[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)]
[Appendices]
[Appendix D. Medicare Reimbursement to Hospitals]
[From the U.S. Government Printing Office, www.gpo.gov]


[1998 Green Book] APPENDIX D. MEDICARE REIMBURSEMENT TO HOSPITALS

                                CONTENTS

General Summary
Basic Payment System
  Transition Period
  Update Factors
  DRG Weighting Factors
  Source and Calculation of the Hospital Wage Index
  Sample Payment Calculation
Additional Payment Amounts
  Graduate Medical Education
  Disproportionate Share Hospitals
  ESRD Beneficiary Discharges
  Outliers
Payment for Capital
Payments on a Reasonable Cost Basis
  Physicians in Teaching Hospitals
  Organ Acquisition Costs
  Passthrough Payments for Hemophilia Inpatients
  Bad Debts of Medicare Beneficiaries
Special Treatment of Certain Facilities Under PPS
  Sole Community Hospitals
  Medicare Dependent Hospitals
  Referral Centers
  Hospitals in Rural Counties Treated as Urban Counties
Hospitals Excluded From the Prospective Payment System
  PPS-Exempt Hospitals
  State Systems
Administration
  Prospective Payment Assessment Commission/Medicare Payment 
            Advisory Commission
  Administrative and Judicial Review
  Review Activities
Historical Trends in PPS Payments, Costs, and Margins
  Medicare Payments to Hospitals
  Policy Changes and PPS Operating Payments
  Distribution of PPS Hospitals, Cases, and Operating Payments
  Trends in PPS Operating Payments and Costs
  PPS Inpatient Margins
  Margins by Hospital Type
  Additional Hospital Data
References

                            GENERAL SUMMARY

    Medicare part A provides reimbursement for inpatient 
hospital care through a payment system based on prospectively 
set rates, the prospective payment system (PPS), for hospital 
cost reporting periods beginning on or after October 1, 1983. 
PPS was enacted by the Social Security Amendments of 1983 
(Public Law 98-21). This appendix describes the major 
reimbursement provisions of PPS.
    Medicare payment for hospital inpatient services is made 
according to a prospective payment system, rather than a 
retrospective cost-based system. Medicare payments are made at 
predetermined, specific rates which represent the average cost, 
nationwide, of treating a Medicare patient according to his or 
her medical condition. The classification system used to group 
hospital inpatients according to their diagnoses is known as 
diagnosis-related groups (DRGs). Separate DRG rates apply 
depending on whether a hospital is located in a large urban 
area (greater than 1 million population, or 970,000 in New 
England) or other area of the country, as determined by the 
Office of Management and Budget (OMB) metropolitan statistical 
area (MSA) system.
    During a 4-year transition period, a declining portion of 
the total prospective payment was based on a hospital's 
historical reasonable costs and an increasing portion was based 
on a combination of regional and national Federal DRG rates. 
Since the fifth year of the program (fiscal year 1988), 
Medicare payments have been generally determined under a 
national DRG payment methodology. Special transition provisions 
apply to hospitals located in certain geographic regions. If a 
hospital can treat a patient for less than the payment amount, 
it can keep the savings. If the treatment costs more, the 
hospital must absorb the loss. A hospital is prohibited from 
charging Medicare beneficiaries any amounts (except for 
deductibles, copayment amounts, and services not covered by 
Medicare) which represent any difference between the hospital's 
cost of providing covered care and the Medicare DRG payment 
amount.
    Certain hospital costs are excluded from the prospective 
payment system and are paid on a reasonable cost basis, subject 
to rate of increase limits. Authority is provided for States to 
establish their own all-payer hospital payment systems if they 
meet certain Federal requirements.

                          BASIC PAYMENT SYSTEM

    Unless excluded from PPS, each Medicare participating 
hospital is paid a predetermined payment rate per discharge for 
each type of patient treated. Types of patients are defined by 
the diagnosis related groups patient classification system 
which assigns each hospital inpatient to one of 495 patient 
categories (DRGs) based on the diagnosis and the type of 
treatment received (medical or surgical).
    The payment rate for each DRG is the product of two 
components: a base payment amount which applies for all DRGs, 
and a relative weighting factor for the particular DRG. The 
base payment amount is intended to represent the cost of a 
typical (average) Medicare inpatient case. The relative 
weighting factor represents the relative costliness of an 
average case in the particular DRG compared to the cost of the 
overall average Medicare case (i.e., relative to the base 
payment amount). When the DRG relative weights are each 
multiplied by the base payment amount, the result is a complete 
set of prices for all DRGs. Separate DRG rates apply to 
hospitals located in large urban or other areas (separate base 
payment amounts apply in these areas, but the DRG relative 
weighting factors are the same). In addition, the base payment 
amount (and, therefore, each DRG rate) is adjusted for area 
differences in hospital wage levels compared to the national 
average hospital wage level.

                           Transition Period

    Although the transition to prospective payment rates was 
completed in fiscal year 1988, special transition provisions 
applied to hospitals located in certain geographic regions. In 
a few regions with historically higher costs, Public Law 103-66 
(OBRA 1993) provided for the continued use of Federal amounts 
based in part on regional rates until October 1, 1996. Under 
this transition provision, known as the ``regional floor,'' the 
DRG payment rate was determined as the higher of 100 percent of 
the national amount, or 85 percent of the national amount plus 
15 percent of the regional amount.

                             Update Factors

    PPS payment rates are updated each year using an ``update 
factor.'' The annual update factor applied to increase the 
Federal base payment amounts is determined, in part, by the 
projected increase in the hospital market basket index (MBI). 
The MBI measures the cost of goods and services purchased by 
hospitals, yielding one price inflator for all hospitals in a 
given year. Table D-1 shows the categories of expense used in 
developing the index. The update factor also includes 
adjustments for increases in hospital productivity, 
technological change, and other factors that affect the level 
of operating cost per discharge. The annual update factor is 
also adjusted to include increases in average payments per case 
attributable to increases in case mix due to changes in coding 
and reporting accuracy.
    Before fiscal year 1988, the same factor was used for all 
hospitals; however, in subsequent years separate factors were 
applied to hospitals according to their locations. Separate 
update factors were set for hospitals located in large urban, 
other urban, and rural areas. However, beginning in October 1, 
1995, a single update factor applied for all hospitals in all 
areas. Table D-2 compares the hospital market basket increases 
to actual updates for the past 13 years and shows the increases 
in PPS payments per case that resulted from the updates and 
other policy changes.
    For fiscal year 1997, the market basket increase was 2.5 
percent, the average update was 2.0 percent, and the increase 
in operating payments per case was 3.9 percent (see table D-2).

