[Federal Register Volume 73, Number 157 (Wednesday, August 13, 2008)]
[Rules and Regulations]
[Pages 47075-47092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18670]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 483

[CMS-3191-F]
RIN 0938-AN79


Medicare and Medicaid Programs; Fire Safety Requirements for Long 
Term Care Facilities, Automatic Sprinkler Systems

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

ACTION: Final rule.

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SUMMARY: This final rule requires all long term care facilities to be 
equipped with sprinkler systems by August 13, 2013. Additionally, this 
final rule requires affected facilities to maintain their automatic 
sprinkler systems once they are installed.

DATES: These regulations are effective on October 14, 2008. The 
incorporation by reference listed in the rule is approved by the 
Director of the Federal Register October 14, 2008.

FOR FURTHER INFORMATION CONTACT: Danielle Shearer, (410) 786-6617; 
James Merrill, (410) 786-6998; Marcia Newton, (410) 786-5265; or 
Jeannie Miller, (410) 786-3164.

SUPPLEMENTARY INFORMATION:

I. Background

A. Overview of the Life Safety Code

    The Life Safety Code (LSC), published by the National Fire 
Protection Association (NFPA), a private, nonprofit organization 
dedicated to reducing loss of life due to fire, is a compilation of 
fire safety requirements. The LSC contains fire safety requirements for 
both new and existing buildings. It is updated through a consensus 
process and generally published every 3 years. Sections 1819(d)(2)(B) 
and 1919(d)(2)(B) of the Social Security Act (the Act) require that 
long term care facilities participating in the Medicare and Medicaid 
programs generally meet the applicable provisions of the edition of the 
LSC that is adopted by the Secretary.
    Beginning with the adoption of the 1967 edition of the LSC in 1971, 
Medicare and Medicaid regulations have historically incorporated the 
LSC requirements by reference for all long term care facilities as well 
as other providers, while providing the opportunity for a Secretarial 
waiver of a requirement under certain circumstances. The statutory 
basis for incorporating NFPA's LSC for our other providers is under the 
Secretary's general rulemaking authority at sections 1102 and 1871 of 
the Act, and under provider-specific provisions of title XVIII that 
permit us to issue regulations to protect the health and safety of 
participants in Medicare and Medicaid.
    We adopted the LSC to ensure that patients and residents are 
consistently protected from fire, regardless of the location in which 
they receive care. Since adopting and enforcing the 1967 and subsequent 
editions of the LSC, there has been a significant decline in the number 
of multiple death fires, indicating that the LSC has been effective in 
improving fire safety in health care facilities.
    On October 26, 2001, we published a proposed rule (66 FR 54179), 
and on January 10, 2003, we published a final rule in the Federal 
Register, entitled ``Fire Safety Requirements for Certain Health Care 
Facilities'' (68 FR 1374). In that final rule, we adopted the 2000 
edition of the LSC provisions as the standard governing Medicare and 
Medicaid health care facilities, including long term care facilities. 
The final rule required all existing long term care facilities to 
comply with the 2000 edition of the LSC.
    The 2000 edition of the LSC required all newly constructed 
buildings containing health care facilities to have an automatic 
sprinkler system installed throughout the building. However, like all 
previous editions, the LSC did not require existing buildings to 
install automatic sprinkler systems throughout if they met certain 
construction standards, ranging from the size of the buildings to the 
types of material used in their construction.
    In accordance with the 2000 edition of the LSC, an existing 
building that meets the above-mentioned construction standards must 
install sprinklers if it undergoes a major renovation. However, in such 
cases, it is required to install sprinklers only in the renovated 
section(s). Therefore, a building may have sprinklers only on one floor 
or in one wing. We did not receive any timely public comments in 
response to the October 2001 proposed rule that addressed the issue of 
installing automatic sprinkler systems in buildings not undergoing 
major renovations. That is to say, no public comments supported, 
questioned or challenged our proposal to incorporate this LSC provision 
by reference.
    In the 2006 edition of the LSC, the NFPA decided to include an 
automatic sprinkler system requirement for all long term care 
facilities. We support the NFPA in its decision. We decided to proceed 
with this rule, without proposing adoption of the NFPA 2006 edition of 
the LSC, because we want to avoid further delay in requiring an 
automatic sprinkler system in long term care facilities. As stated in 
the October 27, 2006 proposed rule (71 FR 62957, 62960), given the 
large scope of the LSC, we would not be able to adopt and enforce 
compliance with the 2006 edition of the LSC until 2009 or 2010. 
Therefore, we decided at this time to proceed with rulemaking that does 
not include adoption of the NFPA 2006 LSC.
    We will continue to work with the NFPA to revise and refine each 
edition of the LSC. We are currently working with the NFPA through its 
consensus process to revise and refine the 2009 edition of the LSC. 
Once the 2009 edition is issued, we will review the code in its 
entirety and explore the possibility of adopting it for all

[[Page 47076]]

Medicare and Medicaid-participating health care facilities.

B. Recent Fire Safety Developments

    A Government Accountability Office (GAO) report entitled ``Nursing 
Home Fire Safety: Recent Fires Highlight Weaknesses in Federal 
Standards and Oversight'' (GAO-04-660, July 16, 2004, http://www.gao.gov/new.items/d04660.pdf) examined two long term care facility 
fires (Hartford and Nashville) in 2003 that resulted in 31 total 
resident deaths. The report examined Federal fire safety standards and 
enforcement procedures, as well as results from the fire investigations 
of these two incidents. The report recommended that fire safety 
standards for unsprinklered facilities be strengthened and the report 
cited the effectiveness of smoke detectors' and sprinklers' fire 
protection features for long term care facilities.
    In response to a recommendation made in the GAO report, on March 
25, 2005, we published an interim final rule with comment period in the 
Federal Register entitled, ``Fire Safety Requirements for Certain 
Health Care Facilities; Amendment'' (70 FR 15229). This interim final 
rule added paragraph (a)(7) to Sec.  483.70, to require long term care 
facilities, at minimum, to install battery-operated smoke detectors in 
resident sleeping rooms and public areas, unless they had a hard-wired 
smoke detector system in resident rooms and public areas or a sprinkler 
system installed throughout the facility. This IFC was finalized 
September 22, 2006 (71 FR 55326).
    Structural fires in long term care facilities are relatively common 
events. From 1994 to 1999, an average of 2,300 long term care 
facilities reported a structural fire each year (2004 GAO Report). 
Although approximately 2,300 facilities per year reported fires, those 
fires resulted in an average of only 5 fatalities nationwide per year 
(2004 GAO Report). The likelihood of a fatality occurring due to a long 
term care facility fire was quite low.
    From 1990 to 2002, there were no fires in long term care facilities 
that resulted in more than one or two fatalities. During that time 
period there were no fires in long term care facilities that resulted 
in a loss of life comparable to that of the Hartford and Nashville 
fires.
    We believe the low number of fire-related fatalities each year is 
attributable, in part, to the increasing use of automatic sprinkler 
systems in long term care facilities as a fire protection method. State 
and local jurisdictions often adopt an edition of the LSC or a 
comparable fire safety code shortly after it is published. Therefore, a 
building constructed in the early 1990s likely met the requirements of 
the 1991 edition of the LSC or another comparable code. Beginning with 
the 1991 edition of the LSC, all newly built facilities were required 
to have automatic sprinkler systems. In addition, beginning with the 
1991 edition of the LSC, all facilities undergoing major renovations 
were also required by the LSC to install automatic sprinkler systems at 
least in those renovated areas. Therefore, as new facilities have 
replaced old facilities, and as facilities have been renovated, the 
number of residents protected by automatic sprinkler systems has 
increased. The increase in the number of automatic sprinkler systems 
and the number of residents residing in sprinklered buildings has 
decreased significantly the likelihood of a fatality occurring due to 
fire.
    According to NFPA data cited in the 2004 GAO report, there is an 82 
percent reduction in the chance of death occurring in a sprinklered 
building when compared to the chance of death occurring in an 
unsprinklered building. In addition, we note that there has never been 
a multiple death fire in a long term care facility that had an 
automatic sprinkler system installed throughout the facility.
    Automatic sprinkler systems are effective in reducing the risk of 
fatalities due to fire because they limit the size of a developing fire 
and prevent the fire from growing and spreading beyond the area where 
the fire ignited. In addition, impeding the fire's growth gives the 
facility staff and residents and the local fire department more time to 
respond to the situation.
    Automatic fire suppression through sprinklers also alleviates some 
of the current heavy reliance on facility staff to implement the 
facility's emergency plan. Fires often occur at night, as both the 
Hartford and Tennessee fires did, when staffing levels are lowest. 
Investigators of the Hartford fire determined that the facility's staff 
did not fully implement the facility's emergency plan, which may have 
contributed to the number of fatalities in that fire. The 2004 GAO 
report concluded that ``reliance on staff response as a key component 
of fire protection may not always be realistic, particularly in an 
unsprinklered facility.'' Limiting the area of a building affected by a 
fire may result in less of a need to evacuate or relocate residents.
    The effectiveness of automatic sprinkler systems has prompted some 
States, including Virginia, Connecticut, and Tennessee, to require that 
all long term care facilities have sprinklers. The NFPA also requires 
all long term care facilities to have automatic sprinkler systems as 
part of the 2006 edition of the LSC.

II. Provisions of the Proposed Regulations

    We published a proposed rule in the Federal Register on October 27, 
2006 (71 FR 62957) that would require all long term care facilities to 
be equipped with sprinkler systems. That proposed rule also requested 
public comments on the duration of a phase-in period to allow such 
facilities to install such systems.
    For the reasons described in section I of this preamble, we 
proposed a rule with three main components. First, the regulation 
proposed to add a sunset provision to paragraph (a)(7) in Sec.  483.70 
that would correspond to the phase-in date of the sprinkler 
requirement. This sunset provision would provide that, as of the phase-
in date, we would no longer enforce the requirement that facilities 
have and maintain at least battery-operated smoke alarms. We proposed 
to add the sunset date because the requirements of Sec.  483.70(a)(7) 
apply only to unsprinklered and partially sprinklered long term care 
facilities. Once all long term care facilities are fully sprinklered, 
there would not be any unsprinklered or partially sprinklered 
facilities to which Sec.  483.70(a)(7) would apply.
    Second, we proposed to require every long term care facility to 
install an approved, supervised automatic sprinkler system in 
accordance with the 1999 edition of NFPA 13, Standard for the 
Installation of Sprinkler Systems, throughout the facility if it did 
not have such a system already. If a long term care facility was part 
of another building, such as a hospital, then the building would be 
required to have sprinklers only in the long term care facility 
section. The NFPA 13 specifies how to properly design and install 
sprinkler systems using the proper components. The standards of NFPA 13 
cover a wide variety of factors that are involved in designing and 
installing sprinkler systems. The NFPA 13 is divided into 10 main 
chapters governing the design and installation phases of automatic 
sprinkler systems, and the October 2006 proposed rule summarized the 
content of these chapters.
    The NFPA 13 is a very detailed document, with a wide variety of 
standards and exceptions to those standards. The document provides many 
options for the design and

[[Page 47077]]

installation of sprinkler systems so that each system may be tailored 
to the building in which it is installed.
    Third, the regulation proposed to require every long term care 
facility to test, inspect, and maintain an approved, supervised 
automatic sprinkler system in accordance with the 1998 edition of NFPA 
25, Standard for the Inspection, Testing and Maintenance of Water-Based 
Fire Protection Systems. Proper inspections, tests, and maintenance of 
sprinkler systems are critical to ensuring that sprinkler systems 
function properly on a continuous basis. Fires are, by nature, 
unpredictable, and sprinkler systems must be operable at all times to 
ensure that buildings are protected whenever and wherever fires occur. 
NFPA 25 covers a wide variety of testing, inspection, and maintenance 
requirements for the numerous types of sprinkler systems that 
facilities may install and the auxiliary equipment that may be 
necessary for some facilities. We summarized the content of NFPA 25 in 
the proposed rule.
    The proposed requirements of this regulation include three 
technical terms: ``approved,'' ``automatic,'' and ``supervised.'' These 
terms are terms of art in the fire safety community and are included in 
NFPA 101, Life Safety Code, with which long term care facilities must 
already comply. There may be, however, individuals who are not familiar 
with the terms. Their definitions, as used in the fire safety 
community, are as follows:
     Approved means acceptable to the authority having 
jurisdiction (from 2000 edition of NFPA 101, the LSC).
     Automatic means that which provides a function without the 
necessity of human intervention (from 2000 edition of NFPA 101, the 
LSC).
     Supervised means that the system and particular components 
of the system are monitored by a device with auditory and visual 
signals that are capable of alerting facility staff should the system 
or one of its components become inoperable for any reason (adapted from 
1999 edition of NFPA 13, Standard for the Installation of Sprinkler 
Systems).

