[Federal Register Volume 79, Number 116 (Tuesday, June 17, 2014)]
[Rules and Regulations]
[Pages 34444-34452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14070]



[[Page 34444]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1599-N]
RIN 0938-ZB17


Medicare Program; Additional 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 2014

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

ACTION: Extension of a Payment Adjustment and a Program.

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SUMMARY: This document 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 the second half of FY 2014 (April 1, 2014 through September 30, 
2014) in accordance with sections 105 and 106, respectively, of the 
Protecting Access to Medicare Act of 2014 (PAMA).

DATES: Effective Date: June 12, 2014.
    Applicability Dates: The provisions described in this document are 
applicable for discharges on or after April 1, 2014 and on or before 
September 30, 2014.

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

SUPPLEMENTARY INFORMATION:

I. Background

    On April 1, 2014, the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93) was enacted. Section 105 of PAMA extends 
changes to the payment adjustment for low-volume hospitals for an 
additional year, through March 31, 2015, that is, through the first 6 
months of fiscal year (FY) 2015. Section 106 of PAMA extends the 
Medicare-dependent, small rural hospital (MDH) program for an 
additional year, through March 31, 2015, that is, through the first 6 
months of FY 2015. This document addresses payment for these programs 
only for the second half of FY 2014 (April 1, 2014 through September 
30, 2014). We proposed to implement the statutory changes for the first 
half of FY 2015 (October 1, 2014 through March 31, 2015) in the FY 2015 
IPPS/LTCH PPS proposed rule that appeared in the May 15, 2014 Federal 
Register.

II. Provisions of the Document

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 qualifying low-volume hospitals that are 
paid under the 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. Section 605 of the American Taxpayer Relief Act of 
2012 (ATRA) extended, 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. Section 1105 of the Pathway for SGR Reform Act of 
2013 extended, for the first 6 months of FY 2014 (that is, through 
March 31, 2014), the temporary changes in the low-volume hospital 
payment policy originally provided for by the Affordable Care Act and 
extended through subsequent legislation.
    We addressed the extension of the temporary changes to the low-
volume hospital payment policy through March 31, 2014 under the Pathway 
for SGR Reform Act in an interim final rule with comment period (IFC) 
that appeared in the March 18, 2014 Federal Register (79 FR 15022 
through 15025) (hereinafter referred to as the FY 2014 IPPS IFC). In 
the FY 2014 IPPS IFC, we also amended the regulations at 42 CFR 412.101 
to reflect the extension of the temporary changes to the qualifying 
criteria and the payment adjustment for low-volume hospitals through 
March 31, 2014 in accordance with section 1105 of the Pathway for SGR 
Reform Act.
2. Low-Volume Hospital Payment Adjustment Under the Temporary Changes 
(Originally Provided by the Affordable Care Act) for FYs 2011 Through 
2013 and FY 2014 Discharges Occurring Before April 1, 2014
    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 0 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 existing regulations 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).
    Section 605 of the ATRA extended the temporary changes in the low-
volume hospital payment policy provided for in FYs 2011 and 2012 by the 
Affordable Care Act for FY 2013, that is, for discharges occurring 
before October 1, 2013. We announced the extension of the Affordable 
Care Act amendments to the low-volume hospital payment adjustment 
requirements under section 1886(d)(12) of the Act for FY 2013 pursuant 
to section 605 of the ATRA in a notice of extension that appeared in 
the March 7, 2013 Federal Register (78 FR 14689 through 14694).
    Section 1105 of the Pathway for SGR Reform Act extended, for the 
first 6 months of FY 2014 (that is, through March 31, 2014), the 
temporary changes in the low-volume hospital payment policy originally 
provided by the Affordable Care Act. In the FY 2014 IPPS IFC (79 FR 
15022 through 15025), we implemented the extension of the Affordable 
Care Act amendments to the low-volume hospital payment policy through 
March 31, 2014 under the Pathway for SGR Reform Act. In that IFC, we 
also amended the regulations at 42 CFR 412.101 to reflect the extension 
of the temporary changes to the qualifying criteria and the payment 
adjustment for low-volume hospitals through March 31, 2014.

