[Federal Register Volume 78, Number 45 (Thursday, March 7, 2013)]
[Rules and Regulations]
[Pages 14689-14694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05263]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1588-N]
RIN 0938-AR12


Medicare Program; Extension of the Payment Adjustment for Low-
volume Hospitals and the Medicare-dependent Hospital (MDH) Program 
Under the Hospital Inpatient Prospective Payment Systems (IPPS) for 
Acute Care Hospitals for Fiscal Year 2013

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

ACTION: Notice of extension.

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SUMMARY: This notice announces changes to the payment adjustment for 
low-volume hospitals and to the Medicare-dependent hospital (MDH) 
program under the hospital inpatient prospective payment systems (IPPS) 
for FY 2013 in accordance with sections 605 and 606, respectively, of 
the American Taxpayer Relief Act of 2012.

DATES: Effective date: March 4, 2013. Applicability dates: The 
provisions described in this notice are applicable for discharges on or 
after October 1, 2012 and on or before September 30, 2013.

FOR FURTHER INFORMATION CONTACT: 
    Michele Hudson, (410) 786-5490.
    Maria Navarro, (410) 786-4553.
    Shevi Marciano, (410) 786-2874.

SUPPLEMENTARY INFORMATION: 

I. Background

    On January 2, 2013, the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L. 112-240) was enacted. Section 605 of the ATRA extends changes 
to the payment adjustment for low-volume hospitals for an additional 
year, through fiscal year (FY) 2013. Section 606 of the ATRA extends 
the Medicare-dependent hospital (MDH) program for an additional year, 
through FY 2013.

II. Provisions of the Notice

A. Extension of the Payment Adjustment for Low-Volume Hospitals

1. Background
    Section 1886(d)(12) of the Social Security Act (the Act) provides 
for an additional payment to each qualifying low-volume hospital under 
the hospital inpatient prospective payment systems (IPPS) beginning in 
FY 2005. Sections 3125 and 10314 of the Affordable Care Act provided 
for a temporary change in the low-volume hospital payment policy for 
FYs 2011 and 2012. Prior to the enactment of the ATRA, beginning with 
FY 2013, the low-volume hospital qualifying criteria and payment 
adjustment returned to the statutory requirements under section 
1886(d)(12) of the Act that were in effect prior to the amendments made 
by the Affordable Care Act. (For additional information on the 
expiration of the provisions of the Affordable Care Act that amended 
the low-volume hospital adjustment at section 1886(d)(12) of the Act, 
we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53406 
through 53408).) The regulations describing the payment adjustment for 
low-volume hospitals are at 42 CFR 412.101.
2. Low-Volume Hospital Payment Adjustment for FYs 2011 and 2012
    For FYs 2011 and 2012, sections 3125 and 10314 of the Affordable 
Care Act expanded the definition of low-volume hospital and modified 
the methodology for determining the payment adjustment for hospitals 
meeting that definition. Specifically, the provisions of the Affordable 
Care Act amended the qualifying criteria for low-volume hospitals under 
section 1886(d)(12)(C)(i) of the Act to specify that, for FYs 2011 and 
2012, a hospital qualifies as a low-volume hospital if it is more than 
15 road miles from another subsection (d) hospital and has less than 
1,600 discharges of individuals entitled to, or enrolled for, benefits 
under Part A during the fiscal year. In addition, section 
1886(d)(12)(D) of the Act, as added by the Affordable Care Act, 
provides that the low-volume hospital payment adjustment (that is, the 
percentage increase) is to be determined ``using a continuous linear 
sliding scale ranging from 25 percent for low-volume hospitals with 200 
or fewer discharges of individuals entitled to, or enrolled for, 
benefits under Part A in the fiscal year to zero percent for low-volume 
hospitals with greater than 1,600 discharges of such individuals in the 
fiscal year.''
    We revised the regulations at 42 CFR 412.101 to reflect the changes 
to the qualifying criteria and the payment adjustment for low-volume 
hospitals according to the provisions of the Affordable Care Act in the 
FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 and 50414). 
In addition, we also defined, at Sec.  412.101(a), the term ``road 
miles'' to mean ``miles'' as defined at Sec.  412.92(c)(1), and 
clarified the existing regulations to indicate that a hospital must 
continue to qualify as a low-volume hospital in order to receive the 
payment adjustment in that year (that is, it is not based on a one-time 
qualification). Furthermore, in that same final rule, we discussed the 
process for requesting and obtaining the low-volume hospital payment 
adjustment for FY 2011 (75 FR 50240). For the second year of the 
changes to the low-volume hospital adjustment provided for by the 
provisions of the Affordable Care Act (that is, FY 2012), consistent 
with the regulations at Sec.  412.101(b)(2)(ii), we updated the 
discharge data source used to identify qualifying low-volume hospitals 
and calculate the payment adjustment (percentage increase) in the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51677 through 51680). Under Sec.  
412.101(b)(2)(ii), for FYs 2011 and 2012, a hospital's Medicare 
discharges from the most recently available MedPAR data, as determined 
by CMS, are used to determine if the hospital meets the discharge 
criteria to receive the low-volume payment adjustment in the current 
year. In that same final rule, we established that, for FY 2012, 
qualifying low-volume hospitals and their payment adjustment are 
determined using Medicare discharge data from the March 2011 update of 
the FY 2010 MedPAR file, as these data were the most recent data 
available at that time. In addition, we noted that eligibility for the 
low-volume payment adjustment for FY 2012 was also dependent upon 
meeting (if the hospital was qualifying for the low-volume payment 
adjustment for the first time in FY 2012), or continuing to meet (if 
the hospital qualified in FY 2011) the mileage criteria specified at 
Sec.  412.101(b)(2)(ii). Furthermore, we established a procedure for a 
hospital to request low-volume hospital status for FY 2012 (which was 
consistent with the process we employed for the low-volume hospital 
payment adjustment for FY 2011).

