharge is made for both 
inpatient operating and capital-related costs. Therefore, we compute a 
single ``overall'' or ``total'' LTCH-specific CCR based on the sum of 
LTCH operating and capital costs (as described in Chapter 3, section 
150.24, of the Medicare Claims Processing Manual (CMS Pub. 100-4)) as 
compared to total charges. Specifically, a LTCH's CCR is calculated by 
dividing a LTCH's total Medicare costs (That is, the sum of its 
operating and capital inpatient routine and ancillary costs) by its 
total Medicare charges (that is, the sum of its operating and capital 
inpatient routine and ancillary charges).
    Generally, a LTCH is assigned the applicable statewide average CCR 
if, among other things, a LTCH's CCR is found to be in excess of the 
applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This 
is because CCRs above this threshold are most likely due to faulty data 
reporting or entry, and, therefore, CCRs based on erroneous data should 
not be used to identify and make payments for outlier cases. Thus, 
under our established policy, generally, if a LTCH's calculated CCR is 
above the applicable ceiling, the applicable LTCH PPS statewide average 
CCR is assigned to the LTCH instead of the CCR computed from its most 
recent (settled or tentatively settled) cost report data.
    In the FY 2008 IPPS final rule with comment period, in accordance 
with Sec.  412.525(a)(4)(iv)(C)(2) for high-cost outliers and Sec.  
412.529(c)(4)(iv)(C)(2) for short-stay outliers, using our established 
methodology for determining the LTCH total CCR ceiling, based on IPPS 
total CCR data from the March 2007 update to the Provider-Specific File 
(PSF), we established a total CCR ceiling of 1.284 under the LTCH PPS 
effective October 1, 2007 through September 30, 2008. We also note that 
in the FY 2009 IPPS proposed rule (73 FR 23681), using our established 
methodology for determining the LTCH total CCR ceiling, based on IPPS 
total CCR data from the December 2007 update of the PSF, we proposed a 
total CCR ceiling of 1.262 under the LTCH PPS that would be effective 
October 1, 2008 through September 30, 2009. In that same proposed rule, 
we also proposed that if more recent data were available, we would use 
it to establish a total CCR ceiling under the LTCH PPS for FY 2009 in 
the FY 2009 IPPS final rule. (For further detail on our methodology for 
annually determining the LTCH total CCR ceiling, we refer readers to 
the FY 2007 IPPS final rule (71 FR 48119 through 48121) and the FY 2008 
IPPS final rule with comment period (72 FR 47403 through 47404).)
    Our general methodology established for determining the statewide 
average CCRs used under the LTCH PPS is similar to our established 
methodology for determining the LTCH total CCR ceiling (described 
above) since it is based on ``total'' IPPS CCR data. Under the LTCH PPS 
HCO policy at Sec.  412.525(a)(4)(iv)(C) and the SSO policy at Sec.  
412.529(c)(4)(iv)(C), the fiscal intermediary (FI) may use a statewide 
average CCR, which is established annually by CMS, if it is unable to 
determine an accurate CCR for a LTCH in one of the following 
circumstances: (1) New LTCHs that have not yet submitted their first 
Medicare cost report (for this purpose, consistent with current policy, 
a new LTCH is defined as an entity that has not accepted assignment of 
an existing hospital's provider agreement in accordance with Sec.  
489.18); (2) LTCHs whose CCR is in excess of the LTCH CCR ceiling (as 
discussed above); and (3) other LTCHs for whom data with which to 
calculate a CCR are not available (for example, missing or faulty 
data). (Other sources of data that the FI may consider in determining a 
LTCH's CCR include data from a different cost reporting period for the 
LTCH, data from the cost reporting period preceding the period in which 
the hospital began to be paid as a LTCH (that is, the period of at 
least 6 months that it was paid as a short-term acute care hospital), 
or data from other comparable LTCHs, such as LTCHs in the same chain or 
in the same region.)
    In Table 8C of the Addendum the FY 2008 IPPS final rule with 
comment period (72 FR 48127), in accordance with the regulations at 
Sec.  412.525(a)(4)(iv)(C) for HCOs and Sec.  412.529(c)(4)(iv)(C) for 
SSO, using our established methodology for determining the LTCH 
statewide average CCRs, based on using the most recent complete IPPS 
total CCR data from the March 2007 update of the PSF, we established 
the LTCH PPS statewide average total CCRs for urban and rural hospitals 
effective for discharges occurring on or after October 1, 2007, and 
before October 1, 2008. We note that in the FY 2009 IPPS proposed rule 
(73 FR 23681), using our established methodology for determining the 
LTCH statewide average CCRs, based on the most recent complete IPPS 
total CCR data from the December 2007 update of the PSF, we proposed 
LTCH PPS statewide average total CCRs for urban and rural hospitals 
that would be effective for discharges occurring on or after October 1, 
2008, and through September 30, 2009, in Table 8C of the Addendum to 
that proposed rule (73 FR 23874). In that same proposed rule, we also 
proposed that if more recent data were available, we would use it to 
establish LTCH PPS statewide average

[[Page 26821]]

total CCRs for urban and rural hospitals for FY 2009 in the FY 2009 
IPPS final rule. (For further detail on our methodology for annually 
determining the LTCH urban and rural statewide average CCRs, we refer 
readers to the FY 2007 IPPS final rule (71 FR 48119 through 48121) and 
FY 2008 IPPS final rule with comment period (72 FR 47403 through 
47404).)
    We note, under the LTCH PPS high cost outlier policy at Sec.  
412.525(a)(4)(iv)(D) and the LTCH PPS SSO policy at Sec.  
412.529(c)(4)(iv)(D), the payments for high cost outlier and SSO cases, 
respectively, are subject to reconciliation. Specifically, any 
reconciliation of outlier payments is based on the CCR calculated based 
on a ratio of costs to charges computed from the relevant cost report 
and charge data determined at the time the cost report coinciding with 
the discharge is settled. For additional information, refer to the RY 
2008 LTCH PPS final rule (72 FR 26899 through 26900).
c. Establishment of the RY 2009 Fixed-Loss Amount
    When we implemented the LTCH PPS, as discussed in the August 30, 
2002 LTCH PPS final rule (67 FR 56022 through 56026), under the broad 
authority of section 123 of the BBRA as amended by section 307(b) of 
BIPA, we established a fixed-loss amount so that total estimated 
outlier payments are projected to equal 8 percent of total estimated 
payments under the LTCH PPS. To determine the fixed-loss amount, we 
estimate outlier payments and total LTCH PPS payments for each case 
using claims data from the MedPAR files. Specifically, to determine the 
outlier payment for each case, we estimate the cost of the case by 
multiplying the Medicare covered charges from the claim by the LTCH's 
hospital specific CCR. Under Sec.  412.525(a)(3) (in conjunction with 
the revised definition of ``LTC-DRG'' at Sec.  412.503), if the 
estimated cost of the case exceeds the outlier threshold (the sum of 
the adjusted Federal prospective payment for the MS-LTC-DRG and the 
fixed-loss amount), we pay an outlier payment equal to 80 percent of 
the difference between the estimated cost of the case and the outlier 
threshold (the sum of the adjusted Federal prospective payment for the 
MS-LTC-DRG and the fixed-loss amount).
    In the RY 2008 LTCH PPS final rule (72 FR 26898), we used claims 
data from the December 2006 update of the FY 2006 MedPAR files and CCRs 
from the December 2006 update of the PSF, as those were the best 
available data at that time, to calculate a fixed-loss amount that 
would result in estimated outlier payments projected to be equal to 8 
percent of total estimated payments for the 2008 LTCH PPS rate year. We 
believe that CCRs from the PSF are the best available CCR data for 
determining estimated LTCH PPS payments for a given LTCH PPS rate year 
because they are the most recently available CCRs actually used to make 
LTCH PPS payments.
    We also discussed in the RY 2008 LTCH PPS rate year final rule (72 
FR 26898), we calculated a single fixed-loss amount for the 2008 LTCH 
PPS rate year based on the version 24.0 of the GROUPER, which was the 
version in effect as of the beginning of the LTCH PPS rate year (that 
is, July 1, 2007 for the 2008 LTCH PPS rate year). In addition, we 
applied the outlier policy in the regulations at Sec.  412.525(a) in 
determining the fixed-loss amount for the 2008 LTCH PPS rate year; that 
is, we assigned the applicable Statewide average CCR only to LTCHs 
whose CCRs exceeded the ceiling. Accordingly, we used the FY 2007 LTCH 
PPS total CCR ceiling of 1.321 (72 FR 26898). As noted in that same 
final rule, in determining the fixed-loss amount for the 2008 LTCH PPS 
rate year using the CCRs from the PSF, there were no LTCHs with missing 
CCRs or with CCRs in excess of the current ceiling and, therefore, 
there was no need for us to independently assign the applicable 
Statewide average CCR to any LTCHs in determining the fixed-loss amount 
for the 2008 LTCH PPS rate year (as this may have already been done by 
the FI in the PSF in accordance with the established policy).
    Accordingly, in the RY 2008 final rule (72 FR 26898), as amended by 
the RY 2008 correction notice (72 FR 36613), we established a fixed-
loss amount of $20,738 for the 2008 LTCH PPS rate year. In the recently 
issued interim final rule with comment that implements certain 
provisions of section 114 of the MMSEA, including the revision to the 
standard Federal rate for RY 2008, we revised the fixed-loss amount to 
$20,707 for discharges occurring on or after April 1, 2008 through June 
30, 2008. Thus, we pay an outlier case 80 percent of the difference 
between the estimated cost of the case and the outlier threshold (the 
sum of the adjusted Federal LTCH PPS payment for the MS-LTC-DRG and the 
applicable RY 2008 fixed-loss amount).
    In the RY 2009 proposed rule, for the 2009 LTCH PPS rate year, we 
used the March 2006 update of the FY 2006 MedPAR claims data to 
determine a proposed fixed-loss amount that would result in estimated 
outlier payments projected to be equal to 8 percent of total estimated 
payments, based on the policies described in that proposed rule, 
because those data were the most recent complete LTCH data available. 
Consistent with our historical practice of using the best data 
available, we also proposed that if more recent LTCH claims data become 
available, we would to use it for determining the fixed-loss amount for 
the 2009 LTCH PPS rate year in the final rule. In the proposed rule, as 
also noted previously, we proposed to determined the RY 2009 fixed-loss 
amount based on the version of the GROUPER that would be in effect as 
of the beginning of the 2009 LTCH PPS rate year (July 1, 2008), that 
is, Version 25.0 of the GROUPER (as established in the FY 2008 IPPS 
final rule (72 FR 47278)).
    Additionally, in the proposed rule, we used CCRs from the July 2007 
update of the PSF for determining the proposed fixed-loss amount for 
the 2009 LTCH PPS rate year as they were the most recent complete 
available data at that time. Consistent with our historical practice of 
using the best data available, we also proposed that if more recent CCR 
data were available, we would use it for determining the fixed-loss 
amount for the 2009 LTCH PPS rate year in the final rule. Furthermore, 
in determining the proposed fixed-loss amount for the 2009 LTCH PPS 
rate year, we used the current FY 2008 applicable LTCH ``total'' CCR 
ceiling of 1.284 and LTCH Statewide average ``total'' CCRs established 
in the FY 2008 IPPS final rule (72 FR 47404 and 48126 through 48127) 
such that the current applicable Statewide average CCR would be 
assigned if, among other things, a LTCH's CCR exceeded the current 
ceiling (1.284).
    Therefore, based on the data and policies described in the proposed 
rule, under the broad authority of section 123(a)(1) of the BBRA and 
section 307(b)(1) of BIPA, in this final rule, we are establishing a 
fixed-loss amount of $22,960 for the 2009 LTCH PPS rate year. Thus, we 
pay an outlier case 80 percent of the difference between the estimated 
cost of the case and the outlier threshold (the sum of the adjusted 
proposed Federal LTCH payment for the MS-LTC-DRG and the fixed-loss 
amount of $22,960).
    Comment: A few commenters expressed concern that we made an error 
in computing the proposed fixed-loss amount by not incorporating the 
changes to LTCH PPS payments provided for by the MMSEA, such as the 
modification to the payment formula for short-stay outlier (SSO) cases 
at Sec.  412.529 and to the payment adjustments to LTCH discharges that

[[Page 26822]]

were admitted from specific referring hospitals and that exceed various 
percentage thresholds at Sec. Sec.  412.534 and 412.536 (often referred 
to as the ``25-percent rule'') that were current law. These commenters 
expected that because these MMSEA provisions would increase LTCH PPS 
payments in RY 2009, the fixed-loss amount for RY 2009 should either 
decrease from the current RY 2008 amount or be lower than the proposed 
fixed-loss amount (holding all other factors constant). The commenters 
believed that because total estimated RY 2009 LTCH PPS payments that 
include the effect of these MMSEA provisions would increase over the 
original estimate of RY 2009 LTCH PPS payments, the 8 percent outlier 
target that is based on total estimated payments would also increase in 
size, and therefore, the fixed-loss amount for RY 2009 should decrease 
in order to increase estimated high cost outlier payments so as to meet 
the 8 percent target. Several commenters also stated that they believe 
that, because we are projecting that estimated LTCH PPS payments would 
increase in RY 2009 as compared to RY 2008, the fixed-loss amount for 
RY 2009 should decrease relative to the RY 2008 fixed-loss amount. 
Therefore, these commenters recommended that the calculation of the 
fixed-loss amount for RY 2009 be revised to take into account all the 
known policy changes that would affect LTCH PPS payments in RY 2009, 
including those mandated by the MMSEA, as to not establish a fixed-loss 
amount that would result in ``underpayment'' to LTCHs. A few other 
commenters opposed the proposed increase to the fixed-loss amount since 
such an increase would result in fewer cases qualifying for an 
additional high cost outlier payment. One commenter remarked that the 
proposed ``modest increase'' in the fixed-loss amount is 
``acceptable,'' but asserted that LTCHs with very high case-mix indexes 
would be impacted more than LTCHs with low case-mix indexes. Another 
commenter stated that the proposed increase to the fixed-loss amount 
failed to consider the acuity of patients and is based only on 
mathematics. The commenter added that the proposed increase to the 
fixed-loss amount would further increase LTCHs' loss on these cases 
before they qualify for an additional payment as HCOs. The commenter 
recommended that if CMS believes an increase to the fixed-loss amount 
is warranted, then any increase to the fixed-loss amount should be 
limited to an annual inflationary increase.
    Response: We disagree with the commenters that we erred in the 
computation of the proposed fixed-loss amount by not incorporating all 
of the known policy changes that would affect LTCH PPS payments in RY 
2009. In addition to including the proposed changes to the rates and 
factor for RY 2009 included in the proposed rule, such as the proposed 
2.6 percent RY 2009 Federal rate, we did in fact include those 
provisions of the MMSEA that would affect RY 2009 LTCH PPS payments. 
Specifically, our payment model for estimating RY 2009 LTCH PPS 
payments, used in both the proposed rule and in this final rule, 
incorporated the modification to the payment formula for SSO cases, 
such that in RY 2009 LTCH payments for SSO cases would be the lesser of 
100 percent of the estimated cost of the case; 120 percent of the MS-
LTC-DRG specific per diem amount for each covered day; the full LTC-DRG 
payment; or a blend of the 120 percent of the MS-LTC-DRG specific per 
diem amount and an amount comparable to the IPPS per diem amount 
(capped at the full IPPS comparable amount). With respect to the ``25-
percent rule,'' historically in estimating LTCH PPS payments for 
purposes of determining the fixed-loss amount (and for the impact 
analysis, as we discuss in section XI. of this final rule), we have not 
included an estimated change in payments due to the payment adjustments 
to LTCH discharges that were admitted from specific referring hospitals 
and that exceed various percentage thresholds at Sec. Sec.  412.534 and 
412.536. We are not aware of any instances where the FI has made any 
adjustments to LTCHs' payments under this policy. Consequently, we 
believe that LTCHs have modified their admission practices such that 
they have not become subject to those payment adjustments, and 
therefore, no estimated payment adjustments under these provisions are 
reflected in our payment model. Therefore, as the commenters 
recommended, in calculating both the proposed RY 2009 fixed-loss amount 
and the RY 2009 fixed-loss amount established in this final rule, we 
have taken into account all the known policy changes that would affect 
LTCH PPS payments in RY 2009, including those mandated by the MMSEA.
    Generally, we would agree with the commenters that an estimated 
increase in LTCH PPS payments alone, holding all other factors 
constant, should result in a decrease in the fixed-loss amount from the 
current fixed-loss amount. However, the commenters have not considered 
other factors that affect the computation of the fixed-loss amount. 
Specifically, as discussed in the proposed rule and as discussed below 
in this section, we used the best available LTCH claims data from the 
MedPAR files and CCRs from the PSF to estimate total LTCH PPS payments 
and to estimate the costs of each case, as well as the payment rates, 
factors and policies that would be in effect during the applicable time 
period, in determining a fixed-loss amount that would result in 
estimated outlier payments that would be equal to 8 percent of total 
estimated payments. In computing the current fixed-loss amount for RY 
2008, as noted above, we used claims data from the December 2006 update 
of the FY 2006 MedPAR files and CCRs from the December 2006 update of 
the PSF, as that was the best available data at that time. We also used 
Version 24.0 (FY 2007) of the GROUPER software and the FY 2007 LTC-DRG 
relative weights to determine the RY 2008 fixed-loss amount as this was 
the version that was in effect as of the beginning of RY 2008 (July 1, 
2007). In the proposed rule, in computing the proposed fixed-loss 
amount for RY 2009 that would result in estimated outlier payments that 
would be equal to 8 percent of total estimated payments, we used LTCH 
claims data from the March 2006 update of the FY 2006 MedPAR files and 
CCRs from the July 2007 update of the PSF as they were the most recent 
complete available data at that time. We also used Version 25.0 (FY 
2008) of the GROUPER software and the FY 2008 MS-LTC-DRG relative 
weights to determine the proposed RY 2009 fixed-loss amount as this 
would be the version that would be in effect as of the beginning of RY 
2009 (July 1, 2008). As we have discussed throughout this section, in 
order to determine a fixed-loss amount that would result in estimated 
high cost outlier payments that would be equal to 8 percent of total 
estimated payments, it is necessary to use the best available payment 
rates, factors and policy information upon which to compute those 
payment estimates, and therefore, it would be inappropriate to ``hold 
all other factors constant'' when determining the fixed-loss amount. 
Furthermore, based on the most recent available data and payment model 
described above, we currently project that estimated RY 2008 high cost 
outlier payments are approximately 8.2 percent of estimated total RY 
2008 LTCH PPS payments. Maintaining the fixed-loss amount at the 
current level would result in HCO payment that exceed the current 
regulatory

[[Page 26823]]

requirement that estimated HCO payments would be projected to equal 8 
percent of estimated total LTCH PPS payments. Therefore, based on more 
recent data, it appears that the current RY 2008 fixed-loss amount may 
be too low since estimated HCO payments are slightly higher than the 8 
percent target. For these reasons, we disagree with commenters that 
just because we are projecting an estimated increase in LTCH PPS 
payments in RY 2009 as compared to RY 2008, the fixed-loss amount for 
RY 2009 should decrease relative to the RY 2008 fixed-loss amount or 
should be lower than the proposed RY 2009 fixed-loss amount.
    We acknowledge that an increase to the fixed-loss amount will 
increase a LTCH's ``loss'' on a specific case before it qualifies for 
an additional payment a HCO, as noted by one commenter; however, as we 
explained in the RY 2007 LTCH PPS final rule (71 FR 27836), because a 
relatively higher fixed-loss amount identifies fewer cases as HCO cases 
(since the amount that the estimated cost of the case must exceed 
before the case qualifies as a HCO case is higher), such a policy 
better identifies LTCH patients that are unusually costly cases. The 
intent of the HCO policy is to provide an additional payment to LTCH 
cases that have unusually high costs. We would remind commenters that 
if we would not increase the fixed-loss amount, HCO payments would 
represent significantly more than 8 percent of estimated total LTCH PPS 
payments. Furthermore, as also discussed in the same RY 2007 final 
rule, HCO payments are budget neutral and are funded by prospectively 
reducing the non-outlier PPS payment rates by projected total outlier 
payments. The higher the outlier target, the greater the (prospective) 
reduction to the base payment that would need to be applied to the 
standard Federal rate in order to maintain budget neutrality. Moreover 
in the proposed rule (73 FR 5371), we discussed the possibility of 
adjusting the existing 8 percent outlier target or 80 percent marginal 
cost factor under the LTCH PPS HCO policy and explained our reasons for 
not proposing to make any changes to those components of the LTCH PPS 
HCO policy at that time. However, we stated that we continue to be 
interested in any comments that would support revisiting the analysis 
that was used to establish the existing 8 percent outlier target and 
the existing 80 percent marginal cost factor, using the most recent 
available data to evaluate whether any changes to the current HCO 
policy should be made, and therefore, may result in a smaller increase 
(or even a decrease) in the fixed-loss amount for RY 2009. We received 
no comments in response to this solicitation or in response to our 
decision not to propose changes to the existing 8 percent outlier 
target and the existing 80 percent marginal cost factor. Therefore, for 
the reasons cited previously in this response, we continue to believe 
that it is appropriate to increase the fixed-loss amount in order to 
maintain estimated HCO payments at the projected 8 percent of total 
estimated payments. Such a policy continues to appropriately identify 
cases that are HCO cases (that is, cases with an unusually high cost). 
Because maintaining an 8 percent outlier target necessitates an 
increase to the fixed-loss amount based on our payment simulations, we 
are not adopting the commenter's suggestion to limit any increase to 
the fixed-loss to an annual inflationary increase, such as the most 
recent estimate of the LTCH PPS market basket because that would result 
in estimated outlier payments in excess of 8 percent of estimated total 
LTCH PPS payments.
    We appreciate the commenters' acceptance of the proposed increase 
to the fixed-loss amount; however, we disagree that the increase would 
have a disproportionate impact on LTCHs with very high case-mix indexes 
as compared to LTCHs with low case-mix indexes. Rather we believe that 
LTCHs with high and low case mix indexes would be impacted similarly by 
the change in the fixed loss amount. High cost outlier payments are 
made to LTCHs when the estimated costs of a case exceed the adjusted 
MS-LTC-DRG payment amount by more than the fixed-loss amount, with the 
additional outlier payment equaling 80 percent of that difference as 
provided in Sec.  412.525(a) (in conjunction with Sec.  412.503). Cases 
in MS-LTC-DRGs with higher relative weights (higher case-mix) receive 
higher adjusted MS-LTC-DRG payments than cases in MS-LTC-DRGs with 
lower relative weights (lower case-mix). With differences in case-mix 
already accounted for in the adjusted MS-LTC-DRG payment amounts that 
are part of the formula for determining high cost outlier payments, 
LTCHs with higher or lower case-mix are treated similarly in terms of 
how much costs must exceed the adjusted MS-LTC-DRG payment amount by in 
order to receive additional high cost outlier payments. In addition, as 
we discussed in the RY 2007 final rule (71 FR 27835), LTCHs could have 
a relatively high case-mix index, but have few or no HCO cases since a 
``high'' case-mix index is an indication of the level of intensity of 
the types of patients treated at a LTCH and not necessarily an 
indication of treating unusually high cost cases.
    In summary, we believe that an increase to the fixed-loss amount 
for RY 2009 is appropriate. We are using the same methodology that we 
proposed to use in the RY 2009 proposed rule to calculate the fixed-
loss amount for RY 2009 in this final rule (using updated data and the 
policies established in this final rule, as described below) in order 
to maintain estimated HCO payments at the projected 8 percent of total 
estimated LTCH PPS payments. Consistent with our historical practice of 
using the best data available as we proposed, in this final rule, in 
determining the fixed-loss amount for RY 2009, we used the most recent 
available LTCH claims data and CCR data, as well as all the known 
policy changes that would affect LTCH PPS payments in RY 2009, 
including those mandated by the MMSEA and those established in this 
final rule. Specifically, in this final rule, for the 2009 LTCH PPS 
rate year, we used LTCH claims data from the December 2007 update of 
the FY 2007 MedPAR files to determine a fixed-loss amount that would 
result in estimated outlier payments projected to be equal to 8 percent 
of total estimated payments in RY 2009, based on the policies described 
in this final rule (including those established in section 114 of the 
MMSEA as discussed above), because these data are the most recent 
complete LTCH data currently available. As noted above, as proposed, we 
determined the RY 2009 fixed-loss amount based on the version of the 
GROUPER that will be in effect as of the beginning of the 2009 LTCH PPS 
rate year (July 1, 2008), that is, Version 25.0 of the GROUPER (as 
established in the FY 2008 IPPS final rule (72 FR 47278)). 
Additionally, in this final rule, we used CCRs from the January 2008 
update of the PSF for determining the RY 2009 fixed-loss amount as they 
are the most recent complete data currently available. Furthermore, as 
proposed, in determining the RY 2009 fixed-loss amount, we used the 
current FY 2008 applicable LTCH ``total'' CCR ceiling of 1.284 and LTCH 
Statewide average ``total'' CCRs established in the FY 2008 IPPS final 
rule (72 FR 47404 and 48126 through 48127) such that the current 
applicable Statewide average CCR would be assigned if, among other 
things, a LTCH's CCR exceeded the current ceiling (1.284). As was the 
case when we determined the proposed RY 2009 fixed-loss amount in the 
proposed

[[Page 26824]]

rule, in determining the RY 2009 fixed-loss amount using the CCRs from 
the PSF, there was no need for us to independently assign the 
applicable Statewide average CCR to any LTCHs (as this may have already 
been done by the FI or MAC in the PSF in accordance with our 
established policy). (Currently, the applicable FY 2008 LTCH Statewide 
average CCRs can be found in Table 8C of the FY 2008 IPPS final rule 
(72 FR 48126 through 48127).)
    In this final rule, based on the data and policies described in 
this final rule (including those established in section 114 of the 
MMSEA as discussed above), under the broad authority of section 
123(a)(1) of the BBRA and section 307(b)(1) of BIPA, we are 
establishing a fixed-loss amount of $22,960 for the 2009 LTCH PPS rate 
year. Thus, we will to pay an outlier case 80 percent of the difference 
between the estimated cost of the case and the outlier threshold (the 
sum of the adjusted Federal LTCH payment for the MS-LTC-DRG and the 
fixed-loss amount of $22,960).
    We note that the final fixed-loss amount for RY 2009 is somewhat 
higher than the proposed RY 2009 fixed-loss amount of $21,199 and the 
current fixed-loss amount of $20,738. As discussed in greater detail 
above, based on the most recent available LTCH data to estimate the 
cost of each LTCH case and estimated total LTCH PPS payments, this 
increase in the fixed-loss amount is appropriate and necessary to 
maintain the requirement that estimated outlier payments would be 
projected to be equal to 8 percent of estimated total LTCH PPS 
payments, as required under Sec.  412.525(a). As stated above, based on 
the most recent available data we estimate that the current fixed-loss 
amount may be too low as our payment models project that RY 2008 HCO 
payments are estimated to equal 8.2 percent of total estimated LTCH PPS 
payments. As we discussed in the proposed rule (73 FR 5371), 
maintaining the fixed-loss amount at the current level would result in 
HCO payments above the current regulatory requirement that estimated 
outlier payments would be projected to equal 8 percent of estimated 
total LTCH PPS payments. Based on the regression analysis that was 
performed when we implemented the LTCH PPS (August 30, 2002 final rule 
(67 FR 56022 through 56027)), we established the outlier target at 8 
percent of estimated total LTCH PPS payments to allow us to achieve a 
balance between the ``conflicting considerations of the need to protect 
hospitals with costly cases, while maintaining incentives to improve 
overall efficiency'' (67 FR 56024). That regression analysis also 
showed that additional increments of outlier payments over 8 percent 
(that is, raising the outlier target to a larger percentage than 8 
percent) would reduce financial risk, but by successively smaller 
amounts. Outlier payments are budget neutral, and therefore, outlier 
payments are funded by prospectively reducing the non-outlier PPS 
payment rates by projected total outlier payments. The higher the 
outlier target, the greater the (prospective) reduction to the base 
payment would need to be applied to the Federal rate to maintain budget 
neutrality.
    As an alternative to proposing to lower the fixed-loss amount for 
RY 2009, in the proposed rule (73 FR 5371), we discussed adjusting the 
marginal cost factor (that is, the percentage that Medicare will pay of 
the estimated cost of a case that exceeds the sum of the adjusted 
Federal prospective payment for the MS-LTC-DRG and the fixed-loss 
amount for LTCH PPS outlier cases as specified in Sec.  412.525(a)(3) 
(in conjunction with the revised definition of ``LTC-DRG'' at Sec.  
412.503), which is currently equal to 80 percent, as a means of 
ensuring that estimated outlier payments would be projected to equal 8 
percent of estimated total LTCH PPS payments. When we initially 
established the 80 percent marginal cost factor in the August 30, 2002 
final rule (67 FR 56022 through 56027), we explained that our analysis 
of payment-to-cost ratios for HCO cases showed that a marginal cost 
factor of 80 percent appropriately addresses outlier cases that are 
significantly more expensive than nonoutlier cases, while 
simultaneously maintaining the integrity of the LTCH PPS.
    In proposing increases to the fixed-loss amount for RY 2007, RY 
2008 and RY 2009 (71 FR 27834; 72 FR 4799 through 4800; and 73 FR 5371, 
respectively), we solicited comments on whether we should revisit the 
regression analysis discussed above in this section that was used to 
establish the existing 8 percent outlier target and 80 percent marginal 
cost factor, using the most recent available data to evaluate whether 
the current outlier target of 8 percent or the 80 percent marginal cost 
factor should be adjusted, and therefore, could have resulted in less 
of an increase in the fixed-loss amount for RY 2007 and RY 2008, 
respectively. In response to this solicitation in the RY 2007 proposed 
rule (as summarized in the RY 2007 LTCH PPS final rule (71 FR 27834 
through 27835)), several commenters opposed any option that would allow 
us to revisit the regression analysis that was used to establish the 
existing 80 percent marginal cost factor and existing outlier target of 
8 percent. The commenters stated their belief that the LTCH PPS is 
still in its early stages and further changes to the 80 percent 
marginal cost factor or 8 percent outlier target would result in 
instability to the system. The commenters cautioned against making any 
premature changes to the factors affecting HCO payments to LTCHs, 
particularly the marginal cost factor and outlier target established by 
regulation when the LTCH PPS was implemented. Also, the commenters 
agreed that keeping the marginal cost factor at 80 percent and the 
outlier pool at 8 percent better identifies LTCH patients that are 
unusually costly cases, and that this policy appropriately addresses 
outlier cases that are significantly more expensive than non-outlier 
cases. Similarly, as summarized in the RY 2008 final rule (72 FR 26897 
through 26899), we received no comments in support of revisiting the 
regression analysis discussed above that was used to establish the 
existing 8 percent outlier target and 80 percent marginal cost factor, 
using the most recent available data to evaluate whether the current 
outlier target of 8 percent or the 80 percent marginal cost factor 
should be adjusted in response to our solicitation on this issue. As 
noted above, we received no response to this solicitation in the RY 
2009 proposed rule.
    In response to these comments, we agreed with the commenters that, 
based on the regression analysis done for the implementation of the 
LTCH PPS (August 30, 2002; 68 FR 56022 through 56027), a marginal cost 
factor of 80 percent and a outlier target of 8 percent adequately 
identifies LTCH patients that are unusually costly cases, and that such 
a policy appropriately addresses LTCH HCO cases that are significantly 
more expensive than non-outlier cases, which is consistent with our 
intent of the LTCH HCO policy as stated when we implemented the LTCH 
PPS in the August 30, 2002 final rule (67 FR 56025). Therefore, as 
supported by many commenters, in both the RY 2007 final rule (71 FR 
27834) and the RY 2008 final rule (72 FR 26897 through 26899), we did 
not revisit the regression analysis that was used to establish the 
existing 80 percent marginal cost factor and existing outlier target of 
8 percent, and therefore, did not make any changes to the marginal cost 
factor or outlier target in either of those final rules.
    Although increasing the fixed-loss amount from $20,738 to $22,960 
based on the latest available data and all known policy changes that 
would affect LTCH PPS payments in RY 2009,

