[Federal Register Volume 75, Number 105 (Wednesday, June 2, 2010)]
[Notices]
[Pages 31118-31222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12563]



  Federal Register / Vol. 75, No. 105 / Wednesday, June 2, 2010 / 
Notices  

[[Page 31118]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1406-N]
RIN 0938-AQ03


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and Fiscal Year 2010 Rates and to the Long-
Term Care Hospital Prospective Payment System and Rate Year 2010 Rates: 
Final Fiscal Year 2010 Wage Indices and Payment Rates Implementing the 
Affordable Care Act

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

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: This notice contains the final wage indices, hospital 
reclassifications, payment rates, impacts, and other related tables 
effective for the fiscal year (FY) 2010 hospital inpatient prospective 
payment systems (IPPS) and rate year 2010 long-term care hospital 
(LTCH) prospective payment system (PPS). The rates, tables, and impacts 
included in this notice reflect changes required by or resulting from 
the implementation of several provisions of the Patient Protection and 
Affordable Care Act and the Health Care and Education Reconciliation 
Act of 2010. These provisions require the extension of the expiration 
date for certain geographic reclassifications and special exception 
wage indices through September 30, 2010; and certain market basket 
updates for the IPPS and LTCH PPS.

DATES: Effective Date: The revised standard Federal rates described in 
this notice are effective for payment years beginning October 1, 2009. 
Hospitals are paid based on the rates published in this notice for 
discharges on or after April 1, 2010.

FOR FURTHER INFORMATION CONTACT: Tzvi Hefter, (410) 786-4487.

SUPPLEMENTARY INFORMATION:

I. Background

    The final rule setting forth the Medicare fiscal year (FY) 2010 
hospital inpatient prospective payment systems (IPPS) for acute care 
hospitals and the rate year (RY) 2010 long-term care hospital (LTCH) 
prospective payment system (PPS) final rule (hereinafter referred to as 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule) was published in the 
August 27, 2009 Federal Register (74 FR 43754) and subsequently 
corrected in an October 7, 2009 notice (74 FR 51496).
    On March 23, 2010, the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) was enacted. Following enactment of Public Law 111-
148, the Health Care and Education Reconciliation Act of 2010, Public 
Law 111-152 (enacted on March 30, 2010), amended certain provisions of 
Public Law 111-148. (These public laws are collectively known as the 
Affordable Care Act.) Several of the provisions of the Affordable Care 
Act affect the FY 2010 IPPS and the RY 2010 LTCH PPS. However, due to 
the timing of the passage of the legislation, we noted in the FY 2011 
IPPS and LTCH PPS proposed rule published in the May 4, 2010 Federal 
Register (75 FR 23852) that we would issue separate Federal Register 
documents addressing the provisions of the Affordable Care Act that 
affect our final policies and payment rates for FY 2010 IPPS and the RY 
2010 LTCH PPS and proposed policies for FY 2011 under the IPPS and the 
LTCH PPS.
    This notice addresses the provisions of the Affordable Care Act 
that impact the FY 2010 IPPS/RY 2010 LTCH PPS final wage index tables, 
rates, and impacts.

II. Final FY 2010 Wage Indices and Payment Rates

A. Final FY 2010 Hospital Wage Index Reclassifications/Redesignations

1. Section 508 Extension
    Section 3137(a) of Public Law 111-148, as amended by section 10317 
of Public Law 111-148, extends through the end of FY 2010 wage index 
reclassifications under section 508 of the Medicare Prescription Drug 
Improvement and Modernization Act of 2003 (MMA) (Pub. L. 108-173) and 
certain special exceptions (for example, those special exceptions 
contained in the final rule promulgated in the Federal Register on 
August 11, 2004 (69 FR 49105 and 49107) extended under section 117 of 
the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. 
L. 110-173)) and further extended under section 124 of the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 
110-275).
    Under section 508 of Public Law 108-173, a qualifying hospital 
could appeal the wage index classification otherwise applicable to the 
hospital and apply for reclassification to another area of the State in 
which the hospital is located (or, at the discretion of the Secretary), 
to an area within a contiguous State. We implemented this process 
through notices published in the Federal Register on January 6, 2004 
(69 FR 661), and February 13, 2004 (69 FR 7340). Such reclassifications 
were applicable to discharges occurring during the 3-year period 
beginning April 1, 2004, and ending March 31, 2007. Section 106(a) of 
the Medicare Improvements and Extension Act, Division B of the Tax 
Relief and Health Care Act of 2006 (MIEA-TRHCA) extended any geographic 
reclassifications of hospitals that were made under section 508 and 
that would expire on March 31, 2007. In the March 23, 2007 Federal 
Register (72 FR 3799), we published a notice that indicated how we were 
implementing section 106(a) of the MIEA-TRHCA through September 30, 
2007. Section 117 of the MMSEA further extended section 508 
reclassifications and certain special exceptions through September 30, 
2008. On February 22, 2008 in the Federal Register (73 FR 9807), we 
published a notice regarding our implementation of section 117 of the 
MMSEA. Section 124 of MIPPA, Public Law 110-275, then further extended 
section 508 reclassifications and certain special exceptions through 
September 30, 2009. Final rates incorporating these MIPPA extensions 
were published in a Federal Register notice on October 3, 2008 (73 FR 
57888).
    Section 3137(a) of Public Law 111-148, as amended by section 10317 
of Public Law 111-148 has now extended the hospital reclassification 
provisions of section 508 and certain special exceptions through 
September 30, 2010 (FY 2010). Furthermore, section 3137(a)(2)(B) of 
Public Law 111-148 contains a new provision not previously included in 
prior mid-year extensions to section 508 requiring that ``beginning on 
April 1, 2010, in determining the wage index applicable to hospitals 
that qualify for wage index reclassification, the Secretary shall 
include the average hourly wage data of hospitals whose 
reclassification was extended pursuant to the amendment made by 
paragraph (1) only if including such data results in a higher 
applicable reclassified wage index.'' Finally, section 3401 of Public 
Law 111-148, as amended by section 10319 of Public Law 111-148 and 
section 1105 of Public Law 111-152, imposes a 0.25 percent decrease in 
the market basket calculated under section 1886(b)(3)(B) of the Social 
Security Act. As a result of these changes, we have recalculated 
certain wage indexes, recalculated the standardized amounts, and 
revised budget neutrality factors (including rural floor budget 
neutrality) to account for the new legislation.
    For hospitals receiving an extension of their section 508 
reclassifications or special exceptions, we have used the rates 
contained in the August 27, 2009

[[Page 31119]]

Federal Register, and as corrected in the October 7, 2009 Federal 
Register, unless the rates published in this notice result in a higher 
applicable wage index. Those section 508 and special exception 
providers that are receiving an extension through September 30, 2010 
are shown in Table 9B of the Addendum to this notice. Please note we 
are not making reclassification decisions on behalf of hospitals in 
this extension as we did with the MIPPA provision. (Because MIPPA was 
enacted prior to the finalization of the FY 2009 rates, we were able to 
modify reclassifications that had not yet taken effect. In contrast, 
the Affordable Care Act has been enacted in the middle of the fiscal 
year, and reclassifications are already in effect). As explained in 
this notice, the intervening Affordable Care Act legislation affects 
only those labor market areas including hospitals whose 
reclassifications/special exceptions are extended, or areas to which 
such hospitals were reclassified for FY 2010.
    When originally implementing section 508 of the MMA, we required 
each hospital to submit a request in writing by February 15, 2004, to 
the Medicare Geographic Classification Review Board (MGCRB), with a 
copy to CMS. We will neither require nor accept written requests for 
the extension required by the Affordable Care Act, since that 
legislation simply provides a 1-year continuation through the end of FY 
2010 for any section 508 reclassifications and special exceptions wage 
indexes that expired September 30, 2009.
2. FY 2010 Final Wage Indices
    The final wage index values for FY 2010 (except those for hospitals 
receiving wage index adjustments under section 505 of Pub. L. 108-173) 
are included in Tables 4A, 4B, and 4C of the Addendum to this notice 
and are posted on our Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/. For hospitals that are receiving a wage index 
adjustment under section 505 of Public Law 108-173, only one county's 
adjustment factor changed due to the implementation of section 
3137(a)(2)(B) of Public Law 111-148; therefore only that revised factor 
is shown in abbreviated Table 4J of the Addendum to this notice. In 
addition, Table 2 of the Addendum to this notice includes the final 
wage index values and occupational mix adjusted average hourly wage 
(from the FYs 2004, 2005, and 2006 cost reporting periods) for each 
hospital. Table 4D-1 of the Addendum of this notice lists the State 
rural floor budget neutrality factors for FY 2010. Table 4D-2 of this 
Addendum of this notice lists the urban areas with hospitals receiving 
the State rural floor or imputed rural floor wage index. Table 9B of 
the Addendum of this notice lists hospitals that are section 508 and 
special exception providers which have their reclassifications extended 
until September 30, 2010.

B. Inpatient Hospital Market Basket Update

1. FY 2010 Inpatient Hospital Update
    In accordance with section 1886(b)(3)(B)(i) of the Act, each year 
we update the national standardized amount for inpatient operating 
costs by a factor called the ``applicable percentage increase.'' Prior 
to enactment of the Affordable Care Act, section 1886(b)(3)(B)(i)(XX) 
of the Act set the applicable percentage increase for FY 2007 and each 
subsequent fiscal year as equal to the rate-of-increase in the hospital 
market basket for IPPS hospitals in all areas, subject to the hospital 
submitting quality information under rules established by the Secretary 
in accordance with section 1886(b)(3)(B)(viii) of the Act. For 
hospitals that do not provide these data, the update is equal to the 
market basket percentage increase less an additional 2.0 percentage 
points. In accordance with these statutory provisions, in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 43850), we finalized an 
applicable percentage increase equal to the full market basket update 
of 2.1 percent based on IHS Global Insight, Inc.'s second quarter 2009 
forecast of the FY 2010 market basket increase, provided the hospital 
submits quality data in accordance with our rules. For hospitals that 
do not submit quality data, the FY 2010 update to the operating 
standardized amount equals 0.1 percent (that is, the FY 2010 estimate 
of the market basket rate-of-increase minus 2.0 percentage points).
    Sections 3401(a) and 10319(a) of Public Law 111-148 and section 
1105 of Public Law 111-152, amend section 1886(b)(3)(B) of the Act. 
Specifically, section 1886(b)(3)(B)(xii)(I) of the Act, as added and 
amended by these sections of the Affordable Care Act, requires the 
Secretary to reduce the applicable percentage increase for FY 2010 by 
0.25 percentage point, subject to the hospital submitting quality 
information under rules established by the Secretary in accordance with 
section 1886(b)(3)(B)(viii) of the Act. For hospitals that do not 
provide these data, the update is equal to the market basket percentage 
increase minus 0.25 percentage point less an additional 2.0 percentage 
points. Section 1886(b)(3)(B)(xii) of the Act, as added and amended by 
these sections of the Affordable Care Act, further states that the 
application of this adjustment ``may result in the applicable 
percentage increase described in clause (i) being less than 0.0 for a 
fiscal year.'' Although these amendments modify the applicable 
percentage increase applicable to the FY 2010 rates under the IPPS, 
section 3401(p) of Public Law 111-148 states that the amendments made 
by section 3401(a) of Public Law 111-148 shall not apply to discharges 
occurring prior to April 1, 2010. In other words, for discharges 
occurring on or after October 1, 2009 and prior to April 1, 2010, 
payment for a hospital's inpatient operating costs under the IPPS will 
be based on the applicable percentage increase set forth in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule.
    Consistent with section 3401(p) of Public Law 111-148, for the 
first half of FY 2010 (that is, discharges on or after October 1, 2009 
through March 30, 2010), payment will be made based on the applicable 
percentage increase equaling the market basket index for IPPS hospitals 
(which is defined in 42 CFR 413.40(a)(3)) in all areas for hospitals 
that submit quality data in accordance with our rules, and the market 
basket index for IPPS hospitals in all areas less 2.0 percentage for 
hospitals that fail to submit quality data in accordance with our 
rules. As noted previously, in the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule, we calculated that the full market basket update equals 2.1 
percent based on IHS Global Insight, Inc.'s second quarter 2009 
forecast of the FY 2010 market basket increase. Consistent with section 
1886(b)(3)(B)(xii) of the Act, as added and amended by sections 3401(a) 
and 10319(a) of Public Law 111-148 and section 1105 of Public Law 111-
152, and section 3401(p) of Public Law 111-148, payment for discharges 
during the second half of FY 2010 (discharges on or after April 1, 2010 
through September 30, 2010), will reflect the revised FY 2010 rate, 
which includes the 0.25 percentage point reduction for hospitals that 
submit quality data in accordance with our rules. For those hospitals 
that fail to submit quality data in accordance with our rules, we are 
reducing the market basket index for IPPS hospitals by an additional 
2.0 percentage points (which is in addition to the 0.25 percentage 
point reduction required by section 1886(b)(3)(B)(xii) of the Act, as 
added and amended by sections 3401(a) and 10319(a) of Pub. L. 111-148 
and section 1105 of Pub. L. 111-152).