[[Page 14690]]

3. Implementation of the Extension of the Low-Volume Hospital Payment 
Adjustment for FY 2013
    Section 605 of the ATRA extends, for FY 2013, the temporary changes 
in the low-volume hospital payment policy provided for in FYs 2011 and 
2012 by the Affordable Care Act. As noted previously, prior to the 
enactment of section 605 of the ATRA, beginning with FY 2013, the low-
volume hospital definition and payment adjustment methodology returned 
to the policy established under statutory requirements that were in 
effect prior to the amendments made by the Affordable Care Act. 
Specifically, section 605 of the ATRA extends the changes made by the 
Affordable Care Act by amending section 1886(d)(12)(B) of the Act by 
striking ``2013'' and inserting ``2014'' and by amending sections 
1886(d)(12)(C)(i) and (D) of the Act by striking ``and 2012'' and 
inserting ``, 2012, and 2013''.
    Prior to the enactment of the ATRA, in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53406 through 53409), we discussed the low-volume 
hospital payment adjustment for FY 2013 and subsequent fiscal years. 
Specifically, we discussed that in accordance with section 1886(d)(12) 
of the Act, beginning with FY 2013, the low-volume hospital definition 
and payment adjustment methodology reverted back to the statutory 
requirements that were in effect prior to the amendments made by the 
Affordable Care Act. Therefore, we explained, as specified under the 
existing regulations at Sec.  412.101, effective for FY 2013 and 
subsequent years, in order to qualify as a low-volume hospital, a 
subsection (d) hospital must be more than 25 road miles from another 
subsection (d) hospital and have less than 200 discharges (that is, 
less than 200 total discharges, including both Medicare and non-
Medicare discharges) during the fiscal year. We also established a 
procedure for hospitals to request low-volume hospital status for FY 
2013 (which was consistent with our previously established procedures 
for FYs 2011 and 2012).
    To implement the extension of the temporary change in the low-
volume hospital payment policy for FY 2013 provided for by the ATRA, in 
accordance with the existing regulations at Sec.  412.101(b)(2)(ii) and 
consistent with our implementation of the changes in FYs 2011 and 2012, 
we are updating the discharge data source used to identify qualifying 
low-volume hospitals and calculate the payment adjustment (percentage 
increase) for FY 2013. As noted previously, under Sec.  
412.101(b)(2)(ii), for FYs 2011 and FY 2012, a hospital's Medicare 
discharges from the most recently available MedPAR data, as determined 
by us, are used to determine if the hospital meets the discharge 
criteria to receive the low-volume payment adjustment in the current 
year. The applicable low-volume percentage increase provided for by the 
provisions of the Affordable Care Act is determined using a continuous 
linear sliding scale equation that results in a low-volume adjustment 
ranging from an additional 25 percent for hospitals with 200 or fewer 
Medicare discharges to a zero percent additional payment adjustment for 
hospitals with 1,600 or more Medicare discharges.
    For FY 2013, consistent with our historical policy, qualifying low-
volume hospitals and their payment adjustment will be determined using 
Medicare discharge data from the March 2012 update of the FY 2011 
MedPAR file, as these data were the most recent data available at the 
time of the development of the FY 2013 payment rates and factors 
established in the FY 2013 IPPS/LTCH PPS final rule. Table 14 of this 
notice (which is available only through the Internet on the CMS Web 
site at http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) 
lists the ``subsection (d)'' hospitals with fewer than 1,600 Medicare 
discharges based on the March 2012 update of the FY 2011 MedPAR files 
and their FY 2013 low-volume payment adjustment (if eligible). 
Eligibility for the low-volume hospital payment adjustment for FY 2013 
is also dependent upon meeting (in the case of a hospital that did not 
qualify for the low-volume hospital payment adjustment in FY 2012) or 
continuing to meet (in the case of a hospital that did qualify for the 
low-volume hospital payment adjustment in FY 2012) the mileage 