III. Analysis of and Responses to Public Comments

    We received 107 comments from the public on the October 27, 2006 
proposed rule. The comments received and our responses to those 
comments are discussed below.
    Comment: The vast majority of commenters strongly supported our 
intent to require automatic sprinkler systems throughout all long term 
care facilities. Conversely, a small minority of commenters disagreed 
with the proposed rule, citing the expense of purchasing and installing 
sprinklers and the availability of other fire safety features such as 
water-based fire-proof coatings and fire walls as reasons for not 
requiring sprinklers in all long term care facilities.
    Response: We appreciate the strong support expressed by most 
commenters. While we agree that there are other methods for improving 
fire safety in long term care facilities, these other methods do not 
achieve the same high level of fire safety as automatic sprinkler 
systems. We are proceeding with this final rule requiring all long term 
care facilities to install and maintain automatic sprinkler systems 
because we agree with the GAO that such systems are the single most 
effective fire safety method currently available and that the presence 
of such systems will help save lives and property.
    Comment: Several commenters submitted comments related to the 
specific facilities that are, or should be, affected by this final 
rule. One commenter explicitly supported our decision to apply the 
proposed sprinkler requirements to all affected long term care 
facilities, regardless of their size. Some commenters requested that 
this rule be expanded to apply to any residential facility that cares 
for individuals on a 24-hour basis. One commenter suggested that the 
rule should apply to federally operated nursing homes as well, such as 
those operated by the U.S. Department of Veterans Affairs. Another 
commenter suggested that the rule should apply to inpatient facilities 
such as hospitals and critical access hospitals with swing beds. Still 
other commenters asked whether the requirements of the final rule will 
affect adult day care centers.
    Response: We proposed to require all long term care facilities to 
install automatic sprinkler systems regardless of their size because 
their recent fire history and current staffing levels indicated the 
need for additional fire safety features. We do not believe it is 
necessary for us to require sprinkler systems in other facility types, 
such as intermediate care facilities, adult day care facilities, or 
critical access hospitals at this time because there is no demonstrated 
need for such regulation. While we agree that it may be appropriate for 
federally operated nursing homes, such as those operated by the U.S. 
Department of Veterans Affairs, to install automatic sprinkler systems, 
we do not have regulatory authority over these facilities. Therefore, 
we are unable to promulgate a regulation applying to them.
    Comment: Numerous commenters discussed the financial impact that 
the proposed rule will have on long term care facilities, and suggested 
a variety of methods to offset the expected impact. Of these 
commenters, several suggested that CMS should support legislation in 
the Congress that will provide financial incentives for long term care 
facilities to install sprinkler systems. A few commenters indicated 
that they are actively working with the Congress to obtain financial 
assistance for long term care facilities in implementing the 
requirements of this final rule. Other commenters suggested that CMS 
should make financial assistance available to facilities, with some 
suggesting that such assistance should be limited to those facilities 
with not-for-profit status or those that are not profitable. Still 
another commenter suggested that CMS should compel State Medicaid 
programs to increase reimbursement rates to fund capital improvements 
in long term care facilities.
    Response: We recognize that purchasing and installing an automatic 
sprinkler system throughout a long term care facility requires a 
substantial capital investment. We defer to the Congress and States to 
provide financial assistance to long term care facilities to complete 
the purchase and installation process, whether such assistance comes in 
the form of loans, grants, tax relief, and/or increased reimbursement 
rates.
    We have included a 5 year phase-in period in this final rule. This 
phase-in period allows facilities the time and flexibility to install 
sprinkler systems in a manner that is sensitive to the individual 
circumstances of each facility. We believe this phase-in period will 
help mitigate the financial impact of this final rule.
    Comment: Numerous commenters stated that this final rule should 
provide additional discussion of the role that State and locally 
imposed building and fire safety codes play in protecting long term 
care facility residents.
    Response: We acknowledge that State and local authorities use their 
authority to require long term care facilities to meet building and 
fire safety codes independent of the codes applied to facilities 
through Federal regulations. State and local authorities often adopt 
more recent editions of such codes than those required by Federal 
rules. Until 2003, Federal fire safety regulations referenced 
simultaneously Life Safety Code provisions from several editions 
including the editions of 1967, 1973, and 1985. However, health care 
facilities were not being built to these older standards because State 
and local jurisdictions adopted and enforced far

[[Page 47078]]

more recent editions of building and fire safety codes. Such prompt 
adoption of updated codes by State and local jurisdictions likely has 
led to the large number of long term care facilities that currently 
have automatic sprinkler systems throughout their facilities. We 
continue to support the right of State and local authorities to impose 
building and fire safety codes independent of these Federal 
requirements and will continue to monitor all efforts to improve safety 
for long term care facility residents.
    Comment: Some commenters expressed concern that this final rule 
will preempt State and local fire safety requirements. Of these 
commenters, a few expressed concern that this Federal rulemaking 
preempted State and local efforts and did not respond to the unique 
needs of different localities. Furthermore, some of these commenters 
requested a more detailed discussion of Executive Order 13132 
(Federalism) as it relates to this rulemaking action. Conversely, 
several commenters indicated that they agreed with our conclusion that 
this rule is in accordance with the actions of State and local 
governments, and that it is appropriate for the Federal government to 
require automatic sprinkler systems in Medicare and Medicaid-
participating long term care facilities.
    Response: The Federal regulations for long term care facilities are 
considered to be the minimum standards that a facility must meet in 
order to participate in the Medicare and Medicaid programs. As such, 
they will not preempt more stringent State and local requirements. For 
example, if a State or local authority requires a long term care 
facility to install an automatic sprinkler system within 3 years after 
adoption of a law requiring it, then a facility must comply with that 
shorter time frame, even though this Federal regulation allows a 
facility up to 5 years to install an automatic sprinkler system. 
However, if a State or local authority requires a long term care 
facility to install an automatic sprinkler system only in hazardous 
areas, then a facility must go beyond the State or local requirement 
and install an automatic sprinkler system throughout its building in 
order to participate in Medicare or Medicaid. We believe that all 
facilities must install an automatic sprinkler system throughout a 
facility by 2013, regardless of the State or locality where a facility 
is located. In order to achieve this goal, it is necessary to 
promulgate a Federal regulation. State and local jurisdictions have 
always had the authority to require automatic sprinkler systems in 
existing long term care facilities. However, few States have taken 
action to require existing long term care facilities to retrofit their 
buildings with such systems. Thus, we believe it is necessary to take 
this Federal action.
    In addition, this rule adopts the sprinkler installation and 
maintenance requirements established by the NFPA. The NFPA is a 
national standard setting body with representatives from all members of 
the fire safety community, including State and local jurisdictions. As 
such, these representatives had active input in the content and 
framework of the NFPA sprinkler standards. The standards allow 
flexibility in the design, installation, and maintenance of sprinkler 
systems to adapt to the needs of individual facilities as well as 
jurisdictions. Facilities are required by the NFPA standards to submit 
their design and installation plans to the appropriate authorities 
having jurisdiction. This allows local and State authorities the 
opportunity to ensure that such plans meet their individual needs. 
Since this action does not impinge upon a State or local jurisdiction's 
authority to impose more stringent fire safety requirements upon long 
term care facilities in response to the unique needs and concerns of 
the particular area, and gives State and local authorities the 
opportunity to provide further input into individual sprinkler planning 
activities, we do not believe this final rule has Federalism 
implications as described in Executive Order 13132.
    Furthermore, we regularly communicate with State and local 
officials and with the long term care provider community through Open 
Door Forums, as well as through responses to letters, informal phone 
calls, and informal e-mails. Through these communications, as well as 
through the public comment process for this proposed rule, we believe 
we have sufficiently consulted with all affected parties, including 
State and local jurisdictions, as is required by Executive Order 13132.
    Comment: Several commenters submitted views regarding the 
assumptions and estimates we used in the impact analysis for the 
proposed rule. Commenters questioned our estimates of the cost per 
square foot, the projected number of facilities affected, and the 
projected number of lives saved.
    Response: We appreciate the suggestions that we received, and we 
considered them as we revised the impact analysis for this final rule. 
The final impact analysis reflects an increase in our estimate of the 
cost per square foot, from a high of $6.10 to a high of $7.95, to 
reflect inflation since the publication of the proposed rule. The final 
analysis also revises the number of facilities that are affected by 
this rule by replacing projections of future sprinkler system 
installations with the actual number of facilities lacking automatic 
sprinkler systems as of December 2007. The final impact analysis does 
not revise the method for estimating future lives saved by this rule. 
Although a commenter questioned this methodology, the commenter did not 
offer an alternative methodology that would more accurately estimate 
this number. Since we are not aware of an alternative method to 
estimate the number of lives that will be saved, we have retained the 
method used in the proposed rule.
    Comment: Some commenters agreed with our proposal to require 
automatic sprinkler systems in all facilities, while a small number of 
commenters requested that certain long term care facilities be exempt 
from the requirements of this final rule.
    Response: Automatic sprinkler systems are generally considered to 
be the single most effective fire protection feature in a building. As 
such, we believe all long term care facilities, regardless of their 
size or location in relationship to another type of health care 
facility, should be required to have sprinklers. Exempting a particular 
class of long term care facilities, regardless of the criteria used, 
will not provide a consistent level of fire safety across the country.
    Comment: Several commenters submitted comments regarding CMS 
enforcement of this final rule. Some of these commenters sought 
assurance that surveyors would be appropriately trained to enforce the 
new sprinkler requirement. One commenter suggested that we should 
survey each facility annually to ensure compliance with this rule. 
Other commenters asked about the enforcement remedies that would be 
available if a facility was non-compliant with the requirements of this 
final rule, going so far as to suggest that non-compliant facilities 
should receive reduced payments from Medicare and Medicaid. Still other 
commenters requested that additional information about the sprinkler 
status of particular facilities and facilities as a whole be included 
on CMS' Nursing Home Compare Web site.
    Response: We agree that it is essential to ensure that surveyors 
are appropriately trained to survey facilities for compliance with all 
fire safety requirements, including automatic sprinkler systems. To 
that end, we conduct annual training sessions for surveyors to educate 
them on, among