TABLE D-1.--HOSPITAL PROSPECTIVE PAYMENT SYSTEM INPUT PRICE INDEX (``THE MARKET BASKET'') EXPENSE CATEGORIES AND
                                   RATES OF PRICE CHANGE, FISCAL YEARS 1992-98                                  
----------------------------------------------------------------------------------------------------------------
                                Base-year           Federal fiscal year percentage rates of price change        
                                   1992    ---------------------------------------------------------------------
       Expense category        weights \1\                                                                      
                                (percent)   1992 \2\  1993 \2\  1994 \2\  1995 \2\  1996 \2\  1997 \3\  1998 \3\
----------------------------------------------------------------------------------------------------------------
1. Wages and salaries \4\....      50.24         3.7       3.1       2.9       2.7       2.9       2.9       3.3
2. Employee benefits \4\.....      11.15         6.1       5.7       4.2       2.7       2.1       2.5       3.1
3. Professional fees:                                                                                           
 Nonmedical \4\..............       2.13         4.7       4.2       3.4       2.6       3.0       2.8       3.3
4. Energy and utilities......       2.47        -0.7       2.9       0.9       0.0       2.1       4.2      -1.3
    A. Fuel oil, coal, etc...       0.35       -12.5      -1.5      -7.6       3.5       8.7      10.4     -11.7
    B. Electricity...........       1.35         2.0       2.2       1.5       2.4       0.2       0.4       0.3
    C. Natural gas...........       0.67         0.0       6.1       3.2      -6.7       2.6       8.9      -0.5
    D. Water and sewerage....       0.11         7.1       5.9       5.2       3.5       3.9       3.0       6.1
5. Professional liability                                                                                       
 insurance...................       1.19         2.9       3.4      -0.7      -3.3      -0.9      -1.4      -0.4
6. All other.................      32.83         1.3       2.2       1.8       4.7       2.1       1.7       2.1
    A. All other products....      24.03         0.8       1.8       1.3       5.3       1.8       0.8       1.5
         1. Pharmaceuticals..       4.16         7.2       5.0       3.5       2.5       3.8       2.4       2.9
         2. Food: Direct                                                                                        
         purchase............       2.36         0.0       1.0       1.9       0.1       5.0       2.2       1.5
         3. Food: Contract                                                                                      
         service.............       1.10         2.4       1.7       1.7       2.1       2.3       3.3       3.8
         4. Chemicals........       3.80        -4.4       1.4       0.5      14.7      -1.0       0.7       0.1
         5. Medical                                                                                             
         instruments.........       3.13         1.9       2.3       0.9       1.1       1.4       0.8       1.4
         6. Photographic                                                                                        
         supplies............       0.40        -0.7      -0.9       0.4       0.5       2.9       0.1      -0.7
         7. Rubber and                                                                                          
         plastics............       4.87        -0.3       0.9       0.7       5.6       0.7      -0.1       0.4
         8. Paper products...       2.06        -0.5      -0.3       0.2      13.4       2.5      -3.3       2.7
         9. Apparel..........       0.88         2.2       1.3       0.2       0.5       0.7       0.8       1.6
        10. Machinery and                                                                                       
         equipment...........       0.21         0.5       0.5       0.8       1.0       0.5       0.0       1.8
        11. Miscellaneous                                                                                       
         products............       1.07         0.8       1.6       0.4       1.7       2.4       2.0       1.0
    B. All other services....       8.79         2.9       3.1       3.3       3.0       3.0       4.0       3.6
         1. Business services                                                                                   
         \4\.................       3.82         3.3       3.4       3.5       2.9       3.2       4.0       3.7
         2. Computer services                                                                                   
         \4\.................       1.93         1.3       3.5       4.5       3.6       4.0       5.8       3.6
         3. Transportation                                                                                      
         and shipping........       0.19         1.0       3.1       2.8       4.0       2.3       3.3       3.6
         4. Telephone........       0.53         1.2       0.2       1.8       0.8       1.2       2.3       2.0
         5. Postage..........       0.27         4.9       0.0       0.0       7.7       2.4       0.0       8.1
         6. All other labor                                                                                     
         intensive services                                                                                     
         \4\.................       1.71         4.2       3.2       2.7       2.5       1.9       3.1       3.3
         7. All other                                                                                           
         nonlabor intensive                                                                                     
         services............       0.34         3.0       3.0       2.6       2.8       2.8       2.8       2.7
                              ----------------------------------------------------------------------------------
            Total............     100.00         3.1       3.1       2.6       3.2       2.5       2.4      2.7 
----------------------------------------------------------------------------------------------------------------
\1\ Weights may not sum to 100.00 due to rounding.                                                              
\2\ Historical data subject to change only upon revision of underlying series.                                  
\3\ Projected data subject to change in future forecasts.                                                       
\4\ Considered labor related.                                                                                   
                                                                                                                
 Note.--The historical market basket has been revised due to the update from a 1987 to a 1992 base year.        
                                                                                                                
 Source: Health Care Financing Administration, Office of the Actuary.                                           


 TABLE D-2.--COMPARISON OF INCREASE IN PPS HOSPITAL MARKET BASKET INDEX, AVERAGE PPS UPDATE, AND INCREASE IN PPS
                                     PAYMENTS PER CASE, FISCAL YEARS 1984-97                                    
                                                  [In percent]                                                  
----------------------------------------------------------------------------------------------------------------
                                                                    Forecasted                      Increase in 
                                                                    increase in   Average update     operating  
                           Fiscal year                             market basket        \2\        payments per 
                                                                     index \1\                       case \3\   
----------------------------------------------------------------------------------------------------------------
1984............................................................             4.9             4.7            18.5
1985............................................................             4.0             4.5            10.5
1986............................................................             4.3             0.5             3.2
1987............................................................             3.7             1.2             5.4
1988............................................................             4.7             1.5             6.0
1989............................................................             5.4             3.3             6.6
1990............................................................             5.5             4.7             6.5
1991............................................................             5.2             3.4             6.0
1992............................................................             4.4             3.0             5.2
1993............................................................             4.1             2.7             3.8
1994............................................................             4.3             2.0             3.6
1995............................................................             3.6             2.0             4.0
1996............................................................             3.5             1.5             3.4
1997............................................................             2.5             2.0            3.9 
----------------------------------------------------------------------------------------------------------------
\1\ Based on data available when final PPS rates were set.                                                      
\2\ From 1988 to 1995, there were separate updates for hospitals in large urban, other urban, and rural areas.  
  Update for 1990 adjusted to reflect 1.22 percent across-the-board reduction in DRG weights.                   
\3\ Data on PPS operating payments for 1984 through 1995 are for hospital accounting years beginning during each
  Federal fiscal year. Changes are based on cohorts of hospitals with Medicare Cost Reports in two consecutive  
  years. Increases for 1996 and 1997 estimated from current update and case-mix index trends.                   
                                                                                                                
 Source: Prospective Payment Assessment Commission.                                                             

    For fiscal year 1998, the market basket increase is 
forecast at 2.8 percent. The Balanced Budget Act of 1997 sets 
the update for fiscal year 1998 at 0 percent; fiscal year 1999 
at the MBI minus 1.9 percent; fiscal year 2000 at the MBI minus 
1.8 percent; fiscal years 2001 and 2002 at the MBI minus 1.1 
percent; and for fiscal year 2003 and each subsequent fiscal 
year, at the MBI percentage increase for all hospitals in all 
areas.

                         DRG Weighting Factors

    Public Law 98-21 required the Secretary to adjust the DRG 
definitions and weighting factors in fiscal year 1986 and at 
least every 4 years thereafter to reflect changes in treatment 
patterns, technology, and other factors which may change the 
relative use of hospital resources. Public Law 99-509, however, 
required the Secretary to adjust the DRG definitions and 
weighting factors each year, beginning in fiscal year 1988.
    OBRA 1989 required the Secretary to reduce the weighting 
factor for each DRG by 1.22 percent for discharges in fiscal 
year 1990. In addition, the Secretary was prohibited from 
adjusting DRG weighting factors on other than a budget neutral 
basis beginning in fiscal year 1991.
    Table D-3 shows the 20 DRGs accounting for the largest 
numbers of Medicare inpatient discharges during fiscal year 
1995. DRG relative weights appear in table D-21 at the end of 
this appendix.