[[Page 26825]]

including those mandated by the MMSEA and those established in this 
final rule, will increase the amount of the ``loss'' that LTCH must 
incur under the LTCH PPS for a case with unusually high costs before 
the LTCH would receive any additional Medicare payments, as we 
discussed above and as we explained in greater detail in the RY 2006 
LTCH PPS final rule (70 FR 24195 through 24196), we continue to believe 
that the existing 8 percent outlier target and 80 percent marginal cost 
factor continue to adequately maintain the LTCHs' share of the 
financial risk in treating the most costly patients and ensure the 
efficient delivery of services. Accordingly, we are not adjusting the 
existing 8 percent outlier target or 80 percent marginal cost factor 
under the LTCH PPS HCO policy at this time.
    For the reasons described above, we believe the final fixed-loss 
amount of $22,960 will appropriately identify unusually costly LTCH 
cases while maintaining the integrity of the LTCH PPS. Therefore, under 
the broad authority of section 123(a)(1) of the BBRA and section 
307(b)(1) of BIPA, we are establishing a fixed-loss amount of $22,960 
based on the best available LTCH data and all of the known policy 
changes that would affect LTCH PPS payments in RY 2009, including those 
mandated by the MMSEA and those established in this final rule, because 
we believe an increase in the fixed-loss amount is appropriate and 
necessary to maintain estimated outlier payments which are projected to 
be equal to 8 percent of estimated total LTCH PPS payments, as required 
under Sec.  412.525(a).
d. Application of Outlier Policy to Short-Stay Outlier (SSO) Cases
    As we discussed in the August 30, 2002 final rule (67 FR 56026), 
under some rare circumstances, a LTCH discharge could qualify as a SSO 
case (as defined in the regulations at Sec.  412.529 in conjunction 
with the regulations at Sec.  412.503 and discussed in section IV.G. of 
this preamble) and also as a HCO case. In this scenario, a patient 
could be hospitalized for less than five-sixths of the geometric ALOS 
for the specific MS-LTC-DRG, and yet incur extraordinarily high 
treatment costs. If the costs exceeded the high cost outlier threshold 
(that is, the SSO payment plus the fixed-loss amount), the discharge is 
eligible for payment as a HCO. Thus, for a SSO case in the 2009 LTCH 
PPS rate year, the HCO payment would be 80 percent of the difference 
between the estimated cost of the case and the outlier threshold (the 
sum of the proposed fixed-loss amount of $22,960 and the amount paid 
under the SSO policy as specified in Sec.  412.529).
4. Other Payment Adjustments
    Section 123(a)(1) of the BBRA, as amended by section 307(b) of 
BIPA, granted the Secretary broad authority to determine appropriate 
adjustments under the LTCH PPS, including whether (and how) to provide 
for adjustments to reflect variations in the necessary costs of 
treatment among LTCHs. In developing the LTCH PPS payment methodology, 
we conducted extensive regression analyses of the relationship between 
LTCH costs (including both operating and capital-related costs per 
case) and several factors that may affect costs such as the percent of 
Medicaid patients treated, the percent of Supplemental Security Income 
(SSI) patients treated, the hospital's geographic location, and 
training residents in approved medical education programs (67 FR 
56014). The appropriateness of potential payment adjustments were 
evaluated based upon whether including each adjustment increased the 
accuracy of payments to LTCHs.
    In the August 30, 2002 LTCH PPS final rule, we detailed the 
extensive data analysis performed by our contractor, 3M Health 
Information Systems (3M) and our resulting decisions to implement a 
COLA for LTCHs in Alaska and Hawaii (Sec.  412.525(b)) and an 
adjustment to account for geographical differences in area wage levels 
(Sec.  412.525(c)). In addition, we discussed the extensive data 
analyses that led to the decision not to implement adjustments for 
geographic reclassification, rural location, the treatment of a 
disproportionate share of low-income patients (DSH), or indirect 
medical education (IME) costs. We also noted that we would continue to 
collect data and revisit these determinations as additional data became 
available. (For more detailed information, see 67 FR 56014 through 
56027.)
    When we implemented the LTCH PPS for FY 2003, we provided for a 5-
year transition period (Sec.  412.533), to allow LTCHs time to adjust 
to the new payment system (67 FR 56038). For cost reporting periods 
beginning on or after October 1, 2006, the final year of the 5-year 
transition, LTCHs are paid based on 100 percent of the Federal rate.
    We continued to collect and interpret new data as they became 
available to determine if these data support proposing any additional 
payment adjustments. In both the RY 2007 and the RY 2008 LTCH PPS final 
rules, we stated that we believed that it was appropriate to wait for 
the conclusion of the 5-year transition to 100 percent of the Federal 
rate under the LTCH PPS to maximize the availability of data that 
reflected LTCH behavior in response to the implementation of the LTCH 
PPS. The availability of this data would allow us to conduct a 
comprehensive reevaluation of payment adjustments under the LTCH PPS. 
(See the RY 2007 and RY 2008 LTCH PPS final rules (71 FR 27839) and (72 
FR 26900), respectively.)
    Therefore, in the RY 2009 LTCH PPS proposed rule, we indicated that 
we had 3M perform data analyses similar to those conducted at the 
inception of the LTCH PPS for FY 2003. 3M evaluated LTCH data from the 
most recent cost report files in our HCRIS database (updated through 
June 30, 2007) for providers' cost reports beginning during fiscal 
years 2004 through 2006 (73 FR 5371 through 5372). At that time, we 
stated that we believe that in the 5 years since the start of the LTCH 
PPS, there has been sufficient new data generated to allow for a 
comprehensive reevaluation of the appropriateness of payment 
adjustments such as geographic reclassification, rural location, DSH, 
and IME under the LTCH PPS at this time.
    In the RY 2009 LTCH PPS proposed rule, we stated that our most 
recent data analysis which is based on the comprehensive data analysis 
by 3M (referenced above), indicates that proposing payment adjustments 
for geographic reclassification, rural location, DSH, or indirect 
medical education (IME) costs would not improve the accuracy of 
payments to LTCHs (73 FR 3772). (3M's ``Report on LTCH Payment 
Methodology Review and Results'' is posted on our Web site at http://www.cms.hhs.gov/LongTermCareHospitalPPS/08_download.asp#TopOfPage. We 
also noted that we believed that these analyses confirm our initial 
determinations as we developed the LTCH PPS regarding the applicability 
of PPS payment adjustments. Therefore, we did not propose to adopt any 
additional payment adjustments such as geographic reclassification, 
rural location, DSH, or IME, as features of the LTCH PPS. Finalized 
policies for the RY 2009 wage index adjustment and the COLA were 
discussed in sections IV.D.1 and 2. of this final rule, respectively. 
Furthermore, now that the 5-year transition to the LTCH PPS was 
completed, we noted that we had collected data that reflects LTCH 
behavior in response to the implementation of the LTCH PPS. We believe 
that our above described analyses of LTCH PPS data do not

[[Page 26826]]

support the adoption of any additional payment adjustments. We further 
stated that we believe that since 3M's recent analyses confirm policy 
determinations that had been in place since the implementation of the 
LTCH PPS for FY 2003, that annual data analyses related to potential 
payment adjustments for geographic reclassification, rural location, 
DSH or IME would not be necessary barring significant transformations 
in the nature of the LTCH universe or substantial changes in Medicare 
payment outcomes that warrant additional evaluation.
    Comment: One commenter requested that we consider applying a 
payment adjustment under the LTCH PPS to account for increased provider 
costs at LTCHs for dialysis patients. Specifically, the commenter 
suggested that we adopt the IPPS policy of providing additional 
payments to LTCHs if 10 percent or more of the hospital's annual 
Medicare discharges are dialysis patients. Alternatively, the commenter 
suggested that a new MS-DRG be added to recognize the increase in LTCH 
resources utilized by a patient requiring dialysis. The commenter also 
states that Medicare payments presently do not take into account 
resources used for providing higher intensity wound care that does not 
require surgical intervention. The commenter suggests that Medicare 
undertake a study to determine whether the MS-DRG system captures the 
resource intensity necessary for treating this group of patients.
    Response: When we were designing the payment system for LTCHs, we 
evaluated the policies and payment adjustments that are features of the 
PPS for inpatient acute care hospitals (IPPS) and our contractor, 3M 
Health Information Systems conducted comprehensive analyses of CMS data 
to determine which elements were appropriate for adoption in the 
projected LTCH PPS. It was apparent from these analyses that even 
though LTCHs are certified as acute care hospitals and further, that in 
many communities, patients that could otherwise be treated in LTCHs are 
treated in acute care hospitals as high cost outliers, that there are 
differences between the hospitals' systems that should result in 
different payment features. One of these features was the ESRD payment 
add-on. Under the IPPS, additional payments are made for patients with 
ESRD who receive dialysis treatment during an inpatient hospital stay 
unless the principal diagnosis (which determines the Major Diagnostic 
Category to which a case is assigned) is one of three diagnosis-related 
groups (MS-DRGs) directly related to kidney disease. An IPPS hospital 
is eligible for the additional payment if ESRD beneficiaries, excluding 
discharges classified into the three MS-DRGs directly related to kidney 
disease, constitute at least 10 percent of the hospital's total 
Medicare discharges. Furthermore, in order for such a case to count 
towards the threshold percentage, the patient must be certified as an 
end stage renal dialysis (ESRD) patient, that is, the patient must have 
applied and been approved for this program. (The specifics of this 
payment adjustment are set forth at Sec.  412.104.) The reason for this 
is that the number of patients requiring ESRD treatment in all of the 
acute care hospitals in the country over the course of any year (other 
than in those three MS-DRGs referenced above), represent a small 
fraction of acute care hospital cases. Therefore, the costs for 
treating that small number of cases would not be substantially 
reflected in the averaging methodology that we use to determine the 
relative payment for each MS-DRG. If an acute care hospital, for 
example, treats a patient with a broken leg who also needs dialysis, 
costs of the dialysis treatment for that patient would not have a 
significant impact on the averaging process of costs for all broken leg 
cases nationwide, and would not be factored into the DRG payment for 
that case to that acute care hospital. We have established the ESRD 
add-on because we believed that if more than 10 percent of such a 
hospital's discharges during a cost reporting period presented such a 
scenario, this additional payment would ensure that the acute care 
hospital was adequately compensated by Medicare for providing total 
medial treatment for such patients.
    In response to the commenter's suggestion that we adopt a similar 
policy under the LTCH PPS, we continue to believe that applying this 
payment adjustment to LTCHs would be inappropriate. LTCH's typically 
treat very sick patients with a number of serious secondary illnesses 
(multicomorbidities) that require hospital-level care for, on average, 
greater than 25 days for any one spell of illness. We believe that 
given the patient population treated at LTCHs, a higher proportion of 
LTCH patients would require dialysis than would be treated at an acute 
care hospital and paid for under the IPPS. Although the LTCH PPS uses 
the same patient classification system as is used by the IPPS, the 
relative weights assigned to the MS-LTC-DRGs under the LTCH PPS, are 
based on LTCH cases which reflect ``differences in patient resource use 
and costs,'' in LTCHs as mandated by the Balanced Budget Refinement Act 
(BBRA) of 1999, the initial enabling statute for the establishment of 
the LTCH PPS. A patient-classification system using relative weights, 
such as the DRG-based system used by both the IPPS and the LTCH PPS, 
determines the amount that Medicare pays for particular types of cases, 
based on the hospital resources employed in treating such cases as 
compared to the resources utilized in treating other types of cases and 
assigns all cases numerical values, called ``relative weights''. Data, 
such as charges, used to measure hospital resource use for each MS-LTC-
DRG are captured on patient claims which Medicare uses in the annual 
update of the relative weights. Accordingly, we believe that the 
additional resources associated with renal dialysis treatments are 
include in the data used to set the MS-LTC-DRG relative weights each 
year.
    The BBRA also required that total estimated payments under the LTCH 
PPS, established at the outset of the LTCH PPS for cost reporting 
periods beginning on or after October 1, 2002, was to be budget neutral 
to what Medicare would have paid under the then-existing reasonable-
cost based TEFRA payment system had the LTCH PPS not been implemented. 
All patient treatment costs reflected in the LTCH cost data under the 
TEFRA payment system were included in our calculation of the base 
standard Federal rate that was established for FY 2003. Since FY2003, 
the standard Federal Rate has been updated annually (48 FR 39746 and 67 
FR 55957). Accordingly, we believe that since renal dialysis treatments 
were among treatments offered at LTCHs prior to the beginning of the 
LTCH PPS (for cost reporting periods beginning on or after October 1, 
2002), that the costs of such treatments would have been included in 
the base standard Federal rate, which is the foundation of the current 
standard Federal rate (and the RY 2009 standard Federal rate).
    Given the typical profile of the Medicare beneficiary receiving 
treatment in LTCHs, dialysis is not an uncommon treatment so we believe 
that the costs associated with ESRD as a secondary diagnoses or 
comorbidity are both reflected in the setting of the standard Federal 
payment rate and also are reasonably reflected in the annual update of 
the MS-LTC-DRG weights based on the resources used in treating cases 
that are grouped into specific MS-LTC-DRGs (see 67 FR 55984 through 
55995 and 72 FR 47277). Therefore, we believe our payments for specific 
cases

[[Page 26827]]

under the LTCH PPS include the higher costs associated with dialysis 
treatments for patients in LTCHs without any additional add-on. 
Furthermore, an additional feature of the LTCH PPS is that Medicare 
will make outlier payments for unusually costly patients, including 
those with ESRD, if the costs for treating any patient exceed a 
specified threshold. Consequently, at this time, we do not believe that 
an additional ESRD adjustment is either appropriate or necessary under 
the LTCH PPS.
    The commenters alternatively suggested the addition of an 
additional MS-DRG that would recognize the higher resource use of 
dialysis patients. When we developed the MS-DRGs for use beginning 
October 1, 2007, we reduced the existing CMS DRGs down to the base 
DRGs, then applied the five specific criteria upon which we would 
evaluate the instances under which we would then subdivide those base 
DRGs into subgroups based on the severity of the cases. Therefore, this 
alternative had already been considered and rejected, as the base DRG 
did not meet all of the criteria required to make additional subgroups. 
These criteria are listed in the FY 2008 IPPS final rule (72 FR 47169). 
Therefore, we will not create additional MS-LTC-DRGs reflecting 
dialysis treatments for FY 2009.
    Regarding the commenter's concern that Medicare does not recognize 
the hospital resources utilized in treating higher intensity wounds not 
requiring surgery, we note that Medicare payments are based on data 
gathered from LTCH cost reports and LTCH Medicare claims and we 
believe, therefore, that the LTCH PPS payments which are based upon 
this data reflect the reported resource use (that is, charges and 
costs) of delivering care to Medicare beneficiaries at LTCHs including 
treatment for higher intensity wounds not requiring surgery. However, 
we also note that MS-LTC-DRG system is not static but is rather a 
dynamic mechanism which is responsive to changes in medical resource 
use. If, for example, new and more costly treatment modalities became 
available for a particular MS-LTC-DRG, that result in increased 
hospital costs, such increased costs would eventually be reflected in 
increased MS-LTC-DRG relative weights in the future (typically there is 
about a 2-year lag in the claims data used to set the relative 
weights). Similarly, should treatment modalities result in decreased 
treatment costs, we would expect the relative weights for those MS-LTC-
DRGs affected by this change to decrease. Additionally, as noted above, 
we would also remind the commenter that under the LTCH PPS, if the 
costs for treating any patient exceed a specified threshold the case 
could qualify for high cost outlier payments. For the same reasons 
noted previously in this paragraph, we also believe it is unnecessary 
to undertake a study on such wound patients.
    We would also remind the commenter that Medicare payment under a 
PPS is based on a system of averages, so that some Medicare payments 
may exceed hospital costs for a particular case which would then offset 
other cases where the Medicare payments were less than the hospital 
costs. With this model in mind, and available data on LTCH costs and 
industry margins and growth since the start of the LTCH PPS for cost 
reporting periods beginning on or after October 1, 2002, we believe 
that, in general, our Medicare payment policies under the LTCH PPS have 
been and continue to be appropriate and reasonable.
5. Technical Correction to the Budget Neutrality Requirement at Sec.  
412.523(d)(2)
    Section 123(a)(1) of the BBRA requires that the PPS developed for 
LTCHs be budget neutral for the initial year of implementation. 
Furthermore, under section 307(a)(2) of the BIPA, the increases to the 
target amounts and the cap on the target amounts for LTCHs provided for 
by section 307(a)(1) of BIPA (as set forth in section 1886(b)(3)(J) of 
the Act), and the enhanced bonus payments for LTCHs provided for by 
section 122 of BBRA (as set forth in section 1886(b)(2)(E) of the Act) 
were not to be taken into account in the development and implementation 
of the LTCH PPS. Therefore, when we implemented the LTCH PPS, in the 
August 30, 2002 final rule (67 FR 56052), we established a budget 
neutrality requirement at Sec.  412.523(d)(2) for calculating the 
standard Federal rate for FY 2003 such that estimated aggregate LTCH 
PPS payments were estimated to be equal to estimated payments that 
would have been made to LTCHs under the reasonable cost-based payment 
methodology had the PPS for LTCHs not been implemented, and, to 
implement section 307(a)(2) of the BIPA, we excluded the effects of 
sections 1886(b)(2) and (b)(3) of the Act.
    We proposed a technical correction to existing Sec.  412.523(d)(2) 
that would more precisely describe the provisions of sections 
1886(b)(2) and (b)(3) of the Act that were not taken into account when 
determining the standard Federal rate under Sec.  412.523(d). The 
current regulatory language at Sec.  412.523(d)(2) cites the general 
sections of the Act which contain the specific provisions set forth in 
Sec.  307(a)(2) of Public Law 106-554 that the Secretary is required to 
not take into account in developing the PPS. We believe that it is 
clearer and more precise to cite the specific subparagraphs the 
Secretary did not take into account rather than to cite the general 
sections of the Act of which such subparagraphs are a part. In order to 
mitigate any confusion that may be caused by existing regulations, we 
proposed to make a technical correction at Sec.  412.523(d)(2). 
Specifically, we proposed to revise Sec.  412.523(d)(2) to state that 
the effects of section 1886(b)(2)(E) of the Act (enhanced bonus 
payments for LTCHs, as described above) and section 1886(b)(3)(J) of 
the Act (increases to the hospital-specific target amounts and the cap 
on the target amounts for LTCHs, as described above) were excluded in 
the development of the FY 2003 LTCH PPS standard Federal rate. This 
technical correction would make the regulatory language consistent with 
section 307(a)(2) of BBRA and consistent with the methodology we used 
to determine the LTCH PPS standard Federal rate under Sec.  412.523, 
and it is not a change in policy. (Accordingly, no adjustments to the 
LTCH PPS standard Federal rate computed under Sec.  412.523(d) were 
proposed in conjunction with this proposed technical correction to 
Sec.  412.523(d)(2).)
    We received no comments on this proposed technical correction. 
Therefore, for the reasons described above, in this final rule, as we 
proposed, we are revising Sec.  412.523(d)(2) to state that the effects 
of section 1886(b)(2)(E) of the Act (enhanced bonus payments for LTCHs) 
and section 1886(b)(3)(J) of the Act (increases to the hospital-
specific target amounts and the cap on the target amounts for LTCHs) 
were excluded in the development of the FY 2003 LTCH PPS standard 
Federal rate.

G. Conforming Changes

    Various regulations throughout 42 CFR Part 412 Subpart O indicate 
that the terms ``urban area'' and ``rural area'' are defined according 
to the definitions of ``urban area'' and ``rural area'' found in 42 CFR 
Part 412 Subpart D (the IPPS regulations). Specifically, Sec. Sec.  
412.525(c), 412.529(d)(4)(ii)(B) and (d)(4)(iii)(B), 412.534(d)(1), 
(f)(2)(ii), and (f)(3)(ii), and 412.536(c)(1), (e)(2)(ii), and 
(e)(3)(ii) of Subpart O refer to the definitions of ``urban area'' and 
``rural area'' in either Sec.  412.62(f)(1)(ii) and (f)(1)(iii) or 
Sec.  412.64(b)(1)(ii)(A)-(C) in 42 CFR Part 412 Subpart D. As 
discussed above in section IV.F.1.b.(4). of this preamble, we believe 
that it is administratively

[[Page 26828]]

simpler to define the terms ``urban area'' and ``rural area'' in Sec.  
412.503 rather than cross-referencing the definitions of ``urban area'' 
and ``rural area'' in Sec.  412.62(f)(1)(ii) and Sec.  
412.62(f)(1)(iii) and Sec.  412.64(b)(1)(ii)(A) through (C). 
Consequently, as we proposed, we are adding definitions for ``urban 
area'' and ``rural area'' in Sec.  412.503 which will incorporate the 
provisions of Sec.  412.62(f)(1)(ii) and (f)(1)(iii) as well as Sec.  
412.64(b)(1)(ii)(A) through (C). In the proposed rule (73 FR 5372), 
because we proposed to define ``urban area'' and ``rural area'' in 
Sec.  412.503, we proposed to replace the citations to the definitions 
of ``urban area'' and ``rural area'' at Sec.  412.62(f)(1)(ii) and 
Sec.  412.62(f)(1)(iii) and Sec.  412.64(b)(1)(ii)(A) through (C) which 
are found in the existing regulations at Sec. Sec.  412.525(c), 
412.529(d)(4)(ii)(B) and (d)(4)(iii)(B), 412.534(d)(1), (f)(2)(ii), and 
(f)(3)(ii), and 412.536(c)(1), (e)(2)(ii), and (e)(3)(ii) with 
references to Sec.  412.503.
    We received no comments on this proposed conforming change. 
Accordingly, in this final rule, as proposed, we are revising the 
above-described references. Specifically, we are replacing the 
citations to the definitions of ``urban area'' and ``rural area'' at 
Sec.  412.62(f)(1)(ii) and Sec.  412.62 (f)(1)(iii) and Sec.  
412.64(b)(1)(ii)(A)-(C) in the existing regulations at Sec. Sec.  
412.525(c), 412.529(d)(4)(ii)(B) and (d)(4)(iii)(B), 412.534(d)(1), 
(f)(2)(ii), and (f)(3)(ii), and 412.536(c)(1), (e)(2)(ii), and 
(e)(3)(ii) with references to Sec.  412.503.

V. Computing the Adjusted Federal Prospective Payments for the 2009 
LTCH PPS Rate Year

    In accordance with Sec.  412.525 and as discussed in section 
IV.F.1. of this final rule, the standard Federal rate is adjusted to 
account for differences in area wages by multiplying the labor-related 
share of the standard Federal rate by the appropriate LTCH PPS wage 
index (as shown in Tables 1 and 2 of the Addendum of this final rule). 
The standard Federal rate is also adjusted to account for the higher 
costs of hospitals in Alaska and Hawaii by multiplying the nonlabor-
related share of the standard Federal rate by the appropriate cost-of-
living factor (shown in Table III in section IV.F.2 of this preamble). 
In this final rule, we are establishing a standard Federal rate for the 
2009 LTCH PPS rate year of $39,114.36 as discussed in section IV.E.2. 
of this preamble. We illustrate the methodology to adjust the Federal 
prospective payments for the 2009 LTCH PPS rate year in the following 
example:

    Example: During the 2009 LTCH PPS rate year, a Medicare patient 
is in a LTCH located in Chicago, Illinois (CBSA 16974). The full 
LTCH PPS wage index value for CBSA 16974 is 1.0715 (see Table 1 in 
the Addendum of this final rule). The Medicare patient is classified 
into MS-LTC-DRG 28 (Spinal Procedures with MCC), which has a current 
relative weight of 1.1417 (see Table 3 of the Addendum of this final 
rule).
    To calculate the LTCH's total adjusted Federal prospective 
payment for this Medicare patient, we compute the wage-adjusted 
Federal prospective payment amount by multiplying the unadjusted 
standard Federal rate ($39,114.36) by the labor-related share 
(75.662 percent) and the wage index value (1.0715). This wage-
adjusted amount is then added to the nonlabor-related portion of the 
unadjusted standard Federal rate (24.338 percent; adjusted for cost 
of living, if applicable) to determine the adjusted Federal rate, 
which is then multiplied by the MS-LTC-DRG relative weight (1.1417) 
to calculate the total adjusted Federal prospective payment for the 
2009 LTCH PPS rate year ($47,072.73). Table IV illustrates the 
components of the calculations in this example.

                                Table IV
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Unadjusted Standard Federal Prospective Payment Rate.         $39,114.36
Labor-Related Share..................................          x 0.75662
Labor-Related Portion of the Federal Rate............       = $29,594.71
Wage Index (CBSA 16974)..............................           x 1.0715
Wage-Adjusted Labor Share of Federal Rate............       = $31,710.73
Nonlabor-Related Portion of the Federal Rate                 + $9,519.65
 ($39,114.36 x 0.24338)..............................
Adjusted Federal Rate Amount.........................       = $41,230.38
MS-LTC-DRG 9 Relative Weight.........................           x 1.1417
                                                      ------------------
    Total Adjusted Federal Prospective Payment.......       = $47,072.73
------------------------------------------------------------------------

VI. Monitoring

    In the August 30, 2002 final rule (67 FR 56014), we described an 
on-going monitoring component to the new LTCH PPS. Specifically, we 
discussed on-going analysis of the various policies that we believe 
would provide equitable payment for stays that reflect less than the 
full course of treatment and reduce the incentives for inappropriate 
admissions, transfers, or premature discharges of patients that are 
present in a discharge-based PPS. As a result of our data analysis, we 
have revisited a number of our original policies and have identified 
behaviors by certain LTCHs that lead to inappropriate Medicare 
payments.
    In the RY 2009 proposed rule, we summarized policy initiatives that 
we have issued as a result of our ongoing monitoring program (73 FR 
5373 through 5374).
    We did not propose any new payment adjustments in the RY 2009 
proposed rule resulting from our monitoring activity, but we continue 
to pursue our ongoing monitoring program that involves the CMS Office 
of Research and Development (ORDI), existing QIO monitoring, monitoring 
by Medicare contractors (that is, FIs or MACs), and studies described 
in the RY 2006 LTCH PPS final rule (70 FR 24211).

VII. Method of Payment

    Under Sec.  412.513, a Medicare LTCH patient is classified into a 
MS-LTC-DRG based on the principal diagnosis, up to eight additional 
(secondary) diagnoses, and up to six procedures performed during the 
stay, as well as age, sex, and discharge status of the patient. The MS-
LTC-DRG is used to determine the Federal prospective payment that the 
LTCH will receive for the Medicare-covered Part A services the LTCH 
furnished during the Medicare patient's stay. Under Sec.  412.541(a), 
the payment is based on the submission of the discharge bill. The 
discharge bill also provides data to allow for reclassifying the stay 
from payment at the full MS-LTC-DRG rate to payment for a case as a SSO 
(under Sec.  412.529) or as an interrupted stay (under Sec.  412.531), 
or to determine if the case will qualify for a HCO payment (under Sec.  
412.525(a)).
    Accordingly, the ICD-9-CM codes and other information used to 
determine if an adjustment to the full MS-LTC-DRG payment is necessary 
(for example, LOS or interrupted stay status) are recorded by the LTCH 
on the Medicare patient's discharge bill and submitted to

[[Page 26829]]

the Medicare FI for processing. The payment represents payment in full, 
under Sec.  412.521(b), for inpatient operating and capital-related 
costs, but not for the costs of an approved medical education program, 
bad debts, blood clotting factors, anesthesia services by hospital-
employed nonphysician anesthetists or the costs of photocopying and 
mailing medical records requested by a Quality Improvement Organization 
(QIO), which are costs paid outside the LTCH PPS.
    As under the previous reasonable cost-based payment system, under 
Sec.  412.541(b), a LTCH may elect to be paid using the periodic 
interim payment (PIP) method described in Sec.  413.64(h), based on the 
estimated prospective payment for the year, and may be eligible to 
receive accelerated payments as described in Sec.  413.64(g). We 
exclude HCO payments that are paid upon submission of a discharge bill 
from the PIP amounts. In addition, Part A costs that are not paid for 
under the LTCH PPS, including Medicare costs of an approved medical 
education program, bad debts, blood clotting factors, anesthesia 
services by hospital-employed nonphysician anesthetists and the costs 
of photocopying and mailing medical records requested by a QIO, are 
subject to the interim payment provisions as specified in Sec.  
412.541(c).
    Under Sec.  412.541(d), LTCHs with unusually long lengths of stay 
that are not receiving payment under the PIP method may bill on an 
interim basis (60 days after an admission and at intervals of at least 
60 days after the date of the first interim bill) and this should 
include any HCO payment determined as of the last day for which the 
services have been billed.

VIII. RTI's Research

    With the recommendations of MedPAC's June 2004 Report to Congress 
as a point of departure, we awarded a contract to Research Triangle 
Institute, International (RTI) at the start of FY 2005 for a 
comprehensive evaluation of the feasibility of developing patient and 
facility level characteristics for LTCHs that could distinguish LTCH 
patients from those treated in other hospitals.
    In the RY 2009 LTCH PPS proposed rule, we included a description of 
RTI's research, as well as two technical expert panels (TEPs) held 
during 2007 (73 FR 5374 through 5376). We also noted that we had posted 
the reports on both Phase I and Phase II of RTI's research on our Web 
site at http://www.cms.hhs.gov/LongTermCareHospitalPPS/02a_RTIReports.asp#TopOfPage.
    Although we did not propose any policy initiatives in the RY 2009 
LTCH PPS proposed rule as a result of RTI's research, we received 10 
comments on their work. We will pass these comments on to RTI and we 
have instructed RTI researchers to consider these concerns as they 
proceed with Phase III of their report.
    We would also note that MedPAC's comment on our several policies 
that were proposed in our RY 2009 LTCH PPS proposed rule (addressed 
elsewhere in this preamble) included a section focusing on one 
significant aspect of our contract with RTI for an evaluation of the 
feasibility of developing patient and facility-level criteria for 
LTCHs. Since this contract was developed and awarded as a result of 
MedPAC's recommendations in its June 2004 Report to Congress (p. 120) 
as noted above, we believe that it is appropriate to include the 
following update to their initial analysis:

    The types of cases treated by LTCHs can be (and are) treated in 
other settings, particularly in step-down units of many acute-care 
hospitals. Therefore, it is not possible (nor desirable) to develop 
criteria defining patients who can be cared for exclusively in 
LTCHs. Rather, CMS should seek to define the level of care typically 
furnished in LTCHs, step-down units of many acute-care hospitals, 
and some specialized skilled nursing facilities (SNFs) and inpatient 
rehabilitation facilities (IRFs).

The Commission's entire comment is posted on the MedPAC Web site at 
http://www.medpac.gov/documents/03242008_LTCH_comment_DK.pdf.

    In addition, we wish to take this opportunity to discuss recent 
developments in the related area of value-based purchasing (VBP). VBP 
ties payment to performance through the use of incentives based on 
measures of quality and cost of care. The implementation of VBP is 
rapidly transforming CMS from being a passive payer of claims to an 
active purchaser of higher quality, more efficient health care for 
Medicare beneficiaries. Our VBP initiatives include hospital pay for 
reporting (the Reporting Hospital Quality Data for the Annual Payment 
Update Program), physician pay for reporting (the Physician Quality 
Reporting Initiative), home health pay for reporting, the Hospital VBP 
Plan Report to Congress, and various VBP demonstration programs across 
payment settings, including the Premier Hospital Quality Incentive 
Demonstration and the Physician Group Practice Demonstration.
    The preventable hospital-acquired conditions payment provision for 
IPPS hospitals is another of CMS's value-based purchasing initiatives. 
The principle behind the hospital-acquired conditions payment provision 
(Medicare not paying more for hospital-acquired conditions) could be 
applied to all types of hospitals and Medicare payment systems for 
other settings of care. Section 1886(d)(4)(D) of the Act required the 
Secretary to select, for IPPS hospital payment purposes, hospital-
acquired conditions that: (a) Are high cost, high volume, or both; (b) 
are assigned to a higher-paying Medicare severity diagnosis-related 
group (MS-DRG) when present as a secondary diagnosis; and (c) could 
reasonably have been prevented through the application of evidence-
based guidelines. Beginning October 1, 2008, Medicare can no longer 
assign an inpatient hospital discharge to a higher-paying MS-DRG if a 
selected hospital-acquired condition was not present on admission. That 
is, the case will be paid as though the secondary diagnosis was not 
present (Medicare will continue to assign a discharge to a higher-
paying MS-DRG in those instances where the selected condition was, in 
fact, present on admission).
    The broad principle articulated in the hospital-acquired conditions 
payment provision could be expanded to hospitals other than IPPS 
hospitals, such as long-term care hospitals. Alignment of incentives 
across all Medicare payment systems is an important goal for CMS' VBP 
initiatives. Consequently, we are taking this opportunity to open the 
discussion of the applicability of the hospital-acquired conditions 
payment provision to long-term care hospitals with stakeholders in the 
provider community as well as with the general public as we advance in 
our fight against hospital-acquired conditions in all types of 
hospitals.

IX. Electronic Submission of Cost Reports: Revision to Effective Date 
of Cost Reporting Period

A. Background

    In the August 22, 2003, Federal Register (68 FR 50717), we 
published the ``Electronic Submission of Cost Reports'' final rule 
requiring all hospices, organ procurement organizations (OPOs), rural 
health clinics (RHCs), Federally qualified health centers (FQHCs), and 
community mental health centers (CMHCs) to submit Medicare cost reports 
in a standardized electronic format. This requirement was effective for 
cost reporting periods ending on or after December 31, 2004.
    Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and

[[Page 26830]]

requires the Secretary, in consultation with the Director of the Office 
of Management and Budget, to establish and publish timelines for the 
publication of Medicare final regulations based on the previous 
publication of a Medicare proposed or interim final regulation. Section 
902 of the MMA also states that the timelines for these regulations may 
vary but shall not exceed 3 years after publication of the preceding 
proposed or interim final regulation except under exceptional 
circumstances.
    This final rule finalizes provisions set forth in the May 25, 2005 
interim final rule with comment period. In addition, this final rule 
has been published within 3 years of the interim final rule with 
comment period. Therefore, we believe that the final rule is in 
accordance with the Congress' intent to ensure timely publication of 
final regulations.

B. Provisions of the Interim Final Rule with Comment Period

    In the May 27, 2005, Federal Register (70 FR 30640 through 30643), 
we published the ``Electronic Submission of Cost Reports: Revision to 
Effective Date of Cost Reporting Period'' interim final rule with 
comment period revising the existing effective date for submission of 
electronic cost reports for OPOs, RHCs, FQHCs, and CMHCs from cost 
reporting periods ending on or after December 31, 2004, to cost 
reporting periods ending on or after March 31, 2005.
    As stated in the May 27, 2005, interim final with comment period, 
hospices and End-Stage Renal Disease (ESRD) facilities continue to be 
subject to the electronic filing requirements as referenced in the 
August 23, 2003, final rule as software for these provider types is 
available. Therefore, all hospices and ESRD facilities are still 
required to submit standardized electronic cost reports for cost 
reporting periods ending on or after December 31, 2004.

C. Analysis of and Responses to Public Comments

    We received two public comments in response to the May 27, 2005, 
interim final rule with comment period. One comment was outside the 
scope of this rule because it dealt with physical therapy and will not 
be addressed. The other comment agreed with our proposed change.