[[Page 47079]]

other things, fire safety requirements and appropriate survey 
procedures. This training ensures surveyor competency in this area. We 
also agree that frequent surveys of long term care facilities are key 
to ensuring continued compliance with these requirements. By law, we 
are required to survey long term care facilities every 15 months to 
ensure compliance with all health and safety requirements, and we will 
incorporate this new requirement into the existing survey process. If a 
facility is found to be non-compliant with the provisions of this final 
rule, we have the full complement of enforcement remedies available to 
ensure that a facility comes into compliance. In addition to 
termination of the provider agreement, available remedies include the 
following: (1) Temporary management (that is, the temporary appointment 
by CMS or the State of a temporary director or administrator of a 
facility); (2) denial of payment, including denial of payment for all 
individuals, imposed by CMS upon a skilled nursing facility for 
Medicare payments, by a State for Medicaid payments, or denial of 
payment for all new admissions; (3) civil money penalties; (4) State 
monitoring; (5) transfer of residents; or (6) transfer of residents and 
closure of the facility. CMS currently includes information about a 
facility's sprinkler status on the Nursing Home Compare Web site to 
enable consumers to make an informed decision.
    Comment: A commenter suggested that installation of sprinkler 
systems should be limited to pre-approved companies with proven fire 
safety records. Another commenter suggested that we should create a 
special task force in each State to visit each facility and examine the 
information used to design the facility's sprinkler system.
    Response: While we agree that long term care facilities should look 
for qualified contractors to design and install their sprinkler 
systems, we do not believe it is appropriate to, nor do we have the 
authority to, select or approve such contractors. In addition, we do 
not believe it is appropriate for us to develop task forces in each 
State to review a facility's research and design plan. There are 
numerous qualified designers who are capable of designing sprinkler 
systems that fulfill facility-specific specifications. It is incumbent 
upon facilities to assure that their automatic sprinkler systems meet 
their specific facility needs as identified during a thorough review of 
their current fire and building safety features and various other 
factors.
    Comment: A few commenters submitted additional information on their 
own fire safety features and requirements (for example State sprinkler 
requirements and facility-specific fire safety plans).
    Response: We appreciate the additional information provided by the 
commenters. It validates our understanding of current fire safety 
efforts, both on the facility and State levels.
    Comment: A commenter suggested that staffing levels may also impact 
facility fire safety, and that we should require additional staffing 
during the phase-in period to ensure that facility residents are 
protected from fire.
    Response: We agree that sufficient staffing is necessary to ensure 
resident health and safety, including fire safety. Ensuring resident 
health and safety, which is closely tied to facility staffing, is 
already required in Sec.  483.15, ``Quality of life,'' Sec.  483.30, 
``Nursing services,'' and Sec.  483.70, ``Physical environment.'' We 
believe these regulations ensure sufficient staffing levels in long 
term care facilities to promote and protect resident health and safety 
in all circumstances.
    Comment: A commenter questioned the conclusions of the GAO report 
regarding the two multiple death fires in Connecticut and Tennessee. 
The commenter stated that the GAO report did not demonstrate the 
superiority of sprinklers over smoke alarms. The commenter also stated 
that the number of multiple death fires before 1990 was zero, and that 
the installation of sprinklers in new facilities after 1990 thus had no 
bearing on the number of fires between 1990 and 1992.
    Response: While we recognize that the commenter disagrees with the 
data analysis of current fire safety levels in long term care 
facilities presented by the GAO, we continue to support the GAO's data, 
collection methodology, analytic methodology, and conclusions. We 
concur with the GAO that smoke alarms are necessary in unsprinklered 
facilities; we now require unsprinklered facilities to have such alarms 
in accordance with the requirements of Sec.  483.70(a)(7). We also 
concur with the GAO that before 1990, multiple death fires occurred on 
a more frequent basis. As stated in the GAO report, ``When the federal 
government first adopted the NFPA fire safety standards in 1971, the 
number of multiple-death fires in nursing homes was about 15 to 18 per 
year. With the adoption and enforcement of these standards, including 
the requirement for sprinklers in homes that were not highly fire 
resistant, the number of fire-related nursing home fatalities dropped 
dramatically.'' (p. 14; we note that the average annual number of long 
term care facility fire fatalities, according to the GAO report, is now 
5.) Furthermore, we concur with the GAO that sprinklers improve the 
level of fire safety beyond that which is provided by smoke alarms, and 
we are implementing this final rule to require sprinklers in all long 
term care facilities.
    Comment: A commenter suggested that all facilities that currently 
have automatic sprinkler systems throughout their buildings be required 
to maintain those systems in accordance with the requirements of NFPA 
25.
    Response: Long term care facilities are required to meet the 
standards of the LSC, which requires facilities with existing 
sprinklers to maintain those sprinklers in accordance with the 
requirements of NFPA 25. We agree with the commenter and are adopting 
NFPA 25 by reference at Sec.  483.70(a)(8)(ii).
    Comment: A commenter stated that NFPA 101, NFPA 13, and NFPA 25 can 
all be viewed without charge at http://www.nfpa.org/freecodes/free_access_document.asp.
    Response: We thank the commenter for providing this Web site 
citation. Unfortunately, the citation provided does not link to the 
documents that a long term care facility will need to comply with this 
final rule. Instead, an alternative, free Web site for this information 
is http://www.nfpa.org/aboutthecodes/list_of_codes_and_standards.asp.
    Comment: A few commenters suggested that facilities be permitted to 
have a reduced water supply that does not meet the specifications of 
the NFPA requirements for health care facilities when an adequate level 
of safety can be assured with less water.
    Response: The NFPA uses a consensus process to establish the 
requirements of its sprinkler installation and maintenance codes. It 
would not be in the best interests of long term care facilities and 
their residents to reduce the NFPA standards. We believe that the NFPA 
standards represent the absolute minimum standards that long term care 
facilities must meet, and that lowering the standards below those of 
the NFPA would jeopardize long term care facility resident and staff 
safety.
    Comment: A commenter requested a 90-day extension of the public 
comment period.
    Response: We do not believe it is necessary to extend the standard 
comment period. We received 107 unique comments, as well as numerous 
duplicate comments, from interested parties during the comment period, 
and we believe these comments adequately reflect public sentiment on 
this matter.

[[Page 47080]]

    Comment: A few commenters suggested additional requirements to 
which long term care facilities should be held. One commenter suggested 
that, in addition to installing and maintaining automatic sprinkler 
systems, long term care facilities should be required to install and 
maintain automatic fire alarm systems incorporating commercial smoke 
detectors that comply with the audio and visual notification standards 
of the Americans with Disabilities Act. Another commenter suggested 
that long term care facilities should be required to have mattresses 
that comply with certain fire safety standards.
    Response: We agree with the commenters that numerous additional 
options are available to long term care facilities that wish to further 
enhance their fire safety levels. Long term care facilities may explore 
these options in addition to meeting all requirements of the LSC and 
this final rule.
    Comment: A small number of commenters submitted comments on the 
existing provision that a State may apply to CMS to use its own 
alternative fire safety code imposed by State law if that code 
adequately protects patients. The commenters inquired as to the status 
of their own particular applications for a waiver under this provision.
    Response: CMS actively considers any application submitted by a 
State regarding the use of an alternate fire safety code in health care 
facilities. However, these applications have no bearing on the 
requirements of this final rule because this final rule requires 
automatic sprinklers independent of the requirements of the LSC.
    Comment: A commenter asked us to present a list of those States in 
the early 1990s that adopted the 1991 or later edition of the LSC or 
another code requiring newly constructed long term care facilities to 
install automatic sprinkler systems.
    Response: We do not believe it is necessary to present such a list 
of information regarding the requirements of individual States. While 
such a list may provide additional historic background on fire safety 
requirements in the United States, all unsprinklered long term care 
facilities must install and maintain automatic sprinkler systems.
    Comment: A commenter suggested that, instead of requiring all long 
term care facilities to install an automatic sprinkler system, we 
should permit such facilities an exemption if they have all of the 
following features: Smoke detectors, mattresses that meet certain fire 
safety requirements, and upholstered furniture that meets certain fire 
safety requirements.
    Response: The fire safety measures noted above are valuable tools 
for enhancing fire safety in long term care facilities. However, none 
of these features serve the same purpose as an automatic sprinkler 
system, which is to actively suppress a fire once it is ignited. Thus, 
we do not believe the suggested options achieve the same level of fire 
safety as automatic sprinklers.
    Comment: A commenter suggested that we should include regulatory 
language that endorses standardization and provides for system 
interconnectivity.
    Response: We are not clear regarding the commenter's suggestion. If 
the commenter is referring to the standardization of installation and 
maintenance requirements, we believe that referencing the NFPA 
installation and maintenance standards does endorse standardization of 
fire safety across long term care facilities.
    Comment: Many commenters submitted comments regarding the placement 
of smoke alarms in long term care facilities. In September 2006 we 
published a final rule requiring all unsprinklered long term care 
facilities to, at minimum, install and maintain battery-operated smoke 
alarms in all resident rooms and common areas. In the October 2006 
proposed sprinkler rule, we proposed to add a sunset date to this smoke 
alarm requirement. The smoke alarm requirement would, according to our 
proposal, cease to be effective on the phase-in date of the sprinkler 
requirement. Many commenters disagreed with our proposal to add a 
sunset date to the smoke alarm requirement. Furthermore, many of these 
commenters stated that all long term care facilities should be required 
to have both automatic sprinkler systems throughout their buildings and 
smoke alarms in resident rooms and common areas. Conversely, several 
commenters agreed with our proposal to add a sunset provision to the 
smoke alarm requirement. Of these commenters, many requested that the 
sunset date be flexible for individual long term care facilities. These 
commenters suggested that, rather than having a single sunset date, the 
final rule should state that a long term care facility is no longer 
required to meet the smoke alarm provision as soon as it installs and 
begins using an automatic sprinkler system. Additionally, one commenter 
sought clarification of the relationship between the CMS smoke alarm 
requirement and the smoke alarm requirement of the 2000 edition of the 
Life Safety Code that long term care facilities are required to meet.
    Response: The proposed smoke alarm sunset provision appears to have 
caused significant confusion and concern, and we thank the commenters 
for the opportunity to clarify our intent. The smoke alarm requirements 
of paragraph (a)(7) apply only to unsprinklered or partially 
sprinklered long term care facilities. This final rule will require all 
facilities to be fully sprinklered. Thus, there will no longer be any 
facilities that are unsprinklered or partially sprinklered. Since 
(a)(7) applies only to unsprinklered or partially sprinklered 
facilities, it will be a moot requirement. Nonetheless, we believe that 
it is appropriate to retain the requirements of paragraph (a)(7) until 
the end of the 5-year phase-in period. At the end of this period we 
will consider proposing a rule which would delete both this provision 
and reference to the phase-in period.
    Moreover, facilities that are required to have smoke alarms or 
smoke detection systems in accordance with the requirements of the 2000 
edition of the LSC as incorporated by reference in paragraph Sec.  
483.70(a)(1) must continue to comply with those existing LSC standards.
    A significant number of commenters advocated for smoke alarms and/
or smoke detection systems in all long term care facilities, even those 
that have automatic sprinkler systems throughout their buildings. All 
long term care facilities may consider installing smoke detection 
systems in their facilities in addition to installing automatic 
sprinkler systems. We may consider the appropriateness of such a 
requirement in future rulemaking.
    Comment: We received a large number of public comments regarding 
the appropriate length of a phase-in period for the sprinkler 
installation requirement. Commenter suggestions for the length of the 
phase-in period ranged from as little as 18 months to as long as 15 
years. The most frequently suggested phase-in period was 3-5 years. 
Other commenters made more general recommendations such as ``the sooner 
the better'' and ``sooner rather than later.'' Additionally, many 
commenters suggested that nursing homes should be allowed phase-in 
waivers on a case-by-case basis to provide additional time to those 
nursing homes who make a good faith effort to comply within the stated 
timeframe, but who do not do so. One commenter suggested that we 
include an additional requirement that long term care facility owners 
file a statement with CMS detailing their intent to