criterion specified at Sec.  412.101(b)(2)(ii). We note that the list 
of hospitals with fewer than 1,600 Medicare discharges in Table 14 does 
not reflect whether or not the hospital meets the mileage criterion, 
and a hospital also must be located more than 15 road miles from any 
other IPPS hospital in order to qualify for a low-volume hospital 
payment adjustment in FY 2013.
    In order to receive a low-volume hospital payment adjustment under 
Sec.  412.101, in accordance with our previously established procedure, 
a hospital must notify and provide documentation to its fiscal 
intermediary or Medicare Administrative Contractor (MAC) that it meets 
the mileage criterion. The use of a Web-based mapping tool, such as 
MapQuest, as part of documenting that the hospital meets the mileage 
criterion for low-volume hospitals, is acceptable. The fiscal 
intermediary or MAC will determine if the information submitted by the 
hospital, such as the name and street address of the nearest hospitals, 
location on a map, and distance (in road miles, as defined in the 
regulations at Sec.  412.101(a)) from the hospital requesting low-
volume hospital status, is sufficient to document that it meets the 
mileage criterion. The fiscal intermediary or MAC may follow up with 
the hospital to obtain additional necessary information to determine 
whether or not the hospital meets the low-volume mileage criterion. In 
addition, the fiscal intermediary or MAC will refer to the hospital's 
Medicare discharge data determined by CMS to determine whether or not 
the hospital meets the discharge criterion, and the amount of the FY 
2013 payment adjustment, once it is determined that the mileage 
criterion has been met. The Medicare discharge data shown in Table 14, 
as well as the Medicare discharge data for all ``subsection (d)'' 
hospitals with claims in the March 2012 update of the FY 2011 MedPAR 
file, is also available on the CMS Web site for hospitals to view their 
Medicare discharges to help hospitals to decide whether or not to apply 
for low-volume hospital status.
    Consistent with our previously established procedure, we are 
implementing the following procedure for a hospital to request low-
volume hospital status for FY 2013. In order for the applicable low-
volume percentage increase to be applied to payments for its discharges 
beginning on or after October 1, 2012 (that is, the beginning of FY 
2013), a hospital must make its request for low-volume hospital status 
in writing to its fiscal intermediary or MAC by March 22, 2013. A 
hospital that qualified for the low-volume payment adjustment in FY 
2012 may continue to receive a low-volume payment adjustment in FY 2013 
without reapplying, if it continues to meet the Medicare discharge 
criterion, based on the March 2012 update of the FY 2011 MedPAR data 
(shown in Table 14) and the distance criterion; however, the hospital 
must verify in writing to its fiscal intermediary or MAC no later than 
March 22, 2013, that it continues to be more than 15 miles from any 
other ``subsection (d)'' hospital. Furthermore, for requests for low-
volume hospital status for FY 2013 received after March 22, 2013, if 
the hospital meets the criteria to qualify as a low-volume hospital, 
the fiscal intermediary or MAC

[[Page 14691]]

will apply the applicable low-volume adjustment in determining payments 
to the hospital's FY 2013 discharges prospectively effective within 30 
days of the date of the fiscal intermediary's or MAC's low-volume 
status determination. (As noted previously, this procedure is similar 
to the policy we established for a hospital to request low-volume 
hospital status for FYs 2011 and 2012 in the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 20574 through 20575) and FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51680), respectively.)
    Program guidance on the systems implementation of these provisions, 
including changes to PRICER software used to make payments, will be 
announced in an upcoming transmittal. We intend to make conforming 
changes to the regulations text at 42 CFR 412.101 to reflect the 
changes to the qualifying criteria and the payment adjustment for low-
volume hospitals according to the amendments made by section 605 of the 
ATRA in future rulemaking.