    TABLE D-3.--TWENTY DIAGNOSIS-RELATED GROUPS (DRGs) WITH THE MOST    
                  HOSPITAL DISCHARGES, FISCAL YEAR 1995                 
------------------------------------------------------------------------
                                                                 Average
  DRG                                                   Percent   length
number             Description              Discharges   total   of stay
                                                                  (days)
------------------------------------------------------------------------
127...  Heart failure and shock..........      706,045      6.0      6.2
89....  Simple pneumonia and pleurisy \1\      448,587      3.8      7.1
14....  Specific cerebrovascular                                        
         disorders except transient                                     
         ischemic attack.................      371,815      3.2      7.3
88....  Chronic obstructive pulmonary                                   
         disease.........................      368,439      3.2      6.1
209...  Major joint and limb reattachment                               
         procedures......................      344,458      2.9      6.7
430...  Psychoses........................      274,966      2.4     13.5
182...  Esophagitis, gastroenteritis, and                               
         miscellaneous metabolic                                        
         disorders.......................      246,431      2.1      4.9
174...  G.I. hemorrhage \2\..............      246,339      2.1      5.5
296...  Nutritional and miscellaneous                                   
         metabolic disorders \1\.........      231,548      2.0      6.4
79....  Respiratory infections and                                      
         inflammations...................      221,867      1.9      9.3
138...  Cardiac arrhythmia and conduction                               
         disorders \2\...................      211,494      1.8      4.5
416...  Septicemia.......................      202,024      1.7      8.2
112...  Vascular procedures except major                                
         reconstruction without pump.....      201,066      1.7      4.7
462...  Rehabilitation...................      197,730      1.7     16.0
140...  Angina pectoris..................      184,772      1.6      3.5
320...  Kidney and urinary tract                                        
         infections \1\..................      181,641      1.6      6.4
121...  Circulatory disorders with acute                                
         myocardial infarction and                                      
         cerebrovascular complications,                                 
         discharged alive................      167,202      1.4      7.4
148...  Major small and large bowel                                     
         procedures \2\..................      150,746      1.3     13.4
15....  Transient ischemic attack and                                   
         precerebral occlusions..........      145,915      1.2      4.5
124...  Circulatory disorders except                                    
         acute myocardial infarction,                                   
         with cardiac catheterization and                               
         complex diagnosis...............      145,560      1.2      4.9
                                          ------------------------------
  ....  Total, all DRGs..................   11,680,874    100.0     7.1 
------------------------------------------------------------------------
\1\ Age greater than 17, with complications.                            
\2\ With complications.                                                 
                                                                        
 Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy.                                                         

           Source and Calculation of the Hospital Wage Index

    The hospital wage index is used to adjust a hospital's base 
payment amount for the wage level of the hospital's area. This 
is accomplished by multiplying the labor-related component of 
the national standardized payment amount by a wage index. The 
wage index is intended to measure the average wage level for 
hospital workers in each urban area (metropolitan statistical 
area or MSA) or rural area (non-MSA parts of States) relative 
to the national average wage level.
    The Secretary is required to update the wage index annually 
beginning October 1, 1993. The Secretary is required to base 
the update on a survey of wages and wage-related costs of 
short-term acute care hospitals. Tables D-18, D-19, and D-20, 
at the end of this appendix, give the current wage index values 
for urban areas, for all rural areas in a State, and a special 
index for hospitals that are reclassified.
    Calculation of the index begins with the area average 
hospital hourly wage. For each MSA or non-MSA area (i.e., all 
non-MSA counties in a State), total county compensation and 
total paid hours data are summed separately over all counties 
included in the area. Then aggregate hospital compensation for 
the area is divided by aggregate paid hours of hospital 
employment in the area to produce the area average hourly wage. 
The hospital wage index is calculated by dividing the average 
hourly wage for each area by the national average hourly wage 
(determined by dividing national aggregate compensation by 
national aggregate paid hours of employment).
    This procedure results in an index number, such as 0.9072 
(Asheville, North Carolina) or 1.2202 (Sacramento, California), 
for each MSA or non-MSA area in the United States. Since the 
national average wage level is represented by an index value of 
1.000, the wage index value for any area has a direct and 
simple interpretation. The value of 1.2202 for Sacramento means 
that the hourly wage rate for hospital workers is 22.02 percent 
higher in the Sacramento MSA than nationwide.
    Thus, in computing the hospital payment rates applicable 
for hospitals in the Sacramento MSA, the labor-related 
component of the national large urban adjusted standardized 
payment amount ($2,752.36) is multiplied by 1.2202 in order to 
adjust for the higher level of hourly wage rates in this area. 
Similarly, the calculation of the labor portion of the rates 
for hospitals in Asheville would involve a reduction in the 
published labor-related component of the national adjusted 
standardized payment amount, to reflect the fact that hourly 
wage levels in this MSA are 9.28 percent lower than the 
national average (as indicated by the wage index value of 
0.9072).

                       Sample Payment Calculation

    The Federal large urban and other area base payment amounts 
per discharge for fiscal year 1998 were published in the 
Federal Register on August 29, 1997 (see table D-4). The 
payment rates for most hospitals are computed using the 
national adjusted operating standardized amounts. Puerto Rico 
has its own adjusted operating standardized amounts for DRG 
payment purposes. The Balanced Budget Act of 1997 changes the 
way the standardized amount for Puerto Rico is determined from 
a 25 percent Federal, 75 percent local blend rate, to a 50 
percent Federal, 50 percent local rate.
    Each payment amount is divided into a labor-related 
component and a nonlabor-related component. The sum of these 
components represents the base payment amount that would apply 
for a hospital located in an area with a wage index of 1.0 
(i.e., average wage rates for hospital workers in the area 
match the national average of hospital wage rates across all 
areas).

        TABLE D-4.--NATIONAL AND REGIONAL ADJUSTED STANDARDIZED AMOUNTS, LABOR/NONLABOR, FISCAL YEAR 1998       
----------------------------------------------------------------------------------------------------------------
                                                                     Large urban areas          Other areas     
                                                                 -----------------------------------------------
                                                                     Labor     Nonlabor      Labor     Nonlabor 
                                                                    related     related     related     related 
----------------------------------------------------------------------------------------------------------------
National average................................................   $2,776.21   $1,128.44   $2,732.26   $1,110.58
Puerto Rico:                                                                                                    
    National....................................................    2,752.36    1,118.74    2,752.36    1,118.74
    Puerto Rico.................................................    1,323.01      532.55    1,302.07     524.11 
----------------------------------------------------------------------------------------------------------------
Source: Federal Register, 1997.                                                                                 

    The basic payment to a hospital for a case in a particular 
DRG is the applicable national payment amount, adjusted by the 
local wage index value and multiplied by the weighting factor 
for the DRG.
    For an example of a payment calculation, assume a hospital 
is located in Washington, DC. Such a hospital would be in a 
large urban area. Payment is based on the large urban national 
standardized amount. First, the labor-related portion of this 
amount ($2,776.21 in fiscal year 1998) is multiplied by the 
appropriate wage index (1.0780 for Washington, DC):

                 $2,776.21  1.0780 = $2,992.75

To this total is added the nonlabor-related portion of the 
standardized amount:

                   $2,992.75 + $1,128.44 = $4,121.19

    For each discharge, this new total is then multiplied by 
the relative weight factor for the DRG to which the case has 
been assigned. These weights range from a low of 0.2086 for DRG 
382 (false labor) to a high of 16.0413 for DRG 483 (certain 
tracheostomies). The payment rates for the sample hospital in 
fiscal year 1998 would therefore vary from a low of $859.68 
($4,121.19  0.2086) to a high of $66,109.25 ($4,121.19 
 16.0413).
    In addition to the basic payment amount for each case, 
additional payments may be made to teaching hospitals and 
hospitals that serve a disproportionate share of low-income 
patients. Any hospital may receive additional payments for 
outliers (cases with extraordinarily high costs or a very long 
stay, relative to other cases in the DRG) and for treatment of 
beneficiaries with end-stage renal disease. Finally, certain 
hospital costs are excluded from PPS and reimbursed separately. 
The next sections of this appendix discuss additional PPS 
payments and the separate reimbursement of excluded costs.