[[Page 31120]]

Therefore, based on IHS Global Insight, Inc.'s second quarter 2009 
forecast of the FY 2010 market basket increase, the FY 2010 applicable 
percentage increase, on which payment for discharges occurring in the 
second half of FY 2010 is based, is 1.85 percent (that is, the FY 2010 
estimate of the market basket rate-of-increase of 2.1 percent minus 
0.25 percentage points) for hospitals in all areas, provided the 
hospital submits quality data in accordance with our rules. For 
hospitals that do not submit quality data, the payment update to the 
operating standardized amount is -0.15 percent (that is, the adjusted 
FY 2010 estimate of the market basket rate-of-increase of 1.85 percent 
minus 2.0 percentage points). As provided by these provisions, we are 
proposing to revise 42 CFR 412.64(d) in a supplemental proposed rule 
published elsewhere in this Federal Register.
    Section 1886(b)(3)(B)(iv)(IV) of the Act provides that the 
applicable percentage increase applicable to the hospital-specific 
rates for SCHs and MDHs equals the applicable percentage increase set 
forth in section 1886(b)(3)(B)(i) of the Act (that is, the same update 
factor as for all other hospitals subject to the IPPS). Because the 
statute defines the applicable percentage increase for SCHs and MDHs as 
equal to the applicable percentage increase under section 
1886(b)(3)(B)(i) of the Act for other IPPS hospitals, the update to the 
hospital specific rates for SCHs and MDHs is also subject to the 
amendments to section 1886(b)(3)(B)(i) of the Act made by sections 
3401(a) and 10319(a) of Public Law 111-148 and section 1105 of Public 
Law 111-152, as well as to section 3401(p) of Public Law 111-148. 
Accordingly, for hospitals paid for their inpatient operating costs on 
the basis of a hospital-specific rate, the rates paid to such hospitals 
for discharges occurring during the first half of FY 2010 will be based 
on an annual update estimated to be 2.1 percent for hospitals 
submitting quality data or 0.1 percent for hospitals that fail to 
submit quality data; and the rates paid to such hospitals for the 
second half of FY 2010 will be based on the revised FY 2010 applicable 
percentage increase that is estimated to be 1.85 percent for hospitals 
submitting quality data or -0.15 percent for hospitals that fail to 
submit quality data. Similarly, we are proposing to revise 42 CFR 
412.73(c)(15), 42 CFR 412.75(d), 42 CFR 412.77(e), 42 CFR 412.78(e), 
and 42 CFR 412.79(d) to reflect the changes made to section 
1886(b)(3)(B) by sections 3401(a) and 10319(a) of Public Law 111-148 
and section 1105 of Public Law 111-152, in a supplemental proposed rule 
published elsewhere in this Federal Register.
2. FY 2010 Puerto Rico Hospital Update
    Puerto Rico hospitals are paid a blended rate for their inpatient 
operating costs based on 75 percent of the national standardized amount 
and 25 percent of the Puerto Rico-specific standardized amount. Section 
1886(d)(9)(C)(i) of the Act is the basis for determining the annual 
adjustment to the Puerto Rico-specific standardized amount. Section 
1886(d)(9)(C)(i) of the Act provides that the Puerto Rico standardized 
amount shall be adjusted in accordance with the final determination of 
the Secretary under section 1886(e)(4) of the Act. Section 
1886(e)(4)(A) of the Act in turn directs the Secretary to recommend an 
appropriate change factor for inpatient hospital services for 
discharges in that fiscal year, taking in to account amounts necessary 
for the efficient and effective delivery of medically appropriate and 
necessary care of high quality, as well as the recommendations of 
MedPAC. In order to maintain consistency between the portion of the 
rates paid to Puerto Rico hospitals based on the national standardized 
amount and the portion based on the Puerto Rico-specific standardized 
rate, beginning in FY 2004 we have set the update to the Puerto Rico-
specific operating standardized amount equal to the update to the 
national operating standardized amount for all IPPS hospitals. This 
policy is reflected in our regulations at 42 CFR 412.211.
    The amendments to section 1886(b)(3)(B) of the Act by sections 
3401(a) and 10319(a) of Public Law 111-148 and section 1105 of Public 
Law 111-152, affect only the update factor applicable to the national 
standardized rate for IPPS hospitals and the hospital-specific rates; 
they do not mandate any revisions to the update factor applicable to 
the Puerto Rico-specific standardized amount. Rather, as noted above, 
sections 1886(d)(9)(C)(i) and (e)(4) of the Act direct us to adopt an 
appropriate change factor for the FY 2010 Puerto Rico-specific 
standardized amount, which we did in the FY 2010 IPPS/LTCH PPS final 
rule after notice and comment rulemaking. Therefore, we do not believe 
we have the authority to revise the FY 2010 update factor for the 
Puerto Rico-specific operating standardized amount equal to the update 
factor applicable to the national standardized amount or the hospital-
specific rates (that is the market basket minus 0.25 percentage 
points). Accordingly, the FY 2010 update to the Puerto Rico-specific 
operating standardized amount remains 2.1 percent (that is, the FY 2010 
estimate of the market basket rate-of-increase).

C. Changes to Payment Rates for IPPS for Capital-Related Costs for FY 
2010

    Although the Affordable Care Act does not directly the amend 
provisions regarding payment for the IPPS for capital-related costs, in 
section II.E.2. of this notice we are establishing revised capital IPPS 
standard Federal rates for FY 2010. The revised FY 2010 capital Federal 
rates are effective for discharges occurring on or after April 1, 2010, 
consistent with section 3401(p) of Public Law 111-148. This is 
necessary because the operating IPPS market basket and wage index 
changes required by the provisions of this legislation (discussed above 
in section II.A. of this notice) affect the budget neutrality 
adjustment factor for changes in DRG classifications and weights and 
the geographic adjustment factor (GAF) since the GAF values are derived 
from the wage index values (see Sec.  412.316(a)). In addition, these 
changes necessitate a revision to the outlier payment adjustment factor 
since a single set of thresholds is used to identify outlier cases for 
both inpatient operating and inpatient capital-related payments (see 
Sec.  412.312(c)). The outlier thresholds are set so that operating 
outlier payments are projected to be 5.1 percent of total operating 
IPPS DRG payments. Section 412.308(c)(2) provides that the standard 
Federal rate for inpatient capital-related costs be reduced by an 
adjustment factor equal to the estimated proportion of capital-related 
outlier payments to total inpatient capital-related PPS payments. The 
revised capital IPPS standard Federal rates for FY 2010 (effective for 
discharges occurring on or after April 1, 2010) are discussed in 
section II.E.2. of this notice.

D. Long-Term Care Hospital Market Basket Update and Other Changes

1. Background
    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule that appeared in 
the August 27, 2009 Federal Register (74 FR 43754), we established 
policies, payment rates, and factors for determining payments under the 
LTCH PPS for RY 2010 (October 1, 2009 through September 30, 2010). 
Below we discuss revised RY 2010 LTCH PPS rates and factors consistent 
with the provisions of section 1886(m)(3) as added by section 3401(c) 
of Public Law 111-148, section 1886(m)(4) as added by section 3401(c) 
of Public Law 111-148 and amended by section 10319(b) of

[[Page 31121]]

Public Law 111-148, as further amended by section 1105(b) of Public Law 
111-152, as well as section 3401(p) of Public Law 111-148. Section 
1886(m)(3)(A) of the Act provides that in implementing the system 
described in paragraph (1) [of 1886(m) of the Act] for rate year 2010 
and each subsequent rate year, any annual update to the standard 
Federal rate for discharges for the hospital during the rate year, 
shall be reduced (i) for rate year 2012 and each subsequent rate year, 
by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) [of the Act]; and (ii) for each of the rate years 
2010 through 2019, by the other adjustment described in paragraph (4) 
[of 1886(m) of the Act]. Section 1886(m)(3)(A) of the Act on its face 
explicitly provides for a revised annual update to the standard Federal 
rate beginning RY 2010, thus resulting in a single revised RY 2010 
standard Federal rate. With respect to section 3401(p) of Public Law 
111-148, this section provides that, notwithstanding the previous 
provisions of this section, the amendments made by subsections (a), 
(c), and (d) shall not apply to discharges occurring before April 1, 
2010. When read in conjunction we believe section 1886(m)(3)(A) of the 
Act and section 3401(p) of Public Law 111-148 provide for a single 
revised RY 2010 standard Federal rate; however, for payment purposes, 
discharges occurring on or after October 1, 2009 and before April 1, 
2010, simply will not be based on the revised RY 2010 standard Federal 
rate. In other words, for discharges occurring on or after October 1, 
2009 through March 31, 2010, LTCH PPS payments will be based on the 
payment rates and factors established in the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule (see (74 FR 43754)).
2. Market Basket Update for LTCHs for RY 2010
    As discussed in section VII.C.2. of the preamble of the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 43967 through 43968), we 
continued to use the FY 2002-based rehabilitation, psychiatric, long-
term care (RPL) hospital market basket under the LTCH PPS for RY 2010. 
Also, in that final rule, we stated that at that time, the most recent 
estimate of the increase in the LTCH PPS market basket for RY 2010 was 
2.5 percent. This increase is based on IHS Global Insight, Inc.'s 
second quarter 2009 forecast of the FY 2002-based RPL market basket 
increase for RY 2010. We note, as discussed in the FY 2010 IPPS/RY 2010 
final rule (74 FR 44022), in determining the update to the standard 
Federal rate for RY 2010, in addition to the full market basket 
increase, we also applied a -0.5 percent adjustment to account for the 
increase in case-mix due to changes in documentation and coding 
practices that do not reflect increased patient severity of illness 
from a prior period (that is, FY 2007).
    As indicated above, section 3401(c) of Public Law 111-148 adds 
section 1886(m)(3)(A)(ii) of the Act which specifies that for RY 2010 
and subsequent rate years, any update to the standard Federal rate 
shall be reduced, for each of RYs 2010 through 2019, by the other 
adjustment specified in new section 1886(m)(4) of the Act. 
Specifically, newly added section 1886(m)(4)(A) of the Act requires a 
0.25 percentage point reduction to the annual update for RY 2010. 
Consequently, the market basket update under the LTCH PPS for RY 2010 
is 2.25 percent (that is, the second quarter 2009 forecast estimate of 
the RY 2010 LTCH PPS market basket increase of 2.5 percent minus the 
0.25 percentage points required by sections 1886(m)(3)(A)(ii) and 
(m)(4)(A) of the Act). (We note that to determine the revised standard 
Federal rate for RY 2010 in this notice, we applied the reduced market 
basket update (2.25 percent) as well as a -0.5 percent adjustment to 
account for the increase in case-mix due to changes in documentation 
and coding practices that do not reflect increased patient severity of 
illness from a prior period (FY 2007) that we established in the FY 
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43972).) In addition, in 
section II.F. of the Addendum of this notice, this revision to the 
standard Federal rate for RY 2010 requires us to revise the high cost 
outlier fixed-loss amount for RY 2010, under which the discharges 
occurring on or after April 1, 2010 will be evaluated, in order to 
maintain the requirement that the fixed-loss amount will result in 
estimated total outlier payments being projected to be equal to 8 
percent of projected total LTCH PPS payments. (We also note that we 
determined that it is not necessary to revise the FY 2010 MS-LTC-DRG 
relative weights as a result of the change to the RY 2010 LTCH PPS 
standard Federal rate resulting from the revision to the RY 2010 annual 
update required by the Affordable Care Act. Although the standard 
Federal rate is used in our established methodology for updating the 
annual update to the MS-LTC-DRG classifications and relative weights in 
a manner such that estimated aggregate LTCH PPS payments would be 
unaffected, our payment simulations using the same budget neutrality 
methodology used in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43966 through 43967) show that this revision to the RY 2010 LTCH PPS 
standard Federal rate resulting from the revision to the RY 2010 annual 
update required by the Affordable Care Act, would not change the RY 
2010 budget neutrality factor originally established in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule. Therefore, the FY 2010 MS-LTC-DRG 
relative weights remain unchanged from those established in Table 11 of 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44183 through 
44192).)

E. Final FY 2010 Prospective Payment Systems Payment Rates for Hospital 
Inpatient Operating and Capital Related Costs

1. Final FY 2010 Prospective Payment Rates for Hospital Inpatient 
Operating Costs
    In the FY 2010 IPPS and RY 2010 LTCH PPS final rule published in 
the Federal Register on August 27, 2009 (74 FR 43754), we established 
our methodology to determine the policies, payment rates and factors 
for determining payments under the IPPS for the entire FY 2010 (74 FR 
44002 through 44014). Some of these rates also were corrected, as 
reflected in an October 7, 2009 correction notice (74 FR 51496). Below 
we establish revised FY 2010 IPPS rates and factors consistent with the 
provisions of section 3137(a) of Public Law 111-148, as amended by 
section 10319(a) of Public Law 111-148 and section 1105 of Public Law 
111-152, and section 1886(b)(3)(B), as amended by sections 3401(a) and 
10310(a) of Public Law 111-148 and section 1105 of Public Law 111-152. 
Although these changes modify the FY 2010 rates under the IPPS, in 
accordance with section 3401(p) of Public Law 111-148, the revised IPPS 
payment rates and factors do not apply to discharges occurring prior to 
April 1, 2010. In other words, for discharges occurring on or after 
October 1, 2009 through discharges on or before March 31, 2010, IPPS 
payments will be based on the payment rates and factors established in 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule, and for discharges on or 
after April 1, 2010 through discharges on or before September 30, 2010 
payments will be based on the FY 2010 payment rates and factors 
outlined in this notice.
    The 0.25 percentage point reduction to the applicable percentage 
increase for FY 2010 (as required by section 1886(b)(3)(B)(xii), as 
added and amended by sections 3401(a) and

[[Page 31122]]

section 10319(a) of Pub. L. 111-148 and section 1105 of Pub. L. 111-
152) affects all the budget neutrality factors described below. In 
general, to compute the budget neutrality factors that are applied to 
the standardized amounts, in our simulations of FY 2010 payments we 
used the standardized amount updated by the market basket update 
percentage (for FY 2010). Because the statute now requires a reduction 
to the FY 2010 market basket update, it is necessary to recompute the 
FY 2010 budget neutrality factors applied to the standardized amount by 
resimulating payments with the revised FY 2010 market basket update.
    To calculate the FY 2010 revised payment rates and factors, we used 
the same methodology from the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 44002 through 44014) incorporating the additional reduction 
required by section 1886(b)(3)(B)(xii) of the Act (as discussed below). 
We note that in calculating the budget neutrality factors discussed 
below, we included the wage data corrections discussed in the FY 2010 
IPPS/LTCH PPS final rule correction notice (74 FR 51497 through 51498).
a. Updating the Average Standardized Amounts
    As explained in section II.B. of this notice, in accordance with 
section 3401(p) of Public Law 111-148, for the first half of FY 2010 
(that is, discharges on or after October 1, 2009 through March 30, 
2010), payments will be based on an applicable percentage increase that 
is equal to the market basket index for IPPS hospitals (which is 
defined in 42 CFR 413.40(a)(3)) in all areas for hospitals that submit 
quality data in accordance with our rules, and the market basket index 
for IPPS hospitals in all areas less 2.0 percentage for hospitals that 
fail to submit quality data in accordance with our rules. In the FY 
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44235), we calculated that 
the full market basket update equals 2.1 percent based on IHS Global 
Insight, Inc.'s second quarter 2009 forecast of the FY 2010 market 
basket increase. For the second half of FY 2010 (discharges on or after 
April 1, 2010 through September 30, 2010), in accordance with section 
1886(b)(3)(B)(xii) of the Act, as added and amended by sections 3401(a) 
and 10319(a) of Public Law 111-148 and section 1105 of Public Law 111-
152, as well as section 3401(p) of Public Law 111-148, hospitals are 
paid based on the revised FY 2010 applicable percentage increase. That 
amount is equal to the market basket index for IPPS hospitals in all 
areas reduced by 0.25 percentage points for hospitals that submit 
quality data in accordance with our rules. For those hospitals that 
fail to submit quality data in accordance with our rules, the market 
basket index for IPPS hospitals will continue to be reduced by an 
additional 2.0 percentage points (which is in addition to the 0.25 
percentage point reduction required by new section 1886(b)(3)(B)(xii) 
of the Act). Therefore, based on IHS Global Insight, Inc.'s second 
quarter 2009 forecast of the FY 2010 market basket increase, the 
revised FY 2010 applicable percentage increase is 1.85 percent (that 
is, the FY 2010 estimate of the market basket rate-of-increase of 2.1 
percent minus 0.25 percentage points) for hospitals in all areas, 
provided the hospital submits quality data in accordance with our 
rules. For hospitals that do not submit quality data, the payment 
update to the operating standardized amount is -0.15 percent (that is, 
the adjusted FY 2010 estimate of the market basket rate-of-increase of 
1.85 percent minus 2.0 percentage points). Hospitals will be paid based 
on these revised payment update amounts for discharges occurring in the 
second half of FY 2010. We note that in order to implement the 
requirements of section 1886(b)(3)(B) of the Act, as amended by 
sections 3401(a) and 10319(a) of Public Law 111-148 and section 1105 of 
Public Law 111-152, we are proposing to revise 42 CFR 412.64(d) in a 
supplemental proposed rule published elsewhere in this Federal 
Register.
    The amendments to section 1886(b)(3)(B) of the Act by sections 
3401(a) and 10319(a) of Public Law 111-148 and section 1105 of Public 
Law 111-152, affect only the update factor applicable to the national 
standardized rate for IPPS hospitals and the hospital-specific rates; 
they do not mandate any revisions to the update factor applicable to 
the Puerto Rico-specific standardized amount. Rather, sections 
1886(d)(9)(C)(i) and (e)(4) of the Act direct us to adopt an 
appropriate change factor for the FY 2010 Puerto Rico-specific 
standardized amount, which we did in the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule after notice and consideration of public comments. 
Therefore, we do not believe that we have the authority to revise the 
FY 2010 update factor for the Puerto Rico-specific operating 
standardized amount equal to the update factor applicable to the 
national standardized amount or the hospital-specific rates (that is 
the market basket minus 0.25 percentage points). Accordingly, the FY 
2010 update to the Puerto Rico-specific operating standardized amount 
remains 2.1 percent (that is, the FY 2010 estimate of the market basket 
rate-of-increase).
b. Final FY 2010 Budget Neutrality Adjustments Factors for 
Recalibration of DRG Weights and Updated Wage Index
    Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final 
rule for calculating budget neutrality, for FY 2010 (74 FR 44005), we 
are setting the following budget neutrality factors in order to account 
for the changes made by the Affordable Care Act: A DRG reclassification 
and recalibration factor of 0.997935 and a budget neutrality factor of 
1.000418 for changes to the wage index. We multiplied the DRG 
reclassification and recalibration budget neutrality factor of 0.997935 
by the budget neutrality factor of 1.000418 for changes to the wage 
index to determine the DRG reclassification and recalibration and 
updated wage index budget neutrality factor of 0.998352 (as required by 
sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E)(i) of the Act). 
Consistent with section 3401(p) of Public Law 111-148, we applied these 
revised factors to the Federal rate on which payments are made for 
discharges occurring on or after April 1, 2010.
c. Final FY 2010 Reclassified Hospitals-Budget Neutrality Adjustment
    Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final 
rule for calculating reclassification budget neutrality (74 FR 44005 
through 44006), we computed the following factor in order to account 
for the changes made by the Affordable Care Act: A 0.991985 factor for 
reclassification budget neutrality, as required by section 
1886(d)(8)(D) of the Act. Consistent with sections 3137(a) and 3401(p) 
of the Public Law 111-148, we applied this factor to the Federal rate 
that is applied in determining payments for FY 2010 discharges 
occurring on or after April 1, 2010.
    We note, as discussed in section II.A. of this notice, section 
3137(a) of Public Law 111-148, as amended by section 10317 of Public 
Law 111-148 has now extended the hospital reclassification provisions 
of section 508 and certain special exceptions through September 30, 
2010 (FY 2010). Consistent with section 106(a) of Public Law 109-432, 
payments for providers reclassified under section 508 and under the 
special exception policy are not budget neutral. However, section 
3137(a)(2)(B) of Public Law 111-148 requires us to also recalculate the 
reclassification wage indices of areas by excluding those hospitals 
whose section 508