B. Extension of the Medicare-Dependent, Small Rural Hospital (MDH) 
Program

    Section 606 of the ATRA provides for a 1-year extension of the 
Medicare-dependent, small rural hospital (MDH) program effective from 
October 1, 2012 to September 30, 2013. Specifically, section 606 of the 
ATRA of 2012 amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act by striking ``October 1, 2012'' and 
inserting ``October 1, 2013''. Section 606 of the ATRA of 2012 also 
made conforming amendments to sections 1886(b)(3)(D)(i) and 
1886(b)(3)(D)(iv) of the Act. Generally, as a result of the section 606 
extension, a provider that was classified as an MDH prior to the 
September 30, 2012 expiration of the MDH program will be reinstated as 
an MDH effective October 1, 2012, with no need to reapply for MDH 
classification.
    Prior to the enactment of section 606 of the ATRA, under section 
3124 of the Affordable Care Act, the MDH program authorized by section 
1886(d)(5)(G) of the Act was set to expire at the end of FY 2012. (For 
additional information on the MDH program and the payment methodology, 
we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51683 
through 51684).
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287 and 50414), we 
amended the regulations at Sec.  412.108(a)(1) and (c)(2)(iii) to 
reflect the Affordable Care Act extension of the MDH program through FY 
2012. We intend to amend the regulations at Sec.  412.108(a)(1) and 
(c)(2)(iii) to reflect the statutory extension of the MDH program 
through FY 2013 provided for by the provisions of the ATRA in future 
rulemaking.
    Since MDH status is now extended by statute through the end of FY 
2013, generally, hospitals that previously qualified for MDH status 
will be reinstated as an MDH retroactively to October 1, 2012. However, 
in the following two situations, the effective date of MDH status may 
not be retroactive to October 1, 2012.
1. MDHs That Classified as Sole Community Hospitals (SCHs) on or After 
October 1, 2012
    In anticipation of the September 30, 2012 expiration of the MDH 
provision, we allowed MDHs that applied for reclassification as sole 
community hospitals (SCHs) by August 31, 2012, to have such status be 
effective on October 1, 2012 under the regulations at Sec.  
412.92(b)(2)(v). Hospitals that applied by the August 31, 2012 deadline 
and were approved for SCH classification received SCH status effective 
October 1, 2012. Additionally, some hospitals that had MDH status as of 
the September 30, 2012 expiration of the MDH program may have missed 
the August 31, 2012 application deadline. These hospitals applied for 
SCH status in the usual manner instead and were approved for SCH status 
effective 30 days from the date of approval, resulting in an effective 
date later than October 1, 2012. These hospitals must reapply for MDH 
status under Sec.  412.108(b).
2. MDHs That Requested a Cancellation of Their Rural Classification 
Under Sec.  412.103(b)
    One of the criteria to be classified as an MDH is that the hospital 
must be located in a rural area. To qualify for MDH status, some MDHs 
reclassified from an urban to a rural hospital designation, under the 
regulations at Sec.  412.103(b). With the expiration of the MDH 
provision, some of these providers may have requested a cancellation of 
their rural classification. Therefore, in order to qualify for MDH 
status, these hospitals must request to be reclassified as rural under 
Sec.  412.103(b) and must reapply for MDH status under Sec.  
412.108(b).
    Any provider that falls within either of the two exceptions listed 
previously may not have its MDH status automatically reinstated 
effective October 1, 2012. That is, if a provider reclassified to SCH 
status or cancelled its rural status effective October 1, 2012, its MDH 
status will not be retroactive to October 1, 2012, but will instead be 
applied prospectively based on the date the hospital is notified that 
it again meets the requirements for MDH status in accordance with Sec.  
412.108(b)(4) after reapplying for MDH status. Once granted, this 
status will remain in effect through FY 2013, subject to the 
requirements at Sec.  412.108. However, if a provider reclassified to 
SCH status or cancelled its rural status effective on a date later than 
October 1, 2012, MDH status will be reinstated effective from October 
1, 2012 but will end on the date on which the provider changed its 
status to an SCH or cancelled its rural status. Those hospitals may 
also reapply for MDH status to be effective again 30 days from the date 
the hospital is notified of the determination, in accordance with Sec.  
412.108(b)(4). Once granted, this status will remain in effect through 
FY 2013, subject to the requirements at Sec.  412.108. Providers that 
fall within either of the two exceptions will have to reapply for MDH 
status according to the classification procedures in 42 CFR 412.108(b). 
Specifically, the regulations at Sec.  412.108(b) require the 
following:
     The hospital submit a written request along with 
qualifying documentation to its contractor to be considered for MDH 
status.
     The contractor make its determination and notify the 
hospital within 90 days from the date that it receives the request for 
MDH classification and all required documentation.
     The determination of MDH status be effective 30 days after 
the date of the contractor's written notification to the hospital.
    The following are examples of various scenarios that illustrate how 
and when MDH status will be determined for hospitals that were MDHs as 
of the September 30, 2012 expiration of the MDH program:
    Example 1: Hospital A was classified as an MDH prior to the 
September 30, 2012 expiration of the MDH program. Hospital A retained 
its rural classification and did not reclassify as an SCH. Hospital A's 
MDH status will be automatically reinstated to October 1, 2012.
    Example 2: Hospital B was classified as an MDH prior to the 
September 30, 2012 expiration of the MDH program. per the regulations 
at Sec.  412.92(b)(2)(v) and in anticipation of the expiration of the 
MDH program, Hospital B applied for reclassification as an SCH by 
August 31, 2012, and was approved for SCH status effective on October 
1, 2012. Hospital B's MDH status will not be automatically reinstated. 
In order to reclassify as an MDH, Hospital B must cancel its SCH 
status, in accordance with Sec.  412.92(b)(4), and reapply for