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    To implement the extension of the temporary change in the low-
volume hospital payment policy through the first half of FY 2014 (that 
is, for discharges occurring through March 31, 2014), in the FY 2014 
IPPS IFC we updated the discharge data source used to identify 
qualifying low-volume hospitals and calculate the payment adjustment 
(percentage increase) for FY 2014 discharges occurring before April 1, 
2014. Specifically, for FY 2014 discharges occurring before April 1, 
2014, consistent with our historical policy, qualifying low-volume 
hospitals and their payment adjustment were determined using Medicare 
discharge data from the March 2013 update of the FY 2012 MedPAR file, 
as these data were the most recent data available at the time of the 
development of the FY 2014 payment rates and factors established in the 
FY 2014 IPPS/LTCH PPS final rule. Table 14 of the FY 2014 IPPS IFC 
(which is available only through the Internet on the CMS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the hospitals with fewer than 1,600 
Medicare discharges based on that Medicare discharge data and their 
potential FY 2014 low-volume payment adjustment (for hospitals that 
also meet the mileage criterion specified at 42 CFR 412.101(b)(2)(ii)).
    Similar to our previously established procedure, in the FY 2014 
IPPS IFC we implemented the following procedure for a hospital to 
request low-volume hospital status for FY 2014 discharges occurring 
before April 1, 2014. In order for the applicable low-volume percentage 
increase to be applied to payments for its discharges beginning on or 
after October 1, 2013 (that is, the beginning of FY 2014), a hospital 
must have made its request for low-volume hospital status in writing 
and this request must have been received by its Medicare Administrative 
Contractor (MAC) no later than March 31, 2014. Requests for low-volume 
hospital status for FY 2014 discharges occurring before April 1, 2014 
that were received by the MAC after March 31, 2014 were to be processed 
by the MAC; however, the hospital would not be eligible to have the 
low-volume hospital payment adjustment at Sec.  412.101(c)(2) applied 
to its FY 2014 discharges occurring before April 1, 2014. We also 
explained that the low-volume hospital payment adjustment at Sec.  
412.101(c)(2) would not be prospectively applied in determining 
payments for the hospital's FY 2014 discharges, because, at that time, 
beginning on April 1, 2014, the temporary changes to the low-volume 
hospital payment policy provided for by the Pathway for SGR Reform Act 
would have expired and the low-volume hospital definition and payment 
methodology would have reverted back to the statutory requirements that 
were in effect prior to the amendments made by the Affordable Care Act. 
If the hospital would have otherwise met the criteria to qualify as a 
low-volume hospital under the temporary changes to the low-volume 
hospital policy, the MAC was to notify the hospital that, although the 
hospital met the low-volume hospital criteria set forth at Sec.  
412.101(b)(2)(ii) and would have had low-volume hospital status within 
30 days from the date of the determination, the hospital did not meet 
the criteria for low-volume hospital status applicable for discharges 
occurring on or after April 1, 2014 at that time (79 FR 15022 through 
15025).
3. Implementation of the Extension of the Temporary Changes to the Low-
Volume Hospital Payment Adjustment for FY 2014 Discharges Occurring on 
or After April 1, 2014 Through September 30, 2014
    Section 105 of the PAMA (Pub. L. 113-93) extends, for an additional 
year (that is, through March 31, 2015), the temporary changes in the 
low-volume hospital payment policy provided for in FYs 2011 and 2012 by 
the Affordable Care Act and extended through FY 2013 by the ATRA and 
the first half of FY 2014 by the Pathway for SGR Reform Act. Prior to 
the enactment of the PAMA, beginning with discharges occurring on or 
after April 1, 2014, the low-volume hospital definition and payment 
adjustment methodology was to return to the policy established under 
statutory requirements that were in effect prior to the amendments made 
by the Affordable Care Act as extended by subsequent legislation. 
Section 105 of the PAMA extends the Affordable Care Act amendments to 
the low-volume hospital payment policy by amending sections 
1886(d)(12)(B), (C)(i), and (D) of the Act. Specifically, section 105 
of the PAMA amends section 1886(d)(12)(B) of the Act by striking ``in 
the portion of fiscal year 2014 beginning on April 1, 2014, fiscal year 
2015, and subsequent fiscal years'' and inserting ``in fiscal year 2015 
(beginning on April 1, 2015), fiscal year 2016, and subsequent fiscal 
years''; amends section 1886(d)(12)(C)(i) by striking ``fiscal years 
2011, 2012, and 2013, and the portion of fiscal year 2014 before'' and 
inserting ``fiscal years 2011 through 2014 and fiscal year 2015 (before 
April 1, 2015),'' each place it appears; and amends section 
1886(d)(12)(D) of the Act by striking ``fiscal years 2011, 2012, and 
2013, and the portion of fiscal year 2014 before April 1, 2014,'' and 
inserting ``fiscal years 2011 through 2014 and fiscal year 2015 (before 
April 1, 2015),''.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28090 through 
28092), we proposed to implement the extension of the temporary changes 
to the low-volume hospital payment policy for the first half of FY 2015 
and stated our intent to address the extension of those changes for the 
second half of FY 2014 (that is, from April 1, 2014 through September 
30, 2014) as provided for by the PAMA in a forthcoming Federal Register 
notice. In that proposed rule, we also proposed to make conforming 
changes to the existing regulations text at Sec.  412.101 to reflect 
the extension of the changes to the qualifying criteria and the payment 
adjustment methodology for low-volume hospitals through the first half 
of FY 2015 (that is, through March 31, 2015) in accordance with section 
105 of the PAMA. Specifically, we proposed to revise paragraphs 
(b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of Sec.  412.101. Under 
these proposed changes to Sec.  412.101, beginning with FY 2015 
discharges occurring on or after April 1, 2015, consistent with section 
1886(d)(12) of the Act, as amended, the low volume hospital qualifying 
criteria and payment adjustment methodology would revert to that which 
was in effect prior to the amendments made by the Affordable Care Act 
and subsequent legislation (that is, the low-volume hospital payment 
policy in effect for FYs 2005 through 2010).
    To implement the extension of the temporary change in the low-
volume hospital payment policy for the last 6 months of FY 2014 
provided for by the PAMA, we are using the same data source to identify 
qualifying low-volume hospitals and calculate the payment adjustment 
(percentage increase) that was used to identify qualifying low-volume 
hospitals and calculate the payment adjustment for discharges that 
occurred during the first half of FY 2014 (that is, FY 2012 Medicare 
discharge data from the March 2013 update of the MedPAR files), as 
these data were the most recent data available at the time of the 
development of the FY 2014 payment rates and factors established in the 
FY 2014 IPPS/LTCH PPS final rule. This is consistent with our policy at 
Sec.  412.101(b)(2)(ii), which states that 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