[[Page 47081]]

comply with the final rule within 180 days of publication of the final 
rule.
    Response: We agree with commenters that a phase-in period is 
necessary to allow long term care facilities sufficient time to 
purchase and install automatic sprinkler systems throughout their 
buildings. While we recognize that a relatively short phase-in period 
(such as 18 months-3 years) will rapidly increase the level of fire 
safety in long term care facilities, we believe such a short time frame 
will not allow facilities enough time to comply with the provisions of 
this final rule. Re-allocating and/or securing financial resources, 
securing the services of a system designer and installation contractor, 
purchasing system components, securing any necessary permits, 
completing ancillary projects, and completing the actual installation 
process can take a substantial amount of time. We do not believe an 18-
month to 3-year phase-in period allows enough time for all of these 
tasks to be completed in all affected facilities. Furthermore, we do 
not believe it is appropriate to allow waivers of this important 
requirement. Likewise, we do not believe it will be appropriate to 
allow long term care facilities 7 or more years to install automatic 
sprinkler systems, as some commenters suggested. While such a lengthy 
phase-in period will allow more than ample time for facilities to 
complete the installation process, it may also unnecessarily encourage 
facilities to postpone this much-needed fire safety improvement. In 
light of these considerations, we are finalizing a 5-year phase-in 
period. A long term care facility has 5 years from the date of 
publication of this final rule to purchase and install a fully-
operational automatic sprinkler system throughout its building. A 5-
year phase-in period balances our dual goals of improved fire safety 
and feasibility. It ensures that facilities begin planning for 
installation within a short period of time from the publication of this 
final rule and allows sufficient time for all facilities to complete 
the full installation process.
    Comment: Numerous commenters submitted comments regarding the exact 
fire safety codes that should be used in long term care facilities. 
Many of these commenters supported our proposal to require facilities 
to meet the requirements of the 1999 edition of NFPA 13 and the 1998 
edition of NFPA 25. Some of the commenters suggested that we require 
facilities to meet more recent editions of the NFPA standards. Other 
commenters questioned the role of the building codes issued by the 
International Code Council (ICC). Of these commenters, some suggested 
that we require facilities to meet the ICC codes in place of the NFPA 
codes. Others suggested that States, local jurisdictions, and/or 
facilities be given the option to meet either the NFPA or ICC codes.
    Response: While we agree that more recent editions of NFPA 
sprinkler codes or sprinkler codes issued by other code-setting bodies 
may include appropriate installation and maintenance requirements for 
automatic sprinkler systems in long term care facilities, we believe it 
is most appropriate to require long term care facilities to comply with 
the 1998 and 1999 editions of the NFPA sprinkler codes. If we require 
facilities to meet more recent editions of the sprinkler codes, we 
could be placing them out of compliance with the provisions of the 2000 
edition of the LSC. Similarly, if we were to require or permit 
facilities to meet another sprinkler code issued by a separate code-
setting body, the standards could be incompatible with the 2000 edition 
of the LSC. We do not believe this will be in the best interest of 
facilities and their residents.
    Comment: A substantial number of commenters submitted thoughts in 
response to our discussion of potentially adopting the 2006 edition of 
the LSC, which requires existing long term care facilities to install 
automatic sprinkler systems. Commenters were nearly evenly divided in 
their support of or opposition to adopting the 2006 LSC. The commenters 
who supported adopting the 2006 LSC stressed that this edition is the 
most recent version and has the potential to increase fire safety 
levels in all health care facilities. The commenters who did not 
support adopting the 2006 LSC cited potential delays in implementing 
the automatic sprinkler requirement and overall facility burden as key 
factors in their recommendation.
    Response: The 2006 edition of the LSC made numerous changes to the 
requirements applicable to long term care facilities. The most 
substantial change in the 2006 LSC is the requirement that all long 
term care facilities must have automatic sprinkler systems. However, 
since we are addressing that issue in this rulemaking, we do not 
believe it should affect our evaluation of the overall merits of the 
2006 LSC. We do not believe that the other changes in the 2006 edition 
of the LSC offers substantial improvements in the level of fire safety 
in long term care facilities that outweigh the additional burden to 
facilities of complying with the requirements of a newer edition of the 
LSC at this time. Therefore, we are not adopting the 2006 edition of 
the LSC at this time. We will continue to participate in the NFPA 
consensus process as the NFPA revises and refines subsequent editions 
of the LSC. Additionally, we will carefully examine the 2009 edition of 
the LSC when it is published for possible incorporation by reference in 
our regulations governing long term care facilities and a variety of 
other health care provider types.

IV. Provisions of the Final Regulations

    In this final rule we are adopting the provisions as set forth in 
the October 27, 2006 proposed rule with the following revisions:
     Deleted proposed Sec.  483.70(a)(7)(iv), the sunset 
provision.
     Added a 5-year phase-in date to Sec.  483.70(2)(8)(i).

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We solicited public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements:
    In summary, Sec.  483.70(a)(8)(ii) requires that all long term care 
facilities test, inspect, and maintain an approved, supervised 
automatic sprinkler system in accordance with the 1998 edition of NFPA 
25, Standard for the Inspection, Testing, and Maintenance of Water-
Based Fire Protection Systems. This section states that facilities will 
be required by this proposed rule to comply with all applicable 
chapters of NFPA 25 once they have installed their sprinkler systems in 
accordance with the requirements of NFPA 13.
    We believe facilities will utilize the services of a contractor for 
all inspection, testing, and maintenance activities, including 
documentation of

[[Page 47082]]

those activities. Therefore, no burden will be associated with the 
development of the documentation. The burden associated with this 
requirement, is the time and effort necessary for facilities to 
maintain documentation of inspections, tests, and maintenance 
activities in accordance with the standards outlined in the NFPA 25.
    The burden associated with these requirements is estimated to be 1 
hour per long term care facility. Therefore, we estimate it will take 
2,446 total annual hours (1 hour x 2,446 estimated affected long term 
care facilities) to satisfy this burden.
    These requirements are not effective until they are approved by 
OMB.

VI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). We have 
examined this rule, and we have determined that this rule would meet 
the criteria to be considered economically significant, and it would 
meet the criteria for a major rule. This determination is based on 
2,446 long term care facilities being required to install automatic 
sprinkler systems at an estimated cost of $7.95 per square foot, for a 
total cost of about $847 million over the 5-year phase-in period. 
Hence, in any one year costs in excess of $100 million will be incurred 
regardless of the decisions of individual facilities as to when to make 
the investment.
    The estimated cost for installing a sprinkler system throughout an 
existing average size unsprinklered facility (50,000 square feet to be 
sprinklered at $7.95 per square foot) will be $397,500. Because these 
systems are capital investments, their costs are properly amortized 
over time in estimating their impact on facility finances. We believe 
that a reasonable estimate of the useful life of a sprinkler system is 
20 years. The projected installation cost of this requirement will 
account for approximately one fourth of one percent of an average 
unsprinklered facility's actual revenue over a 20-year period. The 
estimated cost for installing a sprinkler system throughout an existing 
average size partially sprinklered facility (37,125 square feet to be 
sprinklered at $7.95 per square foot) will be $295,143. The projected 
installation cost of this requirement will account for approximately 
one fifth of one percent of an average partially sprinklered facility's 
actual revenue over a 20-year period.
    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 government 
jurisdictions (including tribal governments). Individuals and States 
are not included in the definition of a small entity. For purposes of 
the RFA, most long term care facilities are considered to be small 
entities, either by virtue of their nonprofit or government status or 
by having revenues of less than $12.5 million in any one year. The 
latest SBA size standards classify a ``Nursing Care Facility'' under 
North American Industry Classification System (NAICS) as code 623110, 
and as ``small'' if its annual revenues fall below $12.5 million (for 
details, see the Small Business Administration's Table of Small 
Business Size Standards at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.) According to our 
statistics, long term care facilities, all of which will be required to 
have sprinkler systems throughout their buildings, received a total of 
$124.9 billion in revenue in 2006 (National Health Expenditures 
Accounts, http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealth AccountsHistorical.asp). Also according to CMS data, 
there were 15,941 nursing facilities in operation at that time. The 
average facility therefore had annual revenue of $7.8 million and thus 
fell well below the SBA size threshold. Taking into account both 
typical revenue, and that non-profit facilities of any size are ``small 
entities'' within the meaning of the RFA, we assume for purposes of our 
analysis that all LTC facilities are ``small entities'' for purposes of 
the RFA. Although the average LTC facility has revenues well below the 
SBA size threshold, we have, as described in what follows, also 
analyzed impacts on entities that fall even farther below the size 
threshold. (Note: In the following paragraphs the terms ``average 
facility'' and ``smaller facility'' are strictly based on a revenue 
metric, just as are most of the SBA size thresholds, including that for 
NAICS code 623110. That is, the terms only describe facilities in terms 
of the amount of annual revenue.)
    Long term care facilities vary in a number of ways, ranging from 
the number of residents to the predominant source of payment for those 
residences. For the purposes of our analysis, we chose to assess the 
financial impact of this final rule on a facility with average revenue 
and a facility with a much smaller revenue (50 percent below the mean). 
An average facility had approximately $7,837,714 in revenue in 2006. A 
facility with revenue 50 percent below this average received 
$3,918,857, or less than one third of the amount set by SBA to define 
``small.'' Over the 20-year amortization period revenues of an average 
facility will be about $157 million. The ``smaller'' facility will have 
revenues of about $78 million over the same 20-year amortization 
period. We calculate that the projected cost of this requirement will 
account for about one fourth of one percent of an average unsprinklered 
``smaller'' facility's actual revenue over the 20-year period. Taking 
into account their smaller size and lower investment cost, the 
projected cost of this requirement will account about one fifth of one 
percent of a partially sprinklered ``smaller'' facility's actual 
revenue over the 20-year period. We are assuming that a smaller 
facility's square footage and number of beds are 50 percent less than 
an average facility's square footage because there is a strong 
correlation between the size of a facility, as reflected by the number 
of resident beds it has, and the facility's revenue level. According to 
CMS data from December 2007, there (see Table 3 later in this analysis) 
the median bed size of LTC facilities is about 100 beds, and there are 
433 unsprinklered or partially sprinklered long term care facilities 
that have fewer than 50 beds and presumably meet our revenue definition 
of a ``smaller facility.'' Hence, there are relatively few very small 
(``smaller'') facilities that will be affected by this rule. That said, 
a total of about 2,446 unsprinklered or partially sprinklered facilites 
will be affected, and the great majority of these (we assume all) are 
``small entities'' under the RFA (again, see Table 3 for the size 
distribution of affected entities).
    As a result of these calculations, and because we normally only 
regard an