[[Page 14692]]

MDH status under the regulations at Sec.  412.108(b).
    Example 3: Hospital C was classified as an MDH prior to the 
September 30, 2012 expiration of the MDH program. Hospital C missed the 
application deadline of August 31, 2012 for reclassification as an SCH 
under the regulations at Sec.  412.92(b)(2)(v) and was not eligible for 
its SCH status to be effective as of October 1, 2012. Hospitals C's 
Medicare contractor approved its request for SCH status effective 
November 16, 2012. Hospital C's MDH status will be reinstated effective 
October 1, 2012 through November 15, 2012 and will subsequently be 
cancelled effective November 16, 2012. In order to reclassify as an 
MDH, Hospital C must cancel its SCH status, in accordance Sec.  
412.92(b)(4), and reapply for MDH status under the regulations at Sec.  
412.108(b).
    Example 4: Hospital D was classified as an MDH prior to the 
September 30, 2012 expiration of the MDH program. In anticipation of 
the expiration of the MDH program, Hospital D requested that its rural 
classification be cancelled per the regulations at Sec.  412.103(g). 
Hospital D's rural classification was cancelled effective October 1, 
2012. Hospital D's MDH status will not be automatically reinstated. In 
order to reclassify as an MDH, Hospital D must request to be 
reclassified as rural under Sec.  412.103(b) and must reapply for MDH 
status under Sec.  412.108(b).
    Example 5: Hospital E was classified as an MDH prior to the 
September 30, 2012 expiration of the MDH program. In anticipation of 
the expiration of the MDH program, Hospital E requested that its rural 
classification be cancelled per the regulations at Sec.  412.103(g). 
Hospital E's rural classification was cancelled effective January 1, 
2013. Hospital E's MDH status will be reinstated but only for the 
period of time during which it met the criteria for MDH status. Since 
Hospital E cancelled its rural status and was classified as urban 
effective January 1, 2013, MDH status will only be reinstated effective 
October 1, 2012 through December 31, 2012 and will be cancelled 
effective January 1, 2013. In order to reclassify as an MDH, Hospital E 
must request to be reclassified as rural under Sec.  412.103(b) and 
must reapply for MDH status under Sec.  412.108(b).
    We note that hospitals that were MDHs as of the September 30, 2012 
expiration of the MDH program that have returned to urban status will 
first need to apply for rural status under Sec.  412.103(b), and 
hospitals that became SCHs will first need to request cancellation of 
SCH status under Sec.  412.92(b)(4).
    Finally, we note that hospitals continue to be bound by Sec.  
412.108(b)(4)(i) through (iii) to report a change in the circumstances 
under which the status was approved. Thus, if a hospital's MDH status 
has been extended and it no longer meets the requirements for MDH 
status, it is required under Sec.  412.108(b)(4)(i) through (iii) to 
make such a report to its fiscal intermediary or MAC. Additionally, 
under the regulations at Sec.  412.108(b)(5), Medicare contractors are 
required to evaluate on an ongoing basis whether or not a hospital 
continues to qualify for MDH status.
    A provider affected by the MDH program extension will receive a 
notice from its Medicare contractor detailing its status in light of 
the MDH program extension.
    Program guidance on the systems implementation of these provisions, 
including changes to PRICER software used to make payments, will be 
announced in an upcoming transmittal. We intend to make the conforming 
changes to the regulations text at 42 CFR 412.108 to reflect the 
changes made by section 606 of the ATRA in future rulemaking.