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receive the low-volume payment adjustment in the current year. 
Accordingly, in Table 14 of this document (which is available only 
through the Internet on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp), we are providing the list of the 
subsection (d) hospitals with fewer than 1,600 Medicare discharges 
based on the March 2013 update of the FY 2012 MedPAR files and their FY 
2014 low-volume payment adjustment, if eligible (Table 14 was 
originally made available in connection with the FY 2014 IPPS IFC that 
appeared in the March 18, 2014 Federal Register). 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. A 
hospital also must be located more than 15 road miles from any other 
subsection (d) hospital in order to qualify for a low-volume hospital 
payment adjustment for FY 2014 discharges occurring on or after April 
1, 2014.
    A hospital that qualified for the low-volume hospital payment 
adjustment for its FY 2014 discharges occurring on or after October 1, 
2013 through March 31, 2014 does not need to notify its MAC and will 
continue to receive the applicable low-volume hospital payment 
adjustment for its FY 2014 discharges occurring on or after April 1, 
2014, without reapplying, provided it continues to meet the mileage 
criterion (that is, the hospital continues to be located more than 15 
road miles from any other subsection (d) hospital).
    For a hospital that did not qualify for the low-volume hospital 
payment adjustment for its FY 2014 discharges occurring on or after 
October 1, 2013 through March 31, 2014, in order to receive a low-
volume hospital payment adjustment under Sec.  412.101, consistent with 
our previously established procedure, we are continuing to require a 
hospital to notify and provide documentation to its MAC that it meets 
the mileage criterion. Specifically, the hospital must make its request 
for low-volume hospital status in writing to its MAC and provide 
documentation that it meets the mileage criterion, so that the 
applicable low-volume percentage increase is applied to payments for 
its discharges occurring on or after April 1, 2014. This written 
request must be received by its MAC no later than June 30, 2014 in 
order for the applicable low-volume percentage increase to be applied 
to payments for the hospital's discharges beginning on or after April 
1, 2014. In addition, a hospital that missed the request deadline for 
FY 2014 discharges occurring before April 1, 2014 in the FY 2014 IPPS 
IFC but qualified for the low-volume payment adjustment in FY 2013 may 
receive a low-volume payment adjustment for its FY 2014 discharges 
occurring on or after April 1, 2014 without reapplying if it continues 
to meet the Medicare discharge criterion, based on the March 2013 
update of the FY 2012 MedPAR data (shown in Table 14), and the mileage 
criterion. However, the hospital must send written verification that is 
received by its MAC no later than June 30, 2014, that it continues meet 
the mileage criterion, that is, it is located more than 15 miles from 
any other subsection (d) hospital. This procedure is similar to the 
procedures we used to implement prior extensions of the Affordable Care 
Act amendments to the low-volume hospital payment policy in the FY 2014 
IPPS IFC (79 FR 15024 through 150025) and the FY 2013 IPPS notice of 
extension (78 FR 14689).
    For requests for low-volume hospital status for FY 2014 discharges 
occurring on or after April 1, 2014 that are received by the MAC after 
June 30, 2014, if the hospital meets the criteria to qualify as a low-
volume hospital, the MAC will apply the applicable low-volume 
adjustment in determining payments to the hospital's FY 2014 discharges 
occurring on or after April 1, 2014 prospectively effective within 30 
days of the date of the MAC's low-volume status determination. This 
procedure is similar to the policy we established for a hospital to 
request low-volume hospital status for FY 2013 in the FY 2013 IPPS 
notice of extension (78 FR 14689), as well as for FYs 2011 and 2012 in 
the FY 2011 IPPS/LTCH PPS final rule (75 FR 50274 through 50275) and 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680), respectively.
    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 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 the hospital requesting low-volume hospital status meets 
the mileage criterion. The MAC may follow up with the hospital to 
obtain additional necessary information to determine whether or not the 
hospital meets the low-volume hospital mileage criterion. In addition, 
the MAC will refer to the hospital's Medicare discharge data determined 
by CMS (as provided in Table 14, which is available only through the 
Internet on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) to determine whether or not the 
hospital meets the discharge criterion, and the amount of the payment 
adjustment for FY 2014 discharges occurring on or after April 1, 2014, 
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 2013 update of the FY 2012 MedPAR file, is also available on the 
CMS Web site for hospitals to view the count of their Medicare 
discharges. The data can be used to help hospitals decide whether or 
not to apply for low-volume hospital status.
    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. As stated previously, we proposed 
to make conforming changes to the existing regulations text at Sec.  
412.101 to reflect the extension of the changes to the qualifying 
criteria and the payment adjustment methodology for low-volume 
hospitals through the first half of FY 2015 (that is, through March 31, 
2015) in accordance with section 105 of the PAMA.