[[Page 47083]]

impact that reaches several percent of annual revenue as 
``significant'' under the RFA, we certify that this final rule would 
not have a significant impact on a substantial number of small 
entities. However, some facilities may face financing or other problems 
that concentrate the impact and make its effect proportionally much 
larger than would otherwise be the case. While we do not believe that 
there would be a substantial number of facilities in this circumstance, 
we have prepared a voluntary regulatory flexibility analysis. This 
Regulatory Impact Analysis section, taken together with the remainder 
of the preamble, constitutes this analysis.
    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 know that 8.41 percent 
of long term care facilities, 1,332 nationwide, are located in 
hospitals, but we do not know how many of those hospitals are small 
rural hospitals. However, it is likely that the affected number is 
quite small. Applying the same percentages that apply to the long term 
care universe to the 1,332 long term care facilities located in 
hospitals, we estimate that 1,125 are fully sprinklered, 176 are 
partially sprinklered, and only 31 are not sprinklered. Using these 
estimates and the preceding cost amortization calculations, we have 
concluded that this final rule will not have a significant impact on 
the operations of a substantial number of small rural hospitals and 
that a regulatory flexibility analysis is not required. Our voluntary 
analysis, however, applies equally to facilities regardless of location 
or affiliation and hence covers hospital-based facilities.
    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 by 
either the private sector or by State, local, and tribal governments of 
$100 million in 1995 dollars, updated annually for inflation. That 
threshold level is currently approximately $130 million. This final 
rule does contain mandates that will impose annual spending costs on 
private long term care facilities of $154 million, and on public long 
term care facilities of $16 million, based on an estimated cost of 
about $847 million distributed over a 5-year phase-in period, for an 
average annual cost of about $170 million for all public and private 
facilities. Estimated impacts on State, local, and tribal governments 
are well below the UMRA threshold, since over ninety percent of long 
term care facilities are privately owned, as shown the Federalism 
analysis that follows. With respect to private sector facilities, this 
Regulatory Impact Section, together with the remainder of the preamble, 
constitutes the analysis required under UMRA.

    Note:  For a more detailed discussion of the cost estimates, see 
part B.2 of this section.) In the proposed rule we estimated that 
this rule would cost $47.8 to $69.9 million, $73.5 to $107.5 
million, and $107.7 to $157.6 million annually. These estimates were 
based on example phase-in periods of 10 years, 7 years, and 5 years, 
and cost-per-square-foot estimates of $4.10, $5.50, and $6.10, 
respectively. We sought public comment on the length of an 
appropriate phase-in period, and received suggestions ranging from 
18 months to 15 years. The most frequently suggested phase-in period 
was 3-5 years. We selected the longer phase-in period, 5 years, to 
help mitigate the impact of this rule upon long term care 
facilities. We also increased our cost-per-square-foot estimates to 
reflect increases in construction costs that have occurred since 
publication of the proposed rule.

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct compliance costs on State or local governments, 
preempts State law, or otherwise has Federalism implications. Of the 
2,446 facilities that will be affected by this final rule, 216 
facilities (8.83 percent of all affected facilities) are owned by State 
and local governments. The majority of these facilities (188) are 
already partially sprinklered. Of the 188 partially sprinklered 
facilities, 31 have less than 50 resident beds, 43 have 50-99 resident 
beds, 63 have 100-199 resident beds, and 49 have 200 or more resident 
beds. We estimate that it will cost on average about $14.24 million 
annually for 5 years to install sprinklers throughout the unsprinklered 
portions of these facilities. Of the remaining 30 completely 
unsprinklered facilities, 13 have less than 50 resident beds, 8 have 
50-99 resident beds, 7 have 100-199 resident beds, and 2 have 200 or 
more resident beds. We estimate that it will cost on average about 
$2.12 million annually for 5 years to install sprinklers throughout 
these unsprinklered facilities. The total of these annual average cost 
estimates, about $16 million, is negligible in the context of overall 
State and local budgets and as a capital expense can be financed over a 
period of years by borrowing. Therefore, we believe that this final 
rule will not impose substantial direct compliance costs on State or 
local governments, and thus has no Federalism implications.

B. Anticipated Effects

1. Benefits
    a. Decreasing Loss of Life
    We believe that installing an approved, supervised automatic 
sprinkler system in accordance with NFPA 13, Standard for the 
Installation of Sprinkler Systems, throughout a long term care facility 
will have a positive impact on resident safety. According to the July 
2004 GAO report discussed above, installing sprinklers decreases the 
chances of fire-related deaths by 82 percent. In unsprinklered 
facilities, there are 10.8 deaths per 1,000 fires. In sprinklered 
facilities, there are 1.9 deaths per 1,000 fires.
    The 2003 fires in Hartford and Nashville resulted in more fire 
related deaths (31) than there were for several previous years 
combined. Both of these fires occurred in unsprinklered buildings. If 
sprinklers had been installed in these facilities, and if they were 
properly maintained, we estimate that 82 percent of those fire-related 
deaths may have been prevented, based on an 82 percent reduction in the 
chances of death occurring in a sprinklered facility. We estimate that, 
based on this reduction, 25 (82 percent of 31 deaths = 25) lives could 
have been saved by sprinklers in these two fires, or 13 lives in the 
Hartford fire and 12 lives in the Nashville fire.
    According to the U.S. Census Bureau, in 2006, the average age of a 
long term care facility resident was 83.2 years. This number reflects 
the overall demographic trend in long term care facilities toward an 
older patient population. In 2003 (the most recent year of data 
available), the average life expectancy for an individual at age 85 was 
6.6 years (Older Americans Update 2006: Key Indicators of Well-Being. 
Federal Interagency Forum on Aging-Related Statistics. http://www.agingstats.gov/agingstatsdotnet/Main_Site/Data/2006_Documents/Health_Status.pdf). This means that an 85-year-old long term care 
facility resident could expect to live an average of 6.6 more years. We 
acknowledge that the average age of a long term care facility resident 
(83.2 years) is slightly younger than the 85 year data point used to 
assess average life expectancy; however, we believe that using the life 
expectancy of an 85 year old is an

[[Page 47084]]

acceptable proxy for the life expectancy of an 83.2 year old.
    Based on a life expectancy at age 85 of 6.6 years, we estimate that 
sprinklers in these two fires would have added 165 life years (25 lives 
saved x 6.6 life years per life saved).
    While the number of deaths in these two fires is not typical of the 
number of fire-related deaths in long term care facilities as a whole, 
we believe that they should still be taken into consideration when 
discussing the impact on the general long term care facility resident 
population.
    In a typical year from 1994 through 1999, about 2,300 long term 
care facilities report structural fires (July 2004 GAO report). We 
estimate that 25 percent (575) of the 2,300 facilities that reported 
fires annually during the 1994-1999 time period did not have sprinklers 
installed throughout their buildings. This estimate is based on the 
results of the 2004 GAO report and a nationwide survey of long term 
care facilities conducted by CMS following the results of the GAO 
report.
    Based on the rate of 10.8 deaths per 1,000 unsprinklered facility 
fires, we estimate that 6 deaths occurred in 575 fires in unsprinklered 
and partially sprinklered facilities annually. (575 facilities = 57.5 
percent of 1,000 facilities; 57.5 percent of 10.8 deaths = 6 deaths). 
This estimate differs slightly from the average number of deaths (5) 
that occurred due to long term care facility fires, as presented in the 
July 2004 GAO report, because this estimate predicts the number of 
deaths that statistically would be expected to occur, based on 
established percentages, rather than the average number of deaths that 
occurred annually in the past. This estimate is prospective, whereas 
the 2004 GAO figure is retrospective.
    If these unsprinklered or partially sprinklered facilities install 
sprinklers throughout their buildings and those sprinklers are properly 
maintained, then we estimate that there will be 1 death (57.5 percent x 
1.9 deaths per 1,000 fully sprinklered facility fires according to the 
2004 GAO report = 1) in those same 575 facilities. Installing 
sprinklers in unsprinklered and partially sprinklered buildings would, 
based on these estimates, save 5 lives annually.

                                      Table 1--Estimated Annual Fire Deaths
----------------------------------------------------------------------------------------------------------------
  Number of estimated annual fire-      Number of estimated annual fire-
related deaths in unsprinklered long   related deaths if those facilities     Number of estimated annual lives
        term care  facilities                   were sprinklered                     saved by sprinklers
----------------------------------------------------------------------------------------------------------------
                            6                                     1                                     5
----------------------------------------------------------------------------------------------------------------

    Given the estimate described above that installing and maintaining 
sprinkler systems in existing long term care facilities will save 5 
lives annually, we estimate that sprinklers will save 33 life years 
annually (5 lives saved x 6.6 years gained per life).

                           Table 2--Life Years
------------------------------------------------------------------------
  Number of life years gained per        Number of life years gained
             life saved                            annually
------------------------------------------------------------------------
                       6.6                                   33
------------------------------------------------------------------------

    There are a wide variety of estimates regarding the statistical 
value of a life or of a quality-adjusted life year. For example, there 
are numerous studies that attempt to quantify how much individuals and 
society are willing to pay to gain a single, quality year of life, 
known as a quality-adjusted life year. These studies, using one or more 
of four different methodologies, have estimated that individuals and 
society are willing to pay between $50,000 and $450,000 for a quality-
adjusted life year (see R.A. Hirth, et al, ``Willingness to Pay for 
Quality-Adjusted Life Year: In Search of a Standard,'' Medical Decision 
Making, Volume 20, Number 3, July-Sep. 2000). Due to the fact that 
there is no widely accepted standard value, we refrained in the 
proposed rule from estimating the statistical value of each life or 
life year that will be gained as a result of a final rule requiring 
sprinklers in all long term care facilities. However, a recent FDA rule 
used an estimate of $5 million as the value of a statistical life and 
derived from this figure values of between $213,000 (at a 3 percent 
discount rate) and $373,000 (at a 7 percent discount rate) for a 
quality adjusted life-year (QALY). (See the FDA Final Rule on ``Medical 
Devices: Patient Examination and Surgeon's Gloves; Test Procedures and 
Acceptance Criteria,'' December 19, 2006, 71 FR 75865, as corrected 
January 19, 2007, 72 FR 2436.) These are intended to be rough estimates 
of societal willingness to pay for saving a ``statistical life'' (not a 
particular person) or for adding a year of life that does not involve 
total disability. It is not a settled issue in the literature of 
valuation of life as to how well these estimates fit an elderly 
population, and we use them here only to provide a rough estimate as to 
one of the major benefits of this final rule in the same dollar metric 
as costs.
    Applying these estimates, the life-saving benefits of this final 
rule once all facilities are compliant will be approximately $25 
million dollars annually based on a value of $5 million per statistical 
life saved. These benefits accrue over the entire 20-year horizon 
during which automatic sprinkler systems save lives. Hence, 
undiscounted future benefits from life saving would be as much as $500 
million ($5 million times 5 lives times 20 years).
    There are additional life-year benefits, to the extent that 
residents who survive a fire are nonetheless physically injured in ways 
that that greatly reduce their future quality of life. For example, a 
person who spends months in the hospital recovering from burn injuries 
and the remainder of his life partially incapacitated by those 
injuries, or a person whose lungs are permanently damaged by smoke 
inhalation, do not have the same good health that they would have 
enjoyed absent the fire. We do not have at this time any basis for 
estimating the amount of severe morbidity caused by facility fires that 
sprinklers can mitigate, but it could be very substantial, likely 
approaching and perhaps exceeding the number of life-years lost to 
mortality. For purposes of this analysis, we assume that it equals the 
mortality QALYs, and that total benefits from morbidity reduction range 
from $7 to $10 million a year (33 life years times 20 years time either 
$213,000 or $373,000).
    The FDA estimates were based on a ``willingness to pay'' analysis 
of wage differentials necessary to attract labor to riskier 
occupations. Such analyses have shown that people demand significantly 
higher wages to accept even a small additional risk of death. The 
estimated value of an additional year of life is based on life 
expectancy in the FDA analysis. However, there are other ways to create 
such estimates and many studies have done so. For example, an estimate 
using data on rural interstate highway driving speeds found that the 
value of a statistical life could be estimated as between $1.6 and $5.9 
million (Orley Ashenfelter, ``Measuring the Value of a Statistical 
Life: Problems