                       ADDITIONAL PAYMENT AMOUNTS

    In addition to the DRG prospective payment rates, Medicare 
payments are made to hospitals for four additional items or 
services.

                       Graduate Medical Education

    Financing of graduate medical education, the period of 
training following medical school, is provided predominantly 
through inpatient revenues (both hospital payments and faculty 
physician fees) and a complex mix of Federal and State 
government funds. The Federal Government is the largest single 
explicit financing source for graduate medical education 
through the Medicare Program and through its support of 
residencies in Veterans Administration hospitals. Medicare 
recognizes the costs of graduate medical education under two 
mechanisms: direct medical education payments and an indirect 
medical education adjustment. In fiscal year 1997, Medicare 
paid approximately $2.5 billion in direct medical education 
payments and $4.6 billion in indirect adjustments.
Direct medical education costs
    The direct costs of approved medical education programs 
(such as the salaries of residents and teachers and other 
education costs for residents, for nurses, and for allied 
health professionals trained in provider-operated programs) are 
excluded from the prospective payment system. The direct 
medical education costs for the training of nurses and allied 
health professionals in provider-operated programs are paid for 
on a reasonable cost basis. Residency training programs for 
physicians are funded through formula payments based on each 
hospital's per resident costs.
    Medicare's payment to each hospital equals the hospital's 
cost per full-time equivalent (FTE) resident, times the 
weighted average number of FTE residents, times the percentage 
of inpatient days attributable to Medicare part A 
beneficiaries. Each hospital's per FTE resident amount is 
calculated using data from the hospital's cost reporting period 
that began in fiscal year 1984, increased by 1 percent for 
hospital cost reporting periods beginning July 1, 1985, and 
updated in subsequent cost reporting periods by the change in 
the Consumer Price Index (CPI). The number of FTE residents is 
calculated at 100 percent after July 1, 1986, only for 
residents in their initial residency period (i.e., within the 
minimum number of years of formal training necessary to satisfy 
specialty requirements for board eligibility plus 1 year, but 
not to exceed 5 years; residents in geriatrics or preventive 
medicine are allowed 2 additional years). For residents not in 
their initial residency period, the weighing factor is 50 
percent after that date. Residents who are foreign or 
international medical graduates are not counted as FTE 
residents unless they have passed certain examinations.
    OBRA 1993 provided that the amounts paid per resident for 
the direct costs of graduate medical education would not be 
updated by the CPI for cost reporting periods beginning during 
fiscal years 1994 and 1995, except for primary care residents 
and residents in obstetrics and gynecology. Primary care 
residents are defined to include family medicine, general 
internal medicine, general pediatrics, preventive medicine, 
geriatric medicine, and osteopathic general practice. For 
fiscal year 1997, the per resident amount was updated by the 
CPI.
     The Balanced Budget Act of 1997 made several changes to 
the way in which Medicare makes payments for direct GME costs. 
The Balanced Budget Act of 1997 includes: (1) a cap on the 
total number of residents reimbursed under Medicare at the 
level that existed for the cost reporting period ending on or 
before December 31, 1996; (2) payments to qualified nonhospital 
providers for their direct GME costs (federally qualified 
health centers, rural health clinics, MedicarePlus 
organizations, and other appropriate providers); (3) incentive 
payments to teaching hospitals that voluntarily agree to reduce 
the number of medical residents in training; (4) a 
demonstration project under which direct GME payments are to be 
made to qualifying consortia that consist of a teaching 
hospital and one or more specified entities who operate an 
approved medical residency training program; (5) a study on the 
variations in the costs of hospital overhead and supervisory 
physician medical education costs among hospitals; and (6) the 
requirement that the Medicare Payment Advisory Commission 
(MedPAC) make recommendations on long-term payment policies 
regarding teaching hospitals and GME.
Indirect medical education costs
    Additional payments are made to hospitals under PPS for the 
indirect costs attributable to approved medical education 
programs. These indirect costs may be due to a variety of 
factors, including the extra demands placed on the hospital 
staff as a result of the teaching activity or additional tests 
and procedures that may be ordered by residents. Congressional 
reports on the PPS authorizing legislation indicate that the 
indirect medical education payments are also to account for 
factors not necessarily related to medical education which may 
increase costs in teaching hospitals, such as more severely ill 
patients, increased use of diagnostic testing, and higher 
staff-to-patient ratios.
    The additional payment to a hospital is based on a formula 
that has provided an increase of approximately 7.7 percent in 
the Federal portion of the DRG payment for each 0.1 increase in 
the hospital's intern and resident-to-bed ratio on a 
curvilinear basis (i.e., the increase in the payment is less 
than proportional to the increase in the ratio of interns and 
residents to bed size). The Balanced Budget Act of 1997 
includes reductions in the IME adjustment from 7.7 to 7.0 
percent in fiscal year 1998; to 6.5 percent in fiscal year 
1999; to 6.0 percent in fiscal year 2000; and to 5.5 percent in 
fiscal year 2001 and subsequent years.

                    Disproportionate Share Hospitals

    Public Law 99-272 (COBRA) provided that additional payments 
would be made to hospitals that serve a disproportionate share 
of low-income patients. The adjustment was extended several 
times until OBRA 1990 (Public Law 101-508) made it a permanent 
payment adjustment. A hospital's disproportionate patient 
percentage is defined as the hospital's total number of 
inpatient days attributable to Federal Supplemental Security 
Income (SSI) Medicare beneficiaries divided by the total number 
of Medicare patient days, plus the number of Medicaid patient 
days divided by the total patient days.
    Table D-5 shows the minimum disproportionate patient 
percentages required to qualify for the adjustment and the 
formulas for computing the adjustment effective October 1, 
1993. For discharges occurring after September 1994, hospitals 
with a disproportionate share greater than 20.2 percent would 
receive a disproportionate share adjustment equal to 5.88 
percent plus 0.825 percent of the difference between 20.2 
percent and the hospital's disproportionate share patient 
percentage.