[[Page 31123]]

reclassifications and special exceptions wage indices have been 
extended, if doing so would increase the reclassification wage index. 
These payments of providers located in section 508 and special 
exception areas (that are not section 508 or special exception 
providers), as well as hospitals reclassified to those areas, are 
subject to budget neutrality. Therefore, we included the additional 
payments associated with the increased payments being made to such 
hospitals as a result of section 3137(a) of Public Law 111-148 in our 
calculation of the reclassified wage index budget neutrality factor, 
pursuant to section 1886(d)(8)(D) of the Act. This section requires 
that aggregate payments under section 1886 of the Act do not increase 
as a result of the costs associated with reclassifications. Our 
analysis relied on the most up-to-date wage data, that is, the 
corrected wage indexes from the FY 2010 IPPS/RY 2010 LTCH PPS 
correction notice (74 FR 51497 through 51498) in the calculation of the 
reclassified wage index budget neutrality factor. Guidance to FIs and 
A/B MACs will be issued separate from this notice for hospital wage 
indexes that are increasing as a result of the extension of section 508 
reclassifications and special exceptions.
d. Final FY 2010 Rural and Imputed Floor Budget Neutrality
    We make an adjustment to the wage index to ensure that aggregate 
payments to hospitals are not affected by the rural floor under section 
4410 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) and the 
imputed floor under Sec.  412.64(h)(4) of the regulations. As discussed 
in section III.B. of the preamble to the FY 2009 IPPS final rule (73 FR 
48570 through 48574), we adopted State-level budget neutrality for the 
rural and imputed floors, effective beginning with the FY 2009 wage 
index. In response to the public's concerns and taking into account the 
potentially significant payment cuts that could occur to hospitals in 
some States if we implemented this change with no transition, we phased 
in, over a 3-year period, the transition from a national rural floor 
budget neutrality adjustment on the wage index to a State-level rural 
floor budget neutrality adjustment on the wage index. For FY 2010, the 
blended wage index was determined by adding 50 percent of the wage 
index adjusted by applying the State-level rural and imputed floor 
budget neutrality adjustment and 50 percent of the wage index adjusted 
by applying the national budget neutrality adjustment.
    Similar to the budget neutrality factors above, we included the 
corrected wage data from the FY 2010 IPPS/LTCH PPS final rule 
correction notice and the post reclassified wage index changes that 
resulted from the extension of the hospital reclassification provisions 
of section 508 and certain special exceptions in our calculation of the 
FY 2010 rural and imputed floor budget neutrality factors. We note that 
section 3137(a)(2)(B) of Public Law 111-148, as amended by section 
10317 of Public Law 111-148, requires that beginning April 1, 2010, we 
include the average hourly wage data of hospitals whose section 508 
reclassifications and special exception wage indices were extended, 
only if doing so results in a higher reclassification wage index. We 
interpret this language as referring to the reclassification wage index 
that is calculated pursuant to section 1886(d)(8)(C) of the Act, as 
that is the reclassification wage index calculation that employs 
average hourly wage data. We do not interpret the language as referring 
to the reclassification wage index after it is subsequently adjusted 
for rural/imputed floor budget neutrality, as that budget neutrality 
adjustment is not based upon average hourly wage data, and is not made 
to adjust for the effects of reclassifications.
    Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final 
rule (74 FR 44006), we calculated a national rural and imputed floor 
budget neutrality adjustment factor of 0.996686. Each State's rural or 
imputed floor budget neutrality adjustment can be found in table 4D-1 
of the Addendum of this notice. Additionally, in order to ensure that 
national payments overall remain budget neutral after application of 
the blended national and state rural and imputed floors, an additional 
adjustment factor of 1.000010 must be applied to the blended post 
reclassified, post-floor (including budget neutrality) wage indices. 
Consistent with section 3401(p) of Public Law 111-148, we applied these 
factors to the wage indexes that are applied in determining payments 
for FY 2010 discharges occurring on or after April 1, 2010.
e. Final FY 2010 Rural Community Hospital Demonstration Program 
Adjustment
    Using the methodology finalized in the FY 2010 IPPS/LTCH PPS final 
rule and accounting for the projected total annual impact of 
$27,141,815 for FY 2010 (74 FR 44012; and reflecting the provisions of 
the Affordable Care Act) we computed a budget neutrality adjustment of 
0.999739 for the rural community hospital demonstration, in order to 
satisfy section 410A(c)(2) of Public Law 108-173. We note, after re-
simulating payments reflecting the provisions of the Affordable Care 
Act, the adjustment factor in this notice is the same as the adjustment 
factor computed in the FY 2010 IPPS/LTCH PPS final rule. Consistent 
with section 3401(p) of Public Law 111-148, we applied this factor to 
the Federal rate that is applied in determining payments for FY 2010 
discharges occurring on or after April 1, 2010.
f. Final FY 2010 Outlier Fixed-Loss Cost Threshold
    We are revising the FY 2010 outlier fixed-loss cost threshold due 
to the change in the market basket and other budget neutrality factors 
described above. Using the methodology we finalized in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 44007 through 44011) and taking 
into account the provisions of the Affordable Care Act as discussed 
above, we are finalizing an outlier fixed-loss cost threshold for FY 
2010 equal to the prospective payment rate for the DRG, plus any IME 
and DSH payments, and any add-on payments for new technology, plus 
$23,135. Consistent with section 3401(p) of the Public Law 111-148, we 
are applying this threshold for FY 2010 discharges occurring on or 
after April 1, 2010.
g. Final FY 2010 Outlier Adjustment Factors
    The FY 2010 outlier adjustment factors that are applied to the FY 
2010 standardized amount for the FY 2010 outlier threshold are as 
follows:

------------------------------------------------------------------------
                                          Operating
                                        standardized     Capital federal
                                           amounts            rate
------------------------------------------------------------------------
National............................          0.948998          0.947766
Puerto Rico.........................          0.957417          0.935787
------------------------------------------------------------------------


[[Page 31124]]

    Consistent with section 3401(p) of Public Law 111-148, we applied 
these revised factors to the Federal rate on which payments are made 
for discharges occurring on or after April 1, 2010.
h. FY 2010 Standardized Amount
    We recalculated the FY 2010 final standardized amounts using the 
methodology finalized in the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 44002 through 44014) and taking into account the changes 
required by the provisions of the Affordable Care Act as discussed 
above. Tables 1A and 1B of the Addendum to this notice contain the 
final national standardized amount that we are applying to all 
hospitals, except hospitals in Puerto Rico. The final Puerto Rico-
specific amounts are shown in Table 1C. The amounts shown in Tables 1A 
and 1B differ only in that the labor-related share applied to the final 
standardized amounts in Table 1A is 68.8 percent, and the labor-related 
share applied to the final standardized amounts in Table 1B is 62 
percent.
    In addition, Tables 1A and 1B include the final standardized 
amounts reflecting the FY 2010 adjusted market basket update of 1.85 
percent update and final standardized amounts reflecting the additional 
2.0 percentage point reduction to the update applicable for hospitals 
that fail to submit quality data consistent with section 
1886(b)(3)(B)(viii) of the Act (resulting in a -0.15 percent update). 
Below is a revised table reflecting the changes required by the 
provisions of the Affordable Care Act that details the calculation of 
the final FY 2010 standardized amounts. Consistent with section 3401(p) 
of Public Law 111-148, hospitals are paid based on these rates for 
discharges occurring on or after April 1, 2010.

   Comparison of FY 2009 Standardized Amounts to the FY 2010 Standardized Amount With Full and Reduced Update
----------------------------------------------------------------------------------------------------------------
                                                                           Reduced update (-   Reduced update (-
                                  Full update (1.85    Full update (1.85    0.15 percent);      0.15 percent);
                                    percent); wage      percent); wage       wage index is    wage index is less
                                   index is greater   index is less than     greater than      than or equal to
                                     than 1.0000      or equal to 1.0000        1.0000              1.0000
----------------------------------------------------------------------------------------------------------------
FY 2009 Base Rate, after         Labor: $3,748.52...  Labor: $3,378.03..  Labor: $3,748.52..  Labor: $3,378.03.
 removing geographic             Nonlabor: $1,699.91  Nonlabor:           Nonlabor:           Nonlabor:
 reclassification budget                               $2,070.40.          $1,699.91.          $2,070.40.
 neutrality, demonstration
 budget neutrality and outlier
 offset (based on the labor-
 related share percentage for
 FY 2010).
FY 2010 Update Factor..........  1.0185.............  1.0185............  0.9985............  0.9985.
FY 2010 DRG Recalibration and    0.998352...........  0.998352..........  0.998352..........  0.998352.
 Wage Index Budget Neutrality
 Factor.
FY 2010 Reclassification Budget  0.991985...........  0.991985..........  0.991985..........  0.991985.
 Neutrality Factor.
FY 2010 Outlier Factor.........  0.948998...........  0.948998..........  0.948998..........  0.948998.
Rural Demonstration Budget       0.999739...........  0.999739..........  0.999739..........  0.999739.
 Neutrality Factor.
Rate for FY 2010...............  Labor: $3,587.24...  Labor: $3,232.69..  Labor: $3,516.80..  Labor: $3,169.22.
                                 Nonlabor: $1,626.78  Nonlabor:           Nonlabor:           Nonlabor:
                                                       $1,981.33.          $1,594.84.          $1,942.42.
----------------------------------------------------------------------------------------------------------------

    The labor-related and nonlabor-related portions of the national 
average standardized amounts for Puerto Rico hospitals for FY 2010 are 
set forth in Table 1C in this notice. (The labor-related share applied 
to the Puerto Rico-specific standardized amount is either 62.1 percent 
or 62 percent, depending on which is more advantageous to the 
hospital.)
i. Final FY 2010 Adjustments for Area Wage Levels
    The following wage index tables were revised in this notice as a 
result of the provisions of the Affordable Care Act: Tables 2, 4A, 4B, 
4C, 4D-1, 4D-2, 4J, and 9B. (These tables can be found in the Addendum 
to this notice and are also available on the CMS Web site at http://www.cms.gov/AcuteInpatientPPS/WIFN/itemdetail.asp?filterType=none&filterByDID=0&sortByDID=3&sortOrder=descending&itemID=CMS1234175&intNumPerPage=10 NumPerPage=10.)
2. FY 2010 Prospective Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs
    Although the provisions of the Affordable Care Act do not directly 
affect the payment rates and policies for the IPPS for capital-related 
costs, as discussed in section II.C. of this notice, we are revising 
the capital IPPS standard Federal rates for FY 2010. The revised FY 
2010 capital Federal rates are effective for discharges occurring on or 
after April 1, 2010, consistent with section 3401(p) of Public Law 111-
148. The revision to the FY 2010 capital Federal rates is necessary 
because the operating IPPS market basket and wage index changes 
required by the provisions of the Affordable Care Act (discussed in 
section II.A. of this notice) affect the budget neutrality adjustment 
factor for changes in DRG classifications and weights and the 
geographic adjustment factor (GAF) since the GAF values are derived 
from the wage index values (see Sec.  412.316(a)). In addition, the 
provisions of the Affordable Care Act also necessitate a revision to 
the outlier payment adjustment factor for FY 2010 since a single set of 
thresholds is used to identify outlier cases for both inpatient 
operating and inpatient capital-related payments (see Sec.  
412.312(c)).
    In this notice, we have calculated the final FY 2010 capital 
Federal rates, offsets, and budget neutrality factors using the same 
methodology we adopted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 44014 through 44021), as revised by the FY 2010 IPPS/RY 2010 
LTCH PPS correction notice (October 7, 2009; (74 FR 51496 through 
51499)), that was used to calculate the final rates and factors 
included in that rule which did not reflect the provisions of the 
Affordable Care Act. For a complete description of this methodology, 
please