D. Provisions of the Final Regulations

    We are finalizing the provisions of the May 27, 2005, interim final 
rule with comment period without change. Since the provisions of Sec.  
413.24 are already codified and there are no revisions, we are not 
republishing the regulation text for Sec.  413.24 in this final rule.

X. Collection of Information Requirements

    This document contains the regulation text associated with CMS-
1393-F. The associated regulation text does not contain any information 
collection 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.). However, we are 
republishing the information collection requirements associated with 
CMS-1199-F. The requirements referenced and discussed below pertain to 
42 CFR 413.24 and are currently approved by OMB.
    Currently Sec.  413.24 requires hospitals, to submit cost reports 
in a standardized electronic format for cost reporting periods 
beginning on or after October 1, 1989. SNFs, and HHAs must submit cost 
reports in a standardized electronic format for cost reporting periods 
ending on or after December 31, 1996. Hospices, ESRD facilities, OPOS, 
RHCs, FQHCs and CMHCs must submit cost reports in a standardized 
electronic format for cost reporting periods ending on or after 
December 31, 2004. These reporting requirements are currently approved 
as described below.
    This interim final rule revises the dates by which OPOs, RHCs, 
FQHCs, and CMHCs must submit cost reports in a standardized electronic 
format. Under the revised requirements OPOs, RHCs, FQHCs, and CMHCs 
must now submit cost reports in a standardized electronic format for 
cost reporting periods ending on or after March 31, 2005, rather than 
December 31, 2004. This change does not impose any new burden.
    As noted above, while all the above reporting requirements are 
subject to the PRA, they are currently approved under the following OMB 
control numbers.

 
------------------------------------------------------------------------
                                            OMB control     Expiration
              Provider type                     No.            date
------------------------------------------------------------------------
Hospital................................       0938-0050      05/31/2008
Hospice Program.........................       0938-0758      01/31/2008
Renal Dialysis Facility.................       0938-0236      08/31/2010
Federally Qualified Health Center.......       0938-0107      06/30/2008
Home Health Agency......................       0938-0022      08/31/2010
End Stage Renal Disease Networks........       0938-0657      12/31/2009
Skilled Nursing Facility................       0938-0463      06/30/2010
Organ Procurement Organization/                0938-0102      08/31/2008
 Histocompatibility Laboratories........
------------------------------------------------------------------------

    We have submitted a copy of this final rule to OMB for its review 
of the aforementioned information collection requirements.

XI. Regulatory Impact Analysis

A. RY 2009 LTCH PPS Final Rule

1. Introduction
    We have examined the impacts of this final rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of 
1995 (UMRA) (Pub. L. 104-4), and Executive Order 13132.
a. Executive Order 12866
    Executive Order 12866 (as amended by Executive Order 13258) directs 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any one year). In the impact analysis, we are using the rates, 
factors and policies presented in this final rule, including updated 
wage index values, and the best available claims and CCR

[[Page 26831]]

data to estimate the change in payments for the 2009 LTCH PPS rate 
year. As stated in section IV.E. of this preamble, section 114(e)(1) of 
the MMSEA revises the standard Federal rate for RY 2008 by providing 
that ``for discharges occurring during the rate year ending in 2008 for 
a hospital, the base rate for such discharges for the hospital shall be 
the same as the base rate for 2007'' (in other words, the standard 
Federal rate for RY 2008 is the same as the standard Federal rate for 
RY 2007). Also, section 114(e)(2) of the MMSEA provides that the 
revised standard Federal rate for RY 2008 ``shall not apply to 
discharges occurring on or after July 1, 2007, and before April 1, 
2008'' (that is, the first 9 months of RY 2008). As noted in section 
IV.E. of this preamble, the standard Federal rate for RY 2007 was 
$38,086.04. Accordingly, the standard Federal rate for RY 2008 is 
$38,086.04. As discussed in section IV.E. of this preamble, consistent 
with our historical practice, we updated the standard Federal rate for 
RY 2008 by 2.7 percent in order to establish the RY 2009 standard 
Federal rate at $39,114.36. Furthermore, we note that section 114(c)(3) 
of MMSEA requires a 3-year suspension of our application of the 
revisions to the SSO policy at Sec.  412.529(c)(3)(i) that was 
finalized in the RY 2008 final rule. Both of these revisions to RY 2008 
LTCH PPS payments (that is, sections 114(c)(3) and (e)(1) through (2) 
of MMSEA) affect the modeling of payments in this impact analysis, 
which we discussed in greater detail in section XVI.B.3. of this final 
rule. Based on the best available data for the 391 LTCHs in our 
database, we estimate that the update to the standard Federal rate for 
RY 2009 (discussed in section IV.E. of the preamble of this final rule) 
and the changes to the area wage adjustment (discussed in section 
IV.F.1. of the preamble of this final rule) for the 2009 LTCH PPS rate 
year, in addition to an estimated increase in SSO payments and a slight 
increase in HCO payments (as discussed in greater detail below) will 
result in an increase in estimated payments from the 2008 LTCH PPS rate 
year of approximately $110 million (or about 2.5 percent). Based on the 
391 LTCHs in our database, we estimate RY 2008 LTCH PPS payments to be 
approximately $4.36 billion and RY 2009 LTCH PPS payments to be 
approximately $4.47 billion. Because the combined distributional 
effects and estimated changes to the Medicare program payments would be 
greater than $100 million, this final rule is considered a major 
economic rule, as defined in this section. We note the approximately 
$110 million for the projected increase in estimated aggregate LTCH PPS 
payments resulting from the provisions presented in this final rule 
does not reflect changes in LTCH admissions or case-mix intensity in 
estimated LTCH PPS payments, which would also affect overall payment 
changes.
    We note that the average combined effect of the standard Federal 
rate and area wage adjustment changes on estimated aggregate payments 
cannot be computed by simply adding up the estimated averages in 
columns 6 and 7 of Table V because each of those two columns are 
intended to show the isolated impact of the respective change (that is, 
the change to the standard Federal rate or the change to the area wage 
adjustment) on estimated payments for RY 2009 as compared to RY 2008, 
and the interactive effects resulting from both the change to the 
standard Federal rate and change to the area wage adjustment (and 
estimated changes to the HCO and SSO payments) are not accounted for in 
the modeling of estimated payments to produce the percent change in 
each of these columns. However, the change in estimated SSO and HCO 
payments, and the interactive effects of all changes are taken into 
account in the modeling of estimated payments for RY 2009 as compared 
to RY 2008 in Column 8 of Table V.
    Notwithstanding this limitation in comparing the various columns in 
Table V, the difference between the projected increase in payments per 
discharge from RY 2008 to RY 2009 for all changes of 2.5 percent 
(column 8) and the sum of the projected increase due to the change to 
the standard Federal rate (1.9 percent in column 6) and the change due 
to the area wage adjustment (-0.1 percent in column 7) is mostly 
attributable to the effect of the estimated increase in payments for 
SSO cases and the estimated slight estimated increase in payments for 
HCO cases in RY 2009 as compared to RY 2008. That is, in calculating 
the estimated increase in payments from RY 2008 to RY 2009 for SSO and 
HCO cases, we increased estimated costs by the applicable market basket 
(approximately 3.2 percent). We note that, SSO cases comprise 
approximately 16 percent of estimated total LTCH PPS payments and HCO 
cases comprise approximately 8 percent of estimated total LTCH PPS 
payments. The majority of the payments for SSO cases (over 60 percent) 
are based on the estimated cost of the case.
    While the effects of the estimated increase in SSO and HCO payments 
and the change to the standard Federal rate are projected to increase 
estimated payments per discharge from RY 2008 to RY 2009, the changes 
to the area wage adjustment from RY 2008 to RY 2009 are expected to 
result in a small decrease of 0.1 percent in estimated aggregate LTCH 
PPS payments from the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate 
year (see column 7 of Table V). As discussed in section IV.F.1. of this 
rule, we are updating the wage index values for RY 2009 based on the 
most recent available data. In addition, we are slightly decreasing the 
labor-related share from 75.788 percent to 75.662 percent under the 
LTCH PPS for RY 2009 based on the most recent available data on the 
relative importance of the labor-related share of operating and capital 
costs of the market basket applicable to the LTCH PPS (also discussed 
in section IV.F.1. of this final rule).
b. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. 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 
$6.5 million to $31.5 million in any 1 year. For further information, 
see the Small Business Administration's regulation at 70 FR 72577, 
December 6, 2005. Individuals and States are not included in the 
definition of a small entity. Because we lack data on individual 
hospital receipts, we cannot determine the number of small proprietary 
LTCHs. Therefore, we assume that all LTCHs are considered small 
entities for the purpose of the analysis that follows. Medicare FIs are 
not considered to be small entities. The Secretary certifies that this 
final rule would not have a significant economic impact on a 
substantial number of small entities.
    Currently, our database of 391 LTCHs includes the data for 85 non-
profit (voluntary ownership control) LTCHs and 273 proprietary LTCHs. 
Of the remaining 33 LTCHs, 16 LTCHs are Government-owned and operated 
and the ownership type of the other 17 LTCHs is unknown (as shown in 
Table V). The impact of the payment rate and policy changes for the 
2009 LTCH PPS rate year (including the update to the standard Federal 
rate and the changes to the area wage adjustment) is discussed in 
section XVI.B.4.c. of this final rule.
    As we discuss in detail throughout the preamble of this final rule, 
based on the most recent available LTCH data, we believe that the 
provisions of this final

[[Page 26832]]

rule would result in an increase in estimated aggregate LTCH PPS 
payments and that the resulting LTCH PPS payment amounts result in 
appropriate Medicare payments.
    The impact analysis of the payment rate and policy changes in Table 
V shows that estimated payments per discharge are expected to increase 
approximately 2.5 percent, on average, for all LTCHs from the 2008 LTCH 
PPS rate year as compared to the 2009 LTCH PPS rate year. The projected 
2.5 percent increase in estimated payments per discharge from the 2008 
LTCH PPS rate year to the 2009 LTCH PPS rate year is attributable to 
the change to the rate, the area wage adjustment (discussed in section 
IV.F.1. of this final rule), and estimated increases in SSO and HCO 
payments (as discussed in greater detail below). As Table V shows, the 
change in just the standard Federal rate is projected to result in an 
estimated average increase of 1.9 percent in estimated payments per 
discharge from RY 2008 to RY 2009, on average, for all LTCHs, while 
just the changes to the area wage adjustment are projected to result in 
an estimated decrease of 0.1 percent, on average, for all LTCHs 
(columns 6 and 7 of Table V, respectively). A thorough discussion of 
the regulatory impact analysis for the changes presented in this final 
rule can be found below in section XI.A.3.c. of this final rule.
c. Impact on Rural Hospitals
    For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. As shown in Table V, we 
are projecting a 2.0 percent increase in estimated payments per 
discharge from the 2008 LTCH PPS rate year as compared to the 2009 LTCH 
PPS rate year for rural LTCHs that would primarily result from the 
changes presented in this final rule (that is, the update to the 
standard Federal rate discussed in section IV.E. of the preamble of 
this final rule and the changes to the area wage adjustment as 
discussed in section IV.F.1. of the preamble of this final rule) based 
on the data of the 25 rural LTCHs in our database of 391 LTCHs for 
which complete data were available.
    As shown in Table V, the estimated increase in estimated LTCH PPS 
payments from the 2008 LTCH PPS rate year as compared to the 2009 LTCH 
PPS rate year for rural LTCHs is primarily due to the update to the 
standard Federal rate (as discussed in greater detail in section IV.E. 
of the preamble of this final rule) and the change in the area wage 
adjustment (as discussed in greater detail in section V.F.1. of the 
preamble of this final rule) in conjunction with the estimated 
increased payments for SSO cases and a slight estimated increase in 
payments to HCO cases (as discussed below in section XI.A. 2.c. of this 
final rule). We believe that the changes to the area wage adjustment 
presented in this final rule (that is, the use of updated wage data and 
the change in the labor-related share) will result in accurate and 
appropriate LTCH PPS payments in RY 2009 since they are based on the 
most recent available data. Such updated data appropriately reflect 
national differences in area wage levels and identifies the portion of 
the standard Federal rate that should be adjusted to account for such 
differences in area wages, thereby resulting in accurate and 
appropriate LTCH PPS payments.
d. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any one year of 
$100 million in 1995 dollars, updated annually for inflation. That 
threshold level is currently approximately $130 million. This final 
rule would not mandate any requirements for State, local, or tribal 
governments, nor would it result in expenditures by the private sector 
of $130 million or more in any 1 year.
e. Federalism
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined this final rule under the criteria set forth in 
Executive Order 13132 and have determined that this final rule will not 
have any significant impact on the rights, roles, and responsibilities 
of State, local, or tribal governments or preempt State law, based on 
the 16 State and local LTCHs (that is, Government ownership type) in 
our database of 391 LTCHs for which data were available.
f. Alternatives Considered
    In the preamble of this final rule, we are setting forth the annual 
update to the payment rates for the LTCH PPS for RY 2009. In this 
preamble, we specify the statutory authority for the provisions that 
are presented, identify those policies where discretion has been 
exercised, and present rationale for our decisions as well as 
alternatives that were considered, and address comments on suggested 
alternatives from commenters (where relevant).
2. Anticipated Effects of Payment Rate Changes
    We discuss the impact of the changes to the payment rates, factors, 
and other payment rate policies presented in the preamble of this final 
rule in terms of their estimated fiscal impact on the Medicare budget 
and on LTCHs.
a. Budgetary Impact
    Section 123(a)(1) of the BBRA requires that the PPS developed for 
LTCHs ``maintain budget neutrality.'' We believe that the statute's 
mandate for budget neutrality applies only to the first year of the 
implementation of the LTCH PPS (that is, FY 2003). Therefore, in 
calculating the FY 2003 standard Federal rate under Sec.  
412.523(d)(2), we set total estimated payments for FY 2003 under the 
LTCH PPS so that estimated aggregate payments under the LTCH PPS are 
estimated to equal the amount that would have been paid if the LTCH PPS 
had not been implemented.
b. Impact on Providers
    The basic methodology for determining a per discharge LTCH PPS 
payment is set forth in Sec.  412.515 through Sec.  412.536. In 
addition to the basic MS-LTC-DRG payment (standard Federal rate 
multiplied by the MS-LTC-DRG relative weight), we make adjustments for 
differences in area wage levels, COLA for Alaska and Hawaii, and SSOs. 
Furthermore, LTCHs may also receive HCO payments for those cases that 
qualify based on the threshold established each rate year.
    To understand the impact of the changes to the LTCH PPS payments 
discussed in section IV. of this final rule on different categories of 
LTCHs for the 2009 LTCH PPS rate year, it is necessary to estimate 
payments per discharge for the 2008 LTCH PPS rate year using the rates, 
factors and policies established in the RY 2008 LTCH PPS final rule (72 
FR 26870 through 27029), the RY 2008 LTCH PPS correction notice (72 FR 
36613 through 36616) and the applicable sections of MMSEA (as described 
in greater detail below in section XI.A.2.c. of this final rule). It is 
also necessary to estimate the payments per discharge that will be made 
under the LTCH PPS rates, factors and policies for the 2009 LTCH PPS 
rate year (as discussed in the preamble of this final rule). These 
estimates of RY 2008 and RY 2009 LTCH PPS payments are based

[[Page 26833]]

on the best available LTCH claims data and other factors such as the 
application of inflation factors to estimate costs for SSO and HCO 
cases in each year. We also evaluated the change in estimated 2008 LTCH 
PPS rate year payments to estimated 2009 LTCH PPS rate year payments 
(on a per discharge basis) for each category of LTCHs.
    Hospital groups were based on characteristics provided in the OSCAR 
data, FY 2004 through FY 2006 cost report data in HCRIS, and PSF data. 
Hospitals with incomplete characteristics were grouped into the 
``unknown'' category. Hospital groups include the following:
     Location: Large Urban/Other Urban/Rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.
    To estimate the impacts of the payment rates and policy changes 
among the various categories of existing providers, we used LTCH cases 
from the FY 2007 MedPAR file to estimate payments for RY 2008 and to 
estimate payments for RY 2009 for 391 LTCHs. While currently there are 
just under 400 LTCHs, the most recent growth is predominantly in for-
profit LTCHs that provide respiratory and ventilator-dependent patient 
care. We believe that the discharges from the FY 2007 MedPAR data for 
the 391 LTCHs in our database, which includes 273 proprietary LTCHs, 
provide sufficient representation in the MS-LTC-DRGs containing 
discharges for patients who received LTCH care for the most commonly 
treated LTCH patients' diagnoses.
c. Calculation of Prospective Payments
    For purposes of this impact analysis, to estimate per discharge 
payments under the LTCH PPS, we simulated payments on a case-by-case 
basis using LTCH claims from the FY 2007 MedPAR files. In the impact 
analysis for the proposed rule, for modeling estimated LTCH PPS 
payments for both RY 2008 and RY 2009, we had applied the RY 2008 
standard Federal rate (that is, $38,086.04) provided for by section 
114(e) of MMSEA, and the SSO policy provided for by section 114(c)(3) 
of the MMSEA (that is, excluding the revisions to the SSO policy at 
Sec.  412.529(c)(3)(i) of the regulations). Although we were aware at 
the time that the effective date for the change in the SSO policy 
during RY 2008 in the MMSEA is December 29, 2007, and that discharges 
occurring on or after July 1, 2007 and before April 1, 2008 are not 
paid under the RY 2008 standard Federal rate in 1886(m)(2) of the Act, 
nonetheless, for purposes of that impact analysis in the proposed rule, 
we applied both the MMSEA revised SSO policy and MMSEA revised standard 
Federal rate for all of RY 2008 in the estimation of RY 2008 LTCH PPS 
payments. Similarly, in modeling LTCH PPS payments in the proposed rule 
to project the average change in estimated payments per discharge from 
RY 2008 to RY 2009 due to the change in the standard Federal rate, 
rather than using the RY 2008 standard Federal rate finalized in the RY 
2008 final rule, we compared the MMSEA revised RY 2008 standard Federal 
rate (that is, $38,086.04), to the proposed RY 2009 standard Federal 
rate of $39,076.28 (that is, $38,086.04 updated by the proposed 2.6 
percent update factor, as discussed in the RY 2009 proposed rule (73 FR 
5361 through 5362)) in order to estimate the effect of proposing to 
update the standard Federal rate by 2.6 percent. As we discussed in the 
RY 2009 proposed rule (73 FR 5379), we took this approach for the 
impact analysis in the proposed rule since for the last 3 months of the 
2008 LTCH PPS rate year (that is, April 2008 through June 2008), which 
is the 3-month period immediately preceding the start of the 2009 LTCH 
PPS rate year, LTCH discharges are paid under the RY 2008 standard 
Federal rate and SSO policy established by section 114 of the MMSEA. 
However, we received a comment on the impact analysis of the proposed 
rule.
    Comment: A commenter disagreed with our methodology for projecting 
RY 2008 estimated payments as if the MMSEA provisions on the SSO policy 
and RY 2008 standard Federal rate (that is, sections 114(c)(3) and 
114(c)(1) of the MMSEA) had been in effect for all of RY 2008. The 
commenter believed that we were overstating the projected increase in 
estimated payments for RY 2009 in the proposed rule because we did not 
fully account for the MMSEA provisions that affect the projection of RY 
2008 estimated payments. The commenter suggested that we fully account 
for the MMSEA changes to the standard Federal rate for 2008, the SSO 
payment policy, and the ``25 percent rule'' at 42 CFR 412.534 and 
412.536, in our impact analysis.
    Response: Regarding the ``25 percent rule'' at 42 CFR 412.534 and 
412.536, we note that historically, we have not included this policy in 
our impact analysis. We are not aware of any instances where the FI has 
made any adjustments under this policy. Consequently, our impact 
analysis does not include any effect on estimated payments for RY 2008 
or RY 2009 due to the ``25 percent rule'' at 42 CFR 412.534 and 
412.536. With respect to commenters'' suggestion that we model payments 
for the MMSEA changes according to the timeframes set forth in the 
MMSEA, instead of our approach in which we projected RY 2008 payments 
as if discharges during all of the RY 2008 were paid under the MMSEA 
revised standard Federal rate and MMSEA revised SSO policy for all of 
RY 2008 we agree that our approach may have resulted in slightly 
overstating the estimate of the change in payments from RY 2008 to RY 
2009 in the proposed rule. Therefore, to address this concern, we 
modified the impact analysis for this final rule. Specifically, for 
purposes of the impact analysis in this final rule, rather than 
applying the MMSEA revised SSO policy and MMSEA revised RY 2008 
standard Federal rate to discharges for all of RY 2008 in the 
estimation of RY 2008 LTCH PPS payments, we accounted for the effect on 
LTCH payments as a result of the MMSEA changes to these two policies 
during RY 2008. That is, for the first 9 months of RY 2008 (July 1, 
2007 through March 31, 2008), estimated LTCH payments for LTCH 
discharges were determined based on the ``higher'' rate of $38,356.45, 
while for the last 3 months of RY 2008 (April 1, 2008 through June 30, 
2008), estimated LTCH payments for LTCH discharges were determined 
based on the ``lower'' MMSEA revised RY 2008 standard Federal rate of 
$38,086.04. Additionally, we modeled estimated RY 2008 LTCH PPS 
payments by incorporating the change to the SSO policy, which excludes 
the revisions to the SSO policy at Sec.  412.529(c)(3)(i), that 
occurred midyear in RY 2008 in accordance with the MMSEA. (Additional 
information on section 114 of the MMSEA can be found at section I.A. of 
this final rule.)
    Furthermore, in modeling estimated LTCH PPS payments for both RY 
2008 and RY 2009 in this impact analysis, we applied the RY 2008 and RY 
2009 adjustments for area wage differences (as described in section 
IV.F.1. of the preamble of this final rule), and the COLA for Alaska 
and Hawaii (as described in section IV.F.2. of the preamble of this 
final rule). Specifically, we adjusted for area wage differences for 
estimated 2008 LTCH PPS rate year payments using the current LTCH PPS 
labor-related share of 75.788 percent (72 FR 26892), the wage index 
values established in the Tables 1 and 2 of the Addendum of the RY 2008 
final rule (72 FR 26996 through 27019) and the COLA factors established 
in Table III of the preamble of the RY 2008 final rule (72 FR 26894). 
Similarly, we adjusted for

[[Page 26834]]

area wage differences for estimated 2009 LTCH PPS rate year payments 
using the LTCH PPS labor-related share of 75.662 percent (see section 
IV.D.1.c. of this final rule), the wage index values presented in the 
Tables 1 and 2 of the Addendum of this final rule and the COLA factors 
established in Table III of the preamble of this final rule.
    As discussed above, we also accounted for the payment policy for 
SSOs. We also estimated additional payments that would be made for HCOs 
(as described in section IV.F.3. of this final rule). In modeling 
payments for SSO and HCO cases in RY 2008, we applied an inflation 
factor of 1.025 percent (determined by OACT) to the estimated costs of 
each case determined from the charges reported on the claims in the FY 
2007 MedPAR files and the best available CCRs from the January 2008 
update of the PSF. In modeling payments for SSO and HCO cases in RY 
2009, we applied an inflation factor of 1.058 (determined by OACT) to 
the estimated costs of each case determined from the charges reported 
on the claims in the FY 2007 MedPAR files and the best available CCRs 
from the January 2008 update of the PSF. As noted in section IV.F.4. of 
this final rule, we are not making adjustments for rural location, 
geographic reclassification, indirect medical education costs, or a DSH 
payment for the treatment of low-income patients because our most 
recent data analysis that reflects LTCH behavior subsequent to the 
implementation of the LTCH PPS indicates that payment adjustments for 
geographic reclassification, rural location, DSH, or indirect medical 
education costs would not improve the accuracy of payments made under 
the LTCH PPS to LTCHs. (See Section IV.F.4. of this final rule.).
    These impacts reflect the estimated ``losses'' or ``gains'' among 
the various classifications of LTCHs from the 2008 LTCH PPS rate year 
to the 2009 LTCH PPS rate year based on the payment rates and policy 
changes presented in this final rule. Table V illustrates the estimated 
aggregate impact of the LTCH PPS among various classifications of 
LTCHs.
     The first column, LTCH Classification, identifies the type 
of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases.
     The fourth column shows the estimated payment per 
discharge for the 2008 LTCH PPS rate year (as described above).
     The fifth column shows the estimated payment per discharge 
for the 2009 LTCH PPS rate year (as described above).
     The sixth column shows the percentage change in estimated 
payments per discharge from the 2008 LTCH PPS rate year to the 2009 
LTCH PPS rate year for changes to the standard Federal rate (as 
discussed in section IV.E. of the preamble of this final rule).
     The seventh column shows the percentage change in 
estimated payments per discharge from the 2008 LTCH PPS rate year to 
the 2009 LTCH PPS rate year for changes to the area wage adjustment at 
Sec.  412.525(c) (as discussed in section IV.F.1. of the preamble of 
this final rule).
     The eighth column shows the percentage change in estimated 
payments per discharge from the 2008 LTCH PPS rate year (column 4) to 
the 2009 LTCH PPS rate year (column 5) for all changes.

                            Table V.--Impact of Payment Rate and Payment Rate Policy Changes to LTCH PPS Payments for RY 2009
                          [Estimated 2008 LTCH PPS rate year payments compared to estimated 2009 LTCH PPS rate year payments*]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Percent change  Percent change
                                                                                                           in  estimated   in  estimated
                                                                              Average         Average      payments per    payments per   Percent change
                                                                           estimated RY    estimated RY   discharge from  discharge from   in  payments
                                             Number of    Number of LTCH   2008 LTCH PPS   2009 LTCH PPS   RY 2008 to RY   RY 2008 to RY   per discharge
           LTCH classification                 LTCHs         PPS cases       rate year       rate year       2009 for        2009 for      from RY 2008
                                                                            payment per     payment per      finalized       finalized    to RY 2009 for
                                                                             case \1\        case \2\     changes to the  changes to the    all changes
                                                                                                           federal rate      area wage          \5\
                                                                                                                \3\       adjustment \4\
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Providers...........................             391         129,255         $33,698         $34,545             1.9            -0.1             2.5
By location:
    Rural...............................              25           6,150          27,457          28,019             2.0            -0.4             2.0
    Urban...............................             366         123,105          34,010          34,871             1.9            -0.1             2.5
    Large...............................             188          74,266          35,399          36,322             1.8             0.0             2.6
    Other...............................             178          48,839          31,898          32,665             1.9            -0.2             2.4
By Participation Date:
    Before Oct. 1983....................              17           6,927          29,776          30,691             1.9             0.5             3.1
    Oct. 1983-Sept. 1993................              46          18,659          35,173          36,050             1.8            -0.1             2.5
    Oct. 1993-Sept. 2002................             201          69,664          33,286          34,080             1.9            -0.2             2.4
    After October 2002..................             120          32,289          34,184          35,090             1.9             0.0             2.7
    Unknown Participation Date..........               7           1,716          41,097          42,368             1.8             0.5             3.1
By Ownership Type:
    Voluntary...........................              85          22,712          34,269          35,184             1.8             0.0             2.7
    Proprietary.........................             273         101,601          33,441          34,266             1.9            -0.2             2.5
    Government..........................              16           2,370          36,129          37,151             1.8             0.2             2.8
    Unknown Ownership Type..............              17           2,572          36,564          37,539             1.9             0.0             2.7
By Region:
    New England.........................              16           8,266          30,010          30,969             1.9             0.7             3.2
    Middle Atlantic.....................              29           8,135          34,623          35,341             1.8            -0.6             2.1
    South Atlantic......................              49          13,364          38,348          39,354             1.8            -0.1             2.6

[[Page 26835]]

 
    East North Central..................              67          19,180          37,205          38,117             1.9            -0.2             2.5
    East South Central..................              31           8,343          33,095          33,763             1.9            -0.6             2.0
    West North Central..................              19           5,199          35,471          36,415             1.9             0.0             2.7
    West South Central..................             134          50,770          29,655          30,343             1.9            -0.3             2.3
    Mountain............................              25           5,569          35,779          36,774             1.8             0.0             2.8
    Pacific.............................              21          10,429          41,664          42,987             1.8             0.6             3.2
By Bed Size:
    Beds: 0-24..........................              34           4,633          30,444          31,044             2.0            -0.6             2.0
    Beds: 25-49.........................             195          44,616          33,618          34,440             1.9            -0.2             2.4
    Beds: 50-74.........................              78          26,845          33,393          34,248             1.9            -0.1             2.6
    Beds: 75-124........................              47          22,806          36,034          37,013             1.8             0.1             2.7
    Beds: 125-199.......................              21          16,536          32,717          33,514             1.9            -0.2             2.4
    Beds: 200 +.........................              16          13,819          32,961          33,798             1.9            -0.1            2.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated 2008 LTCH PPS rate year payments based on the rates, factors and policies established in the RY 2008 LTCH PPS final rule (72 FR 26870
  through 27029), the RY 2008 LTCH PPS correction notice (72 FR 36613 through 36616) and the applicable sections of the MMSEA. As described in section
  XVI.B.3. of this final rule, for the purpose of this impact analysis, we modeled estimated RY 2008 payments based on the MMSEA provisions regarding
  the application of the revised standard Federal rate for RY 2008 and the revised SSO policy. Specifically, in estimating RY 2008 LTCH PPS payments, we
  applied the MMSEA revised RY 2008 standard Federal rate of $38,086.04 to 3 months of RY 2008 (that is, April 1, 2008, through June 30, 2008) and we
  applied the RY 2008 rate from the RY 2008 LTCH PPS final rule of $38,356.45 to 9 months of RY 2008 (that is, July 1, 2007, though March 31, 2008).
  Additionally, in estimating RY 2008 LTCH PPS payments, we accounted for the midyear change to the SSO policy provided for by section 114(c)(3) of the
  MMSA (that is, excluding the revisions to the SSO policy at Sec.   412.529(c)(3)(i)) for discharges occurring on or after December 29, 2007.
\2\ Estimated 2009 LTCH PPS rate year payments based on the payment rates and policy changes presented in the preamble of this final rule.
\3\ Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate year for the changes to the Federal
  rate, as discussed in section IV.E. of the preamble of this final rule. (Note, because about 34 percent of all LTCH cases are projected to receive a
  payment adjustment under the SSO policy that is based either on the estimated cost of the case or the ``blend option'' (which is based in part on the
  ``IPPS comparable amount'') rather than the Federal rate in RY 2009, the percent change in estimated payments per discharge due to the changes to the
  Federal rate for most of the categories of LTCHs, 1.9 percent, is somewhat less than the update to the Federal rate of 2.7 percent. In addition, since
  payments in RY 2008 were modeled based on the two rates applied during RY 2008 as described above, the estimated increase in payments to those cases
  that were paid based on the ``higher'' RY 2008 rate from the RY 2008 LTCH PPS final rule (approximately 75 percent of cases) will be less than the 2.7
  percent update that was applied to the ``lower'' revised RY 2008 standard Federal rate in determining the RY 2009 Federal rate.)
\4\ Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year to the 2009 LTCH PPS rate year for changes to the area wage
  adjustment at Sec.   412.525(c) (as discussed in section V.F.1. of the preamble of this final rule).
\5\ Percent change in estimated payments per discharge from the 2008 LTCH PPS rate year (as described in section XI.A.2.c. of this final rule) to the
  2009 LTCH PPS rate year including all of the changes presented in the preamble of this final rule. Note, this column, which shows the percent change
  in estimated payments per discharge for all changes, may not equal the sum of the percent changes in estimated payments per discharge for changes to
  the standard Federal rate (column 6) and the changes to the area wage adjustment (column 7) due to the effect of estimated changes in both payments to
  SSO cases that are paid based on estimated costs and aggregate HCO payments (as discussed in this final rule), as well as other interactive effects
  that cannot be isolated.

d. Results
    Based on the most recent available data (as described previously 
for 391 LTCHs), we have prepared the following summary of the impact 
(as shown in Table V) of the LTCH PPS payment rate and policy changes 
presented in this final rule. The impact analysis in Table V shows that 
estimated payments per discharge are expected to increase approximately 
2.5 percent, on average, for all LTCHs from the 2008 LTCH PPS rate year 
as compared to the 2009 LTCH PPS rate year as a result of the payment 
rate and policy changes presented in this final rule. We note that 
although we are proposing a 2.7 percent increase to the standard 
Federal rate for RY 2009, based on the latest market basket estimate 
(3.6 percent) for the 15-month 2009 rate year and offset by the coding 
and documentation adjustment (0.9 percent), for most categories of 
LTCHs, the impact analysis shown in Table V only shows a 1.9 percent 
increase (column 6) in estimated payments per discharge from RY 2008 to 
RY 2009 as a result of the change to the standard Federal rate. The 
projected impact of 1.9 percent for the change in the standard Federal 
rate shown in column 6 is less than the 2.7 percent update to the 
standard Federal rate discussed in section IV.C. of the preamble due to 
several factors. First, as we discussed above, we modified the impact 
analysis for this final rule in response to a comment we received on 
the impact analysis performed for the proposed rule. Specifically, in 
our modeling of estimated payments for RY 2008, we accounted for the 
mid-year change in the SSO payment policy that occurred during RY 2008 
and incorporated both the ``lower'' MMSEA revised RY 2008 standard 
Federal rate, under which discharges are paid for 3 months, and the 
``higher'' rate from the RY 2008 LTCH PPS final rule, under which 
discharges are paid for 9 months, in accordance with the MMSEA as 
discussed above and in more detail in section I.E. of this preamble. 
Since payments in RY 2008 were modeled