III. 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. 35).

IV. 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 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 the 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, the Congress, in the ATRA, has already 
required that the agency make these changes, and we are simply 
notifying the public of the extension of the changes to the payment 
adjustment for low-volume hospitals and the MDH program for an 
additional year effective October 1, 2012. As this notice merely 
informs the public of these extensions, 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 the 
Congress's requirements or procedures that will be used to implement 
the Congress's directive; they are interpretive rules, general 
statements of policy, and 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 the policies 
or methodologies already in effect as a matter of law, but simply 
applies rate adjustments under the ATRA to these existing policies and 
methodologies. 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 the ATRA. 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.

V. Regulatory Impact Analysis

A. Introduction

    We have examined the impacts of this notice as required by 
Executive Order

[[Page 14693]]

12866 on Regulatory Planning and Review (September 30, 1993), Executive 
Order 13563 on Improving Regulation and Regulatory Review (January 18, 
2011), 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 Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
regulatory actions with economically significant effects ($100 million 
or more in any 1 year). Although we do not consider this notice to 
constitute a substantive rule or regulatory action, the changes 
announced in this notice are ``economically'' significant, under 
section 3(f)(1) of Executive Order 12866, and therefore we have 
prepared a RIA, that to the best of our ability, presents the costs and 
benefits of this notice. In accordance with Executive Order 12866, the 
notice has been reviewed by the Office of Management and Budget.
    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 suppliers 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 $7.5 to $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 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(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 2012, that threshold is approximately $136 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.
    Although this notice merely reflects the implementation of two 
provisions of the ATRA and does not constitute a substantive rule, we 
nevertheless prepared this impact analysis in the interest of ensuring 
that the impacts of these changes are fully understood. 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 and 
13563, the RFA, and section 1102(b) of the Act. The notice will 
positively affect payments to a substantial number of small rural 
hospitals and providers, as well as other classes of hospitals and 
providers, and the effects on some hospitals and providers may be 
significant. The impact analysis, which discusses the effect on total 
payments to IPPS hospitals and providers, is presented in this section.

B. Statement of Need

    This notice is necessary to update the IPPS final FY 2013 payment 
policies to reflect changes required by the implementation of two 
provisions of the ATRA. Section 605 of the ATRA extends the payment 
adjustment for low-volume hospitals through FY 2013. Section 606 of the 
ATRA extends the MDH program through FY 2013. As noted previously, 
program guidance on the systems implementation of these provisions, 
including changes to PRICER software used to make payments, will be 
announced in an upcoming transmittal.

C. Overall Impact

    The FY 2013 IPPS/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 to reflect the changes made by sections 605 
and 606 of the ATRA. Since these sections were not budget neutral, the 
overall estimates for hospitals have changed from our estimates that 
were published in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53748). 
We estimate that the changes in the FY 2013 IPPS/LTCH PPS final rule, 
in conjunction with the changes included in this notice, will result in 
an approximate $2.54 billion increase in total payments to IPPS 
hospitals relative to FY 2012. In the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53748), we had projected that total payments to IPPS hospitals 
would increase by $2.04 billion relative to FY 2012. However, since the 
changes in this notice will increase payments by an estimated $509 
million relative to what was projected in the FY 2013 IPPS/LTCH PPS 
final rule, these changes will result in a net increase of $2.54 
billion in total payments to IPPS hospitals relative to FY 2012, as 
noted previously.