[[Page 31125]]

see the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44014 through 
44021), as revised by the FY 2010 IPPS/RY 2010 LTCH PPS correction 
notice (74 FR 51496 through 51499).
a. Capital Standard Federal Rate Update for FY 2010
    The final factors used in the FY 2010 update framework are not 
affected by the provisions of the Affordable Care Act. Therefore, the 
final update factor for FY 2010 is not being revised from the final 
capital IPPS standard Federal rate update factor discussed in section 
III.A.1. of the FY 2010 IPPS/RY 2010 LTCH PPS final rule, as revised by 
the FY 2010 IPPS/RY 2010 LTCH PPS correction notice and remains at 1.2 
percent for FY 2010. A full discussion of the update framework is 
provided in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44015 
through 44017) in conjunction with the FY 2010 IPPS/RY 2010 LTCH PPS 
correction notice (74 FR 51498 through 51499).
b. Outlier Payment Adjustment Factor
    Based on the thresholds as set forth in section II.E.2. of this 
notice, we estimate that outlier payments for capital-related costs 
will equal 5.22 percent for inpatient capital-related payments based on 
the final capital Federal rate in FY 2010. Therefore, we are applying 
an outlier adjustment factor of 0.9478 in determining the FY 2010 
capital Federal rate. For FY 2009, we estimated that outlier payments 
for capital will equal 5.35 percent of inpatient capital-related 
payments, and we established an outlier adjustment factor of 0.9465 for 
FY 2009 based on the capital Federal rate in FY 2009 (73 FR 57891). 
Thus, we estimate that the percentage of capital outlier payments to 
total capital standard payments for FY 2010 will be lower than the 
percentage for FY 2009. This decrease in capital outlier payments is 
primarily due to the estimated increase in capital IPPS payments per 
discharge. That is, because capital payments per discharge are 
projected to increase in FY 2010 compared to FY 2009, as shown in Table 
III. in section IV.C. of this notice, fewer cases will qualify for 
outlier payments.
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The FY 2010 outlier adjustment of 
0.9478 is a 0.14 percent change from the FY 2009 outlier adjustment of 
0.9465. Therefore, the net change in the outlier adjustment to the 
capital Federal rate for FY 2010 is 1.0014 (0.9478/0.9465). Thus, the 
outlier adjustment increases the FY 2010 capital Federal rate by 0.14 
percent compared to the FY 2009 outlier adjustment.
    A single set of thresholds is used to identify outlier cases for 
both inpatient operating and inpatient capital-related payments (see 
Sec.  412.312(c)). The outlier thresholds are set so that operating 
outlier payments are projected to be 5.1 percent of total operating 
IPPS DRG payments. The outlier thresholds for FY 2010 are in section 
II.E.1. of this notice. For FY 2010, for discharges occurring on or 
after April 1, 2010, a case qualifies as a cost outlier if the cost for 
the case plus the IME and DSH payments is greater than the prospective 
payment rate for the MS-DRG plus the fixed-loss amount of $23,135.
c. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the GAF
    Using the methodology discussed in section III.A.3. of the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 44018 through 44019), for FY 
2010, we are establishing a GAF/DRG budget neutrality factor of 0.9994, 
which is the product of the incremental GAF budget neutrality factor of 
0.9999 and the DRG budget neutrality factor of 0.9995 (the DRG budget 
neutrality factor remains unchanged from the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule). The GAF/DRG budget neutrality factors are built 
permanently into the capital rates; that is, they are applied 
cumulatively in determining the capital Federal rate. This follows the 
requirement that estimated aggregate payments each year be no more or 
less than they would have been in the absence of the annual DRG 
reclassification and recalibration and changes in the GAFs. The 
incremental change in the adjustment from FY 2009 to FY 2010 is 0.9994. 
The cumulative change in the FY 2010 capital Federal rate due to this 
adjustment is 0.9911 (the product of the incremental factors for FYs 
1995 though 2009 and the incremental factor of 0.9994 for FY 2010). (We 
note that averages of the incremental factors that were in effect 
during FYs 2005 and 2006, respectively, and the revised FY 2010 factor 
of 0.9994 that reflect the effect of the provisions of the Affordable 
Care Act (as discussed in section II.C. of this notice) were used in 
the calculation of the cumulative adjustment of 0.9911 for FY 2010.) 
The cumulative adjustments for MS-DRG classifications and changes in 
relative weights and for changes in the national GAFs through FY 2010 
is 0.9911. The following table summarizes the adjustment factors for 
each fiscal year:
BILLING CODE 4120-01-P

[[Page 31126]]

[GRAPHIC] [TIFF OMITTED] TN02JN10.154

BILLING CODE 4120-01-C
    The factor accounts for the MS-DRG reclassifications and 
recalibration and for changes in the GAFs, which include the changes to 
the operating IPPS market basket update and wage index as required by 
the provisions of the Affordable Care Act (as discussed in section 
II.A. of this notice). It also incorporates the effects on the GAFs of 
FY 2010 geographic reclassification decisions made by the MGCRB 
compared to FY 2009 decisions. However, it does not account for changes 
in payments due to changes in the DSH and IME adjustment factors.
d. Exceptions Payment Adjustment Factor
    The provisions of the Affordable Care Act have no effect on capital 
exceptions

[[Page 31127]]

payments. Therefore, the special exceptions adjustment factor remains 
at 0.9998 as discussed in section III.A.4. of the FY 2010 IPPS/RY 2010 
LTCH PPS final rule (74 FR 44019).
e. Capital Standard Federal Rate for FY 2010
    As a result of the 1.2 percent update and other budget neutrality 
factors discussed above, we are establishing a national capital Federal 
rate of $429.56 for FY 2010. As stated above, this rate will apply to 
discharges occurring on or after April 1, 2010, consistent with section 
3401(p) of Public Law 111-148. We are providing the following chart 
that shows how each of the factors and adjustments for FY 2010 affects 
the computation of the FY 2010 national capital Federal rate in 
comparison to the FY 2009 national capital Federal rate. The FY 2010 
update factor has the effect of increasing the capital Federal rate by 
1.2 percent compared to the FY 2009 capital Federal rate. The GAF/DRG 
budget neutrality factor of 0.9994 has the effect of decreasing the 
capital Federal rate by 0.06 percent compared to the FY 2009 capital 
Federal rate. The FY 2010 outlier adjustment factor has the effect of 
increasing the capital Federal rate by 0.14 percent compared to the FY 
2009 capital Federal rate. The FY 2010 exceptions payment adjustment 
factor has the effect of decreasing the capital Federal rate by 0.01 
percent compared to the FY 2009 capital Federal rate. As discussed in 
section VI.E.1. of the preamble of the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 43926 through 43928), we did not apply an additional 
adjustment to the FY 2010 capital Federal rate for changes in 
documentation and coding that do not reflect real changes in patients' 
severity of illness. A permanent cumulative adjustment of -1.5 percent 
(that is, a factor of 0.985) was applied in determining the FY 2009 
capital Federal rate for changes in documentation and coding that do 
not reflect real changes in patients' severity of illness. The combined 
effect of all the changes increase the national capital Federal rate by 
approximately 1.27 percent compared to the FY 2009 national capital 
Federal rate.

      Comparison of Factors and Adjustments: FY 2009 Capital Federal Rate and FY 2010 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
                                                                                                       Percent
                                                                FY 2009      FY 2010       Change       change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\...........................................       1.0090       1.0120       1.0120         1.20
GAF/DRG Adjustment Factor \1\...............................       1.0004       0.9994       0.9994        -0.06
Outlier Adjustment Factor \2\...............................       0.9465       0.9478       1.0014         0.14
Exceptions Adjustment Factor \2\............................       0.9999       0.9998       0.9999        -0.01
MS-DRG Documentation and Coding Adjustment Factor...........   \3\ 0.9850   \3\ 0.9850       1.0000         0.00
Capital Federal Rate........................................      $424.17      $429.56       1.0127         1.27
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality factors are built permanently into the capital rates.
  Thus, for example, the incremental change from FY 2009 to FY 2010 resulting from the application of the 0.9994
  GAF/DRG budget neutrality factor for FY 2010 is a net change of 0.9994.
\2\ The outlier reduction factor and the exceptions adjustment factor are not built permanently into the capital
  rates; that is, these factors are not applied cumulatively in determining the capital rates. Thus, for
  example, the net change resulting from the application of the FY 2010 outlier adjustment factor is 0.9478//
  0.9465, or 1.0014.
\3\ The documentation and coding adjustment factor includes the -0.6 percent in FY 2008, -0.9 percent in FY
  2009, and no additional reduction in FY 2010.

    We are also providing a chart that shows how the revised FY 2010 
capital Federal rate, which reflects the effect of the provisions of 
the Affordable Care Act differs from the FY 2010 capital Federal rate 
as presented in the FY 2010 IPPS final rule (74 FR 44020), as revised 
by the FY 2010 IPPS/RY 2010 LTCH PPS correction notice (74 FR 52499).

  Comparison of Factors and Adjustments: FY 2010 Capital Federal Rate Prior to the Enactment of the Affordable
Care Act and Revised FY 2010 Capital Federal Rate Reflecting the Effect of the Provisions of the Affordable Care
                                                       Act
----------------------------------------------------------------------------------------------------------------
                                                                            Revised FY                 Percent
                                                              FY 2010 \*\   2010 \**\      Change       change
----------------------------------------------------------------------------------------------------------------
Update Factor...............................................       1.0120       1.0120       1.0000         0.00
GAF/DRG Adjustment Factor...................................       0.9990       0.9994       1.0004         0.04
Outlier Adjustment Factor...................................       0.9475       0.9478       1.0003         0.03
Exceptions Adjustment Factor................................       0.9998       0.9998       1.0000         0.00
MS-DRG Documentation and Coding Adjustment Factor...........       1.0000       1.0000       1.0000         0.00
Capital Federal Rate........................................      $429.26      $429.56       1.0007         0.07
----------------------------------------------------------------------------------------------------------------
* FY 2010 capital IPPS rates and factors established in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
  44020), as revised by the FY 2010 IPPS/RY 2010 LTCH PPS correction notice (74 FR 52499), developed prior to
  the enactment of the Affordable Care Act.
** Final FY 2010 capital IPPS rates and factors reflecting the effect of the provisions of the Affordable Care
  Act.


[[Page 31128]]

f. Special Capital Rate for Puerto Rico Hospitals
    Using the methodology discussed in the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule (74 FR 44020), with the changes we are making to the 
factors used to determine the capital rate, the FY 2010 special capital 
rate for hospitals in Puerto Rico is $203.57. (See the FY 2010 IPPS/RY 
2010 LTCH PPS final rule (74 FR 44015 through 44020) and FY 2010 IPPS/
RY 2010 LTCH PPS correction notice (74 FR 51499) for additional 
information on the calculation of the FY 2010 capital Puerto Rico 
specific rate.)

F. Changes to the Payment Rates for the LTCH PPS for RY 2010

1. LTCH PPS Standard Federal Rate for RY 2010
a. Revision of Certain Market Basket Updates as Required by the 
Affordable Care Act
    In section V. of the Addendum of the FY 2010 IPPS/RY 2010 final 
rule (74 FR 44021 through 44022), we discuss the changes to the payment 
rates and factors under the LTCH PPS for RY 2010. Below we establish 
revised RY 2010 LTCH PPS rates and factors consistent with the 
provisions of section 1886(m)(3) of the Act as added by section 3401(c) 
of Public Law 111-148, and section 1886(m)(4) as added by section 
3401(c) of Public Law 111-148 and amended by section 10319(b) of Public 
Law 111-148, as further amended by section 1105(b) of Public Law 111-
152, as well as section 3401(p) of Public Law 111-148. Section 
1886(m)(3)(A) of the Act provides that in implementing the system 
described in paragraph (1) [of 1886(m) of the Act] for rate year 2010 
and each subsequent rate year, any annual update to the standard 
Federal rate for discharges for the hospital during the rate year, 
shall be reduced (i) for rate year 2012 and each subsequent rate year, 
by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) [of the Act]; and (ii) for each of the rate years 
2010 through 2019, by the other adjustment described in paragraph (4) 
[of 1886(m) of the Act]. As explained above in section II.D. of this 
notice, section 1886(m)(3)(A) of the Act on its face explicitly 
provides for a revised annual update to the standard Federal rate 
beginning RY 2010, thus resulting in a single revised RY 2010 standard 
Federal rate. Under section 1886(m)(3)(A)(ii), the annual update to the 
standard Federal rate shall be reduced for each of the rate years 2010 
through 2019, by the other adjustment described in paragraph (4) [of 
1886(m) of the Act]. Section 1886(m)(4)(A) of the Act provides for a 
0.25 percentage point reduction to the annual update for RY 2010. 
Therefore, we are reducing the applicable market basket update for RY 
2010 by 0.25 percentage points, as described in greater detail below. 
With respect to section 3401(p) of Public Law 111-148, this section 
provides that, notwithstanding the previous provisions of this section, 
the amendments made by subsections (a), (c) and (d) shall not apply to 
discharges occurring before April 1, 2010. When read in conjunction, we 
believe section 1886(m)(3)(A)(ii) of the Act and section 3401(p) of 
Public Law 111-148 provide for a single revised RY 2010 standard 
Federal rate; however, for payment purposes, discharges occurring on or 
after October 1, 2009 and before April 1, 2010, simply will not be 
based on the revised RY 2010 standard Federal rate. (In other words, 
for discharges occurring on or after October 1, 2009 and on or before 
March 31, 2010, the update to the LTCH PPS Federal rate will be based 
on the applicable update factor set forth in the FY 2010 IPPS/RY 2010 
LTCH PPS final rule (74 FR 44022).) For discharges occurring on or 
after April 1, 2010 through September 30, 2010, payment is based on the 
revised RY 2010 standard Federal rate established below in this notice.
b. Development of the RY 2010 LTCH PPS Standard Federal Rate
    As discussed in section V.A. of the Addendum of the FY 2010 IPPS/RY 
2010 LTCH PPS final rule (74 FR 44022), while we continue to believe 
that an update to the LTCH PPS standard Federal rate should be based on 
the most recent estimate of the increase in the LTCH PPS market basket, 
we also believe it is appropriate that the standard Federal rate be 
offset by an adjustment to account for any changes in documentation and 
coding practices that do not reflect increased patient severity of 
illness. Such an adjustment protects the integrity of the Medicare 
Trust Funds by ensuring that the LTCH PPS payment rates better reflect 
the true costs of treating LTCH patients.
    As discussed in section II.D. of this notice, consistent with 
sections 1886(m)(3)(A)(ii) and (4)(A) of the Act, the market basket 
update under the LTCH PPS for RY 2010 is 2.25 percent (that is, the 
second quarter 2009 forecast estimate of the RY 2010 LTCH PPS market 
basket increase of 2.5 percent minus the 0.25 percentage points 
required by sections 1886(m)(3)(A)(ii) and (4)(A) of the Act. 
Furthermore, as discussed in greater detail in the FY 2010 IPPS/RY 2010 
final rule (74 FR 44022), while we continued to believe that an update 
to the LTCH PPS standard Federal rate should be based on the most 
recent estimate of the increase in the LTCH PPS market basket, we also 
believed it is appropriate that the standard Federal rate be offset by 
an adjustment to account for any changes in documentation and coding 
practices that do not reflect increased patient severity of illness. 
Therefore, in determining the update to the standard Federal rate for 
RY 2010 in that same final rule, based on an analysis of FY 2007 claims 
data, we established a -0.5 adjustment to account for the increase in 
case-mix due to changes in documentation and coding practices that do 
not reflect increased patient severity of illness from a prior period 
(FY 2007).
    Consistent with our historical practice and the methodology used in 
the FY 2010 IPPS/RY 2010 final rule, in this notice, we are 
establishing an update to the LTCH PPS standard Federal rate for RY 
2010 based on the full forecasted estimated increase in the LTCH PPS 
market basket of 2.5 percent, adjusted by the 0.25 percentage point 
reduction required by sections 1886(m)(3)(A)(ii) and (4)(A) of the Act 
and an adjustment to account for the increase in case-mix in a prior 
period (FY 2007) resulting from changes in documentation and coding 
practices of -0.5 percent. Consequently, the update factor to the 
standard Federal rate for RY 2010 is 1.74 percent (that is, we are 
applying a factor of 1.0174 in determining the LTCH PPS standard 
Federal rate for RY 2010, calculated as 1.0225 x 1 divided by 1.005 = 
1.0174 or 1.74 percent).) Furthermore, consistent with our historical 
practice of updating the standard Federal rate for the previous rate 
year, in determining the standard Federal rate for RY 2010 in this 
notice, we are applying the update factor of 1.0174 to the RY 2009 
standard Federal rate of $39,114.36 (established in the RY 2009 LTCH 
PPS final rule (73 FR 26788)). Furthermore, consistent with section 
3401(p) of Public Law 111-148, this update factor to the standard 
Federal rate for RY 2010 will not be applied in determining LTCH PPS 
payments for discharges occurring prior to April 1, 2010. In other 
words, for discharges occurring on or after October 1, 2009 through 
March 31, 2010, LTCH PPS payments will be based on the standard Federal 
rate established in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (that 
is, 2.0 percent).
    Therefore, in this notice, under the authority of sections 
1886(m)(3)(A)(ii)