[[Page 26836]]

based on the two rates under which discharges are paid during RY 2008 
as described above, the estimated increase in payments to those cases 
that were paid based on the ``higher'' RY 2008 rate from the RY 2008 
LTCH PPS final rule (approximately 75 percent of cases) will be less 
than the 2.7 percent update that was applied to the ``lower'' MMSEA 
revised RY 2008 standard Federal rate in determining the RY 2009 
Federal rate. Furthermore, approximately 30 percent of LTCH cases are 
SSO cases, which are paid based on the estimated cost of the case or 
the blend option one component of which is the IPPS comparable amount 
rather than on the updated Federal rate. The inclusion of the estimated 
payments for these SSO cases in the estimate of the average payment per 
discharge for all LTCH cases results in an estimated increase that is 
less than the 2.7 percent update to the standard Federal rate. 
Therefore, because over 30 percent of all LTCH PPS cases are projected 
to receive a payment that is not based fully on the standard Federal 
rate, the percent change in estimated payments per discharge due to the 
change to the standard Federal rate for most categories of LTCHs shown 
in Table V is projected to be 1.9 percent, which is somewhat less than 
the 2.5 percent update to the standard Federal rate. In addition to the 
1.9 percent increase to the standard Federal rate for RY 2009, the 
projected percent increase in estimated payments per discharge from the 
2008 LTCH PPS rate year to the 2009 LTCH PPS rate year of 2.5 percent 
shown in Table V (see column 8) reflects the effect of estimated SSO 
payments and a slight increase in estimated HCO payments as we 
discussed previously. That is, in calculating the estimated increase in 
payments for HCO and SSO from RY 2008 to RY 2009, we increased costs by 
applying the applicable market basket (approximately 3.2 percent). As 
noted above, SSOs comprise approximately 16 percent of total LTCH PPS 
payments and HCOs comprise approximately 8 percent of estimated total 
LTCH PPS payments. Furthermore, as discussed previously in this 
regulatory impact analysis, the average increase in estimated payments 
per discharge from the 2008 LTCH PPS rate year to the 2009 LTCH PPS 
rate year, on average, for all LTCHs is approximately 2.5 (as shown in 
Table V) and was determined by comparing estimated RY 2009 LTCH PPS 
payments (using the rates and policies discussed in the preamble of 
this rule) to estimated RY 2008 LTCH PPS payments (as described above 
in section XI.A.2.c. of this regulatory impact analysis).
(1) Location
    Based on the most recent available data, the majority of LTCHs are 
in urban areas. Approximately 6 percent of the LTCHs are identified as 
being located in a rural area, and approximately 5 percent of all LTCH 
cases are treated in these rural hospitals. The impact analysis 
presented in Table V shows that the average percent increase in 
estimated payments per discharge for the 2008 LTCH PPS rate year 
compared to the 2009 LTCH PPS rate year for all hospitals is 2.5 
percent for all changes. For rural LTCHs, the percent change for all 
changes is estimated to be 2.0 percent, while for urban LTCHs, we 
estimate this increase to be 2.5 percent. Large urban LTCHs are 
projected to experience a 2.6 percent increase in estimated payments 
per discharge from the 2008 LTCH PPS rate year compared to the 2009 
LTCH PPS rate year, while other urban LTCHs are projected to experience 
a 2.4 percent increase in estimated payments per discharge from the 
2008 LTCH PPS rate year compared to the 2009 LTCH PPS rate year, as 
shown in Table V. Rural LTCHs are projected to experience a somewhat 
lower than average increase in estimated payments per discharge for all 
changes primarily due to the changes to the area wage adjustment (0.4 
percent, see column 7 of table V). That is, 72 percent of the LTCHs in 
these areas are expected to experience a decrease in their wage index 
value from RY 2008 to RY 2009.
(2) Participation Date
    LTCHs are grouped by participation date into four categories: (1) 
Before October 1983; (2) between October 1983 and September 1993; (3) 
between October 1993 and September 2002; and (4) after October 2002. 
Based on the most recent available data, the majority (approximately 51 
percent) of the LTCH cases are in hospitals that began participating 
between October 1993 and September 2002, and are projected to 
experience about the average increase (2.4 percent) in estimated 
payments per discharge from the 2008 LTCH PPS rate year compared to the 
2009 LTCH PPS rate year, as shown in Table V.
    LTCHs that began participating in Medicare between October 1983 and 
September 1993, are projected to experience the average percent 
increase (2.5 percent) in estimated payments per discharge from the 
2008 LTCH PPS rate year compared to the 2009 LTCH PPS rate year, as 
shown in Table V. Approximately 12 percent of LTCHs began participating 
in Medicare between October 1983 and September 1993 while approximately 
31 percent of LTCHs began participating in Medicare after October 2002 
(that is, the beginning of the LTCH PPS, which was implemented for cost 
reporting periods beginning on or after October 1, 2002). LTCHs that 
began participating in Medicare after October 2002 are projected to 
experience a slightly higher than average percent increase (2.7 
percent) in estimated payments per discharge from the 2008 LTCH PPS 
rate year compared to the 2009 LTCH PPS rate year, as shown in Table V. 
Similarly, LTCHs that began participating before October 1983 are 
projected to experience higher than the average increase (3.1 percent) 
in estimated payments per discharge for the 2009 LTCH PPS rate year as 
compared to the 2008 LTCH PPS rate year (see Table V).
(3) Ownership Control
    Other than LTCHs whose ownership control type is unknown, LTCHs are 
grouped into three categories based on ownership control type: 
voluntary; proprietary; and government. Based on the most recent 
available data, approximately 4 percent of LTCHs are identified as 
government-owned and operated (see Table V). We expect that for these 
government-owned and operated LTCHs, estimated 2009 LTCH PPS rate year 
payments per discharge will increase 2.8 percent in comparison to the 
2008 LTCH PPS rate year, as shown in Table V. We are projecting that 
government-run LTCHs will experience a somewhat higher than average 
increase in estimated payments in RY 2009 as compared to RY 2008 
primarily due to the effect of the changes to the area wage adjustment. 
Specifically, the majority (69 percent) of hospitals in this category 
are projected to experience an increase in their wage index value from 
RY 2008 to RY 2009. In addition, because the majority (approximately 75 
percent) of hospitals in this category have a wage index of less than 
1.0, the decrease to the labor-related share (from 75.788 percent to 
75.662 percent) also contributes to the larger than average increase in 
estimated payments for RY 2009 as compared to RY 2008, shown in Table 
V.
    We project that estimated 2009 LTCH PPS rate year payments per 
discharge for voluntary LTCHs, which account for approximately 22 
percent of LTCHs, will increase slightly higher than the average (2.7 
percent) in comparison to estimated 2008 LTCH PPS rate year payments 
(see Table V). The majority (approximately 70 percent) of LTCHs are 
identified as proprietary. We project

[[Page 26837]]

that RY 2009 estimated payments per discharge for these proprietary 
LTCHs will increase by the average (2.5 percent) in comparison to the 
2008 LTCH PPS rate year (see Table V).
(4) Census Region
    Estimated payments per discharge for the 2009 LTCH PPS rate year 
are projected to increase for LTCHs located in all regions in 
comparison to the 2008 LTCH PPS rate year. The percent increase in 
estimated payments per discharge for the 2009 LTCH PPS rate year as 
compared to the 2008 LTCH PPS rate year for all regions is largely 
attributable to the increase in the standard Federal rate, while the 
variations in the estimated percent increases in payments ranging from 
2.0 percent to 3.2 percent, is primarily due to the differences in 
estimated payment changes due to changes to the area wage adjustment.
    Of the 9 census regions, we project that the increase in 2009 LTCH 
PPS rate year estimated payments per discharge in comparison to the 
2008 LTCH PPS rate year will have the largest impact on LTCHs in the 
New England and Pacific regions (3.2 percent for both; see Table V). 
LTCHs located in both the New England and Pacific regions are expected 
to experience a larger than average increase in estimated payments due 
to the changes in the area wage adjustment (0.7 percent for the New 
England region, and 0.6 percent for the Pacific region, as shown in 
Table V). This is because approximately 87 percent of LTCHs located in 
the New England region and all of LTCHs in the Pacific region are 
projected to experience an increase in their wage index values for RY 
2009 as compared to RY 2008.
    For LTCHs located in the Middle Atlantic and East South Central 
regions, we estimate that the somewhat lower than average projected 
increase (2.1 percent and 2.0 percent, respectively) in estimated 
payments per discharge for the 2009 LTCH PPS rate year compared to the 
2008 LTCH PPS rate year is largely a result of the changes to the area 
wage adjustment. Specifically, the vast majority of LTCHs in the Middle 
Atlantic region (approximately 86 percent) and East South Central 
region ( approximately 71 percent) would experience a decrease in their 
wage index value from RY 2008 to RY 2009 which contributes to the lower 
than average estimated increase in payments from RY 2008 to RY 2009.
    We project that in comparison to the 2008 LTCH PPS rate year, the 
2009 LTCH PPS rate year estimated payments per discharge for LTCHs in 
the West North Central, South Atlantic, East North Central, and West 
South Central regions will increase near the average (2.7 percent, 2.6 
percent, 2.5 percent, and 2.3 percent, respectively). For LTCHs located 
in the Mountain region, we estimate that the slightly higher than 
average projected increase (2.8 percent) in estimated payments per 
discharge for the 2009 LTCH PPS rate year compared to the 2008 LTCH PPS 
rate year is a result of the changes to the area wage adjustment. That 
is, we estimate that a slight majority (52 percent) of hospitals in the 
Mountain region will experience an increase in their wage index values 
from RY 2008 to RY 2009.
(5) Bed Size
    LTCHs were grouped into six categories based on bed size: 0-24 
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater 
than 200 beds.
    We are projecting an increase in estimated 2009 LTCH PPS rate year 
payments per discharge in comparison to the 2008 LTCH PPS rate year for 
all bed size categories. Most LTCHs are in bed size categories where 
estimated 2009 LTCH PPS rate year payments per discharge are projected 
to increase at or near the average increase of 2.5 percent for all 
LTCHs, in comparison to estimated 2008 LTCH PPS rate year payments per 
discharge (that is, all LTCH bed size categories except the category of 
LTCHs with 0-24 beds). Specifically, estimated payments per discharge 
for the 2009 LTCH PPS rate year are projected to increase for LTCHs 
with 25-49 and 125-199 beds at 2.4 percent, for LTCHs with more than 
200 beds at 2.5 percent, for LTCHs with 50-74 beds at 2.6 percent, and 
for LTCHs with more than 75-124 beds, at 2.7 percent.
    Estimated payments per discharge for the 2009 LTCH PPS rate year 
for LTCHs with 0-24 beds are projected to have a somewhat lower than 
average increase (2.0 percent) in comparison to all hospitals. This 
lower than average increase in estimated payments per discharge for 
LTCHs with 0-24 beds is largely due to the changes to the area wage 
adjustment. Specifically, LTCHs in this category are expected to 
experience a larger than average decrease in their payments from RY 
2008 to RY 2009 due to the changes to the area wage adjustment 
primarily because approximately 74 percent of the hospitals in this 
category are projected to experience a decrease in their wage index 
value from RY 2008 to RY 2009.
e. Effect on the Medicare Program
    Based on actuarial projections, an estimate of Medicare spending 
(total estimated Medicare program payments) for LTCH services over the 
next 5 years based on current LTCH PPS policy (as established in 
previous LTCH PPS final rules) is shown in Table IV in section IV.D. of 
the preamble of this rule. As noted previously, we project that the 
provisions of this rule will result in an increase in estimated 
aggregate LTCH PPS payments in RY 2009 of approximately 110 million (or 
about 2.5 percent) for the 391 LTCHs in our database.
    Consistent with the statutory requirement for budget neutrality, as 
we discussed in the August 30, 2002 final rule that implemented the 
LTCH PPS, in developing the LTCH PPS, we intended estimated aggregate 
payments under the LTCH PPS in FY 2003 be projected to equal the 
estimated aggregate payments that would have been made if the LTCH PPS 
were not implemented. Our methodology for estimating payments for 
purposes of the BN calculations for determining the FY 2003 standard 
Federal rate used the best available data and necessarily reflects 
assumptions. As discussed in section IV.D. of this rule, section 
114(c)(4) of the MMSEA provides that the ``Secretary shall not, for the 
3-year period beginning on the date of the enactment of this Act, make 
the one-time prospective adjustment to long-term care hospital 
prospective payment rates provided for in Sec.  412.523(d)(3) of title 
42, Code of Federal Regulations, or any similar provision.'' That 
provision delays the effective date of any one-time budget neutrality 
adjustment until no earlier than December 29, 2010. However, prior to 
the enactment of the MMSEA of 2007, we had developed a methodology for 
evaluating the appropriateness of proposing a one-time budget 
neutrality adjustment under existing Sec.  412.523(d)(3). In order to 
inform the public of our thinking, and to stimulate comments for our 
consideration during the 3-year delay in implementing any adjustment 
under the recent legislation, we have presented our analysis and its 
results in section IV.D. of the preamble of the RY 2009 LTCH PPS 
proposed rule (73 FR 5376 through 5383).
f. Effect on Medicare Beneficiaries
    Under the LTCH PPS, hospitals receive payment based on the average 
resources consumed by patients for each diagnosis. We do not expect any 
changes in the quality of care or access to services for Medicare 
beneficiaries under the LTCH PPS, but we expect that

[[Page 26838]]

paying prospectively for LTCH services would enhance the efficiency of 
the Medicare program.
3. Accounting Statement
    As discussed in section XVI.A.1. of this final rule, the impact 
analysis of this final rule projects an increase in estimated aggregate 
payments of approximately $110 million (or about 2.5 percent) for the 
391 LTCHs in our database. Therefore, as required by OMB Circular A-4 
(available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in 
Table V, we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
this final rule. Table VI provides our best estimate of the increase in 
Medicare payments under the LTCH PPS as a result of the provisions 
presented in this final rule based on the data for the 391 LTCHs in our 
database. All expenditures are classified as transfers to Medicare 
providers (that is, LTCHs).

      Table VI.--Accounting Statement: Classification of Estimated
Expenditures, From the 2008 LTCH PPS Rate Year to the 2009 LTCH PPS Rate
                                  Year
                              [In millions]
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  Positive transfer--Estimated
                                             increase in expenditures:
                                             $110 million
From Whom To Whom?                          Federal Government To LTCH
                                             Medicare Providers
------------------------------------------------------------------------

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

B. Electronic Submission of Cost Reports: Revision to Effective Date of 
Cost Reporting Period

    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), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 (as amended by Executive Order 13258) 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 rule does not reach the economic threshold and 
thus is not considered a major 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 
$6.5 million to $31.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. We are not preparing 
an analysis for the RFA because we have determined that this rule will 
not have a significant economic impact on a substantial number of 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 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act because we have determined that 
this rule will not have a significant 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 whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. The threshold 
level is currently approximately $130 million. This rule will have no 
consequential effect on the governments mentioned or on the private 
sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.
    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 412

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

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

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh) and section 124 of Pub. L. 106-113 (113 
Stat. 1501A-332).

Subpart O--Prospective Payment System for Long Term Care Hospitals

0
2. Section 412.503 is amended by--
0
A. Revising the definition of ``Long-term care hospital prospective 
payment system rate year''.
0
B. Adding new definitions of ``rural'' and ``urban'' in alphabetical 
order.
    The revision and additions read as follows:


Sec.  412.503  Definitions.

* * * * *
    Long-term care hospital prospective payment system rate year 
means--
    (1) From July 1, 2003 and ending on or before June 30, 2008, the 
12-month period of July 1 through June 30.
    (2) From July 1, 2008 and ending on September 30, 2009, the 15-
month period of July 1, 2008 through September 30, 2009.
    (3) Beginning on or after October 1, 2009, the 12-month period of 
October 1 through September 30.
* * * * *
    Rural area means--(1) For cost reporting periods beginning on or 
after October 1, 2002, with respect to discharges occurring during the 
period covered by such cost reports but before July 1, 2005, an area 
defined in Sec.  412.62(f)(1)(iii);
    (2) For discharges occurring on or after July 1, 2005, and before 
July 1, 2008, an area as defined in Sec.  412.64(b)(1)(ii)(C); and
    (3) For discharges occurring on or after July 1, 2008, any area 
outside an urban area.
    Urban area means--(1) For cost reporting periods beginning on or 
after October 1, 2002, with respect to

[[Page 26839]]

discharges occurring during the period covered by such cost reports but 
before July 1, 2005, an area defined in Sec.  412.62(f)(1)(ii);
    (2) For discharges occurring on or after July 1, 2005, and before 
July 1, 2008, an urban area means an area as defined in Sec.  
412.64(b)(1)(ii)(A) and (B); and
    (3) For discharges occurring on or after July 1, 2008, a 
Metropolitan Statistical Area, as defined by the Executive Office of 
Management and Budget.
0
3. Section 412.523 is amended by--
0
A. Adding new paragraph (c)(3)(v).
0
B. Revising paragraph (d)(2) by removing the phrase ``sections 
1886(b)(2) and (b)(3) of the Act'' and adding ``section 1886(b)(2)(E) 
and (b)(3)(J) of the Act'' in its place.
0
C. Revising paragraph (d)(3).
    The addition and revisions read as follows:


Sec.  412.523  Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (c) * * *
    (3) * * *
    (v) For long-term care hospital prospective payment system rate 
year beginning July 1, 2008 and ending September 30, 2009. The standard 
Federal rate for long-term care hospital prospective payment system 
rate year beginning July 1, 2008 and ending September 30, 2009 is the 
standard Federal rate for the previous long-term care hospital 
prospective payment system rate year updated by 2.7 percent. The 
standard Federal rate is adjusted, as appropriate, as described in 
paragraph (d) of this section.
* * * * *
    (d) * * *
    (3) The Secretary reviews payments under this prospective payment 
system and may make a one-time prospective adjustment to the long-term 
care hospital prospective payment system rates no earlier than December 
29, 2010, and by no later than October 1, 2012, so that the effect of 
any significant difference between the data used in the original 
computations of budget neutrality for FY 2003 and more recent data to 
determine budget neutrality for FY 2003 is not perpetuated in the 
prospective payment rates for future years.
* * * * *

0
4. Section 412.525 is amended by revising paragraph (c) to read as 
follows:


Sec.  412.525   Adjustments to the Federal prospective payment.

* * * * *
    (c) Adjustments for area levels. The labor portion of a long-term 
care hospital's Federal prospective payment is adjusted to account for 
geographical differences in the area wage levels using an appropriate 
wage index (established by CMS), which reflects the relative level of 
hospital wages and wage-related costs in the geographic area (that is, 
urban or rural area as determined in accordance with the definitions 
set forth in Sec.  412.503) of the hospital compared to the national 
average level of hospital wages and wage-related costs. The appropriate 
wage index (established by CMS) is updated annually.

0
5. Section 412.529 is amended by revising paragraphs (d)(4)(ii)(B) and 
(d)(4)(iii)(b) to read as follows:


Sec.  412.529  Special payment provision for short-stay outliers.

* * * * *
    (d) * * *
    (4) * * *
    (ii) * * *
    (B) Is adjusted for different area wage levels based on the 
geographic classifications set forth at Sec.  412.503 and the 
applicable hospital inpatient prospective payment system labor-related 
share, using the applicable hospital inpatient prospective payment 
system wage index value for nonreclassified hospitals. For LTCHs 
located in Alaska and Hawaii, this amount is also adjusted by the 
applicable hospital inpatient prospective payment system cost of living 
adjustment factors.
* * * * *
    (iii) * * *
    (B) Is adjusted for the applicable geographic adjustment factors, 
including local cost variation based on the geographic classifications 
set forth at Sec.  412.503 and the applicable full hospital inpatient 
prospective payment system wage index value for nonreclassified 
hospitals and, applicable large urban location cost of living 
adjustment factors for LTCHs in Alaska and Hawaii, if applicable.
* * * * *

0
6. Section 412.534 is amended by revising paragraphs (d)(1), 
(f)(2)(ii), and (f)(3)(ii) to read as follows:


Sec.  412.534   Special payment provisions for long-term care hospitals 
within hospitals and satellites of long-term care hospitals.

* * * * *
    (d) * * *
    (1) Subject to paragraphs (g) and (h) of this section, in the case 
of a long-term care hospital or satellite facility that is located in a 
rural area as defined in Sec.  412.503 and is co-located with another 
hospital for any cost reporting period beginning on or after October 1, 
2004 in which the long-term care hospital or satellite facility has a 
discharged Medicare inpatient population of whom more than 50 percent 
were admitted to the long-term care hospital or satellite facility from 
the co-located hospital, payments for the patients who are admitted 
from the co-located hospital and who cause the long-term care hospital 
or satellite facility to exceed the 50 percent threshold for discharged 
patients who were admitted from the co-located hospital are the lesser 
of the amount otherwise payable under this subpart or the amount 
payable under this subpart that is equivalent, as set forth in 
paragraph (f) of this section, to the amount that were otherwise 
payable under Sec.  412.1(a). Payments for the remainder of the long-
term care hospital's or long-term care hospital satellite facility's 
patients are made under the rules in this subpart at Sec. Sec.  412.500 
through 412.541 with no adjustment under this section.
* * * * *
    (f) * * *
    (2) * * *
    (ii) Is adjusted for different area wage levels based on the 
geographic classifications set forth at Sec.  412.503 and the 
applicable hospital inpatient prospective payment system labor-related 
share, using the applicable hospital inpatient prospective payment 
system wage index value for non-reclassified hospitals. For LTCHs 
located in Alaska and Hawaii, this amount is also adjusted by the 
applicable hospital inpatient prospective payment system cost of living 
adjustment factors;* * *
    (3) * * *
    (ii) Is adjusted by the applicable geographic adjustment factors, 
including local cost variation based on the applicable geographic 
classifications set forth at Sec.  412.503 and the applicable full 
hospital inpatient prospective payment system wage index value for 
nonreclassified hospitals, applicable large urban location and cost of 
living adjustment factors for LTCHs for Alaska and Hawaii, if 
applicable;
* * * * *
0
7. Section 412.535 is amended by--
0
A. Revising the introductory text.
0
B. Revising paragraph (a).
0
C. Redesignating paragraph (b) as paragraph (d).
0
D. Adding new paragraphs (b) and (c).
    The revisions and additions read as follows:


Sec.  412.535  Publication of the Federal prospective payment rates.

    Except as specified in paragraph (b), CMS publishes information 
pertaining

[[Page 26840]]

to the long-term care hospital prospective payment system effective for 
each annual update in the Federal Register.
    (a) For the period beginning on or after July 1, 2003 and ending on 
June 30, 2008, information on the unadjusted Federal payment rates and 
a description of the methodology and data used to calculate the payment 
rates are published on or before May 1 prior to the start of each long-
term care hospital prospective payment system rate year which begins 
July 1, unless for good cause it is published after May 1, but before 
June 1.
    (b) For the period beginning on July 1, 2008 and ending on 
September 30, 2009, information of the unadjusted Federal payment rates 
and a description of the methodology and data used to calculate the 
payment rates are published on or before May 1 prior to the start of 
the long-term care hospital prospective payment system rate year which 
begins July 1, unless for good cause it is published after May 1, but 
before June 1.
    (c) For the period beginning on or after October 1, 2009, 
information on the unadjusted Federal payment rates and a description 
of the methodology and data used to calculate the payment rates are 
published on or before August 1 prior to the start of the Federal 
fiscal year which begins October 1, unless for good cause it is 
published after August 1, but before September 1.
* * * * *

0
8. Section 412.536 is amended by revising paragraphs (c)(1), 
(e)(2)(ii), and (e)(3)(ii) to read as follows.


Sec.  412.536   Special payment provisions for long-term care hospitals 
and satellites of long-term care hospitals that discharged Medicare 
patients admitted from a hospital not located in the same building or 
on the same campus as the long-term care hospital or satellite of the 
long-term care hospital.

* * * * *
    (c) Special treatment of rural hospitals. (1) Subject to paragraph 
(f) of this section, in the case of a long-term care hospital or long-
term care hospital satellite facility that is located in a rural area 
as defined in Sec.  412.503 that has a discharged Medicare inpatient 
population of whom more than 50 percent were admitted to the long-term 
care hospital or long-term care hospital satellite facility from a 
hospital not co-located with the long-term care hospital or with the 
satellite of a long-term care hospital, payment for the Medicare 
discharges who are admitted from that hospital and who cause the long-
term care hospital or satellite facility to exceed the 50 percent 
threshold for Medicare discharges is determined at the lesser of the 
amount otherwise payable under this subpart or the amount payable under 
this subpart that is equivalent, as set forth in paragraph (e) of this 
section, to the amount that is otherwise payable under subpart A, Sec.  
412.1(a). Payments for the remainder of the long-term care hospital's 
or long-term care hospital satellite facility's Medicare discharges 
admitted from that referring hospital are made under the rules in this 
subpart at Sec.  412.500 through Sec.  412.541 with no adjustment under 
this section.
* * * * *
    (e) * * *
    (2) * * *
    (ii) Is adjusted for different area wage levels based on the 
geographic classifications defined at Sec.  412.503 and the applicable 
hospital inpatient prospective payment system labor-related share, 
using the applicable hospital inpatient prospective payment system wage 
index value for nonreclassified hospitals. For long-term care hospitals 
located in Alaska and Hawaii, this amount is also adjusted by the 
applicable hospital inpatient prospective payment system cost of living 
adjustment factors;
* * * * *
    (3) * * *
    (ii) Is adjusted by the applicable geographic adjustment factors, 
including local cost variation based on the applicable geographic 
classifications set forth at Sec.  412.503 and the applicable full 
hospital inpatient prospective payment system wage index value for non-
reclassified hospitals, applicable large urban location and cost of 
living adjustment factors for long-term care hospitals for Alaska and 
Hawaii, if applicable;
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: April 24, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 1, 2008.
Michael O. Leavitt,
Secretary.
    The following addendum will not appear in the Code of Federal 
Regulations.

Addendum

    This addendum contains the tables referred to throughout the 
preamble to this final rule. The tables presented below are as follows:
    Table 1: Long-Term Care Hospital Wage Index for Urban Areas for 
Discharges Occurring from July 1, 2008 through September 30, 2009.
    Table 2: Long-Term Care Hospital Wage Index for Rural Areas for 
Discharges Occurring from July 1, 2008 through September 30, 2009.
    Table 3: FY 2008 MS-LTC-DRG Relative Weights, Geometric Average 
Length of Stay, and Short-Stay Outlier Threshold (effective for 
discharges occurring on or after July 1, 2008 through September 30, 
2009)). (Note: This table is the same information provided in Table 11 
of the FY 2008 IPPS final rule (72 FR 48143 through 48157), which has 
been reprinted here for convenience.)

    Table 1.--Long-Term Care Hospital Wage Index for Urban Areas for
    Discharges Occurring From July 1, 2008 Through September 30, 2009
------------------------------------------------------------------------
                                Urban area (constituent        Proposed
        CBSA code                      counties)              wage index
------------------------------------------------------------------------
10180....................  Abilene, TX.....................       0.7957
                           Callahan County, TX.............
                           Jones County, TX................
                           Taylor County, TX...............
10380....................  Aguadilla-Isabela-San                  0.3448
                            Sebasti[aacute]n, PR.
                           Aguada Municipio, PR............
                           Aguadilla Municipio, PR.........
                           A[ntilde]asco Municipio, PR.....
                           Isabela Municipio, PR...........
                           Lares Municipio, PR.............

[[Page 26841]]

 
                           Moca Municipio, PR..............
                           Rinc[oacute]n Municipio, PR.....
                           San Sebasti[aacute]n Municipio,
                            PR.
10420....................  Akron, OH.......................       0.8794
                           Portage County, OH..............
                           Summit County, OH...............
10500....................  Albany, GA......................       0.8514
                           Baker County, GA................
                           Dougherty County, GA............
                           Lee County, GA..................
                           Terrell County, GA..............
                           Worth County, GA................
10580....................  Albany-Schenectady-Troy, NY.....       0.8588
                           Albany County, NY...............
                           Rensselaer County, NY...........
                           Saratoga County, NY.............
                           Schenectady County, NY..........
                           Schoharie County, NY............
10740....................  Albuquerque, NM.................       0.9554
                           Bernalillo County, NM...........
                           Sandoval County, NM.............
                           Torrance County, NM.............
                           Valencia County, NM.............
10780....................  Alexandria, LA..................       0.7979
                           Grant Parish, LA................
                           Rapides Parish, LA..............
10900....................  Allentown-Bethlehem-Easton, PA-        0.9865
                            NJ.
                           Warren County, NJ...............
                           Carbon County, PA...............
                           Lehigh County, PA...............
                           Northampton County, PA..........
11020....................  Altoona, PA.....................       0.8618
                           Blair County, PA................
11100....................  Amarillo, TX....................       0.9116
                           Armstrong County, TX............
                           Carson County, TX...............
                           Potter County, TX...............
                           Randall County, TX..............
11180....................  Ames, IA........................       1.0046
                           Story County, IA................
11260....................  Anchorage, AK...................       1.1913
                           Anchorage Municipality, AK......
                           Matanuska-Susitna Borough, AK...
11300....................  Anderson, IN....................       0.8827
                           Madison County, IN..............
11340....................  Anderson, SC....................       0.9086
                           Anderson County, SC.............
11460....................  Ann Arbor, MI...................       1.0539
                           Washtenaw County, MI............
11500....................  Anniston-Oxford, AL.............       0.7926
                           Calhoun County, AL..............
11540....................  Appleton, WI....................       0.9598
                           Calumet County, WI..............
                           Outagamie County, WI............
11700....................  Asheville, NC...................       0.9185
                           Buncombe County, NC.............
                           Haywood County, NC..............
                           Henderson County, NC............
                           Madison County, NC..............
12020....................  Athens-Clarke County, GA........       1.0517
                           Clarke County, GA...............
                           Madison County, GA..............
                           Oconee County, GA...............
                           Oglethorpe County, GA...........
12060....................  Atlanta-Sandy Springs-Marietta,        0.9828
                            GA.
                           Barrow County, GA...............
                           Bartow County, GA...............
                           Butts County, GA................
                           Carroll County, GA..............
                           Cherokee County, GA.............

[[Page 26842]]

 
                           Clayton County, GA..............
                           Cobb County, GA.................
                           Coweta County, GA...............
                           Dawson County, GA...............
                           DeKalb County, GA...............
                           Douglas County, GA..............
                           Fayette County, GA..............
                           Forsyth County, GA..............
                           Fulton County, GA...............
                           Gwinnett County, GA.............
                           Haralson County, GA.............
                           Heard County, GA................
                           Henry County, GA................
                           Jasper County, GA...............
                           Lamar County, GA................
                           Meriwether County, GA...........
                           Newton County, GA...............
                           Paulding County, GA.............
                           Pickens County, GA..............
                           Pike County, GA.................
                           Rockdale County, GA.............
                           Spalding County, GA.............
                           Walton County, GA...............
12100....................  Atlantic City, NJ...............       1.2198
                           Atlantic County, NJ.............
12220....................  Auburn-Opelika, AL..............       0.8090
                           Lee County, AL..................
12260....................  Augusta-Richmond County, GA-SC..       0.9645
                           Burke County, GA................
                           Columbia County, GA.............
                           McDuffie County, GA.............
                           Richmond County, GA.............
                           Aiken County, SC................
                           Edgefield County, SC............
12420....................  Austin-Round Rock, TX...........       0.9544
                           Bastrop County, TX..............
                           Caldwell County, TX.............
                           Hays County, TX.................
                           Travis County, TX...............
                           Williamson County, TX...........
12540....................  Bakersfield, CA.................       1.1051
                           Kern County, CA.................
12580....................  Baltimore-Towson, MD............       1.0134
                           Anne Arundel County, MD.........
                           Baltimore County, MD............
                           Carroll County, MD..............
                           Harford County, MD..............
                           Howard County, MD...............
                           Queen Anne's County, MD.........
                           Baltimore City, MD..............
12620....................  Bangor, ME......................       0.9978
                           Penobscot County, ME............
12700....................  Barnstable Town, MA.............       1.2603
                           Barnstable County, MA...........
12940....................  Baton Rouge, LA.................       0.8034
                           Ascension Parish, LA............
                           East Baton Rouge Parish, LA.....
                           East Feliciana Parish, LA.......
                           Iberville Parish, LA............
                           Livingston Parish, LA...........
                           Pointe Coupee Parish, LA........
                           St. Helena Parish, LA...........
                           West Baton Rouge Parish, LA.....
                           West Feliciana Parish, LA.......
12980....................  Battle Creek, MI................       1.0179
                           Calhoun County, MI..............
13020....................  Bay City, MI....................       0.8897
                           Bay County, MI..................
13140....................  Beaumont-Port Arthur, TX........       0.8531
                           Hardin County, TX...............