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

1. Background
    Section 1885(d)(5)(G) of the Act provides special payment 
protections, under the IPPS, to Medicare-dependent, small rural 
hospitals (MDHs). (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). As we discussed in the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51683 through 51684), section 3124 of the Affordable 
Care Act extended the expiration of the MDH program from the end of FY 
2011 (that is, for discharges occurring before October 1, 2011) to the 
end of FY 2012 (that is, for discharges occurring before October 1, 
2012). Under prior law, as specified in section 5003(a) of Pub. L. 109-
171 (DRA 2005), the MDH program was to be in effect through the end of 
FY 2011 only.
    Since the extension of the MDH program through FY 2012 provided by 
section 3124 of the ACA, the MDH program has been further extended 
multiple times. First, section 606 of the

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ATRA extended the MDH program through FY 2013 (that is, for discharges 
occurring before October 1, 2013). (For additional information on the 
extension of the MDH program for FY 2013 pursuant to section 606 of the 
ATRA, see the notice of extension that appeared in the March 7, 2013 
Federal Register (78 FR 14691 through 14692).) Second, section 1106 of 
the Pathway for SGR Reform Act of 2013 extended the MDH program through 
the first half of FY 2014 (that is, for discharges occurring before 
April 1, 2014). In the FY 2014 IPPS IFC, we discussed the 6-month 
extension of the MDH program from October 1, 2013 through March 31, 
2014 provided by the Pathway for SGR Reform Act of 2013 (79 FR 15025 
through 15027). In that IFC, we explained how providers may be affected 
by this extension of the program and described the steps to reapply for 
MDH status for FY 2014, as applicable. Generally, a provider that was 
classified as an MDH as of September 30, 2013 was reinstated as an MDH 
effective October 1, 2013, with no need to reapply for MDH 
classification. However, if the MDH had classified as a sole community 
hospital (SCH) or cancelled its rural classification under Sec.  
412.103(g) effective on or after October 1, 2013, the effective date of 
MDH status may not be retroactive to October 1, 2013.
    Lastly, and under current law, section 106 of the PAMA provides for 
a 1-year extension of the MDH program effective from April 1, 2014 to 
March 31, 2015. Specifically, section 106 of the PAMA amended sections 
1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking 
``April 1, 2014'' and inserting ``April 1, 2015''. Section 106 of the 
PAMA also made conforming amendments to sections 1886(b)(3)(D)(i) and 
1886(b)(3)(D)(iv) of the Act. We note that because the extension 
provided by section 106 of the PAMA spans 2 fiscal years, that is, FY 
2014 and FY 2015, we only address the 6-month extension in FY 2014 in 
this document. The extension of the MDH program through the first half 
of FY 2015 was addressed in the FY 2015 IPPS/LTCH PPS proposed rule (79 
FR 28104 through 28105), where we also proposed to make the conforming 
changes to the regulations at Sec.  412.108(a)(1) and (c)(2)(iii) to 
reflect the statutory extension of the MDH program through the first 
half FY 2015 as provided by section 106 of the PAMA.
2. Provisions of the PAMA
    Prior to the enactment of the PAMA, under section 1106 of the 
Pathway to SGR Reform Act of 2013, the MDH program authorized by 
section 1886(d)(5)(G) of the Act was set to expire midway through FY 
2014 (that is, March 31, 2014). Section 106 of the PAMA amended 
sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to 
provide for an additional 1-year extension of the MDH program, 
effective from April 1, 2014 through March 31, 2015. Section 106 of the 
PAMA also made conforming amendments to sections 1886(b)(3)(D)(i) and 
1886(b)(3)(D)(iv) of the Act.
    As noted previously, this document addresses the portion of the MDH 
program extension that includes the last 6 months of FY 2014 as 
provided by section 106 of PAMA. Consistent with our implementation of 
previous MDH extensions (see 79 FR 15025 through 15027 and 78 FR 14691 
through 14692), generally, providers that were classified as MDHs as of 
the anticipated expiration of the MDH provision (that is, as of March 
31, 2014) will be reinstated as MDHs effective April 1, 2014 with no 
need to reapply for MDH classification. However, in the following two 
situations, the effective date of MDH status may not be retroactive to 
April 1, 2014.
a. MDHs That Classified as Sole Community Hospitals (SCHs) on or After 
April 1, 2014
    Our regulations at Sec.  412.92(b)(2)(v) would have permitted an 
MDH that applied for reclassification as an SCH by March 1, 2014 to 
have such status be effective on April 1, 2014. MDHs that applied by 
the March 1, 2014 deadline and were approved for SCH classification 
received SCH status effective April 1, 2014. Hospitals that applied for 
SCH status after the March 1, 2014 SCH application deadline would have 
been subject to the usual effective date for SCH classification, that 
is, 30 days after the date of CMS' written notification of approval, 