[[Page 31129]]

and (4)(A) of the Act, we are specifying that the standard Federal rate 
for the LTCH PPS rate year beginning October 1, 2009 and ending 
September 30, 2010, is the standard Federal rate for the previous rate 
year updated by 1.74 percent. In a supplemental proposed rule published 
elsewhere in this Federal Register, we are proposing to revise the 
regulations text at Sec.  412.523(c)(3)(vi) consistent with the 1.74 
percent update for RY 2010 that we are establishing in this notice. In 
determining the standard Federal rate for RY 2010, we are applying the 
1.0174 update factor to the RY 2009 Federal rate of $39,114.36 (73 FR 
26812). Consequently, the standard Federal rate for RY 2010, developed 
consistent with sections 1886(m)(3)(A)(ii) and (4)(A) of the Act is 
$39,794.95. Furthermore, consistent with section 3401(p) of Public Law 
111-148, we are proposing to revise Sec.  412.523(c)(3)(vi)(B) in a 
supplemental proposed rule published elsewhere in this Federal 
Register. Section 412.523(c)(3(vi)(B) would specify that with respect 
to discharges occurring on or after October 1, 2009 and before April 1, 
2010, payments are based on the standard Federal rate in Sec.  
412.523(c)(v) updated by 2.0 percent (that is, a standard Federal rate 
of $39,896.65 (see 74 FR 44022).
2. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
a. Background
    When we implemented the LTCH PPS in the FY 2003 LTCH PPS final 
rule, in the regulations at Sec.  412.525(a), we established an 
adjustment for additional payments for outlier cases that have 
extraordinarily high costs relative to the costs of most discharges 
(see (67 FR 56022 through 56027)). We refer to these cases as high cost 
outliers (HCOs). Providing additional payments for outliers strongly 
improves the accuracy of the LTCH PPS in determining resource costs at 
the patient and hospital level. These additional payments reduce the 
financial losses that would otherwise be incurred when treating 
patients who require more costly care and, therefore, reduce the 
incentives to underserve these patients. We set the outlier threshold 
before the beginning of the applicable rate year so that total 
estimated outlier payments are projected to equal 8 percent of total 
estimated payments under the LTCH PPS.
    Under Sec.  412.525(a) in the regulations (in conjunction with 
Sec.  412.503), we make outlier payments for any discharges if the 
estimated cost of a case exceeds the adjusted LTCH PPS payment for the 
MS-LTC-DRG plus a fixed-loss amount. Specifically, in accordance with 
Sec.  412.525(a)(3) (in conjunction with Sec.  412.503), we pay outlier 
cases 80 percent of the difference between the estimated cost of the 
patient case and the outlier threshold, which is the sum of the 
adjusted Federal prospective payment for the MS-LTC-DRG and the fixed-
loss amount. The fixed-loss amount is the amount used to limit the loss 
that a hospital will incur under the outlier policy for a case with 
unusually high costs. This results in Medicare and the LTCH sharing 
financial risk in the treatment of extraordinarily costly cases. Under 
the LTCH PPS HCO policy, the LTCH's loss is limited to the fixed-loss 
amount and a fixed percentage of costs above the outlier threshold (MS-
LTC-DRG payment plus the fixed-loss amount). The fixed percentage of 
costs is called the marginal cost factor. We calculate the estimated 
cost of a case by multiplying the Medicare allowable covered charge by 
the hospital's overall hospital cost-to-charge ratio (CCR).
    Under the LTCH PPS, we determine a fixed-loss amount, that is, the 
maximum loss that a LTCH can incur under the LTCH PPS for a case with 
unusually high costs before the LTCH will receive any additional 
payments. We calculate the fixed-loss amount by estimating aggregate 
payments with and without an outlier policy. The fixed-loss amount 
results in estimated total outlier payments being projected to be equal 
to 8 percent of projected total LTCH PPS payments. Currently, MedPAR 
claims data and CCRs based on data from the most recent provider 
specific file (PSF) (or from the applicable statewide average CCR if a 
LTCH's CCR data are faulty or unavailable) are used to establish a 
fixed-loss threshold amount under the LTCH PPS.
    As discussed in section II.F.1.c. of this notice, various sections 
of Public Law 111-148 and Public Law 111-152 amended section 1886(m) of 
the Act by adding new paragraphs (3) and (4). Consistent with the 
provisions of sections 1886(m)(3)(A)(ii) and (4)(A) of the Act, we are 
establishing a revised standard Federal rate for RY 2010 by applying 
the required 0.25 percentage point reduction to the annual update for 
RY 2010. Notwithstanding these provisions, section 3401(p) of Public 
Law 111-148 provides that the amendments made by subsections (a), (c) 
and (d) of section 3401 of of Public Law 111-148 shall not apply to 
discharges occurring before April 1, 2010. When read in conjunction we 
believe section 1886(m)(3)(A) of the Act and section 3401(p) of Public 
Law 111-148 provide for a single revised RY 2010 standard Federal rate; 
however, for payment purposes, discharges occurring on or after October 
1, 2009 and before April 1, 2010, simply will not be based on the 
revised RY 2010 standard Federal rate.
    This legislative change to the standard Federal rate for RY 2010 
requires us to revise the HCO fixed-loss amount for RY 2010 discharges 
occurring on or after April 1, 2010. This is necessary in order to 
maintain the requirement that the fixed-loss amount results in 
estimated total outlier payments being projected to be equal to 8 
percent of projected total LTCH PPS payments since projected total 
payments LTCH PPS for RY 2010 have changed relative to the projected 
total LTCH PPS payments for RY 2010 when we established the original RY 
2010 fixed-loss amount in the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 44029) due to the legislative change to the standard Federal 
rate for RY 2010. Specifically, the original RY 2010 HCO fixed-loss 
amount of $18,425 was determined based on the RY 2010 update of 2.0 
percent and the standard Federal rate of $39,896.65 (as established in 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44022)). However, 
for RY 2010 LTCH discharges occurring on or after April 1, 2010, LTCH 
PPS payments are based on the revised update of 1.74 percent and the 
revised standard Federal rate of $39,794.95 (as established in this 
notice). In order to maintain that estimated total outlier payments are 
projected to be equal to 8 percent of projected total LTCH PPS payments 
in RY 2010, as adopted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 44028 though 44030), we are revising the HCO fixed-loss amount 
for RY 2010 discharges occurring on or after April 1, 2010 (as 
discussed below in the next section). (For an explanation of our 
rationale for establishing an HCO payment ``target'' of 8 percent of 
total estimated LTCH payments, we refer readers to the August 30, 2002 
LTCH PPS final rule (67 FR 56022 through 56024).) Consistent with 
section 3401(p) of Public Law 111-148, the revised HCO fixed-loss 
amount established in this notice will not apply to discharges 
occurring prior to April 1, 2010. In other words, for discharges 
occurring on or after October 1, 2009 through March 31, 2010, LTCH PPS 
payments will be based on the HCO fixed-loss amount established in the 
FY 2010 IPPS/RY 2010 LTCH PPS final rule (that is, $18,425 (see 74 FR 
44029)).

[[Page 31130]]

b. The LTCH PPS Fixed-Loss Amount for RY 2010 Discharges Occurring On 
or After April 1, 2010
    For this notice, to calculate a fixed-loss amount that will 
maintain estimated HCO payments at the projected 8 percent of total 
estimated LTCH PPS payments for RY 2010 discharges occurring on or 
after April 1, 2010, we used the same methodology and data that we used 
to establish the original RY 2010 HCO fixed-loss amount in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 44028). Specifically, we used 
LTCH claims data from the March 2009 update of the FY 2008 MedPAR files 
and CCRs from the March 2009 update of the PSF to determine a fixed-
loss amount that would result in estimated outlier payments projected 
to be equal to 8 percent of total estimated payments in RY 2010. In 
addition, we continued to use the MS-LTC-DRG classifications and 
relative weights from the version of the GROUPER that is in effect as 
of the beginning of RY 2010, that is, Version 27.0 of the GROUPER and 
the FY 2010 MS-LTC-DRG relative weights (discussed in section VIII.B. 
of the preamble of the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43951 through 43967) to determine the revised fixed-loss amount for RY 
2010 discharges occurring on or after April 1, 2010.
    In order to maintain estimated HCO payments at the projected 8 
percent of total estimated LTCH PPS payments for RY 2010, in this 
notice, under the broad authority of section 123(a)(1) of the BBRA and 
section 307(b)(1) of BIPA, we are revising the HCO fixed-loss amount 
for RY 2010 from $18,425 (as established in the FY 2010 IPPS/RY 2010 
LTCH PPS final rule (74 FR 44028)) to $18,615 for RY 2010 discharges 
occurring on or after April 1, 2010 (consistent with section 3401(p) of 
Pub. L. 111-148). Thus, for RY 2010 discharges occurring on or after 
April 1, 2010, we will pay an outlier case 80 percent of the difference 
between the estimated cost of the case and the outlier threshold (the 
sum of the adjusted Federal LTCH payment for the MS-LTC-DRG and the 
fixed-loss amount of $18,615). The revised HCO fixed-loss amount of 
$18,615 results in estimated total HCO payments being projected to be 
equal to 8 percent of projected total LTCH PPS payments for RY 2010 
discharges occurring on or after April 1, 2010.
    The revised fixed-loss amount of $18,615 for RY 2010 discharges 
occurring on or after April 1, 2010 is slightly higher than the 
original RY 2010 fixed-loss amount of $18,425 (established in the FY 
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44029)). Because of the 
0.25 percentage point reduction to the annual update to the standard 
Federal rate for RY 2010 required by sections 1886(m)(3)(A)(i) and 
(4)(A) of the Act, the slight increase in the fixed-loss amount for RY 
2010 is necessary to maintain the existing requirement that estimated 
outlier payments would equal 8 percent of estimated total LTCH PPS 
payments. (For further information on the existing 8 percent HCO 
``target'' requirement, we refer readers to the August 30, 2002 LTCH 
PPS final rule (67 FR 56022 through 56024.) Maintaining the fixed-loss 
amount at the level established in the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule would result in HCO payments that are greater than the 
current 8 percent regulatory requirement because a lower fixed-loss 
amount would result in more cases qualifying as outlier cases as well 
as increases the amount of the additional payment for a HCO case 
because the maximum loss that a LTCH must incur before receiving an HCO 
payment (that is, the fixed-loss amount) would be smaller. For these 
reasons, we believe that raising the fixed-loss amount is appropriate 
and necessary to maintain that estimated outlier payments would equal 8 
percent of estimated total LTCH PPS payments as required under Sec.  
412.525(a).
    As we noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
44030), under some rare circumstances, a LTCH discharge could qualify 
as a SSO case (as defined in the regulations at Sec.  412.529 in 
conjunction with Sec.  412.503) and also as a HCO case. In this 
scenario, a patient could be hospitalized for less than five-sixths of 
the geometric average length of stay for the specific MS-LTC-DRG, and 
yet incur extraordinarily high treatment costs. If the costs exceeded 
the HCO threshold (that is, the SSO payment plus the fixed-loss 
amount), the discharge is eligible for payment as a HCO. Thus, 
effective for discharges occurring on or after April 1, 2010 in RY 2010 
for a SSO case, the HCO payment would be 80 percent of the difference 
between the estimated cost of the case and the outlier threshold (the 
sum of the fixed-loss amount of $18,615 and the amount paid under the 
SSO policy as specified in Sec.  412.529).
3. Computing the Adjusted LTCH PPS Federal Prospective Payments for RY 
2010
    In accordance with Sec.  412.525, the standard Federal rate is 
adjusted to account for differences in area wages by multiplying the 
labor-related share of the standard Federal rate by the appropriate 
LTCH PPS wage index (as shown in Tables 12A and 12B of the Addendum of 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44192 through 
44213)). The standard Federal rate is also adjusted to account for the 
higher costs of hospitals in Alaska and Hawaii by multiplying the 
nonlabor-related share of the standard Federal rate by the appropriate 
cost-of-living factor (shown in the chart in section V.C.5. of the 
Addendum of the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44026). 
In this notice, we are establishing a standard Federal rate for RY 2010 
of $39,794.95, as discussed above in section II.F.1.c. of this notice. 
(As discussed above in that section, discharges occurring on or after 
April 1, 2010 will be paid under the revised RY 2010 standard Federal 
rate established in this notice, consistent with section 3401(p) of 
Pub. L. 111-148.) We illustrate the methodology to adjust the LTCH PPS 
Federal rate for RY 2010 in the following example:
    Example:
    During RY 2010, a Medicare patient is in a LTCH located in Chicago, 
Illinois (CBSA 16974). The RY 2010 LTCH PPS wage index value for CBSA 
16974 is 1.0573 (Table 12A of the Addendum of the FY 2010 IPPS/RY 2010 
LTCH PPS final rule(74 FR 44196)). The Medicare patient is classified 
into MS-LTC-DRG 28 (Spinal Procedures with MCC), which has a relative 
weight for FY 2010 of 1.0834 (Table 11 of the Addendum of the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 44183)).
    To calculate the LTCH's total adjusted Federal prospective payment 
for this Medicare patient, we compute the wage-adjusted Federal 
prospective payment amount by multiplying the unadjusted standard 
Federal rate ($39,794.95) by the labor-related share (75.779 percent) 
and the wage index value (1.0471). This wage-adjusted amount is then 
added to the nonlabor-related portion of the unadjusted standard 
Federal rate (24.221 percent; adjusted for cost of living, if 
applicable) to determine the adjusted Federal rate, which is then 
multiplied by the MS-LTC-DRG relative weight (1.0933) to calculate the 
total adjusted Federal LTCH PPS prospective payment for RY 2010 
($45,060.59). The table below illustrates the components of the 
calculations in this example.