[[Page 47085]]

and Prospects,'' Working Paper 11916, National Bureau of Economic 
Research, January 2006). As another example, a recent study of the 
willingness to pay for better health care found that a reasonable 
estimate of the value of a QALY lies between $183,000 and $264,000 per 
life year (R. Scott Braithwaite, et al, ``What Does the Value of Modern 
Medicine Say About the $50,000 per Quality-Adjusted Life-Year Decision 
Rule?,'' Medical Care, Volume 46, Number 4, April 2008). Thus, the 
estimates used by the FDA, and in this CMS analysis, are broadly 
consistent with estimates from other sources, such as the Hirth and 
Braithwaite studies.
    The reasonableness of applying such estimates to an elderly 
population is unclear, particularly when that population is, by 
definition, at least temporarily unable to live outside an 
institutional setting. However, the general approach used most often in 
the literature is to use the same value of a statistical life for 
persons of all ages. As to value of a life-year, there is considerable 
evidence in the literature that the kinds of disabilities most commonly 
found in nursing homes, such as mobility and mental impairments, do not 
substantially reduce the value of a life-year (see Chaim M. Bell, et 
al, ``An Off-the-Shelf Help List: A comprehensive Catalog of Preference 
Scores from Published Cost-Utility Analyses,'' Medical Decision Making, 
Volume 21, Number 4, July-August 2001). For example, on a scale of zero 
to 1, where zero is represented by a persistent vegetative state and 1 
is best attainable health, this synthesis shows that disability after a 
hip fracture is rated at .8, and even after major stroke from .2 to .5. 
Absent a compelling rationale to the contrary, we therefore use the 
full values of a statistical life and a QALY in our analysis.
    A few commenters questioned our methodology for assessing the 
potential life-saving benefits of installing and maintaining automatic 
sprinkler systems. However, these commenters did not suggest an 
alternate method for assessing these potential benefits. Therefore, we 
reaffirm the methodology and results described above.
b. Decreasing Loss of Property
    As a result of installing and properly maintaining sprinklers, we 
anticipate that facilities that experience fires would lose less 
property. While the amount of property damage and loss that would be 
prevented by installing and maintaining sprinklers is not readily 
quantifiable from existing data, we believe that the amount of damage 
prevented will be substantial, and that this prevention will benefit 
affected long term care facilities.
    Preventing property damage and loss may also reduce the amount of 
money paid by insurers to cover fire-related losses. Such reductions 
may help control long term care facility insurance costs and reduce any 
spill-over effect for other insurance markets. Again, these benefits 
are not easy to estimate reliably from existing data. However, we 
believe that they should be considered as part of the overall analysis 
of the benefits of purchasing, installing, and maintaining automatic 
sprinkler systems in long term care facilities.
    For purposes of estimating overall benefits and costs, we believe 
that an estimate of about $26 million a year would not be unreasonable. 
We base this on the following calculations. First, as previously 
discussed there are approximately 2,300 structural fires annually in 
long term care facilities, a rate of about one fire per every seven 
facilities. However, we estimate that the number of fires in 
unsprinklered or partially sprinklered facilities is far higher, with 
these 2,446 facilities accounting for one fourth of all structural 
fires, or about one fire per every four such facilities (575 fires in 
2,446 facilities). Assuming that the rate could be reduced to the 13 
percent rate in fully sprinklered facilities (1,725 fires in 13,495 
facilities), approximately 260 structural fires a year would be 
prevented. We have no specific data for estimating the dollar cost of 
fighting these fires and restoring the properties, but assuming 
illustratively that the average cost of a structural fire is $100,000, 
total annual savings would be on the order of $26 million a year.
c. Decreasing Fire Recovery Disruption and Time
    In addition to losing less property due to fire, we anticipate that 
long term care facilities that experience fires will be able to recover 
more quickly with fewer disturbances to residents. Because sprinkler 
heads generally activate only in the area immediately near the fire 
source, the area that will be damaged by a fire will likely be much 
smaller in a sprinklered building than it would be in a building 
without sprinklers, thus reducing recovery costs. In addition, by 
limiting the area affected by the fire, there would be fewer 
disturbances to residents during the recovery time. In particular, 
fewer residents would be forced into a change in residence, a 
disruption that often affects residents' physical and mental well-being 
severely. Finally, by limiting the affected area and duration of 
disruption, an affected facility will reduce the number of paid 
patient-days that it loses. While we cannot quantify most of these 
benefits to long term care facilities and their residents, we believe 
that they are substantial. Assuming illustratively that they equal half 
the cost of a fire prevented, annual savings would be on the order of 
$6.5 million a year.
d. Decreasing Legal Liability and Insurance Cost
    As a result of installing sprinklers, facilities will greatly 
reduce their potential exposure to legal costs and legal damages, as 
well as reduce their costs for liability insurance. Again, we cannot 
quantify these benefits but they could be very substantial. For 
example, were a court to find that a facility was negligent either in 
not installing a state-of-the-art system, or in being unable to save 
residents who would have been saved had such a system been in place, 
tort liability could be imposed. Absent any way to predict what might 
occur (which might depend, for example, not only on specific factual 
circumstances but also on the tort law in the state in which such a 
fire might occur), we do not estimate the dollar value of these 
benefits.
e. Reducing Major Medical Care Costs
    Fires cause morbidity as well as mortality. Not all residents who 
suffer deadly burns die immediately. Treatment of severely burned 
persons is among the most expensive kinds of medical care. Other 
effects of fires that require medical treatment include smoke 
inhalation and injuries cause by falls when fleeing from rooms affected 
by fire or smoke. No data are available to us on the extent of these 
medical costs, and hence on costs prevented by this final rule, but 
they are likely to be substantial. Assuming illustratively that there 
are ten expensive medical care cases prevented for each death prevented 
by this rule, and that such cases average $100,000, annual benefits 
would be $5 million (5 x 10 x $100,000).
2. Costs
    This final rule requires a long term care facility to install an 
approved, supervised automatic sprinkler system in accordance with NFPA 
13, Standard for the Installation of Sprinkler Systems, throughout the 
building. This final rule also allows long term care facilities to 
install automatic sprinkler systems over a 5-year phase-in period.
Number and Size of Affected Facilities
    Following publication of the GAO report, CMS incorporated a data 
collection element on the long term care facility survey form. When 
completing a

[[Page 47086]]

survey, a long term care facility surveyor must note whether the 
facility is fully sprinklered, partially sprinklered, or unsprinklered. 
Based on data collected during the survey process, we know that 13,391 
facilities are fully sprinklered, 2,086 facilities are partially 
sprinklered, and 360 facilities are unsprinklered. The following table 
groups the partially and unsprinklered facilities by the number of 
beds.

                                 Table 3--Number of Affected Facilities by Size
----------------------------------------------------------------------------------------------------------------
                                                     <50 beds       50-99 beds     100-199 beds      200+ beds
----------------------------------------------------------------------------------------------------------------
Partially sprinklered...........................             315             675             870             226
Unsprinklered...................................             118             128             102              12
----------------------------------------------------------------------------------------------------------------

    The number of resident beds in a facility strongly corresponds to 
its physical size. Simply put, larger buildings have more resident 
beds, and smaller buildings have fewer resident beds. Therefore, based 
on the number of beds in a facility, we are able to estimate the square 
footage of a long term care facility. For purposes of our analysis, we 
estimate that a long term care facility has 500 total square feet for 
each resident bed. This estimate, which includes space for the 
resident's room, community spaces, and administrative spaces, is based 
on discussions with architects and engineers who are familiar with the 
design of older long term care facilities. Therefore, for purposes of 
our analysis, an average facility with fewer than 50 beds is 24,500 sq 
ft, 50-99 beds is 37,000 sq ft, 100-199 beds is 74,500 sq ft, and 200+ 
beds is 99,501 sq ft. When estimating the cost of installing an 
automatic sprinkler system in an unsprinklered facility, we use these 
square footage estimates.
    However, these estimates do not reflect the area that must still be 
sprinklered in a partially sprinklered long term care facility. By 
definition, a partially sprinklered facility already has an automatic 
sprinkler system in one or more sections of the facility. For purposes 
of this impact analysis, we assume that a partially sprinklered 
building is 25 percent sprinklered, leaving 75 percent of the building 
to be sprinklered in accordance with this final rule. Buildings in this 
category may have more or less sprinkler coverage than this assumption.
    For facilities with fewer than 50 resident beds, we estimate that 
sprinklers will be installed for 18,375 square feet (75 percent of 
maximum square footage in this size category). For facilities with 50 
to 99 resident beds, we estimate that sprinklers will be installed for 
27,750 square feet (75 percent of average square footage in this size 
category). For facilities with 100 to 199 resident beds, we estimate 
that sprinklers will be installed for 55,875 square feet (75 percent of 
average square footage in this size category). For facilities with more 
than 199 resident beds, we estimate that sprinklers will be installed 
for 75,000 square feet (75 percent of minimum square footage in this 
size category).
a. Installation Cost per Square Foot
    Purchasing and installing a sprinkler system according to the 
requirements of NFPA 13 encompasses a wide variety of factors, 
including those briefly described in section II of this final rule. 
Within the requirements of NFPA 13, there are numerous variables that 
can impact the purchase and installation costs for a facility. Each 
facility has different needs that must be addressed when purchasing and 
installing a sprinkler system, and this cost estimate cannot address 
each particular need or combination of needs. Therefore, we are basing 
our cost estimates not on the individual requirements of NFPA 13 for an 
individual facility, but on a bundled purchase and installation 
estimate for an average facility, as described below. Individual 
facilities may have costs above or below those of this average facility 
due to facility size and facility-specific sprinkler system needs. Long 
term care facilities that are based in other health care facilities, 
such as hospitals, are required by this final rule only to have 
sprinklers in the long term care facility section of the building. 
Therefore, we do not believe that facility-based long term care 
facilities will have different installation costs than freestanding 
facilities with similar resident bed and square footage numbers.
    We estimate that it will cost $7.95 per square foot to purchase and 
install a sprinkler in an existing facility. According to the 
Architects, Contractors, Engineers Guide to Construction Costs, 2008 
Edition by Design and Construction Resources, purchasing and installing 
sprinklers in new long term care facilities costs $2.65 per square 
foot. This cost estimate incorporates all contractor costs such as 
labor, materials, and a 20 percent overhead fee; 35 percent taxes and 
insurance on labor, equipment, and tools; and 5 percent sales tax.
    Although we recognize that capital and interest costs may increase 
the cost of purchasing and installing automatic sprinkler systems in 
long term care facilities, these costs are not included in our 
estimates. Due to the individual circumstances of each facility, 
unknown future interest rates, and various other factors, we are unable 
to accurately estimate the capital and interest costs of installing 
sprinkler systems. Therefore, we have chosen to exclude these costs 
from our estimates while acknowledging that they do exist and will play 
a role to some degree in the decisions of long term care facilities 
that will be affected by this final rule. Note, however, that the 
economic costs of financing this capital investment would not be the 
gross cost of borrowing, but the much smaller opportunity cost of the 
capital devoted to sprinklers rather than some other investment. 
Furthermore, to the potentially substantial extent that facilities gain 
from this investment (reduced disruption, revenue loss, etc. as 
previously discussed) the opportunity cost may be very low.
    Renovation costs are typically two to three times higher than new 
construction costs because installing the sprinkler system must be 
completed in a piecemeal fashion while the building remains occupied. 
This increases the length of the construction time and, thus, increases 
its costs. In addition, renovations to add sprinkler systems often 
require upgrading or adding related building components such as water 
lines and fire pumps. The upgrades and additions require more capital 
investment and construction time. Increased investment and construction 
time also increases costs.
    For purposes of this impact analysis, we assume that renovating a 
typical facility to add sprinklers would cost three times more than 
purchasing and installing sprinklers in new long term care facilities. 
In the proposed rule, we presented a range of cost per square foot 
estimates from two to three times the costs of installation in a new 
building. Commenters indicated that the lower estimates in this range 
did not reflect the actual costs incurred by existing