resulting in an effective date of SCH status after April 1, 2014.
    In order to be reclassified as an MDH, these hospitals must first 
cancel their SCH status according to Sec.  412.92(b)(4), because a 
hospital cannot be both an SCH and an MDH, and then reapply and be 
approved for MDH status under Sec.  412.108(b). Under Sec.  
412.92(b)(4), a hospital's cancellation of its SCH classification 
becomes effective no later than 30 days after the date the hospital 
submits its request. Under Sec.  412.108(b)(3), the Medicare contractor 
will make a determination regarding whether a hospital meets the 
criteria for MDH status and notify the hospital within 90 days from the 
date that it receives the hospital's request and all of the required 
documentation. Under Sec.  412.108(b)(4), a determination of MDH status 
made by the Medicare contractor is effective 30 days after the date the 
fiscal intermediary (Note: fiscal intermediaries have been replaced by 
Medicare Administrative Contractors (MACs)) provides written 
notification to the hospital.
b. 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 anticipated March 31, 2014 
expiration of the MDH provision prior to the enactment of the PAMA, 
some of these providers may have requested a cancellation of their 
rural classification. Therefore, in order to qualify for MDH status, 
these hospitals must again request to be reclassified as rural under 
Sec.  412.103(b) and must also reapply for MDH status under Sec.  
412.108(b).
    As noted previously, under Sec.  412.108(b)(3), the Medicare 
contractor will make a determination regarding whether a hospital meets 
the criteria for MDH status and notify the hospital within 90 days from 
the date that it receives the hospital's request and all of the 
required documentation. Under Sec.  412.108(b)(4), a determination of 
MDH status made by the Medicare contractor is effective 30 days after 
the date the fiscal intermediary (MAC) provides written notification to 
the hospital.
    Any provider that falls within either of the two exceptions listed 
previously may not have its MDH status automatically reinstated 
effective April 1, 2014. That is, if a provider reclassified to SCH 
status or cancelled its rural status effective April 1, 2014, its MDH 
status will not be retroactive to April 1, 2014, 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 the hospital reapplies for MDH status. Once 
granted, this MDH status will remain in effect through March 31, 2015, 
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 April 1, 2014, MDH status will be reinstated effective 
from April 1, 2014, 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

[[Page 34448]]

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 March 31, 2015 
subject to the requirements at Sec.  412.108. Providers that fall 
within either of the two exceptions, in order to reclassify as an MDH, 
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 under section 106 of the PAMA will be determined 
for hospitals that were MDHs as of the anticipated March 31, 2014 
expiration of the MDH program:

    Example 1: Hospital A was classified as an MDH as of the 
anticipated March 31, 2014 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 
retroactively to April 1, 2014.
    Example 2: Hospital B was classified as an MDH as of the 
anticipated March 31, 2014 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 March 1, 2014, and was approved for 
SCH status effective on April 1, 2014. Hospital B's MDH status will 
not be automatically reinstated. In order to reclassify as an MDH, 
Hospital B must first cancel its SCH status, in accordance with 
Sec.  412.92(b)(4), and reapply for MDH status under the regulations 
at Sec.  412.108(b).
    Example 3: Hospital C was classified as an MDH as of the 
anticipated March 31, 2014 expiration of the MDH program. Hospital C 
missed the application deadline of March 1, 2014 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 April 1, 2014. The MAC approved Hospital C's request 
for SCH status effective May 16, 2014. Hospital C's MDH status will 
be reinstated but only for the portion of time during which it met 
the criteria for MDH status. Hospital C's MDH status will be 
reinstated effective April 1, 2014 through May 15, 2014, and its MDH 
status will be cancelled effective May 16, 2014. 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 as of the 
anticipated March 31, 2014 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 April 1, 2014. Hospital D's MDH status will 
not be automatically reinstated. In order to reclassify as an MDH, 
Hospital D must first 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 as of the 
anticipated March 31, 2014 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 
is cancelled effective June 1, 2014. 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 is classified as urban effective June 1, 2014, MDH status will 
only be reinstated effective April 1, 2014 through May 31, 2014, and 
will be cancelled effective June 1, 2014. In order to reclassify as 
an MDH, Hospital E must first request to be reclassified as rural 
under Sec.  412.103(b) and must reapply for MDH status under Sec.  
412.108(b).