[[Page 26843]]

 
                           Jefferson County, TX............
                           Orange County, TX...............
13380....................  Bellingham, WA..................       1.1474
                           Whatcom County, WA..............
13460....................  Bend, OR........................       1.0942
                           Deschutes County, OR............
13644....................  Bethesda-Gaithersburg-Frederick,       1.0511
                            MD.
                           Frederick County, MD............
                           Montgomery County, MD...........
13740....................  Billings, MT....................       0.8666
                           Carbon County, MT...............
                           Yellowstone County, MT..........
13780....................  Binghamton, NY..................       0.8949
                           Broome County, NY...............
                           Tioga County, NY................
13820....................  Birmingham-Hoover, AL...........       0.8898
                           Bibb County, AL.................
                           Blount County, AL...............
                           Chilton County, AL..............
                           Jefferson County, AL............
                           St. Clair County, AL............
                           Shelby County, AL...............
                           Walker County, AL...............
13900....................  Bismarck, ND....................       0.7225
                           Burleigh County, ND.............
                           Morton County, ND...............
13980....................  Blacksburg-Christiansburg-             0.8192
                            Radford, VA.
                           Giles County, VA................
                           Montgomery County, VA...........
                           Pulaski County, VA..............
                           Radford City, VA................
14020....................  Bloomington, IN.................       0.8915
                           Greene County, IN...............
                           Monroe County, IN...............
                           Owen County, IN.................
14060....................  Bloomington-Normal, IL..........       0.9325
                           McLean County, IL...............
14260....................  Boise City-Nampa, ID............       0.9465
                           Ada County, ID..................
                           Boise County, ID................
                           Canyon County, ID...............
                           Gem County, ID..................
                           Owyhee County, ID...............
14484....................  Boston-Quincy, MA...............       1.1792
                           Norfolk County, MA..............
                           Plymouth County, MA.............
                           Suffolk County, MA..............
14500....................  Boulder, CO.....................       1.0426
                           Boulder County, CO..............
14540....................  Bowling Green, KY...............       0.8159
                           Edmonson County, KY.............
                           Warren County, KY...............
14740....................  Bremerton-Silverdale, WA........       1.0904
                           Kitsap County, WA...............
14860....................  Bridgeport-Stamford-Norwalk, CT.       1.2735
                           Fairfield County, CT............
15180....................  Brownsville-Harlingen, TX.......       0.8914
                           Cameron County, TX..............
15260....................  Brunswick, GA...................       0.9475
                           Brantley County, GA.............
                           Glynn County, GA................
                           McIntosh County, GA.............
15380....................  Buffalo-Niagara Falls, NY.......       0.9568
                           Erie County, NY.................
                           Niagara County, NY..............
15500....................  Burlington, NC..................       0.8747
                           Alamance County, NC.............
15540....................  Burlington-South Burlington, VT.       0.9660
                           Chittenden County, VT...........
                           Franklin County, VT.............

[[Page 26844]]

 
                           Grand Isle County, VT...........
15764....................  Cambridge-Newton-Framingham, MA.       1.1215
                           Middlesex County, MA............
15804....................  Camden, NJ......................       1.0411
                           Burlington County, NJ...........
                           Camden County, NJ...............
                           Gloucester County, NJ...........
15940....................  Canton-Massillon, OH............       0.8935
                           Carroll County, OH..............
                           Stark County, OH................
15980....................  Cape Coral-Fort Myers, FL.......       0.9396
                           Lee County, FL..................
16180....................  Carson City, NV.................       1.0003
                           Carson City, NV.................
16220....................  Casper, WY......................       0.9385
                           Natrona County, WY..............
16300....................  Cedar Rapids, IA................       0.8852
                           Benton County, IA...............
                           Jones County, IA................
                           Linn County, IA.................
16580....................  Champaign-Urbana, IL............       0.9392
                           Champaign County, IL............
                           Ford County, IL.................
                           Piatt County, IL................
16620....................  Charleston, WV..................       0.8289
                           Boone County, WV................
                           Clay County, WV.................
                           Kanawha County, WV..............
                           Lincoln County, WV..............
                           Putnam County, WV...............
16700....................  Charleston-North Charleston, SC.       0.9124
                           Berkeley County, SC.............
                           Charleston County, SC...........
                           Dorchester County, SC...........
16740....................  Charlotte-Gastonia-Concord, NC-        0.9520
                            SC.
                           Anson County, NC................
                           Cabarrus County, NC.............
                           Gaston County, NC...............
                           Mecklenburg County, NC..........
                           Union County, NC................
                           York County, SC.................
16820....................  Charlottesville, VA.............       0.9277
                           Albemarle County, VA............
                           Fluvanna County, VA.............
                           Greene County, VA...............
                           Nelson County, VA...............
                           Charlottesville City, VA........
16860....................  Chattanooga, TN-GA..............       0.8994
                           Catoosa County, GA..............
                           Dade County, GA.................
                           Walker County, GA...............
                           Hamilton County, TN.............
                           Marion County, TN...............
                           Sequatchie County, TN...........
16940....................  Cheyenne, WY....................       0.9308
                           Laramie County, WY..............
16974....................  Chicago-Naperville-Joliet, IL...       1.0715
                           Cook County, IL.................
                           DeKalb County, IL...............
                           DuPage County, IL...............
                           Grundy County, IL...............
                           Kane County, IL.................
                           Kendall County, IL..............
                           McHenry County, IL..............
                           Will County, IL.................
17020....................  Chico, CA.......................       1.1290
                           Butte County, CA................
17140....................  Cincinnati-Middletown, OH-KY-IN.       0.9784
                           Dearborn County, IN.............
                           Franklin County, IN.............

[[Page 26845]]

 
                           Ohio County, IN.................
                           Boone County, KY................
                           Bracken County, KY..............
                           Campbell County, KY.............
                           Gallatin County, KY.............
                           Grant County, KY................
                           Kenton County, KY...............
                           Pendleton County, KY............
                           Brown County, OH................
                           Butler County, OH...............
                           Clermont County, OH.............
                           Hamilton County, OH.............
                           Warren County, OH...............
17300....................  Clarksville, TN-KY..............       0.8251
                           Christian County, KY............
                           Trigg County, KY................
                           Montgomery County, TN...........
                           Stewart County, TN..............
17420....................  Cleveland, TN...................       0.8052
                           Bradley County, TN..............
                           Polk County, TN.................
17460....................  Cleveland-Elyria-Mentor, OH.....       0.9339
                           Cuyahoga County, OH.............
                           Geauga County, OH...............
                           Lake County, OH.................
                           Lorain County, OH...............
                           Medina County, OH...............
17660....................  Coeur d'Alene, ID...............       0.9532
                           Kootenai County, ID.............
17780....................  College Station-Bryan, TX.......       0.9358
                           Brazos County, TX...............
                           Burleson County, TX.............
                           Robertson County, TX............
17820....................  Colorado Springs, CO............       0.9719
                           El Paso County, CO..............
                           Teller County, CO...............
17860....................  Columbia, MO....................       0.8658
                           Boone County, MO................
                           Howard County, MO...............
17900....................  Columbia, SC....................       0.8800
                           Calhoun County, SC..............
                           Fairfield County, SC............
                           Kershaw County, SC..............
                           Lexington County, SC............
                           Richland County, SC.............
                           Saluda County, SC...............
17980....................  Columbus, GA-AL.................       0.8729
                           Russell County, AL..............
                           Chattahoochee County, GA........
                           Harris County, GA...............
                           Marion County, GA...............
                           Muscogee County, GA.............
18020....................  Columbus, IN....................       0.9537
                           Bartholomew County, IN..........
18140....................  Columbus, OH....................       1.0085
                           Delaware County, OH.............
                           Fairfield County, OH............
                           Franklin County, OH.............
                           Licking County, OH..............
                           Madison County, OH..............
                           Morrow County, OH...............
                           Pickaway County, OH.............
                           Union County, OH................
18580....................  Corpus Christi, TX..............       0.8588
                           Aransas County, TX..............
                           Nueces County, TX...............
                           San Patricio County, TX.........
18700....................  Corvallis, OR...................       1.0959
                           Benton County, OR...............
19060....................  Cumberland, MD-WV...............       0.8294

[[Page 26846]]

 
                           Allegany County, MD.............
                           Mineral County, WV..............
19124....................  Dallas-Plano-Irving, TX.........       0.9915
                           Collin County, TX...............
                           Dallas County, TX...............
                           Delta County, TX................
                           Denton County, TX...............
                           Ellis County, TX................
                           Hunt County, TX.................
                           Kaufman County, TX..............
                           Rockwall County, TX.............
19140....................  Dalton, GA......................       0.8760
                           Murray County, GA...............
                           Whitfield County, GA............
19180....................  Danville, IL....................       0.8957
                           Vermilion County, IL............
19260....................  Danville, VA....................       0.8240
                           Pittsylvania County, VA.........
                           Danville City, VA...............
19340....................  Davenport-Moline-Rock Island, IA-      0.8830
                            IL.
                           Henry County, IL................
                           Mercer County, IL...............
                           Rock Island County, IL..........
                           Scott County, IA................
19380....................  Dayton, OH......................       0.9190
                           Greene County, OH...............
                           Miami County, OH................
                           Montgomery County, OH...........
                           Preble County, OH...............
19460....................  Decatur, AL.....................       0.7885
                           Lawrence County, AL.............
                           Morgan County, AL...............
19500....................  Decatur, IL.....................       0.8074
                           Macon County, IL................
19660....................  Deltona-Daytona Beach-Ormond           0.9031
                            Beach, FL.
                           Volusia County, FL..............
19740....................  Denver-Aurora, CO...............       1.0718
                           Adams County, CO................
                           Arapahoe County, CO.............
                           Broomfield County, CO...........
                           Clear Creek County, CO..........
                           Denver County, CO...............
                           Douglas County, CO..............
                           Elbert County, CO...............
                           Gilpin County, CO...............
                           Jefferson County, CO............
                           Park County, CO.................
19780....................  Des Moines-West Des Moines, IA..       0.9226
                           Dallas County, IA...............
                           Guthrie County, IA..............
                           Madison County, IA..............
                           Polk County, IA.................
                           Warren County, IA...............
19804....................  Detroit-Livonia-Dearborn, MI....       0.9999
                           Wayne County, MI................
20020....................  Dothan, AL......................       0.7270
                           Geneva County, AL...............
                           Henry County, AL................
                           Houston County, AL..............
20100....................  Dover, DE.......................       1.0099
                           Kent County, DE.................
20220....................  Dubuque, IA.....................       0.9058
                           Dubuque County, IA..............
20260....................  Duluth, MN-WI...................       0.9975
                           Carlton County, MN..............
                           St. Louis County, MN............
                           Douglas County, WI..............
20500....................  Durham, NC......................       0.9816
                           Chatham County, NC..............
                           Durham County, NC...............

[[Page 26847]]

 
                           Orange County, NC...............
                           Person County, NC...............
20740....................  Eau Claire, WI..................       0.9475
                           Chippewa County, WI.............
                           Eau Claire County, WI...........
20764....................  Edison, NJ......................       1.1181
                           Middlesex County, NJ............
                           Monmouth County, NJ.............
                           Ocean County, NJ................
                           Somerset County, NJ.............
20940....................  El Centro, CA...................       0.8914
                           Imperial County, CA.............
21060....................  Elizabethtown, KY...............       0.8711
                           Hardin County, KY...............
                           Larue County, KY................
21140....................  Elkhart-Goshen, IN..............       0.9611
                           Elkhart County, IN..............
21300....................  Elmira, NY......................       0.8264
                           Chemung County, NY..............
21340....................  El Paso, TX.....................       0.8989
                           El Paso County, TX..............
21500....................  Erie, PA........................       0.8495
                           Erie County, PA.................
21660....................  Eugene-Springfield, OR..........       1.0932
                           Lane County, OR.................
21780....................  Evansville, IN-KY...............       0.8662
                           Gibson County, IN...............
                           Posey County, IN................
                           Vanderburgh County, IN..........
                           Warrick County, IN..............
                           Henderson County, KY............
                           Webster County, KY..............
21820....................  Fairbanks, AK...................       1.1050
                           Fairbanks North Star Borough, AK
21940....................  Fajardo, PR.....................       0.4375
                           Ceiba Municipio, PR.............
                           Fajardo Municipio, PR...........
                           Luquillo Municipio, PR..........
22020....................  Fargo, ND-MN....................       0.8042
                           Cass County, ND.................
                           Clay County, MN.................
22140....................  Farmington, NM..................       0.9587
                           San Juan County, NM.............
22180....................  Fayetteville, NC................       0.9368
                           Cumberland County, NC...........
                           Hoke County, NC.................
22220....................  Fayetteville-Springdale-Rogers,        0.8742
                            AR-MO.
                           Benton County, AR...............
                           Madison County, AR..............
                           Washington County, AR...........
                           McDonald County, MO.............
22380....................  Flagstaff, AZ...................       1.1687
                           Coconino County, AZ.............
22420....................  Flint, MI.......................       1.1220
                           Genesee County, MI..............
22500....................  Florence, SC....................       0.8249
                           Darlington County, SC...........
                           Florence County, SC.............
22520....................  Florence-Muscle Shoals, AL......       0.7680
                           Colbert County, AL..............
                           Lauderdale County, AL...........
22540....................  Fond du Lac, WI.................       0.9667
                           Fond du Lac County, WI..........
22660....................  Fort Collins-Loveland, CO.......       0.9897
                           Larimer County, CO..............
22744....................  Fort Lauderdale-Pompano Beach-         1.0229
                            Deerfield Beach, FL.
                           Broward County, FL..............
22900....................  Fort Smith, AR-OK...............       0.7933
                           Crawford County, AR.............
                           Franklin County, AR.............

[[Page 26848]]

 
                           Sebastian County, AR............
                           Le Flore County, OK.............
                           Sequoyah County, OK.............
23020....................  Fort Walton Beach-Crestview-           0.8743
                            Destin, FL.
                           Okaloosa County, FL.............
23060....................  Fort Wayne, IN..................       0.9284
                           Allen County, IN................
                           Wells County, IN................
                           Whitley County, IN..............
23104....................  Fort Worth-Arlington, TX........       0.9693
                           Johnson County, TX..............
                           Parker County, TX...............
                           Tarrant County, TX..............
                           Wise County, TX.................
23420....................  Fresno, CA......................       1.0993
                           Fresno County, CA...............
23460....................  Gadsden, AL.....................       0.8159
                           Etowah County, AL...............
23540....................  Gainesville, FL.................       0.9196
                           Alachua County, FL..............
                           Gilchrist County, FL............
23580....................  Gainesville, GA.................       0.9216
                           Hall County, GA.................
23844....................  Gary, IN........................       0.9224
                           Jasper County, IN...............
                           Lake County, IN.................
                           Newton County, IN...............
                           Porter County, IN...............
24020....................  Glens Falls, NY.................       0.8256
                           Warren County, NY...............
                           Washington County, NY...........
24140....................  Goldsboro, NC...................       0.9288
                           Wayne County, NC................
24220....................  Grand Forks, ND-MN..............       0.7881
                           Polk County, MN.................
                           Grand Forks County, ND..........
24300....................  Grand Junction, CO..............       0.9864
                           Mesa County, CO.................
24340....................  Grand Rapids-Wyoming, MI........       0.9315
                           Barry County, MI................
                           Ionia County, MI................
                           Kent County, MI.................
                           Newaygo County, MI..............
24500....................  Great Falls, MT.................       0.8675
                           Cascade County, MT..............
24540....................  Greeley, CO.....................       0.9658
                           Weld County, CO.................
24580....................  Green Bay, WI...................       0.9727
                           Brown County, WI................
                           Kewaunee County, WI.............
                           Oconto County, WI...............
24660....................  Greensboro-High Point, NC.......       0.9010
                           Guilford County, NC.............
                           Randolph County, NC.............
                           Rockingham County, NC...........
24780....................  Greenville, NC..................       0.9402
                           Greene County, NC...............
                           Pitt County, NC.................
24860....................  Greenville-Mauldin-Easley, SC...       0.9860
                           Greenville County, SC...........
                           Laurens County, SC..............
                           Pickens County, SC..............
25020....................  Guayama, PR.....................       0.3064
                           Arroyo Municipio, PR............
                           Guayama Municipio, PR...........
                           Patillas Municipio, PR..........
25060....................  Gulfport-Biloxi, MS.............       0.8773
                           Hancock County, MS..............
                           Harrison County, MS.............
                           Stone County, MS................

[[Page 26849]]

 
25180....................  Hagerstown-Martinsburg, MD-WV...       0.9013
                           Washington County, MD...........
                           Berkeley County, WV.............
                           Morgan County, WV...............
25260....................  Hanford-Corcoran, CA............       1.0499
                           Kings County, CA................
25420....................  Harrisburg-Carlisle, PA.........       0.9280
                           Cumberland County, PA...........
                           Dauphin County, PA..............
                           Perry County, PA................
25500....................  Harrisonburg, VA................       0.8867
                           Rockingham County, VA...........
                           Harrisonburg City, VA...........
25540....................  Hartford-West Hartford-East            1.0959
                            Hartford, CT.
                           Hartford County, CT.............
                           Middlesex County, CT............
                           Tolland County, CT..............
25620....................  Hattiesburg, MS.................       0.7366
                           Forrest County, MS..............
                           Lamar County, MS................
                           Perry County, MS................
25860....................  Hickory-Lenoir-Morganton, NC....       0.9028
                           Alexander County, NC............
                           Burke County, NC................
                           Caldwell County, NC.............
                           Catawba County, NC..............
25980....................  Hinesville-Fort Stewart, GA.....       0.9187
                           Liberty County, GA..............
                           Long County, GA.................
26100....................  Holland-Grand Haven, MI.........       0.9006
                           Ottawa County, MI...............
26180....................  Honolulu, HI....................       1.1556
                           Honolulu County, HI.............
26300....................  Hot Springs, AR.................       0.9109
                           Garland County, AR..............
26380....................  Houma-Bayou Cane-Thibodaux, LA..       0.7892
                           Lafourche Parish, LA............
                           Terrebonne Parish, LA...........
26420....................  Houston-Sugar Land-Baytown, TX..       0.9939
                           Austin County, TX...............
                           Brazoria County, TX.............
                           Chambers County, TX.............
                           Fort Bend County, TX............
                           Galveston County, TX............
                           Harris County, TX...............
                           Liberty County, TX..............
                           Montgomery County, TX...........
                           San Jacinto County, TX..........
                           Waller County, TX...............
26580....................  Huntington-Ashland, WV-KY-OH....       0.9041
                           Boyd County, KY.................
                           Greenup County, KY..............
                           Lawrence County, OH.............
                           Cabell County, WV...............
                           Wayne County, WV................
26620....................  Huntsville, AL..................       0.9146
                           Limestone County, AL............
                           Madison County, AL..............
26820....................  Idaho Falls, ID.................       0.9264
                           Bonneville County, ID...........
                           Jefferson County, ID............
26900....................  Indianapolis-Carmel, IN.........       0.9844
                           Boone County, IN................
                           Brown County, IN................
                           Hamilton County, IN.............
                           Hancock County, IN..............
                           Hendricks County, IN............
                           Johnson County, IN..............
                           Marion County, IN...............
                           Morgan County, IN...............

[[Page 26850]]

 
                           Putnam County, IN...............
                           Shelby County, IN...............
26980....................  Iowa City, IA...................       0.9568
                           Johnson County, IA..............
                           Washington County, IA...........
27060....................  Ithaca, NY......................       0.9630
                           Tompkins County, NY.............
27100....................  Jackson, MI.....................       0.9329
                           Jackson County, MI..............
27140....................  Jackson, MS.....................       0.8011
                           Copiah County, MS...............
                           Hinds County, MS................
                           Madison County, MS..............
                           Rankin County, MS...............
                           Simpson County, MS..............
27180....................  Jackson, TN.....................       0.8676
                           Chester County, TN..............
                           Madison County, TN..............
27260....................  Jacksonville, FL................       0.9021
                           Baker County, FL................
                           Clay County, FL.................
                           Duval County, FL................
                           Nassau County, FL...............
                           St. Johns County, FL............
27340....................  Jacksonville, NC................       0.8079
                           Onslow County, NC...............
27500....................  Janesville, WI..................       0.9702
                           Rock County, WI.................
27620....................  Jefferson City, MO..............       0.8478
                           Callaway County, MO.............
                           Cole County, MO.................
                           Moniteau County, MO.............
                           Osage County, MO................
27740....................  Johnson City, TN................       0.7677
                           Carter County, TN...............
                           Unicoi County, TN...............
                           Washington County, TN...........
27780....................  Johnstown, PA...................       0.7543
                           Cambria County, PA..............
27860....................  Jonesboro, AR...................       0.7790
                           Craighead County, AR............
                           Poinsett County, AR.............
27900....................  Joplin, MO......................       0.8951
                           Jasper County, MO...............
                           Newton County, MO...............
28020....................  Kalamazoo-Portage, MI...........       1.0433
                           Kalamazoo County, MI............
                           Van Buren County, MI............
28100....................  Kankakee-Bradley, IL............       1.0238
                           Kankakee County, IL.............
28140....................  Kansas City, MO-KS..............       0.9504
                           Franklin County, KS.............
                           Johnson County, KS..............
                           Leavenworth County, KS..........
                           Linn County, KS.................
                           Miami County, KS................
                           Wyandotte County, KS............
                           Bates County, MO................
                           Caldwell County, MO.............
                           Cass County, MO.................
                           Clay County, MO.................
                           Clinton County, MO..............
                           Jackson County, MO..............
                           Lafayette County, MO............
                           Platte County, MO...............
                           Ray County, MO..................
28420....................  Kennewick-Richland-Pasco, WA....       1.0075
                           Benton County, WA...............
                           Franklin County, WA.............
28660....................  Killeen-Temple-Fort Hood, TX....       0.8249

[[Page 26851]]

 
                           Bell County, TX.................
                           Coryell County, TX..............
                           Lampasas County, TX.............
28700....................  Kingsport-Bristol-Bristol, TN-VA       0.7658
                           Hawkins County, TN..............
                           Sullivan County, TN.............
                           Bristol City, VA................
                           Scott County, VA................
                           Washington County, VA...........
28740....................  Kingston, NY....................       0.9556
                           Ulster County, NY...............
28940....................  Knoxville, TN...................       0.8036
                           Anderson County, TN.............
                           Blount County, TN...............
                           Knox County, TN.................
                           Loudon County, TN...............
                           Union County, TN................
29020....................  Kokomo, IN......................       0.9591
                           Howard County, IN...............
                           Tipton County, IN...............
29100....................  La Crosse, WI-MN................       0.9685
                           Houston County, MN..............
                           La Crosse County, WI............
29140....................  Lafayette, IN...................       0.8869
                           Benton County, IN...............
                           Carroll County, IN..............
                           Tippecanoe County, IN...........
29180....................  Lafayette, LA...................       0.8247
                           Lafayette Parish, LA............
                           St. Martin Parish, LA...........
29340....................  Lake Charles, LA................       0.7777
                           Calcasieu Parish, LA............
                           Cameron Parish, LA..............
29404....................  Lake County-Kenosha County, IL-        1.0603
                            WI.
                           Lake County, IL.................
                           Kenosha County, WI..............
29420....................  Lake Havasu City-Kingman, AZ....       0.9333
                           Mohave County, AZ...............
29460....................  Lakeland, FL....................       0.8661
                           Polk County, FL.................
29540....................  Lancaster, PA...................       0.9252
                           Lancaster County, PA............
29620....................  Lansing-East Lansing, MI........       1.0119
                           Clinton County, MI..............
                           Eaton County, MI................
                           Ingham County, MI...............
29700....................  Laredo, TX......................       0.8093
                           Webb County, TX.................
29740....................  Las Cruces, NM..................       0.8676
                           Dona Ana County, NM.............
29820....................  Las Vegas-Paradise, NV..........       1.1799
                           Clark County, NV................
29940....................  Lawrence, KS....................       0.8227
                           Douglas County, KS..............
30020....................  Lawton, OK......................       0.8025
                           Comanche County, OK.............
30140....................  Lebanon, PA.....................       0.8192
                           Lebanon County, PA..............
30300....................  Lewiston, ID-WA.................       0.9454
                           Nez Perce County, ID............
                           Asotin County, WA...............
30340....................  Lewiston-Auburn, ME.............       0.9193
                           Androscoggin County, ME.........
30460....................  Lexington-Fayette, KY...........       0.9191
                           Bourbon County, KY..............
                           Clark County, KY................
                           Fayette County, KY..............
                           Jessamine County, KY............
                           Scott County, KY................
                           Woodford County, KY.............

[[Page 26852]]

 
30620....................  Lima, OH........................       0.9424
                           Allen County, OH................
30700....................  Lincoln, NE.....................       1.0051
                           Lancaster County, NE............
                           Seward County, NE...............
30780....................  Little Rock-North Little Rock-         0.8863
                            Conway, AR.
                           Faulkner County, AR.............
                           Grant County, AR................
                           Lonoke County, AR...............
                           Perry County, AR................
                           Pulaski County, AR..............
                           Saline County, AR...............
30860....................  Logan, UT-ID....................       0.9183
                           Franklin County, ID.............
                           Cache County, UT................
30980....................  Longview, TX....................       0.8717
                           Gregg County, TX................
                           Rusk County, TX.................
                           Upshur County, TX...............
31020....................  Longview, WA....................       1.0827
                           Cowlitz County, WA..............
31084....................  Los Angeles-Long Beach-Glendale,       1.1771
                            CA.
                           Los Angeles County, CA..........
31140....................  Louisville-Jefferson County, KY-       0.9065
                            IN.
                           Clark County, IN................
                           Floyd County, IN................
                           Harrison County, IN.............
                           Washington County, IN...........
                           Bullitt County, KY..............
                           Henry County, KY................
                           Jefferson County, KY............
                           Meade County, KY................
                           Nelson County, KY...............
                           Oldham County, KY...............
                           Shelby County, KY...............
                           Spencer County, KY..............
                           Trimble County, KY..............
31180....................  Lubbock, TX.....................       0.8680
                           Crosby County, TX...............
                           Lubbock County, TX..............
31340....................  Lynchburg, VA...................       0.8732
                           Amherst County, VA..............
                           Appomattox County, VA...........
                           Bedford County, VA..............
                           Campbell County, VA.............
                           Bedford City, VA................
                           Lynchburg City, VA..............
31420....................  Macon, GA.......................       0.9541
                           Bibb County, GA.................
                           Crawford County, GA.............
                           Jones County, GA................
                           Monroe County, GA...............
                           Twiggs County, GA...............
31460....................  Madera, CA......................       0.8069
                           Madera County, CA...............
31540....................  Madison, WI.....................       1.0935
                           Columbia County, WI.............
                           Dane County, WI.................
                           Iowa County, WI.................
31700....................  Manchester-Nashua, NH...........       1.0273
                           Hillsborough County, NH.........
31900....................  Mansfield, OH...................       0.9271
                           Richland County, OH.............
32420....................  Mayag[uuml]ez, PR...............       0.3711
                           Hormigueros Municipio, PR.......
                           Mayag[uuml]ez Municipio, PR.....
32580....................  McAllen-Edinburg-Mission, TX....       0.9123
                           Hidalgo County, TX..............
32780....................  Medford, OR.....................       1.0318
                           Jackson County, OR..............

[[Page 26853]]

 
32820....................  Memphis, TN-MS-AR...............       0.9250
                           Crittenden County, AR...........
                           DeSoto County, MS...............
                           Marshall County, MS.............
                           Tate County, MS.................
                           Tunica County, MS...............
                           Fayette County, TN..............
                           Shelby County, TN...............
                           Tipton County, TN...............
32900....................  Merced, CA......................       1.2120
                           Merced County, CA...............
33124....................  Miami-Miami Beach-Kendall, FL...       1.0002
                           Miami-Dade County, FL...........
33140....................  Michigan City-La Porte, IN......       0.8914
                           LaPorte County, IN..............
33260....................  Midland, TX.....................       1.0017
                           Midland County, TX..............
33340....................  Milwaukee-Waukesha-West Allis,         1.0214
                            WI.
                           Milwaukee County, WI............
                           Ozaukee County, WI..............
                           Washington County, WI...........
                           Waukesha County, WI.............
33460....................  Minneapolis-St. Paul-                  1.1093
                            Bloomington, MN-WI.
                           Anoka County, MN................
                           Carver County, MN...............
                           Chisago County, MN..............
                           Dakota County, MN...............
                           Hennepin County, MN.............
                           Isanti County, MN...............
                           Ramsey County, MN...............
                           Scott County, MN................
                           Sherburne County, MN............
                           Washington County, MN...........
                           Wright County, MN...............
                           Pierce County, WI...............
                           St. Croix County, WI............
33540....................  Missoula, MT....................       0.8953
                           Missoula County, MT.............
33660....................  Mobile, AL......................       0.8033
                           Mobile County, AL...............
33700....................  Modesto, CA.....................       1.1962
                           Stanislaus County, CA...........
33740....................  Monroe, LA......................       0.7832
                           Ouachita Parish, LA.............
                           Union Parish, LA................
33780....................  Monroe, MI......................       0.9414
                           Monroe County, MI...............
33860....................  Montgomery, AL..................       0.8088
                           Autauga County, AL..............
                           Elmore County, AL...............
                           Lowndes County, AL..............
                           Montgomery County, AL...........
34060....................  Morgantown, WV..................       0.8321
                           Monongalia County, WV...........
                           Preston County, WV..............
34100....................  Morristown, TN..................       0.7388
                           Grainger County, TN.............
                           Hamblen County, TN..............
                           Jefferson County, TN............
34580....................  Mount Vernon-Anacortes, WA......       1.0529
                           Skagit County, WA...............
34620....................  Muncie, IN......................       0.8214
                           Delaware County, IN.............
34740....................  Muskegon-Norton Shores, MI......       0.9836
                           Muskegon County, MI.............
34820....................  Myrtle Beach-Conway-North Myrtle       0.8634
                            Beach, SC.
                           Horry County, SC................
34900....................  Napa, CA........................       1.4476
                           Napa County, CA.................
34940....................  Naples-Marco Island, FL.........       0.9487

[[Page 26854]]

 
                           Collier County, FL..............
34980....................  Nashville-Davidson-Murfreesboro-       0.9689
                            Franklin, TN.
                           Cannon County, TN...............
                           Cheatham County, TN.............
                           Davidson County, TN.............
                           Dickson County, TN..............
                           Hickman County, TN..............
                           Macon County, TN................
                           Robertson County, TN............
                           Rutherford County, TN...........
                           Smith County, TN................
                           Sumner County, TN...............
                           Trousdale County, TN............
                           Williamson County, TN...........
                           Wilson County, TN...............
35004....................  Nassau-Suffolk, NY..............       1.2640
                           Nassau County, NY...............
                           Suffolk County, NY..............
35084....................  Newark-Union, NJ-PA.............       1.1862
                           Essex County, NJ................
                           Hunterdon County, NJ............
                           Morris County, NJ...............
                           Sussex County, NJ...............
                           Union County, NJ................
                           Pike County, PA.................
35300....................  New Haven-Milford, CT...........       1.1871
                           New Haven County, CT............
35380....................  New Orleans-Metairie-Kenner, LA.       0.8897
                           Jefferson Parish, LA............
                           Orleans Parish, LA..............
                           Plaquemines Parish, LA..........
                           St. Bernard Parish, LA..........
                           St. Charles Parish, LA..........
                           St. John the Baptist Parish, LA.
                           St. Tammany Parish, LA..........
35644....................  New York-White Plains-Wayne, NY-       1.3115
                            NJ.
                           Bergen County, NJ...............
                           Hudson County, NJ...............
                           Passaic County, NJ..............
                           Bronx County, NY................
                           Kings County, NY................
                           New York County, NY.............
                           Putnam County, NY...............
                           Queens County, NY...............
                           Richmond County, NY.............
                           Rockland County, NY.............
                           Westchester County, NY..........
35660....................  Niles-Benton Harbor, MI.........       0.9141
                           Berrien County, MI..............
35980....................  Norwich-New London, CT..........       1.1432
                           New London County, CT...........
36084....................  Oakland-Fremont-Hayward, CA.....       1.5685
                           Alameda County, CA..............
                           Contra Costa County, CA.........
36100....................  Ocala, FL.......................       0.8627
                           Marion County, FL...............
36140....................  Ocean City, NJ..................       1.0988
                           Cape May County, NJ.............
36220....................  Odessa, TX......................       1.0042
                           Ector County, TX................
36260....................  Ogden-Clearfield, UT............       0.9000
                           Davis County, UT................
                           Morgan County, UT...............
                           Weber County, UT................
36420....................  Oklahoma City, OK...............       0.8815
                           Canadian County, OK.............
                           Cleveland County, OK............
                           Grady County, OK................
                           Lincoln County, OK..............
                           Logan County, OK................

[[Page 26855]]

 
                           McClain County, OK..............
                           Oklahoma County, OK.............
36500....................  Olympia, WA.....................       1.1512
                           Thurston County, WA.............
36540....................  Omaha-Council Bluffs, NE-IA.....       0.9561
                           Harrison County, IA.............
                           Mills County, IA................
                           Pottawattamie County, IA........
                           Cass County, NE.................
                           Douglas County, NE..............
                           Sarpy County, NE................
                           Saunders County, NE.............
                           Washington County, NE...........
36740....................  Orlando-Kissimmee, FL...........       0.9226
                           Lake County, FL.................
                           Orange County, FL...............
                           Osceola County, FL..............
                           Seminole County, FL.............
36780....................  Oshkosh-Neenah, WI..............       0.9551
                           Winnebago County, WI............
36980....................  Owensboro, KY...................       0.8652
                           Daviess County, KY..............
                           Hancock County, KY..............
                           McLean County, KY...............
37100....................  Oxnard-Thousand Oaks-Ventura, CA       1.1852
                           Ventura County, CA..............
37340....................  Palm Bay-Melbourne-Titusville,         0.9325
                            FL.
                           Brevard County, FL..............
37380....................  Palm Coast, FL..................       0.8945
                           Flager County, FL...............
37460....................  Panama City-Lynn Haven, FL......       0.8313
                           Bay County, FL..................
37620....................  Parkersburg-Marietta-Vienna, WV-       0.8105
                            OH.
                           Washington County, OH...........
                           Pleasants County, WV............
                           Wirt County, WV.................
                           Wood County, WV.................
37700....................  Pascagoula, MS..................       0.8647
                           George County, MS...............
                           Jackson County, MS..............
37764....................  Peabody, MA.....................       1.0650
                           Essex County, MA................
37860....................  Pensacola-Ferry Pass-Brent, FL..       0.8281
                           Escambia County, FL.............
                           Santa Rosa County, FL...........
37900....................  Peoria, IL......................       0.9299
                           Marshall County, IL.............
                           Peoria County, IL...............
                           Stark County, IL................
                           Tazewell County, IL.............
                           Woodford County, IL.............
37964....................  Philadelphia, PA................       1.0925
                           Bucks County, PA................
                           Chester County, PA..............
                           Delaware County, PA.............
                           Montgomery County, PA...........
                           Philadelphia County, PA.........
38060....................  Phoenix-Mesa-Scottsdale, AZ.....       1.0264
                           Maricopa County, AZ.............
                           Pinal County, AZ................
38220....................  Pine Bluff, AR..................       0.7839
                           Cleveland County, AR............
                           Jefferson County, AR............
                           Lincoln County, AR..............
38300....................  Pittsburgh, PA..................       0.8525
                           Allegheny County, PA............
                           Armstrong County, PA............
                           Beaver County, PA...............
                           Butler County, PA...............
                           Fayette County, PA..............