[[Page 47087]]

long term care facilities. Therefore, we eliminated the lower range and 
only use the highest estimate (three times the cost of installing 
sprinklers in new construction, $7.95).
b. Cost Estimates
    The cost estimates for both unsprinklered and partially sprinklered 
facilities are presented in the following tables. They are based on all 
of the above-described estimates about the number of facilities that 
would be affected, the sizes of those facilities, and the installation 
cost per square foot. We estimate that this final rule will cost 
$846,680,105 over the 5-year phase-in period, or an average of 
$169,336,021 annually for 5 years for all affected partially 
sprinklered and unsprinklered long term care facilities.

    Table 4--One-Time Installation Cost for Partially Sprinklered Facilities at $7.95 per Square Foot by Size
----------------------------------------------------------------------------------------------------------------
                                       >50 beds (18,375      50-99 beds        100-199 beds    200+ beds (75,000
                                         sq ft to be      (27,750 sq ft to   (55,875 sq ft to     sq ft to be
                                         sprinklered)     be sprinklered)    be sprinklered)      sprinklered)
----------------------------------------------------------------------------------------------------------------
Cost per facility...................           $146,081           $220,613           $444,206           $596,250
Number of affected facilities.......                315                675                870                226
Cost for all facilities.............        $46,015,515       $148,913,775       $386,459,220       $134,752,500
----------------------------------------------------------------------------------------------------------------


              Table 5--One-Time Cost for Unsprinklered Facilities at $7.95 per Square Foot by Size
----------------------------------------------------------------------------------------------------------------
                                       >50 beds (24,500      50-99 beds        100-199 beds     00+ beds (99,501
                                         sq ft to be      (37,000 sq ft to   (74,500 sq ft to     sq ft to be
                                         sprinklered)     be sprinklered)    be sprinklered)      sprinklered)
----------------------------------------------------------------------------------------------------------------
Cost per facility...................           $194,775           $294,150           $592,275           $791,033
Number of affected facilities.......                118                128                102                 12
Cost for all facilities.............        $22,983,450        $37,651,200        $60,412,050         $9,492,395
----------------------------------------------------------------------------------------------------------------


                      Table 6--Total One-Time Installation Cost for All Facilities by Size
----------------------------------------------------------------------------------------------------------------
                                           >50 beds          50-99 beds        100-199 beds        200+ beds
----------------------------------------------------------------------------------------------------------------
Partially sprinklered...............        $46,015,515       $148,913,775       $386,459,220       $134,752,500
Unsprinklered.......................         22,983,450         37,651,200         60,412,050          9,492,395
                                     ---------------------------------------------------------------------------
    Total...........................         68,998,965        186,564,975        446,871,270        144,244,895
----------------------------------------------------------------------------------------------------------------

    We do not expect all affected long term care facilities to have all 
necessary resources immediately available to purchase and install 
automatic sprinkler systems. Therefore, we are allowing all facilities 
up to five years from the date of publication of this final rule to 
purchase and install sprinklers. While we will encourage all facilities 
to immediately begin the process of purchasing and installing 
sprinklers, we understand that some facilities will choose to wait 
until later in the phase-in period to begin this process. Therefore, we 
expect that the one-time cost of this final rule will be distributed 
over a period of several years as facilities nationwide will likely 
stagger their installation schedules to meet their individual needs and 
circumstances. We estimate that long term care facilities will spend, 
on average, $169,336,021 annually for five years to purchase and 
install automatic sprinkler systems throughout their facilities.
c. Maintenance
    After installing an approved, supervised automatic sprinkler system 
in accordance with the 1999 edition of NFPA 13 throughout the building, 
all long term care facilities must test, inspect, and maintain their 
sprinkler systems in accordance with the 1998 edition NFPA 25. We 
estimate that long term care facilities will conduct quarterly 
inspections of their sprinkler systems and annual trip tests. We assume 
that each inspection will take 4 hours to complete, at a cost of $150 
per inspection. We also assume that each trip test will take 6 hours, 
at a cost of $250. Based on these assumptions, we estimate that long 
term care facilities will spend $850 annually to test and inspect their 
sprinkler systems. In addition, we assume that long term care 
facilities will spend an additional $150 annually to perform any 
necessary maintenance duties.
    Individuals who perform these testing, inspection, and maintenance 
duties will have to be properly trained and, in some States and local 
jurisdictions, they will have to be licensed. Generally, long term care 
facilities will not have enough sprinkler system work needs to directly 
employ someone with the necessary skills, training, and licensure. 
Therefore, we believe that long term care facilities will likely 
contract with another company to meet their testing, inspection, and 
maintenance needs. However, long term care facilities are not required 
by this rule to contract for these services. In addition to actually 
conducting the necessary testing, inspection, and maintenance 
activities, we believe that a contract will also include a provision 
that the contractor prepares adequate documentation of the activities 
conducted. We estimate that the total cost of meeting these 
requirements will be $1,000 ($150 x 4 quarterly inspections = $600 + 
$250 annual trip test + $150 general maintenance costs = $1,000). We 
estimate that the total maintenance cost for all affected facilities 
will be $2,446,000. We recognize that some commenters suggested that 
this estimate is not sufficient to capture the cost of maintaining an 
automatic sprinkler system. However, the commenters did not suggest a 
more suitable method for assessing the potential maintenance costs or a 
more suitable dollar estimate for such costs. Therefore, we reaffirm 
our original estimates.

[[Page 47088]]

    In addition, all long term care facilities that will be affected by 
this final regulation are required to maintain documentation of all 
inspection, maintenance, and testing activities. The burden associated 
with these requirements is estimated to be 1 hour per long term care 
facility. Therefore, we estimate it will take 2,446 total annual hours 
(1 hour x 2,446 estimated affected long term care facilities) to meet 
this requirement. This documentation maintenance requirement will cost 
an affected facility $19 a year, based on an hourly rate of $19 for an 
office employee ($19 per hour x 1 hour). The total annual cost of this 
final documentation requirement will be $46,474 ($19 per facility x 
2,446 facilities).
3. Summary of Estimated Costs and Benefits
    Taking into account all these categories of benefits and costs, and 
their timing, we believe that this final rule creates a substantial 
excess of benefits over costs at a social discount rate of 3 percent 
and a slight excess of benefits over costs at 7 percent. As shown in 
the table, costs are heavily concentrated in the first five years (we 
assume one-fifth is invested in each of the five years allowed for 
compliance) while benefits accrue over the entire 20-year life of these 
investments.

[[Page 47089]]



                                                                     Table 7--Total Fire Sprinkler System Costs and Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Benefits                                                                   Costs
                                             ---------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Decreasing
                                                           Life years  Life years                Monetized  Decreasing      fire      Reducing
                    Year                      Statistical  saved from  saved from   Monetized    morbidity    loss of     recovery      major      Total    Installation   Maintenance    Total
                                              lives saved   mortality   morbidity  statistical   reduction   property    disruption    medical    benefits       ($M)         ($M)        costs
                                                            reduction   reduction  lives  ($M)     ($M)*       ($M)       and time      costs       ($M)                                  ($M)
                                                                                                                            ($M)        ($M)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1...........................................            1         6.6         6.6            5           1           5          2.6           1       15.2           169           0.5     169.5
2...........................................            2        13.2        13.2           10           3          13          6.5           2       34.3           169           1.0     170.0
3...........................................            3        19.8        19.8           15           4          16          7.8           3       45.6           169           1.5     170.5
4...........................................            4        26.4        26.4           20           6          21         10.4           4       60.8           169           2.0     171.0
5...........................................            5          33          33           25           7          26           13           5       76.0           169           2.5     171.5
6...........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
7...........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
8...........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
9...........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
10..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
11..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
12..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
13..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
14..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
15..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
16..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
17..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
18..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
19..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
20..........................................            5          33          33           25           7          26           13           5       76.0             0           2.5       2.5
Undiscounted Total..........................           90         594         594        450.0       126.5       470.6        235.3        90.0    1,372.4         845.0          45.0     890.0
Net Present Value at 3%.....................  ...........  ..........  ..........  ...........          3%  ..........  ...........  ..........      991.4  ............  ............     806.4
Discount Rate...............................  ...........  ..........  ..........  ...........  ..........  ..........  ...........  ..........  .........  ............  ............  ........
Net Present Value at 7% Discount Rate*......  ...........  ..........  ..........  ...........          7%  ..........  ...........  ..........      722.4  ............  ............    715.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Estimate at 3% discount rate, shown in table, uses a value of $213,000 per QALY; estimate at 7% uses a value of $373,000 per QALY.