  TABLE D-5.--CRITERIA TO QUALIFY FOR DISPROPORTIONATE SHARE ADJUSTMENT 
AND FORMULAS FOR COMPUTING ADDITIONAL PAYMENT, EFFECTIVE OCTOBER 1, 1993
------------------------------------------------------------------------
                                      Qualifying                        
                                   disproportionate    Formula or fixed 
        Type of hospital          patient percentage      percentage    
                                         (P)              adjustment    
------------------------------------------------------------------------
Urban, 100 or more beds........  15 percent.........  (P-15)(0.6) 0.65 +
                                                       2.5.             
Urban, 100 or more beds........  20.2 percent.......  (P-20.2) 0.8 +    
                                                       5.88.            
Urban, 100 or more beds........  30 percent of        35 percent.       
                                  inpatient revenue                     
                                  from State or                         
                                  local indigent                        
                                  care funds.                           
Urban, under 100 beds..........  40 percent.........  5 percent.        
Rural, over 500 beds...........  Not specified in     Same as urban, 100
                                  law; regulations     or more beds.    
                                  set threshold at                      
                                  15 percent.                           
Rural, over 100 beds...........  30 percent.........  4 percent.        
Rural, under 100 beds..........  45 percent.........  4 percent.        
Rural, sole community hospital.  30 percent.........  10 percent.       
Rural, rural referral center                                            
 and--                                                                  
    (a) not a sole community     30 percent.........  (P-30)(0.6) + 4.0.
     hospital, 100 or more beds.                                        
    (b) not a sole community     45 percent.........  (P-30)(0.6) + 4.0.
     hospital, under 100 beds.                                          
    (c) also a sole community    30 percent.........  Greater of 10     
     hospital.                                         percent or (P-   
                                                       30)(0.6) + 4.0.  
------------------------------------------------------------------------
Note.--The disproportionate patient percentage (P) is equal to the sum  
  of (a) the number of Medicare inpatient days provided to Supplemental 
  Security Income recipients divided by total Medicare inpatient days,  
  and (b) the number of inpatient days provided to Medicaid             
  beneficiaries divided by total inpatient days.                        
                                                                        
 Source: Prospective Payment Assessment Commission.                     

     The Balanced Budget Act of 1997 includes reductions in the 
current DSH payment formula amounts of 1 percent for fiscal 
year 1998; 2 percent in fiscal year 1999; 3 percent in fiscal 
year 2000; 4 percent in fiscal year 2001; 5 percent in fiscal 
year 2002; and 0 percent in fiscal year 2003 and each 
subsequent fiscal year. The Balanced Budget Act of 1997 also 
requires the Secretary to submit to the House Ways and Means 
and Senate Finance Committees, no later than 1 year after 
enactment, a report that contains a new formula for determining 
additional DSH payments to hospitals.

                      ESRD Beneficiary Discharges

    Effective with cost reporting periods beginning on or after 
October 1, 1984, additional payments are made to hospitals for 
inpatient dialysis provided to end-stage renal disease (ESRD) 
beneficiaries if total discharges of such beneficiaries from 
non-ESRD related DRGs account for 10 percent or more of the 
hospital's total Medicare discharges. A hospital meeting the 
criteria is paid an additional payment for each ESRD 
beneficiary discharge based on the estimated weekly cost of 
dialysis and the average length of stay of its ESRD 
beneficiaries.

                                Outliers

    Additional amounts are paid to hospitals for atypical cases 
(known as ``outliers'') which have either extremely long length 
of stay (day outliers) or extraordinarily high costs (cost 
outliers) compared to most discharges classified in the same 
DRG. The law requires that total outlier payments to all 
hospitals covered by the system represent no less than 5 
percent and no more than 6 percent of the total estimated PPS 
payments for the fiscal year. Effective with discharges 
occurring on or after October 1, 1984, a transferring hospital 
may qualify for an additional payment for extraordinarily high-
cost cases meeting the criteria for cost outliers. Outlier 
payments are financed by an offsetting overall reduction in the 
base payment amount per discharge. Effective October 1, 1986, 
Public Law 99-509 established separate urban and rural set-
aside factors for financing outlier payments. The separate set-
aside factors for rural and urban hospitals for financing 
outlier payments ended when the other urban/rural payment 
differential was eliminated in fiscal year 1995, as enacted in 
OBRA 1990.
    Public Law 100-203 increased payments for outlier cases 
classified in DRGs relating to patients with burns from April 
1, 1988, through September 30, 1989. This legislation also 
prohibited the Secretary from issuing any final regulations 
before September 1, 1988, which changed the method of payment 
for outlier cases (other than burn cases).
    The Secretary published new outlier rules on September 30, 
1988, effective for discharges on or after October 1, 1988. The 
new rules modified the thresholds used in determining whether a 
case is an outlier and increased the allowable payment amounts 
for cost outliers. The effect of the changes increased the 
proportion of all outlier payments going to cost outliers. 
Previously, about 85 percent of outlier payments were made for 
length-of-stay (LOS) outliers and 15 percent for cost outliers. 
Under the new rules, 60 percent of payments were made for cost 
outliers and 40 percent for LOS outliers. (Cases that meet both 
length-of-stay and cost outlier criteria are paid under the 
policy that produces the higher payment.)
    To determine the amount of additional payments for outlier 
cases, the LOS for each case in a DRG is first compared against 
the applicable LOS threshold for the category. If the LOS for a 
case exceeds the threshold, then the case qualifies as a day 
outlier. In this instance, the hospital is paid its regular 
payment rate per discharge (for this DRG), plus a per diem 
amount (44 percent of the hospital's per diem rate for the DRG) 
for each Medicare covered day above the LOS threshold.
    If the case does not qualify as a day outlier, then it may 
qualify as a cost outlier. The case will qualify for extra 
payments on this basis if the hospital's Medicare covered 
charges for the case, adjusted to operating costs (and reduced 
by its indirect teaching and disproportionate share 
adjustments, if applicable), exceed its cost outlier threshold 
for the DRG. In this instance, the hospital is paid its regular 
payment rate per discharge for the DRG, plus the Federal 
portion of 75 percent of the difference between its adjusted 
(and reduced) charges for the case and the cost outlier 
threshold.
    In October 1991, Medicare began a transition from cost-
based to prospective payment for hospital capital expenses (see 
below). In the August 30, 1991, final rule implementing this 
change, the Secretary established a unified outlier payment 
system for capital and operating costs. For day outliers, 
payments for covered days were set equal to a percentage of the 
combined per diem operating and capital payment rates for the 
DRG. For cost outliers, payments are made only if the combined 
operating and capital cost for the case exceed the cost outlier 
threshold for the DRG. As in the case of operating cost 
payments, standardized capital payment amounts are reduced to 
establish a pool for outlier payments.
    OBRA 1993 legislated two changes in outlier policy that 
became effective in fiscal year 1995. First, day outliers are 
phased out over a period of 4 years. By fiscal year 1999, all 
outlier payments will be based solely on cost. Second, cost-
outlier thresholds are based on a fixed amount beyond the 
payment rate for each case so that hospitals incur the same 
loss on every case before outlier payments are applied.
    The Balanced Budget Act of 1997 eliminates the use of the 
indirect medical education adjustment and disproportionate 
share hospital payments as part of costs that trigger outlier 
payments, effective beginning in fiscal year 1998.