[[Page 26856]]

 
                           Washington County, PA...........
                           Westmoreland County, PA.........
38340....................  Pittsfield, MA..................       1.0091
                           Berkshire County, MA............
38540....................  Pocatello, ID...................       0.9465
                           Bannock County, ID..............
                           Power County, ID................
38660....................  Ponce, PR.......................       0.4450
                           Juana D[iacute]az Municipio, PR.
                           Ponce Municipio, PR.............
                           Villalba Municipio, PR..........
38860....................  Portland-South Portland-               1.0042
                            Biddeford, ME.
                           Cumberland County, ME...........
                           Sagadahoc County, ME............
                           York County, ME.................
38900....................  Portland-Vancouver-Beaverton, OR-      1.1498
                            WA.
                           Clackamas County, OR............
                           Columbia County, OR.............
                           Multnomah County, OR............
                           Washington County, OR...........
                           Yamhill County, OR..............
                           Clark County, WA................
                           Skamania County, WA.............
38940....................  Port St. Lucie, FL..............       1.0016
                           Martin County, FL...............
                           St. Lucie County, FL............
39100....................  Poughkeepsie-Newburgh-                 1.0982
                            Middletown, NY.
                           Dutchess County, NY.............
                           Orange County, NY...............
39140....................  Prescott, AZ....................       1.0020
                           Yavapai County, AZ..............
39300....................  Providence-New Bedford-Fall            1.0574
                            River, RI-MA.
                           Bristol County, MA..............
                           Bristol County, RI..............
                           Kent County, RI.................
                           Newport County, RI..............
                           Providence County, RI...........
                           Washington County, RI...........
39340....................  Provo-Orem, UT..................       0.9557
                           Juab County, UT.................
                           Utah County, UT.................
39380....................  Pueblo, CO......................       0.8851
                           Pueblo County, CO...............
39460....................  Punta Gorda, FL.................       0.9254
                           Charlotte County, FL............
39540....................  Racine, WI......................       0.9498
                           Racine County, WI...............
39580....................  Raleigh-Cary, NC................       0.9839
                           Franklin County, NC.............
                           Johnston County, NC.............
                           Wake County, NC.................
39660....................  Rapid City, SD..................       0.8811
                           Meade County, SD................
                           Pennington County, SD...........
39740....................  Reading, PA.....................       0.9356
                           Berks County, PA................
39820....................  Redding, CA.....................       1.3541
                           Shasta County, CA...............
39900....................  Reno-Sparks, NV.................       1.0715
                           Storey County, NV...............
                           Washoe County, NV...............
40060....................  Richmond, VA....................       0.9425
                           Amelia County, VA...............
                           Caroline County, VA.............
                           Charles City County, VA.........
                           Chesterfield County, VA.........
                           Cumberland County, VA...........
                           Dinwiddie County, VA............
                           Goochland County, VA............
                           Hanover County, VA..............

[[Page 26857]]

 
                           Henrico County, VA..............
                           King and Queen County, VA.......
                           King William County, VA.........
                           Louisa County, VA...............
                           New Kent County, VA.............
                           Powhatan County, VA.............
                           Prince George County, VA........
                           Sussex County, VA...............
                           Colonial Heights City, VA.......
                           Hopewell City, VA...............
                           Petersburg City, VA.............
                           Richmond City, VA...............
40140....................  Riverside-San Bernardino-              1.1100
                            Ontario, CA.
                           Riverside County, CA............
                           San Bernardino County, CA.......
40220....................  Roanoke, VA.....................       0.8691
                           Botetourt County, VA............
                           Craig County, VA................
                           Franklin County, VA.............
                           Roanoke County, VA..............
                           Roanoke City, VA................
                           Salem City, VA..................
40340....................  Rochester, MN...................       1.0755
                           Dodge County, MN................
                           Olmsted County, MN..............
                           Wabasha County, MN..............
40380....................  Rochester, NY...................       0.8858
                           Livingston County, NY...........
                           Monroe County, NY...............
                           Ontario County, NY..............
                           Orleans County, NY..............
                           Wayne County, NY................
40420....................  Rockford, IL....................       0.9814
                           Boone County, IL................
                           Winnebago County, IL............
40484....................  Rockingham County-Strafford            1.0111
                            County, NH.
                           Rockingham County, NH...........
                           Strafford County, NH............
40580....................  Rocky Mount, NC.................       0.9001
                           Edgecombe County, NC............
                           Nash County, NC.................
40660....................  Rome, GA........................       0.9042
                           Floyd County, GA................
40900....................  Sacramento--Arden-Arcade--             1.3505
                            Roseville, CA.
                           El Dorado County, CA............
                           Placer County, CA...............
                           Sacramento County, CA...........
                           Yolo County, CA.................
40980....................  Saginaw-Saginaw Township North,        0.8812
                            MI.
                           Saginaw County, MI..............
41060....................  St. Cloud, MN...................       1.0549
                           Benton County, MN...............
                           Stearns County, MN..............
41100....................  St. George, UT..................       0.9358
                           Washington County, UT...........
41140....................  St. Joseph, MO-KS...............       0.8762
                           Doniphan County, KS.............
                           Andrew County, MO...............
                           Buchanan County, MO.............
                           DeKalb County, MO...............
41180....................  St. Louis, MO-IL................       0.9024
                           Bond County, IL.................
                           Calhoun County, IL..............
                           Clinton County, IL..............
                           Jersey County, IL...............
                           Macoupin County, IL.............
                           Madison County, IL..............
                           Monroe County, IL...............
                           St. Clair County, IL............
                           Crawford County, MO.............

[[Page 26858]]

 
                           Franklin County, MO.............
                           Jefferson County, MO............
                           Lincoln County, MO..............
                           St. Charles County, MO..........
                           St. Louis County, MO............
                           Warren County, MO...............
                           Washington County, MO...........
                           St. Louis City, MO..............
41420....................  Salem, OR.......................       1.0572
                           Marion County, OR...............
                           Polk County, OR.................
41500....................  Salinas, CA.....................       1.4775
                           Monterey County, CA.............
41540....................  Salisbury, MD...................       0.8994
                           Somerset County, MD.............
                           Wicomico County, MD.............
41620....................  Salt Lake City, UT..............       0.9399
                           Salt Lake County, UT............
                           Summit County, UT...............
                           Tooele County, UT...............
41660....................  San Angelo, TX..................       0.8579
                           Irion County, TX................
                           Tom Green County, TX............
41700....................  San Antonio, TX.................       0.8834
                           Atascosa County, TX.............
                           Bandera County, TX..............
                           Bexar County, TX................
                           Comal County, TX................
                           Guadalupe County, TX............
                           Kendall County, TX..............
                           Medina County, TX...............
                           Wilson County, TX...............
41740....................  San Diego-Carlsbad-San Marcos,         1.1492
                            CA.
                           San Diego County, CA............
41780....................  Sandusky, OH....................       0.8822
                           Erie County, OH.................
41884....................  San Francisco-San Mateo-Redwood        1.5195
                            City, CA.
                           Marin County, CA................
                           San Francisco County, CA........
                           San Mateo County, CA............
41900....................  San Germ[aacute]n-Cabo Rojo, PR.       0.4729
                           Cabo Rojo Municipio, PR.........
                           Lajas Municipio, PR.............
                           Sabana Grande Municipio, PR.....
                           San Germ[aacute]n Municipio, PR.
41940....................  San Jose-Sunnyvale-Santa Clara,        1.5735
                            CA.
                           San Benito County, CA...........
                           Santa Clara County, CA..........
41980....................  San Juan-Caguas-Guaynabo, PR....       0.4528
                           Aguas Buenas Municipio, PR......
                           Aibonito Municipio, PR..........
                           Arecibo Municipio, PR...........
                           Barceloneta Municipio, PR.......
                           Barranquitas Municipio, PR......
                           Bayam[oacute]n Municipio, PR....
                           Caguas Municipio, PR............
                           Camuy Municipio, PR.............
                           Can[oacute]vanas Municipio, PR..
                           Carolina Municipio, PR..........
                           Cata[ntilde]o Municipio, PR.....
                           Cayey Municipio, PR.............
                           Ciales Municipio, PR............
                           Cidra Municipio, PR.............
                           Comer[iacute]o Municipio, PR....
                           Corozal Municipio, PR...........
                           Dorado Municipio, PR............
                           Florida Municipio, PR...........
                           Guaynabo Municipio, PR..........
                           Gurabo Municipio, PR............
                           Hatillo Municipio, PR...........

[[Page 26859]]

 
                           Humacao Municipio, PR...........
                           Juncos Municipio, PR............
                           Las Piedras Municipio, PR.......
                           Lo[iacute]za Municipio, PR......
                           Manat[iacute] Municipio, PR.....
                           Maunabo Municipio, PR...........
                           Morovis Municipio, PR...........
                           Naguabo Municipio, PR...........
                           Naranjito Municipio, PR.........
                           Orocovis Municipio, PR..........
                           Quebradillas Municipio, PR......
                           R[iacute]o Grande Municipio, PR.
                           San Juan Municipio, PR..........
                           San Lorenzo Municipio, PR.......
                           Toa Alta Municipio, PR..........
                           Toa Baja Municipio, PR..........
                           Trujillo Alto Municipio, PR.....
                           Vega Alta Municipio, PR.........
                           Vega Baja Municipio, PR.........
                           Yabucoa Municipio, PR...........
42020....................  San Luis Obispo-Paso Robles, CA.       1.2488
                           San Luis Obispo County, CA......
42044....................  Santa Ana-Anaheim-Irvine, CA....       1.1766
                           Orange County, CA...............
42060....................  Santa Barbara-Santa Maria-             1.1714
                            Goleta, CA.
                           Santa Barbara County, CA........
42100....................  Santa Cruz-Watsonville, CA......       1.6122
                           Santa Cruz County, CA...........
42140....................  Santa Fe, NM....................       1.0734
                           Santa Fe County, NM.............
42220....................  Santa Rosa-Petaluma, CA.........       1.4696
                           Sonoma County, CA...............
42260....................  Sarasota-Bradenton-Venice, FL...       0.9933
                           Manatee County, FL..............
                           Sarasota County, FL.............
42340....................  Savannah, GA....................       0.9131
                           Bryan County, GA................
                           Chatham County, GA..............
                           Effingham County, GA............
42540....................  Scranton--Wilkes-Barre, PA......       0.8457
                           Lackawanna County, PA...........
                           Luzerne County, PA..............
                           Wyoming County, PA..............
42644....................  Seattle-Bellevue-Everett, WA....       1.1572
                           King County, WA.................
                           Snohomish County, WA............
42680....................  Sebastian-Vero Beach, FL........       0.9412
                           Indian River County, FL.........
43100....................  Sheboygan, WI...................       0.8975
                           Sheboygan County, WI............
43300....................  Sherman-Denison, TX.............       0.8320
                           Grayson County, TX..............
43340....................  Shreveport-Bossier City, LA.....       0.8476
                           Bossier Parish, LA..............
                           Caddo Parish, LA................
                           De Soto Parish, LA..............
43580....................  Sioux City, IA-NE-SD............       0.9251
                           Woodbury County, IA.............
                           Dakota County, NE...............
                           Dixon County, NE................
                           Union County, SD................
43620....................  Sioux Falls, SD.................       0.9563
                           Lincoln County, SD..............
                           McCook County, SD...............
                           Minnehaha County, SD............
                           Turner County, SD...............
43780....................  South Bend-Mishawaka, IN-MI.....       0.9617
                           St. Joseph County, IN...........
                           Cass County, MI.................
43900....................  Spartanburg, SC.................       0.9422

[[Page 26860]]

 
                           Spartanburg County, SC..........
44060....................  Spokane, WA.....................       1.0455
                           Spokane County, WA..............
44100....................  Springfield, IL.................       0.8944
                           Menard County, IL...............
                           Sangamon County, IL.............
44140....................  Springfield, MA.................       1.0366
                           Franklin County, MA.............
                           Hampden County, MA..............
                           Hampshire County, MA............
44180....................  Springfield, MO.................       0.8695
                           Christian County, MO............
                           Dallas County, MO...............
                           Greene County, MO...............
                           Polk County, MO.................
                           Webster County, MO..............
44220....................  Springfield, OH.................       0.8694
                           Clark County, OH................
44300....................  State College, PA...............       0.8768
                           Centre County, PA...............
44700....................  Stockton, CA....................       1.1855
                           San Joaquin County, CA..........
44940....................  Sumter, SC......................       0.8599
                           Sumter County, SC...............
45060....................  Syracuse, NY....................       0.9910
                           Madison County, NY..............
                           Onondaga County, NY.............
                           Oswego County, NY...............
45104....................  Tacoma, WA......................       1.1055
                           Pierce County, WA...............
45220....................  Tallahassee, FL.................       0.9025
                           Gadsden County, FL..............
                           Jefferson County, FL............
                           Leon County, FL.................
                           Wakulla County, FL..............
45300....................  Tampa-St. Petersburg-Clearwater,       0.9020
                            FL.
                           Hernando County, FL.............
                           Hillsborough County, FL.........
                           Pasco County, FL................
                           Pinellas County, FL.............
45460....................  Terre Haute, IN.................       0.8805
                           Clay County, IN.................
                           Sullivan County, IN.............
                           Vermillion County, IN...........
                           Vigo County, IN.................
45500....................  Texarkana, TX-Texarkana, AR.....       0.7770
                           Miller County, AR...............
                           Bowie County, TX................
45780....................  Toledo, OH......................       0.9431
                           Fulton County, OH...............
                           Lucas County, OH................
                           Ottawa County, OH...............
                           Wood County, OH.................
45820....................  Topeka, KS......................       0.8538
                           Jackson County, KS..............
                           Jefferson County, KS............
                           Osage County, KS................
                           Shawnee County, KS..............
                           Wabaunsee County, KS............
45940....................  Trenton-Ewing, NJ...............       1.0699
                           Mercer County, NJ...............
46060....................  Tucson, AZ......................       0.9245
                           Pima County, AZ.................
46140....................  Tulsa, OK.......................       0.8340
                           Creek County, OK................
                           Okmulgee County, OK.............
                           Osage County, OK................
                           Pawnee County, OK...............
                           Rogers County, OK...............
                           Tulsa County, OK................

[[Page 26861]]

 
                           Wagoner County, OK..............
46220....................  Tuscaloosa, AL..................       0.8303
                           Greene County, AL...............
                           Hale County, AL.................
                           Tuscaloosa County, AL...........
46340....................  Tyler, TX.......................       0.9114
                           Smith County, TX................
46540....................  Utica-Rome, NY..................       0.8486
                           Herkimer County, NY.............
                           Oneida County, NY...............
46660....................  Valdosta, GA....................       0.8098
                           Brooks County, GA...............
                           Echols County, GA...............
                           Lanier County, GA...............
                           Lowndes County, GA..............
46700....................  Vallejo-Fairfield, CA...........       1.4666
                           Solano County, CA...............
47020....................  Victoria, TX....................       0.8302
                           Calhoun County, TX..............
                           Goliad County, TX...............
                           Victoria County, TX.............
47220....................  Vineland-Millville-Bridgeton, NJ       1.0133
                           Cumberland County, NJ...........
47260....................  Virginia Beach-Norfolk-Newport         0.8818
                            News, VA-NC.
                           Currituck County, NC............
                           Gloucester County, VA...........
                           Isle of Wight County, VA........
                           James City County, VA...........
                           Mathews County, VA..............
                           Surry County, VA................
                           York County, VA.................
                           Chesapeake City, VA.............
                           Hampton City, VA................
                           Newport News City, VA...........
                           Norfolk City, VA................
                           Poquoson City, VA...............
                           Portsmouth City, VA.............
                           Suffolk City, VA................
                           Virginia Beach City, VA.........
                           Williamsburg City, VA...........
47300....................  Visalia-Porterville, CA.........       1.0091
                           Tulare County, CA...............
47380....................  Waco, TX........................       0.8518
                           McLennan County, TX.............
47580....................  Warner Robins, GA...............       0.9128
                           Houston County, GA..............
47644....................  Warren-Troy-Farmington Hills, MI       1.0001
                           Lapeer County, MI...............
                           Livingston County, MI...........
                           Macomb County, MI...............
                           Oakland County, MI..............
                           St. Clair County, MI............
47894....................  Washington-Arlington-Alexandria,       1.0855
                            DC-VA-MD-WV.
                           District of Columbia, DC........
                           Calvert County, MD..............
                           Charles County, MD..............
                           Prince George's County, MD......
                           Arlington County, VA............
                           Clarke County, VA...............
                           Fairfax County, VA..............
                           Fauquier County, VA.............
                           Loudoun County, VA..............
                           Prince William County, VA.......
                           Spotsylvania County, VA.........
                           Stafford County, VA.............
                           Warren County, VA...............
                           Alexandria City, VA.............
                           Fairfax City, VA................
                           Falls Church City, VA...........
                           Fredericksburg City, VA.........

[[Page 26862]]

 
                           Manassas City, VA...............
                           Manassas Park City, VA..........
                           Jefferson County, WV............
47940....................  Waterloo-Cedar Falls, IA........       0.8519
                           Black Hawk County, IA...........
                           Bremer County, IA...............
                           Grundy County, IA...............
48140....................  Wausau, WI......................       0.9679
                           Marathon County, WI.............
48260....................  Weirton-Steubenville, WV-OH.....       0.7924
                           Jefferson County, OH............
                           Brooke County, WV...............
                           Hancock County, WV..............
48300....................  Wenatchee, WA...................       1.1469
                           Chelan County, WA...............
                           Douglas County, WA..............
48424....................  West Palm Beach-Boca Raton-            0.9728
                            Boynton Beach, FL.
                           Palm Beach County, FL...........
48540....................  Wheeling, WV-OH.................       0.6961
                           Belmont County, OH..............
                           Marshall County, WV.............
                           Ohio County, WV.................
48620....................  Wichita, KS.....................       0.9062
                           Butler County, KS...............
                           Harvey County, KS...............
                           Sedgwick County, KS.............
                           Sumner County, KS...............
48660....................  Wichita Falls, TX...............       0.7920
                           Archer County, TX...............
                           Clay County, TX.................
                           Wichita County, TX..............
48700....................  Williamsport, PA................       0.8043
                           Lycoming County, PA.............
48864....................  Wilmington, DE-MD-NJ............       1.0824
                           New Castle County, DE...........
                           Cecil County, MD................
                           Salem County, NJ................
48900....................  Wilmington, NC..................       0.9410
                           Brunswick County, NC............
                           New Hanover County, NC..........
                           Pender County, NC...............
49020....................  Winchester, VA-WV...............       0.9913
                           Frederick County, VA............
                           Winchester City, VA.............
                           Hampshire County, WV............
49180....................  Winston-Salem, NC...............       0.9118
                           Davie County, NC................
                           Forsyth County, NC..............
                           Stokes County, NC...............
                           Yadkin County, NC...............
49340....................  Worcester, MA...................       1.1287
                           Worcester County, MA............
49420....................  Yakima, WA......................       1.0267
                           Yakima County, WA...............
49500....................  Yauco, PR.......................       0.3284
                           Gu[aacute]nica Municipio, PR....
                           Guayanilla Municipio, PR........
                           Pe[ntilde]uelas Municipio, PR...
                           Yauco Municipio, PR.............
49620....................  York-Hanover, PA................       0.9359
                           York County, PA.................
49660....................  Youngstown-Warren-Boardman, OH-        0.9002
                            PA.
                           Mahoning County, OH.............
                           Trumbull County, OH.............
                           Mercer County, PA...............
49700....................  Yuba City, CA...................       1.0756
                           Sutter County, CA...............
                           Yuba County, CA.................
49740....................  Yuma, AZ........................       0.9488
                           Yuma County, AZ.................
------------------------------------------------------------------------


[[Page 26863]]


    Table 2.--Long-Term Care Hospital Wage Index for Rural Areas for
    Discharges Occurring From July 1, 2008 Through September 30, 2009
------------------------------------------------------------------------
                                                               Proposed
        CBSA code                    Nonurban area            wage index
------------------------------------------------------------------------
01.......................  Alabama.........................       0.7533
02.......................  Alaska..........................       1.2109
03.......................  Arizona.........................       0.8479
04.......................  Arkansas........................       0.7371
05.......................  California......................       1.2023
06.......................  Colorado........................       0.9704
07.......................  Connecticut.....................       1.1119
08.......................  Delaware........................       0.9727
10.......................  Florida.........................       0.8465
11.......................  Georgia.........................       0.7659
12.......................  Hawaii..........................       1.0612
13.......................  Idaho...........................       0.7920
14.......................  Illinois........................       0.8335
15.......................  Indiana.........................       0.8576
16.......................  Iowa............................       0.8566
17.......................  Kansas..........................       0.7981
18.......................  Kentucky........................       0.7793
19.......................  Louisiana.......................       0.7373
20.......................  Maine...........................       0.8476
21.......................  Maryland........................       0.9034
22.......................  Massachusetts...................       1.1589
23.......................  Michigan........................       0.8953
24.......................  Minnesota.......................       0.9079
25.......................  Mississippi.....................       0.7700
26.......................  Missouri........................       0.7930
27.......................  Montana.........................       0.8379
28.......................  Nebraska........................       0.8849
29.......................  Nevada..........................       0.9272
30.......................  New Hampshire...................       1.0470
31.......................  New Jersey*.....................
32.......................  New Mexico......................       0.8940
33.......................  New York........................       0.8268
34.......................  North Carolina..................       0.8603
35.......................  North Dakota....................       0.7182
36.......................  Ohio............................       0.8714
37.......................  Oklahoma........................       0.7492
38.......................  Oregon..........................       0.9906
39.......................  Pennsylvania....................       0.8385
41.......................  Rhode Island*...................  ...........
42.......................  South Carolina..................       0.8656
43.......................  South Dakota....................       0.8549
44.......................  Tennessee.......................       0.7723
45.......................  Texas...........................       0.7968
46.......................  Utah............................       0.8116
47.......................  Vermont.........................       0.9919
49.......................  Virginia........................       0.7896
50.......................  Washington......................       1.0259
51.......................  West Virginia...................       0.7454
52.......................  Wisconsin.......................       0.9667
53.......................  Wyoming.........................       0.9287
------------------------------------------------------------------------
* All counties within the State are classified as urban.


    Table 3.--FY-2008 MS-LTC-DRGs, Relative Weights, Geometric Average Length of Stay and Short-Stay Outlier
                                                    Threshold
----------------------------------------------------------------------------------------------------------------
                                                                                         Geometric    Short stay
                                                                             Relative     average      outlier
           MS-LTC-DRG                         MS-LTC-DRG title              weight \1\   length of    threshold
                                                                                            stay         \2\
----------------------------------------------------------------------------------------------------------------
001.............................  Heart transplant or implant of heart          0.0000          0.0          0.0
                                   assist system w MCC.
002.............................  Heart transplant or implant of heart          0.0000          0.0          0.0
                                   assist system w/o MCC.
003.............................  ECMO or trach w MV 96+ hrs or PDX exc         4.2380         64.3         53.6
                                   face, mouth & neck w maj O.R.
004.............................  Trach w MV 96+ hrs or PDX exc face,           3.0249         46.7         38.9
                                   mouth & neck w/o maj O.R.
005.............................  Liver transplant w MCC or intestinal          0.0000          0.0          0.0
                                   transplant.
006.............................  Liver transplant w/o MCC...............       0.0000          0.0          0.0
007.............................  Lung transplant........................       0.0000          0.0          0.0
008.............................  Simultaneous pancreas/kidney transplant       0.0000          0.0          0.0
009.............................  Bone marrow transplant.................       1.1417         29.0         24.2

[[Page 26864]]

 
010.............................  Pancreas transplant....................       1.1417         29.0         24.2
011.............................  Tracheostomy for face, mouth & neck           1.5545         35.2         29.3
                                   diagnoses w MCC.
012.............................  Tracheostomy for face, mouth & neck           1.5545         35.2         29.3
                                   diagnoses w CC.
013.............................  Tracheostomy for face, mouth & neck           1.5545         35.2         29.3
                                   diagnoses w/o CC/MCC.
020.............................  Intracranial vascular procedures w PDX        1.5545         35.2         29.3
                                   hemorrhage w MCC.
021.............................  Intracranial vascular procedures w PDX        0.5472         20.3         16.9
                                   hemorrhage w CC.
022.............................  Intracranial vascular procedures w PDX        0.5472         20.3         16.9
                                   hemorrhage w/o CC/MCC.
023.............................  Cranio w major dev impl/acute complex         1.5545         35.2         29.3
                                   CNS PDX w MCC or chemo implant.
024.............................  Cranio w major dev impl/acute complex         0.5472         20.3         16.9
                                   CNS PDX w/o MCC.
025.............................  Craniotomy & endovascular intracranial        1.5545         35.2         29.3
                                   procedures w MCC.
026.............................  Craniotomy & endovascular intracranial        1.5545         35.2         29.3
                                   procedures w CC.
027.............................  Craniotomy & endovascular intracranial        1.5545         35.2         29.3
                                   procedures w/o CC/MCC.
028.............................  Spinal procedures w MCC................       1.1417         29.0         24.2
029.............................  Spinal procedures w CC or spinal              1.1417         29.0         24.2
                                   neurostimulators.
030.............................  Spinal procedures w/o CC/MCC...........       0.5472         20.3         16.9
031.............................  Ventricular shunt procedures w MCC.....       1.5545         35.2         29.3
032.............................  Ventricular shunt procedures w CC......       0.5472         20.3         16.9
033.............................  Ventricular shunt procedures w/o CC/MCC       0.5472         20.3         16.9
034.............................  Carotid artery stent procedure w MCC...       1.5545         35.2         29.3
035.............................  Carotid artery stent procedure w CC....       1.1417         29.0         24.2
036.............................  Carotid artery stent procedure w/o CC/        1.1417         29.0         24.2
                                   MCC.
037.............................  Extracranial procedures w MCC..........       1.5545         35.2         29.3
038.............................  Extracranial procedures w CC...........       1.1417         29.0         24.2
039.............................  Extracranial procedures w/o CC/MCC.....       1.1417         29.0         24.2
040.............................  Periph/cranial nerve & other nerv syst        1.2704         36.2         30.2
                                   proc w MCC.
041.............................  Periph/cranial nerve & other nerv syst        1.0810         34.3         28.6
                                   proc w CC or periph neurostim.
042.............................  Periph/cranial nerve & other nerv syst        0.7305         22.9         19.1
                                   proc w/o CC/MCC.
052.............................  Spinal disorders & injuries w CC/MCC...       1.0629         32.3         26.9
053.............................  Spinal disorders & injuries w/o CC/MCC.       1.0629         32.3         26.9
054.............................  Nervous system neoplasms w MCC.........       0.7205         23.6         19.7
055.............................  Nervous system neoplasms w/o MCC.......       0.6779         22.0         18.3
056.............................  Degenerative nervous system disorders w       0.7407         26.4         22.0
                                   MCC.
057.............................  Degenerative nervous system disorders w/      0.6309         24.4         20.3
                                   o MCC.
058.............................  Multiple sclerosis & cerebellar ataxia        0.7305         22.9         19.1
                                   w MCC.
059.............................  Multiple sclerosis & cerebellar ataxia        0.5595         22.6         18.8
                                   w CC.
060.............................  Multiple sclerosis & cerebellar ataxia        0.5472         20.3         16.9
                                   w/o CC/MCC.
061.............................  Acute ischemic stroke w use of                0.7897         24.2         20.2
                                   thrombolytic agent w MCC.
062.............................  Acute ischemic stroke w use of                0.6563         22.7         18.9
                                   thrombolytic agent w CC.
063.............................  Acute ischemic stroke w use of                0.5472         20.3         16.9
                                   thrombolytic agent w/o CC/MCC.
064.............................  Intracranial hemorrhage or cerebral           0.7746         25.1         20.9
                                   infarction w MCC.
065.............................  Intracranial hemorrhage or cerebral           0.6691         23.3         19.4
                                   infarction w CC.
066.............................  Intracranial hemorrhage or cerebral           0.5472         20.3         16.9
                                   infarction w/o CC/MCC.
067.............................  Nonspecific cva & precerebral occlusion       0.5472         20.3         16.9
                                   w/o infarct w MCC.
068.............................  Nonspecific cva & precerebral occlusion       0.5472         20.3         16.9
                                   w/o infarct w/o MCC.
069.............................  Transient ischemia.....................       0.5472         20.3         16.9
070.............................  Nonspecific cerebrovascular disorders w       0.7897         24.2         20.2
                                   MCC.
071.............................  Nonspecific cerebrovascular disorders w       0.6563         22.7         18.9
                                   CC.
072.............................  Nonspecific cerebrovascular disorders w/      0.5472         20.3         16.9
                                   o CC/MCC.
073.............................  Cranial & peripheral nerve disorders w        0.7849         25.6         21.3
                                   MCC.
074.............................  Cranial & peripheral nerve disorders w/       0.6260         23.4         19.5
                                   o MCC.
075.............................  Viral meningitis w CC/MCC..............       0.7305         22.9         19.1
076.............................  Viral meningitis w/o CC/MCC............       0.5472         20.3         16.9
077.............................  Hypertensive encephalopathy w MCC......       0.7305         22.9         19.1
078.............................  Hypertensive encephalopathy w CC.......       0.7305         22.9         19.1
079.............................  Hypertensive encephalopathy w/o CC/MCC.       0.5472         20.3         16.9
080.............................  Nontraumatic stupor & coma w MCC.......       0.6312         24.6         20.5
081.............................  Nontraumatic stupor & coma w/o MCC.....       0.5618         23.1         19.3
082.............................  Traumatic stupor & coma, coma >1 hr w         0.8864         29.5         24.6
                                   MCC.
083.............................  Traumatic stupor & coma, coma >1 hr w         0.7305         22.9         19.1
                                   CC.
084.............................  Traumatic stupor & coma, coma >1 hr w/o       0.7305         22.9         19.1
                                   CC/MCC.
085.............................  Traumatic stupor & coma, coma <1 hr w         0.9044         28.3         23.6
                                   MCC.
086.............................  Traumatic stupor & coma, coma <1 hr w         0.7437         25.1         20.9
                                   CC.
087.............................  Traumatic stupor & coma, coma <1 hr w/o       0.6361         20.4         17.0
                                   CC/MCC.
088.............................  Concussion w MCC.......................       1.1417         29.0         24.2
089.............................  Concussion w CC........................       1.1417         29.0         24.2
090.............................  Concussion w/o CC/MCC..................       1.1417         29.0         24.2
091.............................  Other disorders of nervous system w MCC       0.8019         25.6         21.3
092.............................  Other disorders of nervous system w CC.       0.6704         22.0         18.3

[[Page 26865]]

 
093.............................  Other disorders of nervous system w/o         0.5811         20.1         16.8
                                   CC/MCC.
094.............................  Bacterial & tuberculous infections of         1.0328         27.9         23.3
                                   nervous system w MCC.
095.............................  Bacterial & tuberculous infections of         0.9306         27.0         22.5
                                   nervous system w CC.
096.............................  Bacterial & tuberculous infections of         0.9306         27.0         22.5
                                   nervous system w/o CC/MCC.
097.............................  Non-bacterial infect of nervous sys exc       0.9289         26.8         22.3
                                   viral meningitis w MCC.
098.............................  Non-bacterial infect of nervous sys exc       0.8629         22.7         18.9
                                   viral meningitis w CC.
099.............................  Non-bacterial infect of nervous sys exc       0.7305         22.9         19.1
                                   viral meningitis w/o CC/MCC.
100.............................  Seizures w MCC.........................       0.7904         26.5         22.1
101.............................  Seizures w/o MCC.......................       0.6177         21.4         17.8
102.............................  Headaches w MCC........................       0.8249         25.0         20.8
103.............................  Headaches w/o MCC......................       0.8249         25.0         20.8
113.............................  Orbital procedures w CC/MCC............       0.7305         22.9         19.1
114.............................  Orbital procedures w/o CC/MCC..........       0.7305         22.9         19.1
115.............................  Extraocular procedures except orbit....       0.8249         25.0         20.8
116.............................  Intraocular procedures w CC/MCC........       0.8249         25.0         20.8
117.............................  Intraocular procedures w/o CC/MCC......       0.8249         25.0         20.8
121.............................  Acute major eye infections w CC/MCC....       0.7305         22.9         19.1
122.............................  Acute major eye infections w/o CC/MCC..       0.5472         20.3         16.9
123.............................  Neurological eye disorders.............       0.5472         20.3         16.9
124.............................  Other disorders of the eye w MCC.......       1.1417         29.0         24.2
125.............................  Other disorders of the eye w/o MCC.....       0.8249         25.0         20.8
129.............................  Major head & neck procedures w CC/MCC         1.1977         26.4         22.0
                                   or major device.
130.............................  Major head & neck procedures w/o CC/MCC       0.7305         22.9         19.1
131.............................  Cranial/facial procedures w CC/MCC.....       1.5545         35.2         29.3
132.............................  Cranial/facial procedures w/o CC/MCC...       1.5545         35.2         29.3
133.............................  Other ear, nose, mouth & throat O.R.          0.7305         22.9         19.1
                                   procedures w CC/MCC.
134.............................  Other ear, nose, mouth & throat O.R.          0.7305         22.9         19.1
                                   procedures w/o CC/MCC.
135.............................  Sinus & mastoid procedures w CC/MCC....       0.7305         22.9         19.1
136.............................  Sinus & mastoid procedures w/o CC/MCC..       0.7305         22.9         19.1
137.............................  Mouth procedures w CC/MCC..............       1.5545         35.2         29.3
138.............................  Mouth procedures w/o CC/MCC............       1.5545         35.2         29.3
139.............................  Salivary gland procedures..............       1.5545         35.2         29.3
146.............................  Ear, nose, mouth & throat malignancy w        1.1977         26.4         22.0
                                   MCC.
147.............................  Ear, nose, mouth & throat malignancy w        1.0416         24.9         20.8
                                   CC.
148.............................  Ear, nose, mouth & throat malignancy w/       0.7305         22.9         19.1
                                   o CC/MCC.
149.............................  Dysequilibrium.........................       0.5472         20.3         16.9
150.............................  Epistaxis w MCC........................       0.7305         22.9         19.1
151.............................  Epistaxis w/o MCC......................       0.7305         22.9         19.1
152.............................  Otitis media & URI w MCC...............       0.7305         22.9         19.1
153.............................  Otitis media & URI w/o MCC.............       0.7305         22.9         19.1
154.............................  Nasal trauma & deformity w MCC.........       0.7703         21.0         17.5
155.............................  Nasal trauma & deformity w CC..........       0.7703         21.0         17.5
156.............................  Nasal trauma & deformity w/o CC/MCC....       0.7305         22.9         19.1
157.............................  Dental & Oral Diseases w MCC...........       0.8249         25.0         20.8
158.............................  Dental & Oral Diseases w CC............       0.8249         25.0         20.8
159.............................  Dental & Oral Diseases w/o CC/MCC......       0.5472         20.3         16.9
163.............................  Major chest procedures w MCC...........       2.2157         39.7         33.1
164.............................  Major chest procedures w CC............       1.5545         35.2         29.3
165.............................  Major chest procedures w/o CC/MCC......       1.5545         35.2         29.3
166.............................  Other resp system O.R. procedures w MCC       2.4392         42.3         35.3
167.............................  Other resp system O.R. procedures w CC.       2.1594         38.0         31.7
168.............................  Other resp system O.R. procedures w/o         1.1417         29.0         24.2
                                   CC/MCC.
175.............................  Pulmonary embolism w MCC...............       0.7160         22.0         18.3
176.............................  Pulmonary embolism w/o MCC.............       0.5989         20.1         16.8
177.............................  Respiratory infections & inflammations        0.8393         23.5         19.6
                                   w MCC.
178.............................  Respiratory infections & inflammations        0.7671         22.2         18.5
                                   w CC.
179.............................  Respiratory infections & inflammations        0.6885         19.0         15.8
                                   w/o CC/MCC.
180.............................  Respiratory neoplasms w MCC............       0.8140         20.2         16.8
181.............................  Respiratory neoplasms w CC.............       0.7103         19.3         16.1
182.............................  Respiratory neoplasms w/o CC/MCC.......       0.5472         20.3         16.9
183.............................  Major chest trauma w MCC...............       0.5472         20.3         16.9
184.............................  Major chest trauma w CC................       0.5472         20.3         16.9
185.............................  Major chest trauma w/o CC/MCC..........       0.5472         20.3         16.9
186.............................  Pleural effusion w MCC.................       0.8259         23.6         19.7
187.............................  Pleural effusion w CC..................       0.7042         21.1         17.6
188.............................  Pleural effusion w/o CC/MCC............       0.7042         21.1         17.6
189.............................  Pulmonary edema & respiratory failure..       0.9743         24.0         20.0
190.............................  Chronic obstructive pulmonary disease w       0.6858         20.9         17.4
                                   MCC.