[[Page 47090]]

    The Office of Management and Budget has stated that the value of a 
statistical life could be put anywhere between $1 and $10 million (in 
practice a number as low as $1 million is almost never used). Clearly 
using the lower end of this range would greatly reduce the benefits of 
this final rule, and using the higher end would greatly increase those 
benefits. Broad (though not equally broad) ranges of comparisons could 
be made for most categories of benefits. However, only if the most 
conservative possible estimates were used for almost every category of 
benefits would total discounted benefits fall below discounted costs at 
a discount rate of 3 percent. Therefore, we have chosen not to present 
a detailed sensitivity analysis.
    Our installation cost estimates, in contrast, do not pose remotely 
as wide a range of possibilities. In our view we have estimated these 
quite conservatively, and actual costs could easily be ten or twenty 
percent lower than the estimates we use. For example, the five year 
compliance horizon we provide means that many facilities will be able 
to combine sprinkler installation with other major renovations such 
that the cost of sprinkler installation will be considerably less. In 
fact, during the next five years it is quite likely that a considerable 
fraction of long term care providers in the older facilities most 
affected by this final rule will for unrelated business reasons decide 
to move to new facilities and dispose of their older facility 
buildings. We have not attempted to estimate the effects of such 
estimate-reducing actions.
    Finally, there is an alternative way to estimate and present the 
effects of this rule. Approaching these estimates from the perspective 
of cost-effectiveness analysis (CEA), Table 7 shows that we estimate a 
total of 1,188 undiscounted life years saved from both mortality and 
morbidity reductions. Subtracting from total monetary costs the 
monetary benefits from reduced property damage, disruption, and medical 
costs, the net undiscounted costs are $94.1 million. Undiscounted, the 
cost per life-year saved is $79,000. Discounting both life years and 
costs to present value, the cost per life-year saved would be $270,000 
at a 3 percent discount rate, and $553,000 at a 7 percent discount 
rate. These results are markedly sensitive to the discount rate because 
the benefits of the rule accrue roughly evenly over time, while the 
costs are highly concentrated in the early years. Despite the fact that 
this mostly elderly population has relatively few years of life 
expectancy compared to an average population, even at a 7 percent 
discount rate the cost per life-year saved, while higher than the most 
widely used values for a QALY, is within the range of accepted 
``willingness to pay'' values (e.g., the Hirsch study published in 2000 
presents $450,000 as an accepted value, which adjusted for inflation 
roughly equals our estimate of $553,000).

C. Alternatives Considered

1. Maintain Current Fire Safety Requirements
    We currently require long term care facilities to comply with the 
fire safety requirements in the LSC. In addition, we currently require 
long term care facilities that do not have sprinklers installed 
throughout the building to have and maintain at least battery operated 
smoke alarms in resident rooms and public areas. We believe that these 
requirements are a solid foundation for ensuring that all long term 
care facility residents are protected from the threat of fire.
    We also believe that these current measures do not go far enough to 
protect long term care facility residents. Both the Hartford and 
Nashville facilities were in substantial compliance with the LSC, yet 
both facilities experienced severe fires with large numbers of 
fatalities.
    The smoke alarm requirement that we published in the Federal 
Register on March 25, 2005 (70 FR 15229) after these fires was a step 
toward improving fire safety and avoiding another devastating fire. 
Unfortunately, single station smoke alarms can only warn facility staff 
and residents of the fire. They cannot suppress a fire or prevent it 
from spreading to other areas.
    Long-term care facility residents often have multiple or severe 
health problems that complicate the facility's ability to ensure their 
safety in the event of a fire. For example, frail elderly residents may 
rely on facility staff to assist them in transferring and otherwise 
moving about the facility. These types of residents are unable to 
independently protect themselves from the threat of fire by moving away 
from the danger. They are dependent on facility staff, who are also 
responsible for ensuring the safety of dozens of other residents. A 
rapidly growing fire can overwhelm both the staff and residents, 
leading to tragic consequences.
    However, a properly designed, installed, and maintained sprinkler 
system effectively prevents a fire from spreading to other areas and 
overwhelming the staff and residents. Containing a fire reduces the 
threat to residents in other portions of the building and allows 
facility staff to focus their energy on the area that is most affected 
by the fire, without worry about the fire spreading to other areas and 
threatening other residents. Sprinkler systems have consistently served 
this function for many years, and they are commonly recognized as the 
single most effective fire safety device currently available.
    Given the past success of sprinkler systems and their potential for 
saving lives in the future, we believe that maintaining the existing 
fire safety requirements without adding sprinkler requirements does not 
ensure the safety of long term care facility residents to the greatest 
extent possible.
    In addition, maintaining the existing fire safety requirements will 
have left decisions regarding more stringent fire safety measures in 
the hands of State and local governments. State and local governments 
have, in the past, made very different decisions about fire safety 
requirements in long-term care facilities. For example, some States, 
such as Tennessee and Virginia, already require all long-term care 
facilities to have sprinklers throughout their buildings. In contrast, 
other States, such as South Dakota, Michigan, and the District of 
Columbia, do not have such requirements, resulting in almost 50 percent 
or more of their long-term care facilities lacking sprinklers 
throughout their buildings. This level of variability is not acceptable 
because residents of long-term care facilities should be assured the 
same minimum level of fire safety regardless of what State or locality 
they reside in. Federal regulation is the most efficient and expedient 
manner for achieving the goal of uniform nationwide minimum fire safety 
standards; therefore, we chose to pursue Federal regulation rather than 
depending on State and local governments.
2. Exempt Smaller Facilities
    The Medicare Conditions of Participation are the minimum 
requirements that providers are required to meet in order to be 
Medicare and Medicaid certified. Many other standards setting 
organizations have requirements that go beyond what Medicare and 
Medicaid require. Facilities may choose to strive for these higher 
standards, although Medicare and Medicaid do not require them to do so.
    Exempting any facility from this final minimum requirement will be 
a disservice to the residents of that facility. Residents deserve to be 
safe from the threat of fire, whether they reside in a large facility 
or a smaller one. The final sprinkler requirement will ensure that, 
regardless of the size or

[[Page 47091]]

location of their residence, all residents are protected by the same 
basic minimum fire safety requirements.
    However, we did consider whether there might be some size or other 
threshold creating a ``cut off'' point below which some facilities 
might be exempted on the grounds that the cost of sprinkler 
installation is prohibitively expensive in relation to the number of 
residents to be protected. We were unable to identify any such 
threshold from the GAO study, our own analysis, or the comments we 
received. To the contrary, it appears that there is a linear or near 
linear relationship among facility revenue, facility size, number of 
facility residents, and cost of installing automated sprinkler systems. 
Nor are there any data suggesting that risk or rates of fire vary with 
facility size. The one certainty is that automated sprinkler systems 
are the most certainly effective method of preventing and controlling 
expansion of fires.
    We believe that the 5-year phase-in period will substantially help 
to mitigate the costs of installing sprinklers for small facilities by 
providing substantial flexibility to coordinate sprinkler decisions 
with other business arrangements, including financing and renovation 
decisions. Therefore, we have no reasonable basis to exempt any 
particular type of facility, including smaller facilities, from this 
requirement.
3. Require Compliance in Less Than or More Than Five Years
    Requiring compliance with this final rule in less than five years 
would, we believe, be a hardship for affected long term care 
facilities. Allocating resources, designing a sprinkler system, 
purchasing it, obtaining necessary permits, installing it, and testing 
it all require a significant amount of time. In 15 states, 20% or more 
of all long term care facilities will be required to go through this 
process, potentially increasing the wait time permit applications and 
for the availability of qualified system designers and installers. For 
these reasons, and to provide flexibility to coordinate with other 
business decisions, we have chosen to allow up to 5 years to complete 
this process.
    Allowing facilities more than 5 years to complete the sprinkler 
process could encourage facilities to unnecessarily delay the 
installation process. Such delays could unduly jeopardize resident and 
staff safety. Therefore, we believe that a phase-in period of more than 
five years would not be in the best interest of long term care facility 
resident and staff safety and would not accomplish the goals of this 
final rule.

D. Accounting Statement

    As Required by OMB Circular A-4 (available at http:// 
www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 7 below, we 
have prepared an accounting statement showing the classification of the 
costs and benefits associated with the provisions of this final rule. 
This table is based on our best estimate of the undiscounted total cost 
of $845 million, over a five year phase in period, for the 2,446 long 
term care facilities being required to install automatic sprinkler 
systems at an estimated cost of $7.95 per square foot, plus an 
additional $45 million undiscounted for maintenance costs of about $2.5 
million annually. After discounting to present value, total costs are 
estimated to be $806 million at a 3 percent discount rate, and $715 
million at a 7 percent discount rate. The table also reflects total 
benefits of $1,372 million undiscounted, $991 million discounted to 
present value at 3 percent, and $722 million discounted to present 
value at 7 percent.

                      Table 7--Accounting Statement
------------------------------------------------------------------------
                                                               Primary
                          Category                             estimate
                                                                 ($M)
------------------------------------------------------------------------
Monetized Costs ($ Millions):
  Total Cost Over 20-Year Period (PV at 0% discount rate)..         $890
  Total Cost Over 20-Year Period (PV at 3% discount rate)..          806
  Total Cost Over 20-Year Period (PV at 7% discount rate)..          715
Monetized Benefits:
  Total Benefits (PV at 0% discount rate)..................         1372
  Total Benefits (PV at 3% discount rate)..................          991
  Total Benefits (PV at 7% discount rate)..................          722
------------------------------------------------------------------------

E. Conclusion

    We estimate that this regulation will result in private sector 
expenditures of $846,680,105, over a 5-year phase-in period, or 
$169,336,021 annually for 5 years, to purchase and install automatic 
sprinkler systems throughout affected long-term care facilities. We 
also estimate that this regulation will result in private sector 
expenditures of $2,492,474 ($2,446,000 for maintenance + $46,474 for 
documentation) annually to maintain those automatic sprinkler systems. 
While the effects of this regulation are substantial, they are 
necessary to protect the safety of long-term care facility residents 
and staff.
    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 483

    Grant programs--health, Health facilities, Health professions, 
Health records, Incorporation by Reference, Medicaid, Medicare, Nursing 
homes, Nutrition, Reporting and recordkeeping requirements, Safety.

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 483--REQUIREMENTS FOR STATES AND LONG-TERM CARE FACILITIES

0
1. The authority citation for part 483 continues to read as follows:

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

Subpart B--Requirements for Long-Term Care Facilities

0
2. In Sec.  483.70, add new paragraph (a)(8) to read as follows:


Sec.  483.70  Physical environment.

    (a) * * *
    (8) A long term care facility must:
    (i) Install an approved, supervised automatic sprinkler system in 
accordance with the 1999 edition of NFPA 13, Standard for the 
Installation of Sprinkler Systems, as incorporated by reference, 
throughout the building by August 13, 2013. The Director of the Office 
of the Federal Register has approved the NFPA 13 1999 edition of the 
Standard for the Installation of Sprinkler Systems, issued July 22, 
1999 for incorporation by reference in accordance with 5 U.S.C. 552(a) 
and 1 CFR part 51. A copy of the Code is available for inspection at 
the CMS Information Resource Center, 7500 Security Boulevard, 
Baltimore, MD or at the National Archives and Records Administration 
(NARA). For information on the availability of this material at NARA, 
call 202-741-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. Copies may be 
obtained from the National Fire Protection Association, 1 Batterymarch 
Park, Quincy, MA 02269.
    (ii) Test, inspect, and maintain an approved, supervised automatic 
sprinkler system in accordance with the 1998 edition of NFPA 25, 
Standard for the Inspection, Testing, and Maintenance of Water-Based 
Fire

[[Page 47092]]

Protection Systems, as incorporated by reference. The Director of the 
Office of the Federal Register has approved the NFPA 25, Standard for 
the Inspection, Testing, and Maintenance of Water-Based Fire Protection 
Systems, 1998 edition, issued January 16, 1998 for incorporation by 
reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. A copy 
of the Code is available for inspection at the CMS Information Resource 
Center, 7500 Security Boulevard, Baltimore, MD or at the National 
Archives and Records Administration (NARA). For information on the 
availability of this material at NARA, call 202-741-6030, or go to: 
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. Copies may be obtained from the 
National Fire Protection Association, 1 Batterymarch Park, Quincy, MA 
02269.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program) (Catalog of Federal Domestic Assistance Program 
No. 93.773, Medicare--Hospital Insurance; and Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: March 6, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 6, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-18670 Filed 8-8-08; 3:30 pm]
BILLING CODE 4120-01-P