                          PAYMENT FOR CAPITAL

    Until fiscal year 1992, Medicare paid a share of hospitals' 
reasonable capital-related costs, based on services used by 
beneficiaries as a proportion of total services furnished by 
the hospital. (Payments in recent years have been subject to 
fixed percentage reductions described below.) Four basic types 
of costs are allowable for Medicare reimbursement:
 1. Interest on mortgages, bonds, or other borrowing used to 
        finance capital investments or current operations. 
        Interest costs are generally offset by any interest 
        income earned by the hospital on investments;
 2. Depreciation, figured on a straight line basis, for plant 
        and equipment, but not for land;
 3. Rental payments for plant and equipment;
 4. Property taxes and insurance premiums related to capital 
        assets.
    One other type of capital cost was formerly recognized 
under Medicare, but has not been reimbursable for hospital 
services since fiscal year 1989: return on equity for investor-
owned hospitals. Return on equity payments provided a return to 
investors equivalent to what they would have earned if they had 
used their money for some other purpose.
    When the new PPS system was enacted in 1983, Congress 
excluded capital costs. However, the Secretary was instructed 
to report to Congress on methods for including capital in PPS 
and was authorized (but not required) to implement prospective 
payment for capital on or after October 1, 1986.
    The Secretary's authority to include capital in PPS was 
postponed twice. The Supplemental Appropriations Act of 1986 
(Public Law 99-349) delayed prospective capital payment until 
October 1, 1987. The Omnibus Budget Reconciliation Act of 1987 
(Public Law 100-203) delayed prospective payment until October 
1, 1991. However, the Secretary was required, not merely 
authorized, to implement a prospective system by that date. The 
system was required to provide that capital payments be made on 
a per-discharge basis, with adjustments based on each 
discharge's classification under the DRGs or some similar 
system. At the Secretary's discretion, the system could include 
adjustments to reflect variations in costs of construction or 
borrowing, exceptions (including exceptions for hospitals with 
existing obligations), and adjustments to reflect hospital 
occupancy rates.
    While prospective payment for capital was delayed (see 
below), Congress included in budget reconciliation legislation 
fixed percentage reductions in amounts otherwise payable by 
Medicare for capital costs. These cuts began in fiscal year 
1987, with a 3.5-percent reduction. Medicare would compute its 
share of total costs for each hospital and then reduce that 
computed share by 3.5 percent. The percentage reduction 
increased to 7 percent for the first quarter of fiscal year 
1988, 12 percent for the rest of that fiscal year, and 15 
percent for fiscal year 1989 through fiscal year 1991. Delays 
in completing budget legislation meant that there were brief 
intervals in 1987 and 1989 when no reduction was taken. The 
reductions originally applied only to capital costs related to 
inpatient care. Beginning in fiscal year 1990, capital payments 
for outpatient hospital services were also reduced. The 
reductions did not apply to certain types of rural hospitals 
defined in Medicare law, including sole community hospitals, 
essential access community hospitals, and rural primary care 
hospitals.
    The Omnibus Budget Reconciliation Act of 1990 (Public Law 
101-508) continued capital payment reductions through fiscal 
year 1995, with the reduction percentage lowered to 10 percent 
for fiscal years 1992 through 1995. Because prospective payment 
began in fiscal year 1992, the reductions were not applied 
directly to each hospital's computed capital costs. Instead, 
the Secretary was required to set payments under the new system 
(or under the new system and PPS combined) in such a way as to 
achieve an aggregate inpatient hospital capital spending 
reduction of 10 percent, as compared to what would have been 
spent under the reasonable cost system.
    The administration's rules for prospective payment for 
capital costs were published in the Federal Register on August 
30, 1991. The rule provides for a 10-year transition to fully 
prospective payment beginning October 1, 1991.
    Under the rule, the Secretary establishes a standard per 
case capital payment rate, based on average capital costs per 
case in fiscal year 1989 and updated for inflation and other 
factors. Through fiscal year 1995, the base rate was adjusted 
in order to meet the requirement that capital payment rates be 
set in such a way as to achieve an aggregate saving of 10 
percent relative to what would have been paid under a full cost 
system. Beginning with fiscal year 1996, that requirement 
expired. As a result, the standardized payment rates increased 
by more than 20 percent. For fiscal year 1998 the standardized 
payment rate for capital is $371.51 ($177.57 in Puerto Rico). 
Rates are adjusted using the DRG weights and a geographic 
factor based on area wage indices.
    Hospitals in large urban areas receive a 3-percent increase 
and hospitals in Alaska and Hawaii receive a cost-of-living 
adjustment. A disproportionate share adjustment is provided for 
urban hospitals with more than 100 beds. A hospital receives 
approximately a 2.1 percent point increase in capital payments 
for each 10 percent increment in its disproportionate share 
percentage.
    An adjustment is also made for the indirect costs of 
medical education. This adjustment is based on the ratio of 
residents to average daily inpatient census. Capital payments 
increase approximately 2.8 percentage points for each 10 
percent increment in the residents to average daily census 
ratio. Additional capital payments are issued for outlier 
cases.
    During a transition period that ends September 30, 2000, 
each individual hospital's capital payment rate is a blended 
rate based partly on its own historic capital costs and partly 
on the Federal rate. In fiscal year 1996, rates are 50 percent 
hospital-specific and 50 percent Federal. The hospital-specific 
portion will drop by 10 percent a year, until fully Federal 
rates take effect in fiscal year 2001.
    The Omnibus Budget Reconciliation Act of 1993 (Public Law 
103-66) reduced the Federal rate for inpatient capital expenses 
by 7.4 percent to correct for inflation forecast errors.
     The transition rules include two provisions to assist 
hospitals most disadvantaged by the shift to prospective 
payment: a ``hold harmless'' payment system and exception 
payments for certain facilities. Hospitals with base year 
capital costs above average continue to be paid on a cost basis 
for the portion of their costs related to ``old'' capital 
investments (generally assets put in use or obligated by the 
end of 1990). The rest of the hospital's capital payments are 
based on the prospective rates. For example, if 75 percent of a 
hospital's costs are for depreciation and interest on a pre-
1990 building, the hospital is paid Medicare's share of those 
costs (subject to the current 10-percent reduction). For 
``new'' capital, it receives a portion of the prospective rate 
based on the hospital's own ratio of new to total capital. In 
this case, because old capital accounts for 75 percent of 
costs, the hospital's new capital payment is 25 percent of the 
prospective rate for each case treated. This hold harmless 
payment system will continue until the end of the 10-year 
transition, or until a hospital's old capital costs drop to the 
point at which it is more advantageous for the hospital to 
shift to fully prospective payment.
    Exception payments are made to hospitals whose capital 
payments under the new system fall significantly short of their 
actual capital costs. Most hospitals are assured of receiving a 
minimum of 70 percent of costs. Specified urban hospitals with 
a disproportionate share of low-income patients receive at 
least 80 percent of costs, and rural sole community hospitals 
at least 90 percent. Computation of exception payments is 
cumulative. If a hospital received more than the minimum in 1 
year but a shortfall the next, the surplus from the first year 
would be applied before any additional payment would be made in 
the second year.
     The Balanced Budget Act of 1997 requires the Secretary to 
rebase the capital payment rates for discharges occurring on or 
after October 1, 1997 by the actual rates in effect in fiscal 
year 1995, so that aggregate capital payments will equal 90 
percent of what payments would have been under reasonable cost 
payments, with an additional reduction in the capital payment 
rate of 2.1 percent from October 1, 1997 through September 30, 
2002. The Balanced Budget Act of 1997 eliminates the allowance 
for return on equity capital. In addition, when a facility 
undergoes a change of ownership, the Balanced Budget Act of 
1997 provides for a depreciation adjustment of the historical 
cost of the asset recognized by Medicare, less depreciation 
allowed, to the owner of record as of the date of enactment, or 
to the first owner of record of the asset in the case of an 
asset not in existence as of the date of enactment.
    Table D-6 shows the average capital payments per case 
received by PPS hospitals in each year since the implementation 
of PPS for inpatient operating costs in 1984. The decrease in 
average capital payments per case in 1988 reflects the 
provision in the Omnibus Budget Reconciliation Acts of 1986 and 
1987 that reduced Medicare payments below costs. The decrease 
in 1994 reflects the provision in the Omnibus Budget 
Reconciliation Act of 1993 that corrected for previous errors 
in setting the base capital payment rates. Capital payments 
generally have stayed between 8 and 9 percent of total 
inpatient payments. The proportion of capital costs covered by 
those payments fell from 100 percent under cost-based 
reimbursement to a low of 87.4 percent in 1990. The 
implementation of capital PPS initially resulted in increased 
payment-to-cost ratios, but those fell as the payment rates 
were adjusted to reflect more accurate data. The jump in the 
payment-to-cost ratio in 1995--when Medicare inpatient capital 
payments exceeded cost for the first time ever--reflects the 
elimination of the budget neutrality requirement in fiscal year 
1996.
    The per case capital payment amount varies widely by 
hospital group, as shown in table D-7. Urban hospitals had an 
average payment rate of $682 in 1995, for example, while rural 
hospitals received only $422 per case. Major teaching hospitals 
were paid $922 for each case, while nonteaching hospitals got 
$545. However, the share of total PPS inpatient payments, which 
include both operating and capital payments, was very similar 
for different types of hospitals. Moreover, the share of 
capital costs covered by these payments frequently was higher 
for groups with lower payment amounts. Despite urban hospitals' 
much higher average payment, that amount equalled 101.5 percent 
of their capital costs, while rural hospitals were paid 102.3 
percent of their capital costs.