    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 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.
    As noted previously, we proposed to make conforming changes to the 
regulations at Sec.  412.108(a)(1) and (c)(2)(iii) to reflect the 
statutory extension of the MDH program through March 31, 2015 as 
provided by section 106 of the PAMA in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28104 through 28105). 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. A provider affected by the MDH program extension will 
receive a notice from its MAC detailing its status in light of the MDH 
program extension.
    We also note that the same approach for the additional payment for 
uncompensated care under Sec.  412.106(g) discussed in the FY 2014 IPPS 
IFC (79 FR 15027) will apply in determining MDH payments for FY 2014 
discharges occurring on or after April 1, 2014. That is, a pro rata 
share of the uncompensated care payment amount for that period will be 
included as part of the Federal rate payment in the comparison of 
payments under the hospital-specific rate and the Federal rate. 
Therefore, in making this comparison at cost report settlement, we will 
include the pro rata share of the uncompensated care payment amount 
that reflects the period of time the hospital was paid under the MDH 
program for its FY 2014 discharges occurring on or after April 1, 2014 
and before September 30, 2014. This pro rata share will be determined 
based on the proportion of the applicable Federal fiscal year that is 
included in that cost reporting period. (For additional information on 
our implementation of the additional payment for uncompensated care 
under Sec.  412.106(g), refer to the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50620 through 50647) and the interim final rule with comment 
period titled ``FY 2014 IPPS Changes to Certain Cost Reporting 
Procedures Related to Disproportionate Share Hospital Uncompensated 
Care Payments'' that appeared in the October 3, 2013 Federal Register 
(78 FR 61191 through 61194).)
3. The Treatment of MDHs Under the Hospital Readmissions Reduction 
Program and the Hospital Value-Based Purchasing (VBP) Program for FY 
2014
    The Hospital Readmissions Reduction Program at section 1886(q) of 
the Act requires the Secretary to reduce payments to applicable 
hospitals with excess readmissions effective for discharges beginning 
on or after October 1, 2012. Section 1886(o) of the Act requires the 
Secretary to establish a hospital value-based purchasing program (the 
Hospital Value-Based Purchasing (VBP) Program), effective for 
discharges beginning on or after October 1, 2012, under which value-
based incentive payments are made in a fiscal year to hospitals that 
meet performance standards established for a performance period for 
such fiscal year. In general, the adjustments under both the Hospital 
Readmissions Reduction Program and Hospital VBP Program are applicable 
to MDHs (except when certain exclusions from the Hospital VBP Program 
are met).
    The payment methodology under the Hospital Readmissions Reduction

[[Page 34449]]