[[Page 26866]]

 
191.............................  Chronic obstructive pulmonary disease w       0.6256         19.5         16.3
                                   CC.
192.............................  Chronic obstructive pulmonary disease w/      0.5832         17.2         14.3
                                   o CC/MCC.
193.............................  Simple pneumonia & pleurisy w MCC......       0.7088         21.6         18.0
194.............................  Simple pneumonia & pleurisy w CC.......       0.6429         19.8         16.5
195.............................  Simple pneumonia & pleurisy w/o CC/MCC.       0.5962         18.2         15.2
196.............................  Interstitial lung disease w MCC........       0.6529         20.0         16.7
197.............................  Interstitial lung disease w CC.........       0.6133         19.6         16.3
198.............................  Interstitial lung disease w/o CC/MCC...       0.5956         19.7         16.4
199.............................  Pneumothorax w MCC.....................       0.8249         25.0         20.8
200.............................  Pneumothorax w CC......................       0.7305         22.9         19.1
201.............................  Pneumothorax w/o CC/MCC................       0.5472         20.3         16.9
202.............................  Bronchitis & asthma w CC/MCC...........       0.6903         21.1         17.6
203.............................  Bronchitis & asthma w/o CC/MCC.........       0.5650         17.1         14.3
204.............................  Respiratory signs & symptoms...........       0.8187         22.0         18.3
205.............................  Other respiratory system diagnoses w          0.8207         22.4         18.7
                                   MCC.
206.............................  Other respiratory system diagnoses w/o        0.7667         21.5         17.9
                                   MCC.
207.............................  Respiratory system diagnosis w                2.0266         34.3         28.6
                                   ventilator support 96+ hours.
208.............................  Respiratory system diagnosis w                1.5514         27.8         23.2
                                   ventilator support <96 hours.
215.............................  Other heart assist system implant......       0.8249         25.0         20.8
216.............................  Cardiac valve & oth maj cardiothoracic        1.5545         35.2         29.3
                                   proc w card cath w MCC.
217.............................  Cardiac valve & oth maj cardiothoracic        0.8249         25.0         20.8
                                   proc w card cath w CC.
218.............................  Cardiac valve & oth maj cardiothoracic        0.8249         25.0         20.8
                                   proc w card cath w/o CC/MCC.
219.............................  Cardiac valve & oth maj cardiothoracic        1.5545         35.2         29.3
                                   proc w/o card cath w MCC.
220.............................  Cardiac valve & oth maj cardiothoracic        0.8249         25.0         20.8
                                   proc w/o card cath w CC.
221.............................  Cardiac valve & oth maj cardiothoracic        0.8249         25.0         20.8
                                   proc w/o card cath w/o CC/MCC.
222.............................  Cardiac defib implant w cardiac cath w        1.5545         35.2         29.3
                                   AMI/HF/shock w MCC.
223.............................  Cardiac defib implant w cardiac cath w        1.5545         35.2         29.3
                                   AMI/HF/shock w/o MCC.
224.............................  Cardiac defib implant w cardiac cath w/       1.5545         35.2         29.3
                                   o AMI/HF/shock w MCC.
225.............................  Cardiac defib implant w cardiac cath w/       1.5545         35.2         29.3
                                   o AMI/HF/shock w/o MCC.
226.............................  Cardiac defibrillator implant w/o             1.5545         35.2         29.3
                                   cardiac cath w MCC.
227.............................  Cardiac defibrillator implant w/o             1.5545         35.2         29.3
                                   cardiac cath w/o MCC.
228.............................  Other cardiothoracic procedures w MCC..       1.5410         35.0         29.2
229.............................  Other cardiothoracic procedures w CC...       1.2681         30.8         25.7
230.............................  Other cardiothoracic procedures w/o CC/       0.8249         25.0         20.8
                                   MCC.
231.............................  Coronary bypass w PTCA w MCC...........       1.5545         35.2         29.3
232.............................  Coronary bypass w PTCA w/o MCC.........       0.8249         25.0         20.8
233.............................  Coronary bypass w cardiac cath w MCC...       1.5545         35.2         29.3
234.............................  Coronary bypass w cardiac cath w/o MCC.       0.8249         25.0         20.8
235.............................  Coronary bypass w/o cardiac cath w MCC.       1.5545         35.2         29.3
236.............................  Coronary bypass w/o cardiac cath w/o          0.8249         25.0         20.8
                                   MCC.
237.............................  Major cardiovasc procedures w MCC or          1.5545         35.2         29.3
                                   thoracic aortic anuerysm repair.
238.............................  Major cardiovasc procedures w/o MCC....       0.8249         25.0         20.8
239.............................  Amputation for circ sys disorders exc         1.3794         37.4         31.2
                                   upper limb & toe w MCC.
240.............................  Amputation for circ sys disorders exc         1.2872         36.1         30.1
                                   upper limb & toe w CC.
241.............................  Amputation for circ sys disorders exc         1.1417         29.0         24.2
                                   upper limb & toe w/o CC/MCC.
242.............................  Permanent cardiac pacemaker implant w         1.5545         35.2         29.3
                                   MCC.
243.............................  Permanent cardiac pacemaker implant w         1.5545         35.2         29.3
                                   CC.
244.............................  Permanent cardiac pacemaker implant w/o       1.1417         29.0         24.2
                                   CC/MCC.
245.............................  AICD lead & generator procedures.......       0.7305         22.9         19.1
246.............................  Perc cardiovasc proc w drug-eluting           0.8249         25.0         20.8
                                   stent w MCC or 4+ vessels/stents.
247.............................  Perc cardiovasc proc w drug-eluting           0.8249         25.0         20.8
                                   stent w/o MCC.
248.............................  Perc cardiovasc proc w non-drug-eluting       1.5545         35.2         29.3
                                   stent w MCC or 4+ ves/stents.
249.............................  Perc cardiovasc proc w non-drug-eluting       1.5545         35.2         29.3
                                   stent w/o MCC.
250.............................  Perc cardiovasc proc w/o coronary             0.8249         25.0         20.8
                                   artery stent or AMI w MCC.
251.............................  Perc cardiovasc proc w/o coronary             0.8249         25.0         20.8
                                   artery stent or AMI w/o MCC.
252.............................  Other vascular procedures w MCC........       1.5410         35.0         29.2
253.............................  Other vascular procedures w CC.........       1.2681         30.8         25.7
254.............................  Other vascular procedures w/o CC/MCC...       0.8249         25.0         20.8
255.............................  Upper limb & toe amputation for circ          1.1713         33.7         28.1
                                   system disorders w MCC.
256.............................  Upper limb & toe amputation for circ          0.9516         29.4         24.5
                                   system disorders w CC.
257.............................  Upper limb & toe amputation for circ          0.9516         29.4         24.5
                                   system disorders w/o CC/MCC.
258.............................  Cardiac pacemaker device replacement w        1.5545         35.2         29.3
                                   MCC.
259.............................  Cardiac pacemaker device replacement w/       1.5545         35.2         29.3
                                   o MCC.
260.............................  Cardiac pacemaker revision except             1.5545         35.2         29.3
                                   device replacement w MCC.
261.............................  Cardiac pacemaker revision except             0.5472         20.3         16.9
                                   device replacement w CC.
262.............................  Cardiac pacemaker revision except             0.5472         20.3         16.9
                                   device replacement w/o CC/MCC.
263.............................  Vein ligation & stripping..............       0.8249         25.0         20.8
264.............................  Other circulatory system O.R.                 1.0667         31.6         26.3
                                   procedures.

[[Page 26867]]

 
280.............................  Acute myocardial infarction, discharged       0.7263         21.4         17.8
                                   alive w MCC.
281.............................  Acute myocardial infarction, discharged       0.6931         22.8         19.0
                                   alive w CC.
282.............................  Acute myocardial infarction, discharged       0.6931         22.8         19.0
                                   alive w/o CC/MCC.
283.............................  Acute myocardial infarction, expired w        0.6609         17.0         14.2
                                   MCC.
284.............................  Acute myocardial infarction, expired w        0.6609         17.0         14.2
                                   CC.
285.............................  Acute myocardial infarction, expired w/       0.6609         17.0         14.2
                                   o CC/MCC.
286.............................  Circulatory disorders except AMI, w           1.1417         29.0         24.2
                                   card cath w MCC.
287.............................  Circulatory disorders except AMI, w           0.8249         25.0         20.8
                                   card cath w/o MCC.
288.............................  Acute & subacute endocarditis w MCC....       0.9082         26.4         22.0
289.............................  Acute & subacute endocarditis w CC.....       0.8580         26.4         22.0
290.............................  Acute & subacute endocarditis w/o CC/         0.7664         25.5         21.3
                                   MCC.
291.............................  Heart failure & shock w MCC............       0.6968         21.4         17.8
292.............................  Heart failure & shock w CC.............       0.6252         20.4         17.0
293.............................  Heart failure & shock w/o CC/MCC.......       0.5775         18.5         15.4
294.............................  Deep vein thrombophlebitis w CC/MCC....       0.8249         25.0         20.8
295.............................  Deep vein thrombophlebitis w/o CC/MCC..       0.8249         25.0         20.8
296.............................  Cardiac arrest, unexplained w MCC......       0.6609         17.0         14.2
297.............................  Cardiac arrest, unexplained w CC.......       0.6609         17.0         14.2
298.............................  Cardiac arrest, unexplained w/o CC/MCC.       0.6609         17.0         14.2
299.............................  Peripheral vascular disorders w MCC....       0.7152         24.8         20.7
300.............................  Peripheral vascular disorders w CC.....       0.6150         22.2         18.5
301.............................  Peripheral vascular disorders w/o CC/         0.5557         19.4         16.2
                                   MCC.
302.............................  Atherosclerosis w MCC..................       0.6170         21.9         18.3
303.............................  Atherosclerosis w/o MCC................       0.5673         20.5         17.1
304.............................  Hypertension w MCC.....................       0.8249         25.0         20.8
305.............................  Hypertension w/o MCC...................       0.5856         22.6         18.8
306.............................  Cardiac congenital & valvular disorders       0.8786         24.2         20.2
                                   w MCC.
307.............................  Cardiac congenital & valvular disorders       0.7767         23.1         19.3
                                   w/o MCC.
308.............................  Cardiac arrhythmia & conduction               0.7431         24.7         20.6
                                   disorders w MCC.
309.............................  Cardiac arrhythmia & conduction               0.5940         20.4         17.0
                                   disorders w CC.
310.............................  Cardiac arrhythmia & conduction               0.5184         17.0         14.2
                                   disorders w/o CC/MCC.
311.............................  Angina pectoris........................       0.7305         22.9         19.1
312.............................  Syncope & collapse.....................       0.5336         19.7         16.4
313.............................  Chest pain.............................       0.5472         20.3         16.9
314.............................  Other circulatory system diagnoses w          0.8123         23.1         19.3
                                   MCC.
315.............................  Other circulatory system diagnoses w CC       0.7114         21.6         18.0
316.............................  Other circulatory system diagnoses w/o        0.6243         18.9         15.8
                                   CC/MCC.
326.............................  Stomach, esophageal & duodenal proc w         1.8646         36.2         30.2
                                   MCC.
327.............................  Stomach, esophageal & duodenal proc w         1.5545         35.2         29.3
                                   CC.
328.............................  Stomach, esophageal & duodenal proc w/o       0.5472         20.3         16.9
                                   CC/MCC.
329.............................  Major small & large bowel procedures w        1.5545         35.2         29.3
                                   MCC.
330.............................  Major small & large bowel procedures w        1.5545         35.2         29.3
                                   CC.
331.............................  Major small & large bowel procedures w/       0.5472         20.3         16.9
                                   o CC/MCC.
332.............................  Rectal resection w MCC.................       1.5057         36.1         30.1
333.............................  Rectal resection w CC..................       1.3309         30.7         25.6
334.............................  Rectal resection w/o CC/MCC............       0.8249         25.0         20.8
335.............................  Peritoneal adhesiolysis w MCC..........       1.5545         35.2         29.3
336.............................  Peritoneal adhesiolysis w CC...........       0.7305         22.9         19.1
337.............................  Peritoneal adhesiolysis w/o CC/MCC.....       0.7305         22.9         19.1
338.............................  Appendectomy w complicated principal          0.8884         24.1         20.1
                                   diag w MCC.
339.............................  Appendectomy w complicated principal          0.7667         22.2         18.5
                                   diag w CC.
340.............................  Appendectomy w complicated principal          0.6856         19.9         16.6
                                   diag w/o CC/MCC.
341.............................  Appendectomy w/o complicated principal        0.8884         24.1         20.1
                                   diag w MCC.
342.............................  Appendectomy w/o complicated principal        0.7667         22.2         18.5
                                   diag w CC.
343.............................  Appendectomy w/o complicated principal        0.6856         19.9         16.6
                                   diag w/o CC/MCC.
344.............................  Minor small & large bowel procedures w        0.8884         24.1         20.1
                                   MCC.
345.............................  Minor small & large bowel procedures w        0.7667         22.2         18.5
                                   CC.
346.............................  Minor small & large bowel procedures w/       0.6856         19.9         16.6
                                   o CC/MCC.
347.............................  Anal & stomal procedures w MCC.........       1.1417         29.0         24.2
348.............................  Anal & stomal procedures w CC..........       0.8249         25.0         20.8
349.............................  Anal & stomal procedures w/o CC/MCC....       0.5472         20.3         16.9
350.............................  Inguinal & femoral hernia procedures w        1.5545         35.2         29.3
                                   MCC.
351.............................  Inguinal & femoral hernia procedures w        1.1417         29.0         24.2
                                   CC.
352.............................  Inguinal & femoral hernia procedures w/       0.8249         25.0         20.8
                                   o CC/MCC.
353.............................  Hernia procedures except inguinal &           0.8249         25.0         20.8
                                   femoral w MCC.
354.............................  Hernia procedures except inguinal &           0.8249         25.0         20.8
                                   femoral w CC.
355.............................  Hernia procedures except inguinal &           0.8249         25.0         20.8
                                   femoral w/o CC/MCC.
356.............................  Other digestive system O.R. procedures        1.5057         36.1         30.1
                                   w MCC.

[[Page 26868]]

 
357.............................  Other digestive system O.R. procedures        1.3309         30.7         25.6
                                   w CC.
358.............................  Other digestive system O.R. procedures        0.8249         25.0         20.8
                                   w/o CC/MCC.
368.............................  Major esophageal disorders w MCC.......       1.1417         29.0         24.2
369.............................  Major esophageal disorders w CC........       1.1417         29.0         24.2
370.............................  Major esophageal disorders w/o CC/MCC..       1.1417         29.0         24.2
371.............................  Major gastrointestinal disorders &            0.8884         24.1         20.1
                                   peritoneal infections w MCC.
372.............................  Major gastrointestinal disorders &            0.7667         22.2         18.5
                                   peritoneal infections w CC.
373.............................  Major gastrointestinal disorders &            0.6856         19.9         16.6
                                   peritoneal infections w/o CC/MCC.
374.............................  Digestive malignancy w MCC.............       0.8340         22.9         19.1
375.............................  Digestive malignancy w CC..............       0.7563         19.7         16.4
376.............................  Digestive malignancy w/o CC/MCC........       0.5472         20.3         16.9
377.............................  G.I. hemorrhage w MCC..................       0.7032         22.5         18.8
378.............................  G.I. hemorrhage w CC...................       0.6334         21.5         17.9
379.............................  G.I. hemorrhage w/o CC/MCC.............       0.5472         20.3         16.9
380.............................  Complicated peptic ulcer w MCC.........       0.8249         25.0         20.8
381.............................  Complicated peptic ulcer w CC..........       0.8249         25.0         20.8
382.............................  Complicated peptic ulcer w/o CC/MCC....       0.7305         22.9         19.1
383.............................  Uncomplicated peptic ulcer w MCC.......       0.8249         25.0         20.8
384.............................  Uncomplicated peptic ulcer w/o MCC.....       0.7305         22.9         19.1
385.............................  Inflammatory bowel disease w MCC.......       0.8874         24.6         20.5
386.............................  Inflammatory bowel disease w CC........       0.7655         22.9         19.1
387.............................  Inflammatory bowel disease w/o CC/MCC..       0.7655         22.9         19.1
388.............................  G.I. obstruction w MCC.................       0.8967         22.8         19.0
389.............................  G.I. obstruction w CC..................       0.7893         21.9         18.3
390.............................  G.I. obstruction w/o CC/MCC............       0.7893         21.9         18.3
391.............................  Esophagitis, gastroent & misc digest          0.8509         24.4         20.3
                                   disorders w MCC.
392.............................  Esophagitis, gastroent & misc digest          0.6943         20.4         17.0
                                   disorders w/o MCC.
393.............................  Other digestive system diagnoses w MCC.       0.9915         25.5         21.3
394.............................  Other digestive system diagnoses w CC..       0.8523         22.0         18.3
395.............................  Other digestive system diagnoses w/o CC/      0.7214         20.9         17.4
                                   MCC.
405.............................  Pancreas, liver & shunt procedures w          1.5545         35.2         29.3
                                   MCC.
406.............................  Pancreas, liver & shunt procedures w CC       1.5545         35.2         29.3
407.............................  Pancreas, liver & shunt procedures w/o        1.1417         29.0         24.2
                                   CC/MCC.
408.............................  Biliary tract proc except only                1.5545         35.2         29.3
                                   cholecyst w or w/o c.d.e. w MCC.
409.............................  Biliary tract proc except only                1.5545         35.2         29.3
                                   cholecyst w or w/o c.d.e. w CC.
410.............................  Biliary tract proc except only                1.5545         35.2         29.3
                                   cholecyst w or w/o c.d.e. w/o CC/MCC.
411.............................  Cholecystectomy w c.d.e. w MCC.........       1.1417         29.0         24.2
412.............................  Cholecystectomy w c.d.e. w CC..........       1.1417         29.0         24.2
413.............................  Cholecystectomy w c.d.e. w/o CC/MCC....       1.1417         29.0         24.2
414.............................  Cholecystectomy except by laparoscope w/      1.1417         29.0         24.2
                                   o c.d.e. w MCC.
415.............................  Cholecystectomy except by laparoscope w/      1.1417         29.0         24.2
                                   o c.d.e. w CC.
416.............................  Cholecystectomy except by laparoscope w/      1.1417         29.0         24.2
                                   o c.d.e. w/o CC/MCC.
417.............................  Laparoscopic cholecystectomy w/o c.d.e.       1.5545         35.2         29.3
                                   w MCC.
418.............................  Laparoscopic cholecystectomy w/o c.d.e.       1.1417         29.0         24.2
                                   w CC.
419.............................  Laparoscopic cholecystectomy w/o c.d.e.       1.1417         29.0         24.2
                                   w/o CC/MCC.
420.............................  Hepatobiliary diagnostic procedures w         1.1417         29.0         24.2
                                   MCC.
421.............................  Hepatobiliary diagnostic procedures w         0.8249         25.0         20.8
                                   CC.
422.............................  Hepatobiliary diagnostic procedures w/o       0.8249         25.0         20.8
                                   CC/MCC.
423.............................  Other hepatobiliary or pancreas O.R.          1.1417         29.0         24.2
                                   procedures w MCC.
424.............................  Other hepatobiliary or pancreas O.R.          0.8249         25.0         20.8
                                   procedures w CC.
425.............................  Other hepatobiliary or pancreas O.R.          0.8249         25.0         20.8
                                   procedures w/o CC/MCC.
432.............................  Cirrhosis & alcoholic hepatitis w MCC..       0.6223         19.0         15.8
433.............................  Cirrhosis & alcoholic hepatitis w CC...       0.6223         19.0         15.8
434.............................  Cirrhosis & alcoholic hepatitis w/o CC/       0.5472         20.3         16.9
                                   MCC.
435.............................  Malignancy of hepatobiliary system or         0.7422         20.2         16.8
                                   pancreas w MCC.
436.............................  Malignancy of hepatobiliary system or         0.7086         19.6         16.3
                                   pancreas w CC.
437.............................  Malignancy of hepatobiliary system or         0.7086         19.6         16.3
                                   pancreas w/o CC/MCC.
438.............................  Disorders of pancreas except malignancy       1.0057         24.3         20.3
                                   w MCC.
439.............................  Disorders of pancreas except malignancy       0.8437         21.9         18.3
                                   w CC.
440.............................  Disorders of pancreas except malignancy       0.7204         18.8         15.7
                                   w/o CC/MCC.
441.............................  Disorders of liver except malig, cirr,        0.7588         21.8         18.2
                                   alc hepa w MCC.
442.............................  Disorders of liver except malig, cirr,        0.6925         21.2         17.7
                                   alc hepa w CC.
443.............................  Disorders of liver except malig, cirr,        0.6925         21.2         17.7
                                   alc hepa w/o CC/MCC.
444.............................  Disorders of the biliary tract w MCC...       0.8181         24.0         20.0
445.............................  Disorders of the biliary tract w CC....       0.6977         21.7         18.1
446.............................  Disorders of the biliary tract w/o CC/        0.5472         20.3         16.9
                                   MCC.
453.............................  Combined anterior/posterior spinal            1.5545         35.2         29.3
                                   fusion w MCC.
454.............................  Combined anterior/posterior spinal            1.5545         35.2         29.3
                                   fusion w CC.

[[Page 26869]]

 
455.............................  Combined anterior/posterior spinal            1.5545         35.2         29.3
                                   fusion w/o CC/MCC.
456.............................  Spinal fus exc cerv w spinal curv/malig/      1.5545         35.2         29.3
                                   infec or 9+ fus w MCC.
457.............................  Spinal fus exc cerv w spinal curv/malig/      1.5545         35.2         29.3
                                   infec or 9+ fus w CC.
458.............................  Spinal fus exc cerv w spinal curv/malig/      1.5545         35.2         29.3
                                   infec or 9+ fus w/o CC/MCC.
459.............................  Spinal fusion except cervical w MCC....       1.5545         35.2         29.3
460.............................  Spinal fusion except cervical w/o MCC..       1.5545         35.2         29.3
461.............................  Bilateral or multiple major joint procs       1.5545         35.2         29.3
                                   of lower extremity w MCC.
462.............................  Bilateral or multiple major joint procs       1.1417         29.0         24.2
                                   of lower extremity w/o MCC.
463.............................  Wnd debrid & skn grft exc hand, for           1.3514         38.8         32.3
                                   musculo-conn tiss dis w MCC.
464.............................  Wnd debrid & skn grft exc hand, for           1.1906         36.3         30.3
                                   musculo-conn tiss dis w CC.
465.............................  Wnd debrid & skn grft exc hand, for           1.0747         29.6         24.7
                                   musculo-conn tiss dis w/o CC/MCC.
466.............................  Revision of hip or knee replacement w         1.5545         35.2         29.3
                                   MCC.
467.............................  Revision of hip or knee replacement w         1.5545         35.2         29.3
                                   CC.
468.............................  Revision of hip or knee replacement w/o       1.5545         35.2         29.3
                                   CC/MCC.
469.............................  Major joint replacement or reattachment       1.5545         35.2         29.3
                                   of lower extremity w MCC.
470.............................  Major joint replacement or reattachment       1.5545         35.2         29.3
                                   of lower extremity w/o MCC.
471.............................  Cervical spinal fusion w MCC...........       1.5545         35.2         29.3
472.............................  Cervical spinal fusion w CC............       1.5545         35.2         29.3
473.............................  Cervical spinal fusion w/o CC/MCC......       1.5545         35.2         29.3
474.............................  Amputation for musculoskeletal sys &          1.3338         36.6         30.5
                                   conn tissue dis w MCC.
475.............................  Amputation for musculoskeletal sys &          1.1390         32.7         27.3
                                   conn tissue dis w CC.
476.............................  Amputation for musculoskeletal sys &          1.1390         32.7         27.3
                                   conn tissue dis w/o CC/MCC.
477.............................  Biopsies of musculoskeletal system &          1.5545         35.2         29.3
                                   connective tissue w MCC.
478.............................  Biopsies of musculoskeletal system &          1.1417         29.0         24.2
                                   connective tissue w CC.
479.............................  Biopsies of musculoskeletal system &          1.1417         29.0         24.2
                                   connective tissue w/o CC/MCC.
480.............................  Hip & femur procedures except major           1.5545         35.2         29.3
                                   joint w MCC.
481.............................  Hip & femur procedures except major           1.5545         35.2         29.3
                                   joint w CC.
482.............................  Hip & femur procedures except major           1.1417         29.0         24.2
                                   joint w/o CC/MCC.
483.............................  Major joint & limb reattachment proc of       1.5545         35.2         29.3
                                   upper extremity w CC/MCC.
484.............................  Major joint & limb reattachment proc of       1.1417         29.0         24.2
                                   upper extremity w/o CC/MCC.
485.............................  Knee procedures w pdx of infection w          1.5545         35.2         29.3
                                   MCC.
486.............................  Knee procedures w pdx of infection w CC       1.1417         29.0         24.2
487.............................  Knee procedures w pdx of infection w/o        1.1417         29.0         24.2
                                   CC/MCC.
488.............................  Knee procedures w/o pdx of infection w        1.5545         35.2         29.3
                                   CC/MCC.
489.............................  Knee procedures w/o pdx of infection w/       1.5545         35.2         29.3
                                   o CC/MCC.
490.............................  Back & neck proc exc spinal fusion w CC/      1.1417         29.0         24.2
                                   MCC or disc device/neurostim.
491.............................  Back & neck proc exc spinal fusion w/o        1.1417         29.0         24.2
                                   CC/MCC.
492.............................  Lower extrem & humer proc except hip,         1.5545         35.2         29.3
                                   foot, femur w MCC.
493.............................  Lower extrem & humer proc except hip,         1.1417         29.0         24.2
                                   foot, femur w CC.
494.............................  Lower extrem & humer proc except hip,         0.8249         25.0         20.8
                                   foot, femur w/o CC/MCC.
495.............................  Local excision & removal int fix              1.3650         38.1         31.8
                                   devices exc hip & femur w MCC.
496.............................  Local excision & removal int fix              1.1981         36.8         30.7
                                   devices exc hip & femur w CC.
497.............................  Local excision & removal int fix              1.1417         29.0         24.2
                                   devices exc hip & femur w/o CC/MCC.
498.............................  Local excision & removal int fix              1.5545         35.2         29.3
                                   devices of hip & femur w CC/MCC.
499.............................  Local excision & removal int fix              0.7305         22.9         19.1
                                   devices of hip & femur w/o CC/MCC.
500.............................  Soft tissue procedures w MCC...........       1.3212         35.2         29.3
501.............................  Soft tissue procedures w CC............       1.2903         30.7         25.6
502.............................  Soft tissue procedures w/o CC/MCC......       0.8249         25.0         20.8
503.............................  Foot procedures w MCC..................       1.1417         29.0         24.2
504.............................  Foot procedures w CC...................       0.8249         25.0         20.8
505.............................  Foot procedures w/o CC/MCC.............       0.5472         20.3         16.9
506.............................  Major thumb or joint procedures........       0.7305         22.9         19.1
507.............................  Major shoulder or elbow joint                 0.8249         25.0         20.8
                                   procedures w CC/MCC.
508.............................  Major shoulder or elbow joint                 0.8249         25.0         20.8
                                   procedures w/o CC/MCC.
509.............................  Arthroscopy............................       0.5472         20.3         16.9
510.............................  Shoulder, elbow or forearm proc, exc          1.1417         29.0         24.2
                                   major joint proc w MCC.
511.............................  Shoulder, elbow or forearm proc, exc          1.1417         29.0         24.2
                                   major joint proc w CC.
512.............................  Shoulder, elbow or forearm proc, exc          0.5472         20.3         16.9
                                   major joint proc w/o CC/MCC.
513.............................  Hand or wrist proc, except major thumb        1.5545         35.2         29.3
                                   or joint proc w CC/MCC.
514.............................  Hand or wrist proc, except major thumb        0.7305         22.9         19.1
                                   or joint proc w/o CC/MCC.
515.............................  Other musculoskelet sys & conn tiss           1.3230         34.8         29.0
                                   O.R. proc w MCC.
516.............................  Other musculoskelet sys & conn tiss           1.1417         29.0         24.2
                                   O.R. proc w CC.
517.............................  Other musculoskelet sys & conn tiss           0.8249         25.0         20.8
                                   O.R. proc w/o CC/MCC.
533.............................  Fractures of femur w MCC...............       0.8249         25.0         20.8
534.............................  Fractures of femur w/o MCC.............       0.7305         22.9         19.1
535.............................  Fractures of hip & pelvis w MCC........       0.7305         22.9         19.1
536.............................  Fractures of hip & pelvis w/o MCC......       0.5998         23.7         19.8
537.............................  Sprains, strains, & dislocations of           0.5472         20.3         16.9
                                   hip, pelvis & thigh w CC/MCC.