[[Page 31131]]



Unadjusted Standard Federal Prospective Payment Rate.         $39,794.95
Labor-Related Share..................................          x 0.75779
Labor-Related Portion of the Federal Rate............       = $30,156.22
Wage Index (CBSA 16974)..............................           x 1.0471
Wage-Adjusted Labor Share of Federal Rate............       = $31,576.57
Nonlabor-Related Portion of the Federal Rate                 + $9,638.73
 ($39,794.95 x 0.24221)..............................
Adjusted Federal Rate Amount.........................       = $41,215.30
MS-LTC-DRG 28 Relative Weight........................           x 1.0933
Total Adjusted Federal Prospective Payment...........       = $45,060.59
 

III. Other Required Information

A. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

B. Waiver of Proposed Rulemaking and Delay of Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment prior to a rule taking 
effect in accordance with section 553(b) of the Administrative 
Procedure Act (APA) and section 1871 of the Act. In addition, in 
accordance with section 553(d) of the APA and section 1871(e)(1)(B)(i) 
of the Act, we ordinarily provide a 30-day delay to a substantive 
rule's effective date. For substantive rules that constitute major 
rules, in accordance with 5 U.S.C. 801, we ordinarily provide a 60-day 
delay in the effective date.
    None of the above processes or effective date requirements apply, 
however, when the rule in question is interpretive, a general statement 
of policy, or a rule of agency organization, procedure or practice. 
They also do not apply, when Congress, itself, has created the rules 
that are to be applied, leaving no discretion or gaps for an agency to 
fill in through rulemaking.
    In addition, an agency may waive notice and comment rulemaking, as 
well as any delay in effective date, when the agency for good cause 
finds that notice and public comment on the rule as well the effective 
date delay are impracticable, unnecessary, or contrary to the public 
interest. In cases where an agency finds good cause, the agency must 
incorporate a statement of this finding and its reasons in the rule 
issued.
    The policies being publicized in this notice do not constitute 
agency rulemaking. Rather, Congress, in the Affordable Care Act, has 
already required that the agency make these changes, and we are simply 
notifying the public of certain required revisions to standard Federal 
rates that are effective for payment years beginning October 1, 2009 
and their implication on payments made for discharges on or after April 
1, 2010. We also are notifying the public of the extension of section 
508 reclassifications and special exception wage indexes for FY 2010, 
as well as the wage indexes resulting from Congress' requirement that 
certain reclassification wage indexes be recalculated (effective April 
1, 2010) to account for such extensions. As this notice merely informs 
the public of these required modifications to the payment rates under 
the IPPS and LTCH PPS, it is not a rule and does not require any notice 
and comment rulemaking. To the extent any of the policies articulated 
in this notice constitute interpretations of Congress's requirements or 
procedures that will be used to implement Congress's directive, they 
are interpretive rules, general statements of policy, and/or rules of 
agency procedure or practice, which are not subject to notice-and-
comment rulemaking or a delayed effective date.
    However, to the extent that notice and comment rulemaking or a 
delay in effective date or both would otherwise apply, we find good 
cause to waive such requirements. Specifically, we find it unnecessary 
to undertake notice and comment rulemaking in this instance as this 
notice does not propose to make any substantive changes to IPPS or LTCH 
PPS policies or methodologies already in effect as a matter of law, but 
simply applies rate adjustments required by Public Law 111-148 and 
Public Law 111-152 to these existing policies and methodologies. 
Therefore, we would be unable to change any of the policies governing 
the IPPS for FY 2010 or the LTCH PPS for RY 2010 in response to public 
comment on this notice. As the changes outlined in this notice have 
already taken effect, it would also be impracticable to undertake 
notice and comment rulemaking. For these reasons, we also find that a 
waiver of any delay in effective date, if it were otherwise applicable, 
is necessary to comply with the requirements of sections 
1886(b)(3)(B)(xii) and 1886(m)(3)(A)(ii) and (4), as added and amended 
by Public Law 111-148 and Public Law 111-152, and sections 3137(a) and 
3401(p) of Public Law 111-148, which require that hospitals be paid on 
the basis of revised rates for discharges on or after April 1, 2010. 
Therefore, we find good cause to waive notice and comment procedures as 
well as any delay in effective date, if such procedures or delays are 
required at all.

IV. Regulatory Impact Analysis

A. Overall Impact

    Although this notice merely reflects the implementation of 
provisions of the Affordable Care Act and does not constitute a 
substantive rule, we are nevertheless preparing this impact analysis in 
the interest of ensuring that the impacts of these changes are fully 
understood. The changes in this notice are already in effect with 
changes made to PRICER and announced through a Joint-Signature 
Memorandum. We have examined the impacts of this notice as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. 
L. 96-354), section 1102(b) of the Social Security Act, section 202 of 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive 
Order 13132 on Federalism (August 4, 1999), 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 
determined that the rates announced in this notice are ``economically 
significant'' as measured by the $100 million threshold. Therefore, 
although we do not consider this notice to constitute a substantive 
rule, we have prepared a Regulatory Impact Analysis, that to the best 
of our ability, presents the costs and benefits of this notice.

[[Page 31132]]

    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
government jurisdictions. We estimate that most hospitals and most 
other providers and supplies are small entities as that term is used in 
the RFA. The great majority of hospitals and most other health care 
providers and suppliers are small entities, either by being nonprofit 
organizations or by meeting the SBA definition of a small business 
(having revenues of less than $34.5 million in any 1 year). (For 
details on the latest standard for health care providers, we refer 
readers to page 33 of the Table of Small Business Size Standards at the 
Small Business Administration's Web site at http://www.sba.gov/services/contractingopportunities/sizestandardstopics/tableofsize/index.html.) For purposes of the RFA, all hospitals and other providers 
and suppliers are considered to be small entities. Individuals and 
States are not included in the definition of a small entity. We believe 
that this notice will have a significant impact on small entities. 
Because we acknowledge that many of the affected entities are small 
entities, the analysis discussed in this section would fulfill any 
requirement for a final regulatory flexibility 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. With 
the exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we now define a small rural 
hospital as a hospital that is located outside of an urban area and has 
fewer than 100 beds. Section 601(g) of the Social Security Amendments 
of 1983 (Pub. L. 98-21) designated hospitals in certain New England 
counties as belonging to the adjacent urban area. Thus, for purposes of 
the IPPS, we continue to classify these hospitals as urban hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in any 
1 year of $100 million in 1995 dollars, updated annually for inflation. 
In 2010, that threshold is approximately $135 million. This notice will 
not mandate any requirements for State, local, or tribal governments, 
nor will it affect private sector costs.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This notice will not have a substantial effect on State 
and local governments.
    The following analysis, in conjunction with the remainder of this 
document, demonstrates that this notice is consistent with the 
regulatory philosophy and principles identified in Executive Order 
12866, the RFA, and section 1102(b) of the Act. The notice will affect 
payments to a substantial number of small rural hospitals, as well as 
other classes of hospitals, and the effects on some hospitals may be 
significant.
    The FY 2010 IPPS/RY 2010 LTCH PPS final rule included an impact 
analysis for the changes to the IPPS included in that rule. This notice 
updates those impacts to the IPPS operating payment system as to 
reflect certain changes required by the Affordable Care Act. Because 
provisions in the Affordable Care Act were non-budget neutral, the 
overall estimates for hospitals have changed from our estimate that was 
published in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
44215). We estimate that the changes in the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule, in conjunction with the final IPPS rates and wage index 
included in this notice, will result in an approximate $1.8 billion 
increase in operating payments relative to FY 2009 or an additional 0.1 
billion relative to what was projected in the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule (74 FR 44215). Capital payments are estimated to 
increase by $173 million relative to FY 2009 due to the changes under 
the Affordable Care Act or an additional 19 million relative to what 
was published in the FY 2010 IPPS/RY 2010 LTCH PPS correction notice 
(74 FR 51507).

B. Revised FY 2010 Impacts on IPPS Operating Costs

1. Analysis of Table I
    Table I displays the results of our analysis of the payment changes 
for FY 2010 after implementing provisions of the Affordable Care Act, 
which extended section 508 reclassifications and special exception wage 
indices through FY 2010 and which reduced the market basket update to 
the standardized amount by 0.25 percent for discharges occurring on or 
after April 1, 2010. In this notice, we describe these revisions to the 
wage index, standardized amounts, outlier thresholds and budget 
neutrality factors resulting from implementation of the Affordable Care 
Act. Because of these revisions, we are displaying all of the impact 
columns that were affected by the market basket reduction and the 
section 508/special exception extension. In addition, we are adding a 
column to display the impact of the section 508/special exception 
extension. These columns show the impact of the FY 2010 changes in this 
notice compared to the FY 2010 impacts as published in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 44216).
    Table I displays the results of our analysis of the changes for FY 
2010 resulting from the Affordable Care Act provisions. The table 
categorizes hospitals by various geographic and special payment 
consideration groups to illustrate the varying impacts on different 
types of hospitals. The top row of the table shows the overall impact 
on the 3,517 acute care hospitals included in the analysis.
    The next four rows of Table I contain hospitals categorized 
according to their geographic location: All urban, which is further 
divided into large urban and other urban; and rural. There are 2,525 
hospitals located in urban areas included in our analysis. Among these, 
there are 1,377 hospitals located in large urban areas (populations 
over 1 million), and 1,148 hospitals in other urban areas (populations 
of 1 million or fewer). In addition, there are 992 hospitals in rural 
areas. The next two groupings are by bed-size categories, shown 
separately for urban and rural hospitals. The final groupings by 
geographic location are by census divisions, also shown separately for 
urban and rural hospitals.
    The second part of Table I shows hospital groups based on 
hospitals' FY 2010 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban, large urban, other urban, and rural show that 
the numbers of hospitals paid based on these categorizations after 
consideration of geographic reclassifications (including 
reclassifications under sections 1886(d)(8)(B) and (d)(8)(E) of the 
Act) are 2,593; 1,422; 1,171; and 924, respectively.
    The next three groupings examine the impacts of the changes on 
hospitals grouped by whether or not they have GME residency programs 
(teaching hospitals that receive an IME

[[Page 31133]]

adjustment) or receive DSH payments, or some combination of these two 
adjustments. There are 2,475 nonteaching hospitals in our analysis, 804 
teaching hospitals with fewer than 100 residents, and 238 teaching 
hospitals with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their DSH 
payment status, and whether they are considered urban or rural for DSH 
purposes. The next category groups together hospitals considered urban 
or rural, in terms of whether they receive the IME adjustment, the DSH 
adjustment, both, or neither.
    The next five rows examine the impacts of the changes on rural 
hospitals by special payment groups (SCHs, RRCs, and MDHs). There were 
187 RRCs, 337 SCHs, 186 MDHs, and 106 hospitals that are both SCHs and 
RRCs, and 15 hospitals that are both an MDH and an RRC.
    The next series of groupings are based on the type of ownership and 
the hospital's Medicare utilization expressed as a percent of total 
patient days. These data were taken from the FY 2007 or FY 2006 
Medicare cost reports.
    The next two groupings concern the geographic reclassification 
status of hospitals. The first grouping displays all urban hospitals 
that were reclassified by the MGCRB for FY 2010. The second grouping 
shows the MGCRB rural reclassifications. The last row of this section 
identifies the 104 section 508 and special exception hospitals.
    The final category shows the impact of the policy changes on the 20 
cardiac hospitals in our analysis.
BILLING CODE 4120-01-P

[[Page 31134]]

[GRAPHIC] [TIFF OMITTED] TN02JN10.155


[[Page 31135]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.156


[[Page 31136]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.157


[[Page 31137]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.158

BILLING CODE 4120-01-C

[[Page 31138]]

1. Effects of the Changes to the MS-DRG Reclassifications and Relative 
Cost-Based Weights With the Application of Recalibration Budget 
Neutrality (Column 1)
    Column 1 shows the effects of the changes to the MS-DRGs and 
relative weights with the application of the recalibration budget 
neutrality factor to the standardized amounts as compared to the FY 
2010 IPPS/RY 2010 LTCH PPS final rule. The recalibration budget 
neutrality factor was revised due to the 0.25 percentage point 
reduction to the applicable percentage increase applied to the Federal 
standardized amount, as required by section 1886(b)(3)(B) of the Act, 
as amended by the Affordable Care Act. The recalibration budget 
neutrality factor published in the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule was 0.997941, which is applied to the standardized amount as 
determined in the final rule. The revised recalibration budget 
neutrality is now 0.997935, applied to the revised FY 2010 standardized 
amount. Consistent with section 1886(d)(4)(C)(iii) of the Act, we have 
calculated a recalibration budget neutrality factor to account for the 
changes in MS-DRGs and relative weights to ensure that the overall 
payment impact is budget neutral. The change in the budget neutrality 
factor did not change the impact to most hospital categories as 
compared to the FY 2010 IPPS/RY 2010 LTCH PPS final rule.
2. Effect of the Wage Index Changes With the Application of the Wage 
Budget Neutrality Factor (Column 2)
    Column 2 shows the impact of the FY 2010 wage data, FY 2010 labor 
share with the application of the wage budget neutrality factor. For FY 
2010, we calculate the wage budget neutrality factor without regard to 
the lower labor share of 62 percent for hospitals with a wage index 
less than or equal to 1, in accordance with section 1886(d)(3)(E)(i) of 
the Act. We refer readers to our FY 2010 final rule (74 FR 44005) for a 
discussion of this policy. Because the market basket update to the 
standardized amount was reduced by 0.25 percent as required under the 
Affordable Care Act, the wage budget neutrality factor was revised. The 
wage budget neutrality factor published in the FY 2010 IPPS/RY 2010 
LTCH PPS final rule was 1.000407. For this notice, the wage budget 
neutrality factor is revised to 1.000418. This column shows the impact 
of the revised wage budget neutrality factor relative to the impact in 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule. The change in the budget 
neutrality factor did not change the impact to most hospital categories 
as compared to the FY 2010 IPPS/RY 2010 LTCH PPS final rule.
3. Combined Effects of MS-DRG and Wage Index Changes (Column 3)
    Section 1886(d)(4)(C)(iii) of the Act requires that changes to MS-
DRG reclassifications and the relative weights cannot increase or 
decrease aggregate payments. In addition, section 1886(d)(3)(E) of the 
Act specifies that any updates or adjustments to the wage index are to 
be budget neutral. The FY 2010 MS-DRG reclassification, relative 
weights and wage index have not changed in this notice. As required by 
section 1886(b)(3)(B)(xii), as added by the Affordable Care Act, the 
market basket update was reduced by -0.25 percent and applied to the 
Federal standardized amount and the hospital-specific rates for SCHs 
and MDHs. Consequentially, the wage and recalibration budget neutrality 
factors were revised. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, 
we computed a wage budget neutrality factor of 1.000411, and a 
recalibration budget neutrality factor of 0.997926 (which is applied to 
the Puerto Rico specific standardized amount and the hospital-specific 
rates). The product of the two budget neutrality factors is the 
cumulative wage and recalibration budget neutrality factor. The 
cumulative wage and recalibration budget neutrality adjustment is 
0.998347 or approximately -0.2 percent which is applied to the national 
standardized amounts. In this notice, the recalibration budget 
neutrality factor is revised to 0.997935 and the wage budget neutrality 
factor has been revised to 1.000418, so the cumulative wage and 
recalibration budget neutrality factor has been revised to 0.998352. 
This impact column shows the impact of these changes for FY 2010 
relative to the impact of these changes as published in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule.
4. Effects of MGCRB Reclassifications (Column 4)
    Because section 3137(a) of Public Law 111-148 extended certain 
special exceptions and section 508 reclassifications through FY 2010, 
we analyzed the data of hospitals in labor market areas affected by 
legislation, including hospitals with Lugar redesignations, and made 
our best effort to give those extended hospitals a wage index value 
that we believe results in the highest FY 2010 wage index for which 
they are eligible.
    The impacts shown in Column 4 of Table 1 reflect the effects of 
MGCRB reclassifications (and excludes the effects of extending the 
section 508 reclassifications and special exception wage indices). The 
overall effect of geographic reclassification is required by section 
1886(d) (8) (D) of the Act to be budget neutral. For the purposes of 
this impact analysis, we apply an adjustment of 0.991985, which ensures 
that the effects of the section 1886(d) (10) reclassifications are 
budget neutral. The number of providers receiving a geographic 
reclassification has been reduced from 807 providers in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule to 766 hospitals because many of the 
providers that received geographic reclassification will now be 
reclassified as a section 508 or receive a special exception wage 
index. Urban New England hospitals and rural Pacific hospitals will 
experience a -0.3 and -0.2 percent change in payments, respectively due 
to reclassification changes compared to the FY 2010 IPPS Final rule 
because many of the New England and Pacific hospitals that had been 
reclassified in the FY 2010 IPPS/RY 2010 LTCH PPS final rule are no 
longer reclassified, and are instead section 508 hospitals.
5. Effects of the Rural Floor and Imputed Floor (Column 5)
    As discussed in the FY 2009 IPPS/RY 2010 LTCH PPS final rule (73 FR 
49070), for FY 2010, hospitals receive a blended wage index that is 50 
percent of a wage index with the State level rural and imputed floor 
budget neutrality adjustment and 50 percent of a wage index with the 
national budget neutrality adjustment.
    The column compares the revised post-reclassification FY 2010 wage 
index of providers with the rural floor and imputed floor adjustment 
with the transitional rural floor budget neutrality factors applied to 
the post-reclassification FY 2010 wage index of providers with the 
rural floor and imputed floor adjustment with the transitional rural 
floor budget neutrality factors applied as published in the FY 2010 
IPPS final rule. Many of the section 508 and special exception 
providers had been eligible for the rural floor, but they are no longer 
eligible for the rural floor because of the higher section 508/special 
exception wage index they now receive. As a result, the rural floor 
budget neutrality figures have been revised. (The revised figures are 
calculated using the corrected wage data published October 7, 2009). 
The revised national rural floor budget neutrality factor is 0.996686. 
The revised State