Program and Hospital VBP Program applies each program's adjustment 
factors respectively to the ``base operating DRG payment amount.'' (For 
additional information on the calculation of the adjustment factor and 
payment methodology under the Hospital Readmissions Reduction Program, 
refer to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53391). For additional information on the calculation of the adjustment 
factor and payment methodology under the Hospital VBP Program, refer to 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53569 through 53576).) The 
``base operating DRG payment amount'' is generally defined as the wage-
adjusted DRG operating payment plus any applicable new technology add-
on payments (see Sec.  412.152 and Sec.  412.160). For years prior to 
FY 2014, the statutory provisions related to the definition of ``base 
operating DRG payment amount'' under section 1886(q) of the Act and 
section 1886(o) of the Act excluded the difference between an MDH's 
applicable hospital-specific payment (HSP) rate and the Federal payment 
rate (referred to as the HSP add-on) from the definition of the base 
operating DRG payment amount. (MDHs are paid based on the Federal rate 
or, if higher, the Federal rate plus 75 percent of the amount by which 
the Federal rate is exceeded by the updated HSP rate from certain 
specified base years. Thus for MDHs, the HSP add-on for these years is 
equal to 75 percent of the difference between the Federal rate payment 
and HSP rate payment. At cost report settlement, the MAC determines 
which of the payment options yields a higher aggregate payment for an 
MDH, and also determines the final HSP add-on (if applicable) for that 
MDH for each cost reporting period.)
    The treatment of MDHs under the Hospital Readmissions Reduction 
Program and the Hospital VBP Program for FY 2014 was not addressed in 
the FY 2014 IPPS/LTCH PPS final rule because at the time of the 
publication of that final rule, the MDH program was set to expire at 
the end of FY 2013. Accordingly, the payment adjustment factors and 
payment methodology for FY 2014 under both the Hospital Readmissions 
Reduction Program and Hospital VBP Program established in that final 
rule were determined without regard to HSP add-on payments to MDHs. 
That is, for hospitals that were MDHs, the FY 2014 readmissions and 
value-based incentive payment adjustment factors were calculated using 
base operating DRG payment amounts that do not include the difference 
between the HSP payment rate and the Federal payment rate (as 
applicable). Similarly, in determining payments for MDH discharges 
occurring in FY 2014, the base operating DRG payment amounts currently 
also do not include the difference between the HSP payment rate and the 
Federal payment rate (as applicable).
    As discussed previously, subsequent to the publication of the FY 
2014 IPPS/LTCH PPS final rule, the MDH program was extended from 
October 1, 2013, to March 31, 2014, by section 1106 of the Pathway for 
SGR Reform Act (Pub. L. 113-67) and was further extended an additional 
year from April 1, 2014, to March 31, 2015, by section 106 of the 
Protecting Access to Medicare Act of 2014 (Pub. L. 113-93). This 
legislation extended the MDH program by amending sections 
1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act and also made 
conforming amendments to sections 1886(b)(3)(D)(i) and 
1886(b)(3)(D)(iv) of the Act. Given the extension of the MDH program 
for FY 2014, in this document we discuss how the payment methodology 
under both the Hospital Readmissions Reduction Program and Hospital VBP 
Program will be applied for MDH discharges occurring during FY 2014, 
consistent with the sections 1886(q)(2)(B)(i) and 1886(o)(7)(D)(i)(I) 
of the Act.
    We are not revising the FY 2014 readmissions and value-based 
incentive payment adjustment factors that we established through notice 
and comment rulemaking in the FY 2014 IPPS/LTCH PPS final rule because 
at the time we established those factors, the MDH program was set to 
expire at the end of FY 2013. Therefore, the FY 2014 Readmissions 
Adjustment Factors in Table 15 of the FY 2014 IPPS/LTCH PPS final rule 
(as subsequently corrected by the FY 2014 IPPS/LTCH PPS final rule 
correcting document that appeared in the October 3, 2013 Federal 
Register) and the FY 2014 Hospital VBP Program Adjustment Factors in 
Table 16B of the FY 2014 IPPS/LTCH PPS final rule (which are only 
available on the Internet at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) will remain unchanged 
and will continue to apply in determining payments for MDHs' discharges 
occurring during FY 2014.
    However, because a final payment determination for an MDH's cost 
reporting period is not done until cost report settlement, if an MDH 
ultimately receives the HSP add-on (that is, its final payment is 
determined to be the Federal rate payment plus 75 percent of the amount 
by which the Federal rate is exceeded by the updated HSP rate), then 
additional adjustments under the Hospital Readmissions Reduction 
Program and Hospital VBP Program (as applicable) will be made during 
cost report settlement. If at cost report settlement an MDH ultimately 
does not receive an HSP add-on for the cost reporting period (that is, 
its final payment is determined to be the Federal rate payment only), 
then no additional adjustment (if otherwise applicable) under the 
Hospital Readmissions Reduction Program and Hospital VBP Program will 
be made.

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 statute 
establishes rules 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 document do not constitute 
agency rulemaking. Rather, the statute, as amended by the PAMA, has 
already

[[Page 34450]]

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 that was 
effective April 1, 2014. As this document 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 document constitute interpretations of the statute's requirements 
or procedures that will be used to implement the statute'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 
document 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 PAMA to these existing 
policies and methodologies. As the changes outlined in this document 
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 PAMA. 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 document as required by 
Executive Order 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 document to constitute a substantive 
rule or regulatory action, the changes announced in this document 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 the provisions announced in 
this document. In accordance with Executive Order 12866, this document 
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 Small Business Administration 
definition of a small business (having revenues of less than $7.5 to 
$35.5 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 document 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 2014, that threshold is approximately $141 million. This 
document 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 document will not have a substantial effect on State 
and local governments.
    Although this document merely reflects the implementation of two 
provisions of the PAMA 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 document 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 changes announced 
in this document 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 document is necessary to update the FY 2014 IPPS final payment 
policies to reflect changes required by the implementation of two 
provisions of the PAMA. Section 105 of the PAMA extends the temporary 
changes to the payment adjustment for low-volume