[[Page 26870]]

 
538.............................  Sprains, strains, & dislocations of           0.5472         20.3         16.9
                                   hip, pelvis & thigh w/o CC/MCC.
539.............................  Osteomyelitis w MCC....................       0.9013         29.7         24.8
540.............................  Osteomyelitis w CC.....................       0.8107         28.7         23.9
541.............................  Osteomyelitis w/o CC/MCC...............       0.7787         26.9         22.4
542.............................  Pathological fractures & musculoskelet        0.7359         21.7         18.1
                                   & conn tiss malig w MCC.
543.............................  Pathological fractures & musculoskelet        0.6347         21.3         17.8
                                   & conn tiss malig w CC.
544.............................  Pathological fractures & musculoskelet        0.5472         20.3         16.9
                                   & conn tiss malig w/o CC/MCC.
545.............................  Connective tissue disorders w MCC......       0.8501         23.9         19.9
546.............................  Connective tissue disorders w CC.......       0.6492         20.7         17.3
547.............................  Connective tissue disorders w/o CC/MCC.       0.5472         20.3         16.9
548.............................  Septic arthritis w MCC.................       0.8584         28.2         23.5
549.............................  Septic arthritis w CC..................       0.7347         26.4         22.0
550.............................  Septic arthritis w/o CC/MCC............       0.6704         23.5         19.6
551.............................  Medical back problems w MCC............       0.7305         26.6         22.2
552.............................  Medical back problems w/o MCC..........       0.6022         22.8         19.0
553.............................  Bone diseases & arthropathies w MCC....       0.8249         25.0         20.8
554.............................  Bone diseases & arthropathies w/o MCC..       0.4822         20.5         17.1
555.............................  Signs & symptoms of musculoskeletal           0.7305         22.9         19.1
                                   system & conn tissue w MCC.
556.............................  Signs & symptoms of musculoskeletal           0.7305         22.9         19.1
                                   system & conn tissue w/o MCC.
557.............................  Tendonitis, myositis & bursitis w MCC..       0.8177         25.9         21.6
558.............................  Tendonitis, myositis & bursitis w/o MCC       0.6919         21.4         17.8
559.............................  Aftercare, musculoskeletal system &           0.7157         26.2         21.8
                                   connective tissue w MCC.
560.............................  Aftercare, musculoskeletal system &           0.6393         24.6         20.5
                                   connective tissue w CC.
561.............................  Aftercare, musculoskeletal system &           0.5889         21.7         18.1
                                   connective tissue w/o CC/MCC.
562.............................  Fx, sprn, strn & disl except femur,           1.1417         29.0         24.2
                                   hip, pelvis & thigh w MCC.
563.............................  Fx, sprn, strn & disl except femur,           0.5472         20.3         16.9
                                   hip, pelvis & thigh w/o MCC.
564.............................  Other musculoskeletal sys & connective        0.8134         24.9         20.8
                                   tissue diagnoses w MCC.
565.............................  Other musculoskeletal sys & connective        0.7382         24.8         20.7
                                   tissue diagnoses w CC.
566.............................  Other musculoskeletal sys & connective        0.6862         22.1         18.4
                                   tissue diagnoses w/o CC/MCC.
573.............................  Skin graft &/or debrid for skn ulcer or       1.3068         38.0         31.7
                                   cellulitis w MCC.
574.............................  Skin graft &/or debrid for skn ulcer or       1.1567         37.1         30.9
                                   cellulitis w CC.
575.............................  Skin graft &/or debrid for skn ulcer or       0.9938         31.7         26.4
                                   cellulitis w/o CC/MCC.
576.............................  Skin graft &/or debrid exc for skin           1.5545         35.2         29.3
                                   ulcer or cellulitis w MCC.
577.............................  Skin graft &/or debrid exc for skin           1.1417         29.0         24.2
                                   ulcer or cellulitis w CC.
578.............................  Skin graft &/or debrid exc for skin           0.7305         22.9         19.1
                                   ulcer or cellulitis w/o CC/MCC.
579.............................  Other skin, subcut tiss & breast proc w       1.2793         36.8         30.7
                                   MCC.
580.............................  Other skin, subcut tiss & breast proc w       1.1001         34.8         29.0
                                   CC.
581.............................  Other skin, subcut tiss & breast proc w/      0.9100         29.9         24.9
                                   o CC/MCC.
582.............................  Mastectomy for malignancy w CC/MCC.....       1.5545         35.2         29.3
583.............................  Mastectomy for malignancy w/o CC/MCC...       1.5545         35.2         29.3
584.............................  Breast biopsy, local excision & other         1.1417         29.0         24.2
                                   breast procedures w CC/MCC.
585.............................  Breast biopsy, local excision & other         1.1417         29.0         24.2
                                   breast procedures w/o CC/MCC.
592.............................  Skin ulcers w MCC......................       0.8875         27.1         22.6
593.............................  Skin ulcers w CC.......................       0.7877         26.8         22.3
594.............................  Skin ulcers w/o CC/MCC.................       0.7342         24.3         20.3
595.............................  Major skin disorders w MCC.............       0.7525         24.5         20.4
596.............................  Major skin disorders w/o MCC...........       0.6155         23.8         19.8
597.............................  Malignant breast disorders w MCC.......       0.8249         25.0         20.8
598.............................  Malignant breast disorders w CC........       0.7305         22.9         19.1
599.............................  Malignant breast disorders w/o CC/MCC..       0.7305         22.9         19.1
600.............................  Non-malignant breast disorders w CC/MCC       0.7305         22.9         19.1
601.............................  Non-malignant breast disorders w/o CC/        0.7305         22.9         19.1
                                   MCC.
602.............................  Cellulitis w MCC.......................       0.6643         22.5         18.8
603.............................  Cellulitis w/o MCC.....................       0.5528         19.4         16.2
604.............................  Trauma to the skin, subcut tiss &             0.8249         25.0         20.8
                                   breast w MCC.
605.............................  Trauma to the skin, subcut tiss &             0.5685         21.2         17.7
                                   breast w/o MCC.
606.............................  Minor skin disorders w MCC.............       0.8324         23.2         19.3
607.............................  Minor skin disorders w/o MCC...........       0.6776         22.6         18.8
614.............................  Adrenal & pituitary procedures w CC/MCC       1.2008         33.1         27.6
615.............................  Adrenal & pituitary procedures w/o CC/        0.7305         22.9         19.1
                                   MCC.
616.............................  Amputat of lower limb for endocrine,          1.4505         41.0         34.2
                                   nutrit, & metabol dis w MCC.
617.............................  Amputat of lower limb for endocrine,          1.2414         33.3         27.8
                                   nutrit, & metabol dis w CC.
618.............................  Amputat of lower limb for endocrine,          0.8249         25.0         20.8
                                   nutrit, & metabol dis w/o CC/MCC.
619.............................  O.R. procedures for obesity w MCC......       0.8249         25.0         20.8
620.............................  O.R. procedures for obesity w CC.......       0.8249         25.0         20.8
621.............................  O.R. procedures for obesity w/o CC/MCC.       0.8249         25.0         20.8
622.............................  Skin grafts & wound debrid for endoc,         1.1462         35.6         29.7
                                   nutrit & metab dis w MCC.
623.............................  Skin grafts & wound debrid for endoc,         1.0197         32.2         26.8
                                   nutrit & metab dis w CC.

[[Page 26871]]

 
624.............................  Skin grafts & wound debrid for endoc,         0.8249         25.0         20.8
                                   nutrit & metab dis w/o CC/MCC.
625.............................  Thyroid, parathyroid & thyroglossal           1.3385         36.6         30.5
                                   procedures w MCC.
626.............................  Thyroid, parathyroid & thyroglossal           1.2008         33.1         27.6
                                   procedures w CC.
627.............................  Thyroid, parathyroid & thyroglossal           0.7305         22.9         19.1
                                   procedures w/o CC/MCC.
628.............................  Other endocrine, nutrit & metab O.R.          1.3385         36.6         30.5
                                   proc w MCC.
629.............................  Other endocrine, nutrit & metab O.R.          1.2008         33.1         27.6
                                   proc w CC.
630.............................  Other endocrine, nutrit & metab O.R.          0.7305         22.9         19.1
                                   proc w/o CC/MCC.
637.............................  Diabetes w MCC.........................       0.7726         25.8         21.5
638.............................  Diabetes w CC..........................       0.6757         24.0         20.0
639.............................  Diabetes w/o CC/MCC....................       0.6064         20.6         17.2
640.............................  Nutritional & misc metabolic disorders        0.7879         23.2         19.3
                                   w MCC.
641.............................  Nutritional & misc metabolic disorders        0.6889         22.0         18.3
                                   w/o MCC.
642.............................  Inborn errors of metabolism............       0.7305         22.9         19.1
643.............................  Endocrine disorders w MCC..............       0.7358         24.9         20.8
644.............................  Endocrine disorders w CC...............       0.7358         24.9         20.8
645.............................  Endocrine disorders w/o CC/MCC.........       0.5472         20.3         16.9
652.............................  Kidney transplant......................       0.0000          0.0          0.0
653.............................  Major bladder procedures w MCC.........       1.1417         29.0         24.2
654.............................  Major bladder procedures w CC..........       0.7305         22.9         19.1
655.............................  Major bladder procedures w/o CC/MCC....       0.5472         20.3         16.9
656.............................  Kidney & ureter procedures for neoplasm       0.8249         25.0         20.8
                                   w MCC.
657.............................  Kidney & ureter procedures for neoplasm       0.8249         25.0         20.8
                                   w CC.
658.............................  Kidney & ureter procedures for neoplasm       0.8249         25.0         20.8
                                   w/o CC/MCC.
659.............................  Kidney & ureter procedures for non-           1.1417         29.0         24.2
                                   neoplasm w MCC.
660.............................  Kidney & ureter procedures for non-           0.7305         22.9         19.1
                                   neoplasm w CC.
661.............................  Kidney & ureter procedures for non-           0.5472         20.3         16.9
                                   neoplasm w/o CC/MCC.
662.............................  Minor bladder procedures w MCC.........       0.8249         25.0         20.8
663.............................  Minor bladder procedures w CC..........       0.8249         25.0         20.8
664.............................  Minor bladder procedures w/o CC/MCC....       1.5545         35.2         29.3
665.............................  Prostatectomy w MCC....................       0.8249         25.0         20.8
666.............................  Prostatectomy w CC.....................       0.8249         25.0         20.8
667.............................  Prostatectomy w/o CC/MCC...............       1.1417         29.0         24.2
668.............................  Transurethral procedures w MCC.........       1.5545         35.2         29.3
669.............................  Transurethral procedures w CC..........       1.5545         35.2         29.3
670.............................  Transurethral procedures w/o CC/MCC....       0.8249         25.0         20.8
671.............................  Urethral procedures w CC/MCC...........       0.7305         22.9         19.1
672.............................  Urethral procedures w/o CC/MCC.........       0.5472         20.3         16.9
673.............................  Other kidney & urinary tract procedures       1.3255         33.6         28.0
                                   w MCC.
674.............................  Other kidney & urinary tract procedures       1.2557         30.6         25.5
                                   w CC.
675.............................  Other kidney & urinary tract procedures       1.1417         29.0         24.2
                                   w/o CC/MCC.
682.............................  Renal failure w MCC....................       0.8553         23.6         19.7
683.............................  Renal failure w CC.....................       0.7752         21.8         18.2
684.............................  Renal failure w/o CC/MCC...............       0.7121         20.5         17.1
685.............................  Admit for renal dialysis...............       0.7726         26.0         21.7
686.............................  Kidney & urinary tract neoplasms w MCC.       0.8933         23.6         19.7
687.............................  Kidney & urinary tract neoplasms w CC..       0.7305         22.9         19.1
688.............................  Kidney & urinary tract neoplasms w/o CC/      0.5472         20.3         16.9
                                   MCC.
689.............................  Kidney & urinary tract infections w MCC       0.6624         22.9         19.1
690.............................  Kidney & urinary tract infections w/o         0.5655         20.2         16.8
                                   MCC.
691.............................  Urinary stones w esw lithotripsy w CC/        1.5545         35.2         29.3
                                   MCC.
692.............................  Urinary stones w esw lithotripsy w/o CC/      1.5545         35.2         29.3
                                   MCC.
693.............................  Urinary stones w/o esw lithotripsy w          0.7305         22.9         19.1
                                   MCC.
694.............................  Urinary stones w/o esw lithotripsy w/o        0.7305         22.9         19.1
                                   MCC.
695.............................  Kidney & urinary tract signs & symptoms       0.8249         25.0         20.8
                                   w MCC.
696.............................  Kidney & urinary tract signs & symptoms       0.5472         20.3         16.9
                                   w/o MCC.
697.............................  Urethral stricture.....................       0.5472         20.3         16.9
698.............................  Other kidney & urinary tract diagnoses        0.7919         22.6         18.8
                                   w MCC.
699.............................  Other kidney & urinary tract diagnoses        0.7293         22.1         18.4
                                   w CC.
700.............................  Other kidney & urinary tract diagnoses        0.6052         19.6         16.3
                                   w/o CC/MCC.
707.............................  Major male pelvic procedures w CC/MCC..       0.7305         22.9         19.1
708.............................  Major male pelvic procedures w/o CC/MCC       0.5472         20.3         16.9
709.............................  Penis procedures w CC/MCC..............       1.1417         29.0         24.2
710.............................  Penis procedures w/o CC/MCC............       1.1417         29.0         24.2
711.............................  Testes procedures w CC/MCC.............       1.1417         29.0         24.2
712.............................  Testes procedures w/o CC/MCC...........       1.1417         29.0         24.2
713.............................  Transurethral prostatectomy w CC/MCC...       1.5545         35.2         29.3
714.............................  Transurethral prostatectomy w/o CC/MCC.       0.5472         20.3         16.9
715.............................  Other male reproductive system O.R.           1.5545         35.2         29.3
                                   proc for malignancy w CC/MCC.

[[Page 26872]]

 
716.............................  Other male reproductive system O.R.           1.5545         35.2         29.3
                                   proc for malignancy w/o CC/MCC.
717.............................  Other male reproductive system O.R.           1.1417         29.0         24.2
                                   proc exc malignancy w CC/MCC.
718.............................  Other male reproductive system O.R.           0.5472         20.3         16.9
                                   proc exc malignancy w/o CC/MCC.
722.............................  Malignancy, male reproductive system w        0.8249         25.0         20.8
                                   MCC.
723.............................  Malignancy, male reproductive system w        0.7305         22.9         19.1
                                   CC.
724.............................  Malignancy, male reproductive system w/       0.5472         20.3         16.9
                                   o CC/MCC.
725.............................  Benign prostatic hypertrophy w MCC.....       1.1417         29.0         24.2
726.............................  Benign prostatic hypertrophy w/o MCC...       0.5472         20.3         16.9
727.............................  Inflammation of the male reproductive         0.7754         25.9         21.6
                                   system w MCC.
728.............................  Inflammation of the male reproductive         0.6172         20.8         17.3
                                   system w/o MCC.
729.............................  Other male reproductive system                1.0319         26.6         22.2
                                   diagnoses w CC/MCC.
730.............................  Other male reproductive system                0.7305         22.9         19.1
                                   diagnoses w/o CC/MCC.
734.............................  Pelvic evisceration, rad hysterectomy &       1.1417         29.0         24.2
                                   rad vulvectomy w CC/MCC.
735.............................  Pelvic evisceration, rad hysterectomy &       0.5472         20.3         16.9
                                   rad vulvectomy w/o CC/MCC.
736.............................  Uterine & adnexa proc for ovarian or          1.1417         29.0         24.2
                                   adnexal malignancy w MCC.
737.............................  Uterine & adnexa proc for ovarian or          0.8249         25.0         20.8
                                   adnexal malignancy w CC.
738.............................  Uterine & adnexa proc for ovarian or          0.5472         20.3         16.9
                                   adnexal malignancy w/o CC/MCC.
739.............................  Uterine, adnexa proc for non-ovarian/         1.1417         29.0         24.2
                                   adnexal malig w MCC.
740.............................  Uterine, adnexa proc for non-ovarian/         0.8249         25.0         20.8
                                   adnexal malig w CC.
741.............................  Uterine, adnexa proc for non-ovarian/         0.5472         20.3         16.9
                                   adnexal malig w/o CC/MCC.
742.............................  Uterine & adnexa proc for non-                0.8249         25.0         20.8
                                   malignancy w CC/MCC.
743.............................  Uterine & adnexa proc for non-                0.5472         20.3         16.9
                                   malignancy w/o CC/MCC.
744.............................  D&C, conization, laparascopy & tubal          0.8249         25.0         20.8
                                   interruption w CC/MCC.
745.............................  D&C, conization, laparascopy & tubal          0.8249         25.0         20.8
                                   interruption w/o CC/MCC.
746.............................  Vagina, cervix & vulva procedures w CC/       0.8249         25.0         20.8
                                   MCC.
747.............................  Vagina, cervix & vulva procedures w/o         0.8249         25.0         20.8
                                   CC/MCC.
748.............................  Female reproductive system                    0.8249         25.0         20.8
                                   reconstructive procedures.
749.............................  Other female reproductive system O.R.         0.8249         25.0         20.8
                                   procedures w CC/MCC.
750.............................  Other female reproductive system O.R.         0.8249         25.0         20.8
                                   procedures w/o CC/MCC.
754.............................  Malignancy, female reproductive system        1.1417         29.0         24.2
                                   w MCC.
755.............................  Malignancy, female reproductive system        0.8249         25.0         20.8
                                   w CC.
756.............................  Malignancy, female reproductive system        0.5472         20.3         16.9
                                   w/o CC/MCC.
757.............................  Infections, female reproductive system        0.8375         22.6         18.8
                                   w MCC.
758.............................  Infections, female reproductive system        0.8317         27.2         22.7
                                   w CC.
759.............................  Infections, female reproductive system        0.5472         20.3         16.9
                                   w/o CC/MCC.
760.............................  Menstrual & other female reproductive         1.1417         29.0         24.2
                                   system disorders w CC/MCC.
761.............................  Menstrual & other female reproductive         0.5472         20.3         16.9
                                   system disorders w/o CC/MCC.
765.............................  Cesarean section w CC/MCC..............       0.8249         25.0         20.8
766.............................  Cesarean section w/o CC/MCC............       0.7305         22.9         19.1
767.............................  Vaginal delivery w sterilization &/or         0.7305         22.9         19.1
                                   D&C.
768.............................  Vaginal delivery w O.R. proc except           0.7305         22.9         19.1
                                   steril &/or D&C.
769.............................  Postpartum & post abortion diagnoses w        0.7305         22.9         19.1
                                   O.R. procedure.
770.............................  Abortion w D&C, aspiration curettage or       0.7305         22.9         19.1
                                   hysterotomy.
774.............................  Vaginal delivery w complicating               0.7305         22.9         19.1
                                   diagnoses.
775.............................  Vaginal delivery w/o complicating             0.7305         22.9         19.1
                                   diagnoses.
776.............................  Postpartum & post abortion diagnoses w/       1.1417         29.0         24.2
                                   o O.R. procedure.
777.............................  Ectopic pregnancy......................       0.7305         22.9         19.1
778.............................  Threatened abortion....................       0.5472         20.3         16.9
779.............................  Abortion w/o D&C.......................       0.5472         20.3         16.9
780.............................  False labor............................       0.5472         20.3         16.9
781.............................  Other antepartum diagnoses w medical          1.1417         29.0         24.2
                                   complications.
782.............................  Other antepartum diagnoses w/o medical        0.5472         20.3         16.9
                                   complications.
789.............................  Neonates, died or transferred to              0.5472         20.3         16.9
                                   another acute care facility.
790.............................  Extreme immaturity or respiratory             0.5472         20.3         16.9
                                   distress syndrome, neonate.
791.............................  Prematurity w major problems...........       1.1417         29.0         24.2
792.............................  Prematurity w/o major problems.........       0.5472         20.3         16.9
793.............................  Full term neonate w major problems.....       1.1417         29.0         24.2
794.............................  Neonate w other significant problems...       1.1417         29.0         24.2
795.............................  Normal newborn.........................       0.5472         20.3         16.9
799.............................  Splenectomy w MCC......................       1.1417         29.0         24.2
800.............................  Splenectomy w CC.......................       0.8249         25.0         20.8
801.............................  Splenectomy w/o CC/MCC.................       0.8249         25.0         20.8
802.............................  Other O.R. proc of the blood & blood          1.5545         35.2         29.3
                                   forming organs w MCC.
803.............................  Other O.R. proc of the blood & blood          0.7305         22.9         19.1
                                   forming organs w CC.
804.............................  Other O.R. proc of the blood & blood          0.7305         22.9         19.1
                                   forming organs w/o CC/MCC.
808.............................  Major hematol/immun diag exc sickle           0.8009         20.7         17.3
                                   cell crisis & coagul w MCC.
809.............................  Major hematol/immun diag exc sickle           0.8009         20.7         17.3
                                   cell crisis & coagul w CC.
810.............................  Major hematol/immun diag exc sickle           0.8009         20.7         17.3
                                   cell crisis & coagul w/o CC/MCC.

[[Page 26873]]

 
811.............................  Red blood cell disorders w MCC.........       0.6655         23.2         19.3
812.............................  Red blood cell disorders w/o MCC.......       0.5699         19.5         16.3
813.............................  Coagulation disorders..................       0.8015         21.5         17.9
814.............................  Reticuloendothelial & immunity                0.7474         22.6         18.8
                                   disorders w MCC.
815.............................  Reticuloendothelial & immunity                0.7305         22.9         19.1
                                   disorders w CC.
816.............................  Reticuloendothelial & immunity                0.7305         22.9         19.1
                                   disorders w/o CC/MCC.
820.............................  Lymphoma & leukemia w major O.R.              0.8249         25.0         20.8
                                   procedure w MCC.
821.............................  Lymphoma & leukemia w major O.R.              0.8249         25.0         20.8
                                   procedure w CC.
822.............................  Lymphoma & leukemia w major O.R.              0.8249         25.0         20.8
                                   procedure w/o CC/MCC.
823.............................  Lymphoma & non-acute leukemia w other         1.1417         29.0         24.2
                                   O.R. proc w MCC.
824.............................  Lymphoma & non-acute leukemia w other         1.1417         29.0         24.2
                                   O.R. proc w CC.
825.............................  Lymphoma & non-acute leukemia w other         0.5472         20.3         16.9
                                   O.R. proc w/o CC/MCC.
826.............................  Myeloprolif disord or poorly diff neopl       0.8249         25.0         20.8
                                   w maj O.R. proc w MCC.
827.............................  Myeloprolif disord or poorly diff neopl       0.8249         25.0         20.8
                                   w maj O.R. proc w CC.
828.............................  Myeloprolif disord or poorly diff neopl       0.8249         25.0         20.8
                                   w maj O.R. proc w/o CC/MCC.
829.............................  Myeloprolif disord or poorly diff neopl       1.5545         35.2         29.3
                                   w other O.R. proc w CC/MCC.
830.............................  Myeloprolif disord or poorly diff neopl       1.5545         35.2         29.3
                                   w other O.R. proc w/o CC/MCC.
834.............................  Acute leukemia w/o major O.R. procedure       1.1417         29.0         24.2
                                   w MCC.
835.............................  Acute leukemia w/o major O.R. procedure       0.8249         25.0         20.8
                                   w CC.
836.............................  Acute leukemia w/o major O.R. procedure       0.5472         20.3         16.9
                                   w/o CC/MCC.
837.............................  Chemo w acute leukemia as sdx or w high       1.5545         35.2         29.3
                                   dose chemo agent w MCC.
838.............................  Chemo w acute leukemia as sdx w CC or         0.8249         25.0         20.8
                                   high dose chemo agent.
839.............................  Chemo w acute leukemia as sdx w/o CC/         1.5545         35.2         29.3
                                   MCC.
840.............................  Lymphoma & non-acute leukemia w MCC....       0.8718         20.8         17.3
841.............................  Lymphoma & non-acute leukemia w CC.....       0.8026         20.1         16.8
842.............................  Lymphoma & non-acute leukemia w/o CC/         0.7305         22.9         19.1
                                   MCC.
843.............................  Other myeloprolif dis or poorly diff          1.1417         29.0         24.2
                                   neopl diag w MCC.
844.............................  Other myeloprolif dis or poorly diff          1.1417         29.0         24.2
                                   neopl diag w CC.
845.............................  Other myeloprolif dis or poorly diff          1.1417         29.0         24.2
                                   neopl diag w/o CC/MCC.
846.............................  Chemotherapy w/o acute leukemia as            1.6788         37.4         31.2
                                   secondary diagnosis w MCC.
847.............................  Chemotherapy w/o acute leukemia as            1.4350         27.6         23.0
                                   secondary diagnosis w CC.
848.............................  Chemotherapy w/o acute leukemia as            0.7305         22.9         19.1
                                   secondary diagnosis w/o CC/MCC.
849.............................  Radiotherapy...........................       0.8994         23.5         19.6
853.............................  Infectious & parasitic diseases w O.R.        1.7687         38.1         31.8
                                   procedure w MCC.
854.............................  Infectious & parasitic diseases w O.R.        1.4381         30.8         25.7
                                   procedure w CC.
855.............................  Infectious & parasitic diseases w O.R.        0.7305         22.9         19.1
                                   procedure w/o CC/MCC.
856.............................  Postoperative or post-traumatic               1.4470         36.1         30.1
                                   infections w O.R. proc w MCC.
857.............................  Postoperative or post-traumatic               1.1886         31.5         26.3
                                   infections w O.R. proc w CC.
858.............................  Postoperative or post-traumatic               1.1109         28.4         23.7
                                   infections w O.R. proc w/o CC/MCC.
862.............................  Postoperative & post-traumatic                0.8670         25.2         21.0
                                   infections w MCC.
863.............................  Postoperative & post-traumatic                0.7478         23.4         19.5
                                   infections w/o MCC.
864.............................  Fever of unknown origin................       0.7305         22.9         19.1
865.............................  Viral illness w MCC....................       0.7823         21.8         18.2
866.............................  Viral illness w/o MCC..................       0.6431         21.2         17.7
867.............................  Other infectious & parasitic diseases         1.0954         23.6         19.7
                                   diagnoses w MCC.
868.............................  Other infectious & parasitic diseases         0.8869         22.0         18.3
                                   diagnoses w CC.
869.............................  Other infectious & parasitic diseases         0.5472         20.3         16.9
                                   diagnoses w/o CC/MCC.
870.............................  Septicemia w MV 96+ hours..............       1.9505         30.5         25.4
871.............................  Septicemia w/o MV 96+ hours w MCC......       0.8299         23.5         19.6
872.............................  Septicemia w/o MV 96+ hours w/o MCC....       0.7340         21.9         18.3
876.............................  O.R. procedure w principal diagnoses of       0.7305         22.9         19.1
                                   mental illness.
880.............................  Acute adjustment reaction &                   0.5472         20.3         16.9
                                   psychosocial dysfunction.
881.............................  Depressive neuroses....................       0.5472         20.3         16.9
882.............................  Neuroses except depressive.............       0.5472         20.3         16.9
883.............................  Disorders of personality & impulse            0.5472         20.3         16.9
                                   control.
884.............................  Organic disturbances & mental                 0.4883         23.3         19.4
                                   retardation.
885.............................  Psychoses..............................       0.4140         23.8         19.8
886.............................  Behavioral & developmental disorders...       0.5472         20.3         16.9
887.............................  Other mental disorder diagnoses........       0.5472         20.3         16.9
894.............................  Alcohol/drug abuse or dependence, left        0.5472         20.3         16.9
                                   ama.
895.............................  Alcohol/drug abuse or dependence w            0.5472         20.3         16.9
                                   rehabilitation therapy.
896.............................  Alcohol/drug abuse or dependence w/o          0.8249         25.0         20.8
                                   rehabilitation therapy w MCC.
897.............................  Alcohol/drug abuse or dependence w/o          0.5472         20.3         16.9
                                   rehabilitation therapy w/o MCC.
901.............................  Wound debridements for injuries w MCC..       1.3395         35.2         29.3
902.............................  Wound debridements for injuries w CC...       1.1605         33.5         27.9
903.............................  Wound debridements for injuries w/o CC/       0.7305         22.9         19.1
                                   MCC.
904.............................  Skin grafts for injuries w CC/MCC......       1.3351         40.8         34.0
905.............................  Skin grafts for injuries w/o CC/MCC....       0.7305         22.9         19.1

[[Page 26874]]

 
906.............................  Hand procedures for injuries...........       0.5472         20.3         16.9
907.............................  Other O.R. procedures for injuries w          1.6622         36.8         30.7
                                   MCC.
908.............................  Other O.R. procedures for injuries w CC       1.3966         34.1         28.4
909.............................  Other O.R. procedures for injuries w/o        0.8249         25.0         20.8
                                   CC/MCC.
913.............................  Traumatic injury w MCC.................       0.8462         26.9         22.4
914.............................  Traumatic injury w/o MCC...............       0.6448         21.9         18.3
915.............................  Allergic reactions w MCC...............       0.5472         20.3         16.9
916.............................  Allergic reactions w/o MCC.............       0.5472         20.3         16.9
917.............................  Poisoning & toxic effects of drugs w          0.7305         22.9         19.1
                                   MCC.
918.............................  Poisoning & toxic effects of drugs w/o        0.7305         22.9         19.1
                                   MCC.
919.............................  Complications of treatment w MCC.......       0.9858         26.3         21.9
920.............................  Complications of treatment w CC........       0.8518         24.6         20.5
921.............................  Complications of treatment w/o CC/MCC..       0.7511         23.0         19.2
922.............................  Other injury, poisoning & toxic effect        0.5472         20.3         16.9
                                   diag w MCC.
923.............................  Other injury, poisoning & toxic effect        0.5472         20.3         16.9
                                   diag w/o MCC.
927.............................  Extensive burns or full thickness burns       1.5545         35.2         29.3
                                   w MV 96+ hrs w skin graft.
928.............................  Full thickness burn w skin graft or           1.1417         29.0         24.2
                                   inhal inj w CC/MCC.
929.............................  Full thickness burn w skin graft or           0.7305         22.9         19.1
                                   inhal inj w/o CC/MCC.
933.............................  Extensive burns or full thickness burns       1.5545         35.2         29.3
                                   w MV 96+ hrs w/o skin graft.
934.............................  Full thickness burn w/o skin grft or          0.6998         24.2         20.2
                                   inhal inj.
935.............................  Non-extensive burns....................       0.7525         24.9         20.8
939.............................  O.R. proc w diagnoses of other contact        1.2500         33.8         28.2
                                   w health services w MCC.
940.............................  O.R. proc w diagnoses of other contact        1.1066         33.8         28.2
                                   w health services w CC.
941.............................  O.R. proc w diagnoses of other contact        0.9719         28.8         24.0
                                   w health services w/o CC/MCC.
945.............................  Rehabilitation w CC/MCC................       0.5867         22.2         18.5
946.............................  Rehabilitation w/o CC/MCC..............       0.4935         18.9         15.8
947.............................  Signs & symptoms w MCC.................       0.6340         22.7         18.9
948.............................  Signs & symptoms w/o MCC...............       0.5642         23.4         19.5
949.............................  Aftercare w CC/MCC.....................       0.6693         22.1         18.4
950.............................  Aftercare w/o CC/MCC...................       0.5735         18.5         15.4
951.............................  Other factors influencing health status       1.5837         26.2         21.8
955.............................  Craniotomy for multiple significant           1.5545         35.2         29.3
                                   trauma.
956.............................  Limb reattachment, hip & femur proc for       0.7305         22.9         19.1
                                   multiple significant trauma.
957.............................  Other O.R. procedures for multiple            1.5545         35.2         29.3
                                   significant trauma w MCC.
958.............................  Other O.R. procedures for multiple            1.1417         29.0         24.2
                                   significant trauma w CC.
959.............................  Other O.R. procedures for multiple            1.1417         29.0         24.2
                                   significant trauma w/o CC/MCC.
963.............................  Other multiple significant trauma w MCC       1.5545         35.2         29.3
964.............................  Other multiple significant trauma w CC.       0.7305         22.9         19.1
965.............................  Other multiple significant trauma w/o         0.5472         20.3         16.9
                                   CC/MCC.
969.............................  HIV w extensive O.R. procedure w MCC...       1.5545         35.2         29.3
970.............................  HIV w extensive O.R. procedure w/o MCC.       1.5545         35.2         29.3
974.............................  HIV w major related condition w MCC....       0.8908         21.9         18.3
975.............................  HIV w major related condition w CC.....       0.7492         21.3         17.8
976.............................  HIV w major related condition w/o CC/         0.7382         18.0         15.0
                                   MCC.
977.............................  HIV w or w/o other related condition...       0.7305         22.9         19.1
981.............................  Extensive O.R. procedure unrelated to         2.2339         42.0         35.0
                                   principal diagnosis w MCC.
982.............................  Extensive O.R. procedure unrelated to         1.8277         37.6         31.3
                                   principal diagnosis w CC.
983.............................  Extensive O.R. procedure unrelated to         1.1417         29.0         24.2
                                   principal diagnosis w/o CC/MCC.
984.............................  Prostatic O.R. procedure unrelated to         1.5545         35.2         29.3
                                   principal diagnosis w MCC.
985.............................  Prostatic O.R. procedure unrelated to         1.1417         29.0         24.2
                                   principal diagnosis w CC.
986.............................  Prostatic O.R. procedure unrelated to         1.1417         29.0         24.2
                                   principal diagnosis w/o CC/MCC.
987.............................  Non-extensive O.R. proc unrelated to          1.6972         37.9         31.6
                                   principal diagnosis w MCC.
988.............................  Non-extensive O.R. proc unrelated to          1.3386         33.2         27.7
                                   principal diagnosis w CC.
989.............................  Non-extensive O.R. proc unrelated to          0.8249         25.0         20.8
                                   principal diagnosis w/o CC/MCC.
998.............................  Principal diagnosis invalid as                0.0000          0.0          0.0
                                   discharge diagnosis.
999.............................  Ungroupable............................       0.0000          0.0          0.0
----------------------------------------------------------------------------------------------------------------
\1\ Transition blended relative weights for FY 2008 determined as described in Step 7 in section II.I.4. of the
  preamble of the FY 2008 IPPS final rule (72 FR 47295).
\2\ The ``short-stay outlier threshold'' is calculated as \5/6\ths of the geometric average length of stay of
  the MS-LTC-DRG (as specified at Sec.   412.529(a), in conjunction with Sec.   412.503).

[FR Doc. 08-1219 Filed 5-2-08; 9:18 am]
BILLING CODE 4120-01-P