[[Page 31139]]

rural floor budget neutrality factors are listed in Table 4D-1in this 
notice. The budget neutrality factors are blended where the 
transitional rural floor budget neutrality factor is based on 50 
percent of the State rural floor budget neutrality factor and 50 
percent of the national rural floor budget neutrality factor. A 
smoothing factor of 1.000010 is applied to the blended rural floor 
budget neutrality factor to ensure that the blended budget neutrality 
factors achieve overall budget neutrality.
    Generally, the decreases in this column can be attributed to 
section 508 hospitals that had been receiving the rural floor in the FY 
2010 IPPS/RY 2010 LTCH PPS final no longer needing a rural floor due to 
their section 508 reclassification. Urban New England and Pacific 
hospitals will experience a -0.1 percent decrease in payments compared 
to the payment estimates published in the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule due to the floor because many of the hospitals in these 
regions had been receiving the rural floor but are now receiving a 
section 508 reclassification.
6. Effects of the Application of Section 508 Reclassification (Column 
6)
    This column displays the impact of the section 508/special 
exception extensions through FY 2010. Because this provision is not 
budget neutral, hospitals, overall, will experience a 0.2 percent 
increase in payments. All the hospital categories, depending on whether 
section 508 and special exception providers are represented in those 
categories, will either experience an increase or no change in 
payments. Providers in urban New England and Middle Atlantic can expect 
increases in payments by 0.8 and 0.6 percent respectively because those 
regions have section 508 and special exception providers. Similarly, 
rural Pacific will experience a 0.6 percent increase in payments due to 
the extensions.
7. Effects of the Wage Index Adjustment for Out-Migration (Column 7)
    Section 1886(d) (13) of the Act, as added by section 505 of Public 
Law 108-173, provides for an increase in the wage index for hospitals 
located in certain counties that have a relatively high percentage of 
hospital employees who reside in the county, but work in a different 
area with a higher wage index. Hospitals located in counties that 
qualify for the payment adjustment receive an increase in the wage 
index that is equal to a weighted average of the difference between the 
wage index of the resident county, post-reclassification, post-floor 
(including budget neutrality), and the higher wage index work area(s), 
weighted by the overall percentage of workers who are employed in an 
area with a higher wage index. Section 508 providers and special 
exception providers that may have qualified for the out-migration 
adjustment in the FY 2010 IPPS/RY 2010 LTCH PPS final rule will now 
receive their section 508 reclassification or special exception wage 
index instead. This column shows the impact of the out-migration 
adjustment in this notice compared to the out-migration adjustment in 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule. The provisions in the 
Affordable Care Act did not have a significant impact on the section 
505 outmigration adjustment which is reflected in the 0.0 percent 
change in payments compared to the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule.
8. Effects of All Changes for FY 2010 (Column 8)
    Column 8 compares our estimate of the percent change in payments 
per case for FY 2010 including the provisions in this notice compared 
to our percent change in payments per case for FY 2010 as published in 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule. The average increase for 
all hospitals is approximately 0.1 percent compared to the original 
estimated increase of payments per case for FY 2010 published in the FY 
2010 IPPS/RY 2010 LTCH PPS final rule. This increase includes the 
effects of the 0.25 percent reduction to the market basket update for 
FY 2010, which is used for determining payment for discharges on or 
after April 1, 2010, reducing FY 2010 payments by 0.1 percent. This 
analysis accounts for the impact of the extension of certain special 
exceptions and section 508 reclassifications for FY 2010. This non-
budget neutral provision, which increases the wage index for 104 
providers, results in an estimated increase in payments by 0.2 percent. 
There might also be interactive effects among the various factors 
comprising the payment system that we are not able to isolate.
    The overall change in payments per case for hospitals in FY 2010 as 
specified in this notice is estimated to increase by 0.1 percent 
compared to the payment estimates published in the FY 2010 IPPS/RY 2010 
LTCH PPS final rule. Hospitals in urban areas will experience an 
estimated 0.1 percent increase in payments per case compared to the 
estimate published FY 2010 IPPS/RY 2010 LTCH PPS final rule. Hospital 
payments per case in rural areas are estimated to decrease 0.1 percent. 
Urban hospitals experience increases under the Affordable Care Act due 
to the extension of section 508 reclassifications, which offset the 
0.25 market basket reduction; while rural hospitals experience 
decreases under the Affordable Care Act due to the -0.25 market basket 
reduction.
    Among urban census divisions, the largest estimated payment 
increases compared to the FY 2010 IPPS/RY 2010 LTCH PPS final rule will 
be 0.2 in New England and 0.3 percent in the Middle Atlantic region, 
generally attributed to section 508 reclassifications and special 
exception wage indexes. Urban hospitals located in the West South 
Central, West North Central, and Mountain region will experience a 0.1 
percent decrease in payments compared to the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule because of the 0.25 market basket reduction applied to 
the second half of FY 2010.
    Among the rural regions in Column 8, rural mountain hospitals can 
expect a -0.5 percent decrease in payments due to the market basket 
reduction and changes in the outlier estimates under the Affordable 
Care Act. Rural Pacific hospitals can expect a 0.2 percent increase in 
payments compared to the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
because of higher wage indexes as a result of section 508 
reclassification.
    Among special categories of rural hospitals in Column 8, the MDHs 
will receive an estimated decrease in payments of 0.2 percent, and the 
SCHs will experience an estimated decrease in payments by 0.3 percent 
due to the market basket reduction.
    Urban hospitals reclassified for FY 2010 are anticipated to receive 
an increase of 0.2 percent, while urban hospitals that are not 
reclassified for FY 2010 will not experience a change in payments. 
Rural hospitals reclassifying for FY 2010 are anticipated to receive a 
0.1 percent payment decrease and rural hospitals that are not 
reclassifying are estimated to receive a payment decrease of 0.2 
percent compared to the FY 2010 IPPS/RY 2010 LTCH PPS final rule.
9. Analysis of Table II
    Table II presents the projected impact of the changes for FY 2010 
for urban and rural hospitals and for the different categories shown in 
Table I. It compares the estimated payments per case for FY 2010 
including the provisions in this notice with the average estimated 
payments per case for FY 2010 as published in the FY 2010 IPPS/RY 2010 
LTCH PPS final rule. Thus, the table presents, in terms of average 
dollar amounts paid per discharge, the combined effects of the changes

[[Page 31140]]

presented in Table I. The percentage changes shown in the last column 
of Table II equal the percentage changes in average payments from 
Column 8 of Table I.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TN02JN10.159


[[Page 31141]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.160


[[Page 31142]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.161

BILLING CODE 4120-01-C

D. Effects of Payment Rate Changes and Policy Changes Under the LTCH 
PPS

1. Introduction and General Considerations
    In section II.F. of this notice, we are setting forth the revised 
payment rates for the RY 2010 LTCH PPS in accordance with the 
Affordable Care Act. In this section of the notice, we discuss the 
impact of the changes to the payment rates, factors, and other payment 
rate policies related to the LTCH PPS that are presented in the notice 
in terms of their estimated fiscal impact on the Medicare budget and on 
LTCHs.
    Currently, our database of 399 LTCHs includes the data for 81 
nonprofit (voluntary ownership control) LTCHs and 267 proprietary 
LTCHs. Of the remaining 51 LTCHs, 12 LTCHs are government-owned and 
operated and the ownership type of the other 39 LTCHs is unknown. In 
the impact analysis, we are using the rates, factors, and policies 
presented in this notice, including the revised RY 2010 rate that 
accounts for the 0.25 reduction to the market basket update under which 
discharges on or after April 1, 2010 are paid. As discussed in the FY 
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44022), we updated the RY 
2009 standard Federal rate by 2.0 percent to establish the RY 2010 
standard Federal rate at $39,896.65. As required under Public Law 111-
148 and Public Law 111-152, we have reduced the annual update to the 
standard Federal rate by 0.25 percentage points such that that RY 2010 
standard Federal rate is $39,794.95. Discharges occurring on or after 
April 1, 2010 are paid under the revised standard Federal rate 
consistent with section 3401(p) of Public Law 111-148. In the FY 2010 
IPPS/RY 2010 LTCH final rule (74 FR 44233), we had estimated that LTCH 
payments would increase by 3.3 percent relative to RY 2009. Because 
only discharges for half of RY 2010 (that is, discharges occurring on 
or after April 1, 2010) are paid under the revised RY 2010 standard 
Federal rate which incorporates the 0.25 percentage point reduction, we 
estimate that LTCH payments will increase by 3.2 percent relative to RY 
2009. In other words, we estimate that LTCH payments will be reduced by 
0.1 percent relative to our estimates published in the FY 2010 IPPS/RY 
2010 LTCH final rule.
    In the FY 2010 IPPS/RY 2010 LTCH final rule (74 FR 44230), we had 
estimated RY 2009 LTCH PPS payments to be approximately $4.609 billion 
and RY 2010 LTCH PPS payments to be approximately $4.762 billion which 
resulted in a $153 million projected increase in estimated aggregate 
LTCH PPS payments from RY 2009 to RY 2010. Based on the changes in this 
notice, we now estimate RY 2010 LTCH PPS payments to be approximately 
$4.752 billion, which results in a projected increase in aggregate LTCH 
PPS payments of $142 million in RY 2010 relative to RY 2009. Our RY 
2010 estimate is approximately $11 million less than our estimate in 
the FY 2010 IPPS/RY 2010 LTCH final rule.
    Table IV shows the payment impact of the changes described in this 
notice required under the Affordable Care Act effective for RY 2010. 
Table IV shows the impact of the payments as projected in the FY 2010 
IPPS/RY 2010 LTCH final rule and the change in payments effective in 
this notice for RY 2010. We estimate a 0.1 percent decrease in payments 
per discharge in this notice compared to the RY 2010 estimated payments 
per discharge published in the FY 2010 IPPS/RY 2010 LTCH final rule. 
This decrease is attributable to the 0.25 percentage point reduction to 
the annual update applied to the standard Federal rate as required by 
sections 1886(m)(3)(ii) and (4) of the Act. As Table IV shows, the 
change attributable solely to the standard Federal rate is projected to 
result in a decrease of 0.2 percent in estimated RY 2010 payments per 
discharge from the FY 2010 IPPS/RY 2010 LTCH final rule to the revised 
RY 2010 payments per discharge in this notice.
    The projected change in payments per discharge from the RY 2010 
published in the FY 2010 IPPS/RY 2010 LTCH final rule to estimated RY 
2010 payments per discharge in this notice is -0.1 percent (shown in 
Column 7). This projected decrease in payments is attributable to the 
impacts of the change to the standard Federal rate required under the 
Affordable Care Act under which discharges occurring on or after April 
1, 2010 (-0.2 percent in Column 6) are paid.
2. Impact on Rural Hospitals
    For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. As shown in Table IV, we 
are projecting a 0.1 decrease in estimated payments per discharge for 
the RY 2010 LTCH as compared to the RY 2010 estimated payments per 
discharge published in the FY 2010 IPPS/RY 2010 LTCH final rule for 
rural LTCHs that will result from the changes presented in this notice 
(that is, the revised update to the standard Federal rate discussed in 
section II.F.1. of this notice). This estimated impact is based on the 
data for the 26 rural LTCHs in our database of 399 LTCHs, for which 
complete data were available.
3. Anticipated Effects of LTCH PPS Payment Rate Change and Policy 
Changes
    We discuss the impact of the changes to the payment rates, factors, 
and other payment rate policies under the LTCH PPS for RY 2010 (in 
terms of their estimated fiscal impact on the Medicare budget and on 
LTCHs) in section II.F. of this notice.