 TABLE D-6.--PPS CAPITAL PAYMENTS PER CASE, SHARE OF TOTAL PPS INPATIENT
            PAYMENTS, AND RATIO OF PAYMENTS TO COSTS, 1984-95           
------------------------------------------------------------------------
                                                      In percent        
                                             ---------------------------
                                   Capital      Share of                
             Year               payments per    total PPS    Payment-to-
                                    case        inpatient    cost ratio 
                                                payments                
------------------------------------------------------------------------
1984..........................          $310           8.1         100.0
1985..........................           371           8.6         100.0
1986..........................           409           9.1          99.3
1987..........................           426           9.0          97.5
1988..........................           423           8.5          90.2
1989..........................           463           8.6          87.9
1990..........................           476           8.3          87.4
1991..........................           510           8.4          87.6
1992..........................           586           9.1          97.2
1993..........................           589           8.9          95.2
1994..........................           585           8.5          92.7
1995..........................           628           8.8        101.6 
------------------------------------------------------------------------
Note.--Data on PPS capital costs and payments are for hospital          
  accounting years beginning during each Federal fiscal year. Hospitals 
  in Massachusetts and New York excluded from data in 1984 and 1985;    
  hospitals in New Jersey excluded from data in 1984 through 1988;      
  hospitals in Maryland excluded from data in all years.                
                                                                        
 Source: Prospective Payment Assessment Commission analysis of Medicare 
  Cost Report data from the Health Care Financing Administration.       


 TABLE D-7.--PROSPECTIVE PAYMENT SYSTEM CAPITAL PAYMENTS PER CASE, SHARE
   OF TOTAL PPS INPATIENT PAYMENTS, AND RATIO OF PAYMENTS TO COSTS BY   
                          HOSPITAL GROUP, 1995                          
------------------------------------------------------------------------
                                                      In percent        
                                             ---------------------------
                                   Capital      Share of                
        Hospital group          payments per    total PPS    Payment-to-
                                    case        inpatient    cost ratio 
                                                payments                
------------------------------------------------------------------------
Urban.........................          $682           8.8         101.5
Rural.........................           422           8.9         102.3
                                                                        
Large urban...................           722           8.7         102.3
Other urban...................           631           9.0         100.3
Rural referral................           517           9.2          96.5
Sole community................           415           8.7         106.3
Other rural...................           392           8.9         103.5
                                                                        
Major teaching................           922           7.9         105.8
Other teaching................           668           8.7         100.6
Nonteaching...................           545           9.3         100.9
                                                                        
Disproportionate share large                                            
 urban........................           768           8.3         104.1
Disproportionate share other                                            
 urban........................           646           8.7         100.6
Disproportionate share rural..           431           9.0          98.6
Nondisproportionate share.....           572           9.2         100.8
                                                                        
Teaching and disproportionate                                           
 share........................           767           8.2         103.3
Teaching only.................           683           8.7         100.4
Disproportionate share only...           575           9.1         100.7
Nonteaching                                                             
 nondisproportionate share....           523           9.5         101.1
                                                                        
Voluntary.....................           640           8.8         101.3
Proprietary...................           665           9.8         102.2
Urban government..............           664           8.0         103.4
Rural government..............           369           8.4         104.3
                                                                        
All hospitals.................          $628           8.8        101.6 
------------------------------------------------------------------------
Source: Prospective Payment Assessment Commission analysis of Medicare  
  Cost Report data from the Health Care Financing Administration.       

                  PAYMENTS ON A REASONABLE COST BASIS

    Costs for certain items are excluded from the prospective 
payment system and thus are not included in the prospective 
payment rates. As explained in the sections below, Medicare 
pays for its share of several costs according to the former 
reasonable cost-based system.

                    Physicians in Teaching Hospitals

    Physician services in hospitals are paid under the 
physician fee schedule. If a teaching hospital so elects, the 
direct medical and surgical services of physicians in such 
hospitals would be paid for on the basis of reasonable costs.

                        Organ Acquisition Costs

    The estimated net expenses associated with Medicare organ 
acquisition in certified transplantation centers are excluded 
from the prospective payment system and paid on a reasonable 
cost basis.

             Passthrough Payments for Hemophilia Inpatients

    OBRA 1989 excluded the cost of administering blood clotting 
factors for hemophilia inpatients from PPS, for items furnished 
from June 19, 1990, through December 19, 1991. OBRA 1993 
further extended this provision through fiscal year 1994. The 
price per unit for the blood clotting factors was set at a 
predetermined rate, in consultation with ProPAC, and the cost 
of administering the blood clotting factors was determined by 
multiplying a predetermined price per unit of blood clotting 
factor by the number of units provided to the individual. The 
Balanced Budget Act of 1997 makes the payment for the costs of 
administering blood clotting factor permanent effective October 
1, 1997.

                  Bad Debts of Medicare Beneficiaries

    An additional payment is made to hospitals for bad debts 
attributable to unpaid deductible and copayment amounts related 
to covered services received by Medicare beneficiaries.
    The Secretary is prohibited from making any change in the 
policy in effect on August 1, 1987, including changes in 
hospital documentation requirements. OBRA 1989 prohibited the 
Secretary from requiring hospitals to change their bad debt 
collection policy if a fiscal intermediary accepted the policy 
in accordance with the rules in effect as of August 1, 1987, 
for indigency determination procedures, for recordkeeping, and 
for determining whether to refer a claim to an external 
collection agency. For such facilities, the Secretary also may 
not collect from the hospital on the basis of an expectation of 
a change in the hospital's collection policy. The Balanced 
Budget Act of 1997 reduces bad debt payments by 25 percent in 
fiscal year 1998; 40 percent in fiscal year 1999; and 45 
percent in fiscal year 2000 and each subsequent fiscal year.