D. Anticipated Effects

    The impact analysis reflects the change in estimated payments to 
IPPS hospitals in FY 2013 due to sections 605 and 606 of the ATRA 
relative to estimated FY 2013 payments to IPPS hospitals published in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53748). As described later 
in the regulatory impact analysis, FY 2013 IPPS payments to hospitals 
affected by sections 605 and 606 of the ATRA are projected to increase 
by $509 million (relative to the FY 2013 payments estimated for these 
hospitals for the FY

[[Page 14694]]

2013 IPPS/LTCH PPS final rule). Furthermore, we project that, on the 
average, overall IPPS payments in FY 2013 for all hospitals will 
increase by 0.5 percent due to these provisions in the ATRA compared to 
the previous estimate of FY 2013 payments to all IPPS hospitals 
published in the FY 2013 IPPS/LTCH PPS final rule.
1. Effects of the Extension of the Payment Adjustment for Low-Volume 
Hospitals
    The extension, for FY 2013, of the temporary changes to the payment 
adjustment for low-volume hospitals (originally provided for by the 
Affordable Care Act for FYs 2011 and 2012) as provided for under 
section 605 of the ATRA is a non-budget neutral payment provision. The 
provisions of the Affordable Care Act expanded the definition of low-
volume hospital and modified the methodology for determining the 
payment adjustment for hospitals meeting that definition for FYs 2011 
and 2012. Prior to the enactment of the ATRA, beginning with FY 2013, 
the low-volume hospital definition and payment adjustment methodology 
was to return to the statutory requirements that were in effect prior 
to the amendments made by the Affordable Care Act. With the additional 
year extension provided for by the ATRA, based on FY 2011 claims data 
(March 2012 update of the MedPAR file), we estimate that approximately 
600 hospitals will now qualify as a low-volume hospital for FY 2013. We 
project that these hospitals will experience an increase in payments of 
approximately $326 million compared to our previous estimates of 
payments to these hospitals for FY 2013 published in the FY 2013 IPPS/
LTCH PPS final rule.
2. Effects of the Extension of the MDH Program
    The extension of the MDH program in FY 2013 as provided for under 
section 606 of the ATRA is a non-budget neutral payment provision. 
Hospitals that qualify to be MDHs receive the higher of operating IPPS 
payments made under the Federal standardized amount or the payments 
made under the Federal standardized amount plus 75 percent of the 
difference between the Federal standardized amount and the hospital-
specific rate (a hospital-specific cost-based rate). Because this 
provision is not budget neutral, we estimate that the extension of this 
payment provision will result in a 0.2 percent increase in payments 
overall. Prior to the extension of the MDH program, there were 213 
MDHs, of which 98 were estimated to be paid under the blended payment 
of the Federal standardized amount and hospital-specific rate in FY 
2013. Because those 98 MDHs will now receive the blended payment (that 
is, the Federal standardized amount plus 75 percent of the difference 
between the Federal standardized amount and the hospital-specific rate) 
in FY 2013, we estimate that those hospitals will experience an overall 
increase in payments of approximately $183 million compared to our 
previous estimates of payments to these hospitals for FY 2013 published 
in the FY 2013 IPPS/LTCH PPS final rule.

E. Alternatives Considered

    This notice provides descriptions of the statutory provisions that 
are addressed and identifies policies for implementing these 
provisions. Due to the prescriptive nature of the statutory provisions, 
no alternatives were considered.

F. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehousegov/omb/circulars/a004/a-4.pdf), in Table I below, we 
have prepared an accounting statement showing the classification of 
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 from the Federal government to Medicare 
providers. As previously discussed, relative to what was projected in 
the FY 2013 IPPS/LTCH PPS final rule, the changes in this notice for 
implementing sections 605 and 606 of the ATRA are projected to increase 
FY 2013 payments to IPPS hospitals by $509 million.

 Table I--Accounting Statement: Classification of Estimated Expenditures
        Under the IPPS From Published FY 2013 to Revised FY 2013
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $509 million
From Whom to Whom......................  Federal Government to IPPS
                                          Medicare Providers
    Total..............................  $509 million
------------------------------------------------------------------------


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

    Dated: January 30, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Approved: March 1, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-05263 Filed 3-4-13; 11:15 am]
BILLING CODE 4120-01-P