[[Page 34451]]

hospitals from April 1, 2014 through March 31, 2015. Section 106 of the 
PAMA extends the MDH program from April 1, 2014 through March 31, 2015. 
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 2014 IPPS/LTCH PPS final rule and the FY 2014 IPPS IFC 
included an impact analysis for the changes to the IPPS included in 
those rules. This document updates those impacts to the IPPS to reflect 
the changes made by sections 105 and 106 of the PAMA. Since these 
sections were not budget neutral, the overall estimates for hospitals 
have changed from our estimates that were published in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 51037) and the FY 2014 IPPS IFC (79 FR 
15029 and 15030). We estimate that the changes in the FY 2014 IPPS 
payments, including the changes announced in this document, will result 
in an approximate $1.68 billion increase in total payments to IPPS 
hospitals relative to FY 2013 rather than the $1.44 billion increase we 
projected in the FY 2014 IPPS IFC (79 FR 15029).

D. Anticipated Effects

    The impact analysis reflects the change in estimated payments to 
IPPS hospitals in FY 2014 as a result of the implementation of sections 
105 and 106 of the PAMA relative to the revised estimated FY 2014 
payments to IPPS hospitals that were published in the FY 2014 IPPS IFC 
(79 FR 15029), which include both the estimated FY 2014 IPPS payments 
from the provisions implemented in that IFC in addition to the 
estimated FY 2014 IPPS payments published in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 51037). As described later in this regulatory impact 
analysis, FY 2014 IPPS payments to hospitals affected by sections 105 
and 106 of the PAMA are projected to increase by $227 million (relative 
to the FY 2014 payments estimated for these hospitals for the FY 2014 
IPPS IFC). Therefore, we project that, on the average, overall IPPS 
payments in FY 2014 for all hospitals will increase by approximately an 
additional 0.24 percent as a result of the estimated $227 million 
increase in payments due to the implementation of sections 105 and 106 
of the PAMA compared to the previous estimate of FY 2014 payments to 
all IPPS hospitals published in the FY 2014 IPPS IFC.
1. Effects of the Extension of the Temporary Changes to the Payment 
Adjustment for Low-Volume Hospitals
    The extension of the temporary changes to the payment adjustment 
for low-volume hospitals (originally provided for by the Affordable 
Care Act) for the last 6 months of FY 2014 (that is, for April 1, 2014 
through September 30, 2014) as provided for under section 105 of the 
PAMA 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. Prior to the enactment of the PAMA, 
beginning April 1, 2014, 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 
and extended by subsequent legislation. With the extension for the last 
6 months of FY 2014 (that is, April 1, 2014 through September 30, 
2014), provided for by the PAMA, based on FY 2012 claims data (March 
2013 update of the MedPAR file), we estimate that approximately 600 
hospitals will qualify as a low-volume hospital through September 30, 
2014. We project that these hospitals will experience an increase in 
payments of approximately $161 million as compared to our previous 
estimate of payments to these hospitals for FY 2014 published in the FY 
2014 IPPS IFC.
2. Effects of the Extension of the MDH Program
    The extension of the MDH program for the last 6 months of FY 2014 
(that is, from April 1, 2014 through September 30, 2014) as provided 
for under section 106 of the PAMA is a non-budget neutral payment 
provision. Hospitals that qualify as a 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. Because this provision is not budget neutral, 
we estimate that the extension of this payment provision for the last 6 
months of FY 2014 will result in a 0.1-percent increase in payments 
overall. Prior to the extension of the MDH program, there were 198 
MDHs, of which 118 were estimated to be paid under the blended payment 
of the Federal standardized amount and hospital-specific rate through 
April 1, 2014. Because those 118 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) for the second half of FY 2014 (from April 1, 
2014 through September 30, 2014), we estimate that those hospitals will 
experience an overall increase in payments of approximately $66 million 
as compared to our previous estimate of payments to these hospitals for 
FY 2014 published in the FY 2014 IPPS IFC.

E. Alternatives Considered

    This document 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.whitehouse.gov/omb/circulars_a004_a-4), in Table I, we have 
prepared an accounting statement showing the classification of 
expenditures associated with the provisions of this document 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 document. All expenditures are 
classified as transfers from the Federal government to Medicare 
providers. As previously discussed, relative to what was projected in 
the FY 2014 IPPS IFC, the changes to FY 2014 IPPS payments made by 
sections 105 and 106 of the PAMA presented in this document are 
projected to increase FY 2014 payments to IPPS hospitals by 
approximately $227 million.

[[Page 34452]]



 Table I--Accounting Statement: Classification of Estimated Expenditures
        Under the IPPS From Published FY 2014 to Revised FY 2014
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $227 million.
From Whom to Whom.........................  Federal Government to IPPS
                                             Medicare Providers.
                                           -----------------------------
  Total...................................  $227 million.
------------------------------------------------------------------------


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


    Dated: June 3, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: June 11, 2014.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-14070 Filed 6-12-14; 11:15 am]
BILLING CODE 4120-01-P