[[Page 31143]]

a. Budgetary Impact
    Section 123(a)(1) of the BBRA requires that the PPS developed for 
LTCHs ``maintain budget neutrality.'' We believe that the statute's 
mandate for budget neutrality applies only to the first year of the 
implementation of the LTCH PPS (that is, FY 2003). Therefore, in 
calculating the FY 2003 standard Federal rate under Sec.  
412.523(d)(2), we set total estimated payments for FY 2003 under the 
LTCH PPS so that estimated aggregate payments under the LTCH PPS were 
estimated to equal the amount that would have been paid if the LTCH PPS 
had not been implemented.
    As discussed in section IV.D.1. of this notice, we project an 
increase in aggregate LTCH PPS payments in RY 2010 of approximately 
$142 million based on the 399 LTCHs in our database.
b. Impact on Providers
    The basic methodology for determining a per discharge LTCH PPS 
payment is set forth in Sec.  412.515 through Sec.  412.536. In 
addition to the basic MS-LTC-DRG payment (standard Federal rate 
multiplied by the MS-LTC-DRG relative weight), we make adjustments for 
differences in area wage levels, COLA for Alaska and Hawaii, and short-
stay outliers (SSOs). Furthermore, LTCHs may also receive high cost 
outlier (HCO) payments for those cases that qualify based on the 
threshold established each rate year.
    Hospital groups were based on characteristics provided in the OSCAR 
data, FY 2004 through FY 2006 cost report data in HCRIS, and PSF data. 
Hospitals with incomplete characteristics were grouped into the 
``unknown'' category. Hospital groups include the following:
     Location: Large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.
    To estimate the impacts of the payment rates and policy changes 
among the various categories of existing providers, we used LTCH cases 
from the FY 2008 MedPAR file to estimate payments for RY 2010 published 
in the FY 2010 IPPS/RY 2010 LTCH final rule and to estimate revised 
payments for RY 2010 in accordance with the changes in this notice for 
399 LTCHs.
c. Calculation of Prospective Payments
    For purposes of this impact analysis, to estimate per discharge 
payments under the LTCH PPS, we simulated payments on a case-by-case 
basis using LTCH claims from the FY 2008 MedPAR files. For modeling 
estimated LTCH PPS payments for RY 2010 in this notice, we applied the 
revised RY 2010 standard Federal rate (that is, $39,794.95, under which 
LTCH discharges occurring on or after April 1, 2010, and through 
September 30, 2010 are paid). For modeling estimated LTCH PPS payments 
for RY 2010 as published in the FY 2010 IPPS/RY 2010 LTCH final rule, 
we applied the published RY 2010 standard Federal rate of $39,896.65, 
under which LTCH discharges occurring on or after October 1, 2009 
through March 31, 2010 are paid).
    These impacts reflect the estimated ``losses'' or ``gains'' among 
the various classifications of LTCHs from the previously published 2010 
LTCH PPS rate year to the revised 2010 LTCH PPS rate year based on the 
payment rates and policy changes presented in this notice. Table IV 
illustrates the estimated aggregate impact of the LTCH PPS among 
various classifications of LTCHs.
     The first column, LTCH Classification, identifies the type 
of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases.
     The fourth column shows the estimated original RY 2010 
payment per discharge (that is, prior to the enactment of the 
Affordable Care Act, as described above).
     The fifth column shows the estimated revised RY 2010 
payment per discharge (that is, reflecting the provisions of the 
Affordable Care Act, as described above).
     The sixth column shows the percentage change in estimated 
payments per discharge due to changes to the standard Federal rate (as 
discussed in section II.F. of this notice). It compares the percent 
change in estimated payments per discharge in the originally published 
FY 2010 IPPS/RY 2010 LTCH PPS final rule (prior to the enactment of the 
Affordable Care Act) to the revised estimated payments per discharge in 
this RY 2010 LTCH PPS notice (reflecting the provisions of the 
Affordable Care Act).
     The seventh column shows the percentage change in 
estimated payments per discharge from the originally published RY 2010 
LTCH PPS (prior to the enactment of the Affordable Care Act, as shown 
in Column 4) to the revised RY 2010 LTCH PPS (reflecting the provisions 
of the Affordable Care Act, as shown in Column 5) for all changes.
BILLING CODE 4120-01-P

[[Page 31144]]

[GRAPHIC] [TIFF OMITTED] TN02JN10.162


[[Page 31145]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.163

BILLING CODE 4120-01-C
d. Results
    Based on the most recent available data (as described previously 
for 399 LTCHs), we have prepared the following summary of the impact 
(as shown in Table IV) of the LTCH PPS payment rate and policy changes 
presented in this notice. The impact analysis in Table IV shows that 
estimated payments per discharge are expected to decrease approximately 
0.1 percent, on average, for all LTCHs comparing the RY 2010 estimated 
LTCH PPS payments published in the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule to the RY 2010 estimated LTCH PPS payments as a result of the 
payment rate and policy changes presented in this notice. The 0.1 
percent decrease is due to the 0.25 percentage point reduction to the 
annual update to the standard Federal rate required under the 
Affordable Care Act. Because only discharges on or after April 1, 2010 
will be paid under the revised standard Federal rate, which 
incorporates the 0.25 percentage point reduction to the annual update 
for RY 2010, the required 0.25 percentage point reduction will only 
reduce aggregate RY 2010 payments by 0.1 percent. All hospital 
categories are equally affected by the provision and will all 
experience an approximate 0.1 percent decrease in payments relative to 
the payment estimates in the FY 2010 IPPS/RY 2010 LTCH final rule.
4. Effect on the Medicare Program
    As noted previously, we project that the provisions of this notice 
will result in an increase in estimated aggregate LTCH PPS payments in 
RY 2010 of approximately $142 million (or about 0.1 percent less than 
previously estimated in the FY 2010 IPPS/RY 2010 LTCH final rule) for 
the 399 LTCHs in our database.
5. Effect on Medicare Beneficiaries
    Under the LTCH PPS, hospitals receive payment based on the average 
resources consumed by patients for each diagnosis. We do not expect any 
changes in the quality of care or access to services for Medicare 
beneficiaries under the LTCH PPS, but we expect that paying 
prospectively for LTCH services would enhance the efficiency of the 
Medicare program.

E. Alternatives Considered

    This notice provides descriptions of the statutory provisions that 
are addressed, identifies policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered.

F. Overall Conclusion

1. Acute Care Hospitals
    Table I of section IV.B. of this notice demonstrates the estimated 
distributional impact of the IPPS budget neutrality requirements for 
the MS-DRG and wage index changes, and for the wage index 
reclassifications under the MGCRB. Table I also shows an overall 
increase of 0.1 percent in operating payments in this notice relative 
to the operating payments published in the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule. We estimate that operating payments will increase by 
approximately $75.7 million in FY 2010

[[Page 31146]]

relative to our published FY 2010 estimate in the FY 2010 IPPS/RY 2010 
LTCH PPS final rule. This accounts for the projected savings associated 
with the 0.25 percentage point reduction to the market basket required 
by section 1886(b)(3)(B) of the Act, as amended by the Affordable Care 
Act, and the extension of section 508 reclassification (a non-budget 
neutral provision) required under the Affordable Care Act. We estimate 
that capital payments will increase by 1.9 percent per case relative to 
FY 2009, as shown in Table III of section IV.C. of this notice. 
Therefore, we project that the increase in capital payments in FY 2010 
compared to FY 2009 will be approximately $173 million, which is $19 
million higher than what was published in the FY 2010 IPPS/RY 2010 LTCH 
PPS correction notice (74 FR 51507). The cumulative operating and 
capital payments should result in a net increase of $94.7 million to 
IPPS providers under the changes in this notice relative to our 
previously published estimates in the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule and correction notice. The discussions presented in the 
previous pages, in combination with the rest of this notice, constitute 
a regulatory impact analysis.
2. LTCHs
    Overall, LTCHs are projected to experience an increase in estimated 
payments per discharge in RY 2010 relative to RY 2009. However, our 
projected increase in estimated payments per discharge in RY 2010 has 
decreased due to the applicable changes specified under the Affordable 
Care Act. Specifically, the decrease in our RY 2010 payment estimates 
is primarily due to the -0.25 percentage point reduction to annual 
update applied to the standard Federal rate under which discharges 
occurring on or after April 1, 2010 are paid. In the impact analysis, 
we are using the rates, factors, and policies presented in this notice 
to estimate the change in payments for the 2010 LTCH PPS rate year. 
Accordingly, based on the best available data for the 399 LTCHs in our 
database, we estimate that RY 2010 LTCH PPS payments will increase $142 
million relative to RY 2009, which is a decrease of approximately $11 
million (or about 0.1 percent) relative to the estimates of RY 2010 
LTCH PPS payments previously published in the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule.

G. Accounting Statements

1. Acute Care Hospitals
    As required by OMB Circular A-4 (available at http://www.whitehousegov/omb/circulars/a004/a-4.pdf), in Table V. below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this notice as they 
relate to acute care hospitals. This table provides our best estimate 
of the change in Medicare payments to providers as a result of the 
changes to the IPPS presented in this notice. All expenditures are 
classified as transfers to Medicare providers.

 Table V--Accounting Statement: Classification of Estimated Expenditures
        Under the IPPS From Published FY 2010 to Revised FY 2010
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $94.7 million.
From Whom to Whom......................  Federal Government to IPPS
                                          Medicare Providers.
                                        --------------------------------
    Total..............................  $94.7 million.
------------------------------------------------------------------------

2. LTCHs
    As discussed in section IV.D. of this notice, the impact analysis 
for the changes under the LTCH PPS for this notice projects an increase 
in estimated aggregate payments of approximately $142 million compared 
to RY 2009, a decrease of $11 million compared our previously published 
estimates for the 399 LTCHs in our database that are subject to payment 
under the LTCH PPS. Therefore, as required by OMB Circular A-4 
(available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in 
Table VI below, we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
this notice as they relate to changes to the LTCH PPS. Table VI 
provides our best estimate of the increase in Medicare payments under 
the LTCH PPS as a result of the provisions presented in this notice 
based on the data for the 399 LTCHs in our database. All expenditures 
are classified as transfers to Medicare providers (that is, LTCHs).

TABLE VI--Accounting Statement: Classification of Estimated Expenditures
 From the Published 2010 LTCH PPS Rate Year to the Revised 2010 LTCH PPS
                                Rate Year
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  Positive transfer--Estimated
                                          increase in expenditures: $11
                                          million.
From Whom to Whom......................  LTCH PPS Medicare Providers to
                                          Federal Government.
                                        --------------------------------
    Total..............................  $11 million.
------------------------------------------------------------------------


[[Page 31147]]

H. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, the 
Executive Office of Management and Budget reviewed this notice.

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

    Dated: May 13, 2010.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 18, 2010.
Kathleen Sebelius,
Secretary.

Addendum

    This addendum includes tables referred to throughout the notice 
which contain data relating to the final FY 2010 wage indices and 
the hospital reclassifications and payment amounts for operating and 
capital-related costs discussed in section II. of this notice.
    Table 1A--National Adjusted Operating Standardized Amounts, 
Labor/Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share 
If Wage Index Is Greater Than 1); Applicable to payments made for 
discharges on or after October 1, 2009 through discharges on or 
before September 30, 2010
    Table 1B--National Adjusted Operating Standardized Amounts, 
Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If 
Wage Index Is Less Than or Equal To 1); Applicable to payments made 
for discharges on or after October 1, 2009 through discharges on or 
before September 30, 2010
    Table 1C--Adjusted Operating Standardized Amounts for Puerto 
Rico, Labor/Nonlabor; Applicable to payments made for discharges on 
or after October 1, 2009 through discharges on or before September 
30, 2010
    Table 1D--Capital Standard Federal Payment Rate: Applicable to 
payments made for discharges on or after October 1, 2009 through 
discharges on or before September 30, 2010
    Table 1E.--LTCH Standard Federal Prospective Payment Rate; 
Applicable to payments made for discharges on or after October 1, 
2009 through discharges on or before September 30, 2010
    Table 2.--Hospital Case-Mix Indexes For Discharges Occurring In 
Federal Fiscal Year 2008; Hospital Wage Indexes For Federal Fiscal 
Year 2010 (April 1, 2010 through September 30, 2010); Hospital 
Average Hourly Wages For Federal Fiscal Years 2008 (2004 Wage Data), 
2009 (2005 Wage Data), And 2010 (2006 Wage Data); and 3-Year Average 
of Hospital Average Hourly Wages
    Table 4A.--Wage Index and Capital Geographic Adjustment Factor 
(GAF) for Urban Areas by CBSA--FY 2010 (April 1, 2010 through 
September 30, 2010)
    Table 4B.--Wage Index and Capital Geographic Adjustment Factor 
(GAF) for Rural Areas by CBSA--FY 2010 (April 1, 2010 through 
September 30, 2010)
    Table 4C.--Wage Index and Capital Geographic Adjustment Factor 
(GAF) for Hospitals That Are Reclassified by CBSA--FY 2010 (April 1, 
2010 through September 30, 2010)
    Table 4D-1.--State Specific Rural Floor Budget Neutrality 
Factors--FY 2010 (April 1, 2010 through September 30, 2010)
    Table 4D-2.--Urban Areas with Hospitals Receiving the Statewide 
Rural Floor or Imputed Wage Index-- FY 2010 (April 1, 2010 through 
September 30, 2010)
    Table 4J.--Out-Migration Adjustment--FY 2010 (April 1, 2010 
through September 30, 2010)
    Table 9B.--Hospital Reclassifications and Redesignations by 
Individual Hospital Under Section 508 of Pub. L. 108-173 for FY 2010 
(Revised as of April 1, 2010 and Effective October 1, 2009 through 
September 30, 2010)
    Table 10.--Geometric Mean Plus the Lesser of 0.75 of the 
National Adjusted Operating Standardized Payment Amount (Increased 
to Reflect the Difference Between Costs and Charges) or 0.75 of One 
Standard Deviation of Mean Charges by Diagnosis-Related Group 
(DRG)--April 2010 (Applicable to Applications for FY 2011 New 
Technology Add-On Payments)


[[Page 31148]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.164


[[Page 31149]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.165


[[Page 31150]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.166


[[Page 31151]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.167


[[Page 31152]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.168


[[Page 31153]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.169


[[Page 31154]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.170


[[Page 31155]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.171


[[Page 31156]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.172


[[Page 31157]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.173


[[Page 31158]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.174


[[Page 31159]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.175


[[Page 31160]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.176


[[Page 31161]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.177


[[Page 31162]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.178


[[Page 31163]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.179


[[Page 31164]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.180


[[Page 31165]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.181


[[Page 31166]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.182


[[Page 31167]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.183


[[Page 31168]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.184


[[Page 31169]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.185


[[Page 31170]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.186


[[Page 31171]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.187


[[Page 31172]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.188


[[Page 31173]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.189


[[Page 31174]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.190


[[Page 31175]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.191


[[Page 31176]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.192


[[Page 31177]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.193


[[Page 31178]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.194


[[Page 31179]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.195


[[Page 31180]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.196


[[Page 31181]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.197


[[Page 31182]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.198


[[Page 31183]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.199


[[Page 31184]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.200


[[Page 31185]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.201


[[Page 31186]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.202


[[Page 31187]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.203


[[Page 31188]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.204


[[Page 31189]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.205


[[Page 31190]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.206


[[Page 31191]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.207


[[Page 31192]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.208


[[Page 31193]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.209


[[Page 31194]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.210


[[Page 31195]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.211


[[Page 31196]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.212


[[Page 31197]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.213


[[Page 31198]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.214


[[Page 31199]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.215


[[Page 31200]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.216


[[Page 31201]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.217


[[Page 31202]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.218


[[Page 31203]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.219


[[Page 31204]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.220


[[Page 31205]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.221


[[Page 31206]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.222


[[Page 31207]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.223


[[Page 31208]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.224


[[Page 31209]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.225


[[Page 31210]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.226


[[Page 31211]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.227


[[Page 31212]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.228


[[Page 31213]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.229


[[Page 31214]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.230


[[Page 31215]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.231


[[Page 31216]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.232


[[Page 31217]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.233


[[Page 31218]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.234


[[Page 31219]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.235


[[Page 31220]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.236


[[Page 31221]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.237


[[Page 31222]]


[GRAPHIC] [TIFF OMITTED] TN02JN10.238

[FR Doc. 2010-12563 Filed 5-21-10; 4:15 pm]
BILLING CODE 4120-01-P