           SPECIAL TREATMENT OF CERTAIN FACILITIES UNDER PPS

                        Sole Community Hospitals

    Sole community hospitals (SCHs) are hospitals that, because 
of factors such as isolated location, weather conditions, 
travel conditions, or absence of other hospitals, are the sole 
source of inpatient services reasonably available in a 
geographic area, or are located more than 35 road miles from 
another hospital. In addition, the Secretary is authorized to 
designate a hospital as an SCH if, by reason of factors such as 
travel time to the nearest alternative source of appropriate 
inpatient care, location, weather conditions, travel 
conditions, or absence of other like hospitals, the Secretary 
determines that it is the sole source of inpatient hospital 
services reasonably available to individuals in a geographic 
area.
    OBRA 1989 established new payment provisions that apply to 
all SCHs for cost reporting periods beginning after April 1, 
1990. An SCH may receive the higher of the following rates as 
the basis of reimbursement: a target amount based on 100 
percent hospital-specific prospective rates based on fiscal 
year 1982 costs updated to the present; a target amount based 
on hospital-specific prospective rates based on fiscal year 
1987 costs updated to the present; or the Federal PPS rate. 
Current SCHs not meeting the criteria are allowed to continue 
to qualify for payments as an SCH.
    OBRA 1989 made permanent the provision by which an SCH may 
request additional payments if the hospital experiences a 
decrease of more than 5 percent in its total inpatient cases 
due to circumstances beyond its control. An SCH may receive 
such payments if it meets sole community hospital criteria but 
is not being paid as a sole community hospital. As of September 
1997, 641 hospitals were classified as sole community 
providers.

                      Medicare Dependent Hospitals

    OBRA 1989 created a new classification of hospitals termed 
Medicare dependent hospitals. Medicare dependent hospitals are 
hospitals that are located in a rural area, have 100 beds or 
less, are not classified as a sole community provider, and for 
which not less than 60 percent of inpatient days or discharges 
in the hospital cost reporting period that began during fiscal 
year 1987 were attributable to Medicare. These hospitals are 
reimbursed in the same fashion as sole community providers 
during cost reporting periods beginning on or after April 1, 
1990, and ending on or before March 31, 1993. As of September 
1997, there were 366 Medicare dependent hospitals. OBRA 1993 
(Public Law 103-66) extended additional payments to Medicare 
dependent hospitals through September 30, 1994, on a phase-down 
basis. The Balanced Budget Act of 1997 extends the MDH Program 
through October 1, 2001.

                            Referral Centers

    The Secretary is authorized to provide exceptions and 
adjustments as appropriate for rural referral centers (RRCs). 
These centers are defined as:
 1. Rural hospitals having 275 or more beds;
 2. Hospitals having at least 50 percent of their Medicare 
        patients referred from other hospitals or from 
        physicians not on the hospital's staff, at least 60 
        percent of their Medicare patients residing more than 
        25 miles from the hospital, and at least 60 percent of 
        the services furnished to Medicare beneficiaries are 
        furnished to those who live 25 miles or more from the 
        hospital; or
 3. Rural hospitals meeting the following criteria for hospital 
        cost reporting periods beginning on or after October 1, 
        1985:
    --A case-mix index equal to or greater than the median case 
            mix for all urban hospitals (the national 
            standard), or the median case mix for urban 
            hospitals located in the same census region, 
            excluding hospitals with approved teaching 
            programs. The case-mix index is a measure of the 
            relative costliness of the hospital's mixture of 
            cases among the DRGs compared to the national 
            average mixture of Medicare cases;
    --A minimum of 5,000 discharges, the national discharge 
            criterion (3,000 in the case of osteopathic 
            hospitals), or the median number of discharges in 
            urban hospitals for the region in which the 
            hospital is located; and
    --At least one of the following three criteria: more than 
            50 percent of the hospital's medical staff are 
            specialists, at least 60 percent of discharges are 
            for inpatients who reside more than 25 miles from 
            the hospital, or at least 40 percent of inpatients 
            treated at the hospital have been referred either 
            from physicians not on the hospital's staff or from 
            other hospitals.
    Referral centers are paid prospective payments based on the 
applicable urban payment amount rather than the rural payment 
amount, as adjusted by the hospital's area wage index. The 
applicable amount is the ``other urban'' rate (i.e., the rate 
for urban areas with 1 million or fewer people) for all 
referral centers except those (if any) located in MSAs greater 
than 1 million.
    OBRA 1993 extended the classification through fiscal year 
1994 for those referral centers classified as of September 30, 
1992. As of September 1997, 158 hospitals were qualified as 
referral centers.
    Although referral centers loose some of the benefit of 
their classification status because of the equalization of the 
other urban and rural payment rates in fiscal year 1995, 
referral centers continue to be entitled to preferential 
consideration before the Medicare Geographic Classification 
Review Board (see below).
    The Balanced Budget Act of 1997 provides that hospitals 
designated as RRCs since fiscal year 1991 are permanently 
classified as RRCs. The Balanced Budget Act of 1997 also 
provides that any hospital ever classified as an RRC cannot be 
denied a request for geographic reclassification on the basis 
of any comparison of its average hourly wage with the average 
hourly wage of hospitals in the area where the RRC is located.

         Hospitals in Rural Counties Treated as Urban Counties

    Public Law 100-203 provided for the reclassification of 
rural hospitals as urban if the county in which the hospital 
was located was adjacent to two or more MSAs and met criteria 
regarding commuting patterns of its residents to the central 
counties of the adjacent MSAs.
    OBRA 1989 (Public Law 101-239) established the Medicare 
Geographic Classification Review Board to consider appeals by 
hospitals for a change in classification from rural to urban, 
or from one urban area to another urban area. The Board was 
created to determine whether a hospital should be redesignated 
to an area with which it has close proximity for purposes of 
using the other area's standardized amount, wage index, or 
both. For geographic reclassifications effective for discharges 
in fiscal year 1994 and subsequent years, a hospital may seek 
reclassification to only one area. Urban hospitals must be no 
more than 15 miles from the area to which they seek 
reassignment, and rural hospitals must be no more than 35 miles 
from such an area.
    A hospital may qualify for the payment rate of another area 
if it proves that its incurred costs are comparable to those of 
hospitals in that area. To use an area's wage index, a hospital 
must demonstrate that: (1) its average hourly wage is equal to 
at least 84 percent of the average hourly wage of hospitals in 
the area to which it seeks redesignation; and (2) its average 
hourly wage weighted for occupational categories is at least 90 
percent of the average hourly wage of hospitals in the area to 
which its seeks redesignation. For geographic reclassifications 
effective for discharges in fiscal year 1994 and subsequent 
years, the wage index guidelines were revised to specify, in 
addition, that a hospital cannot be reclassified unless its 
average hourly wage is at least 108 percent of the average 
hourly wage of the area in which it is located.
    Effective for fiscal year 1996 and subsequent years, a 
hospital may not be reclassified for purposes of using another 
area's standardized amount if the area to which the hospital 
seeks reclassification does not have a higher standardized 
amount than that currently received by the hospital. In 
addition, a hospital that seeks reclassification for the 
purpose of using another area's wage index may apply for 
reclassification only to an area that has a higher pre-
reclassified average hourly wage than that of the hospital's 
original geographic area.
    For fiscal year 1998, 313 rural hospitals (14.1 percent) 
and 109 (4 percent) urban hospitals have been reclassified by 
the Board. The Balanced Budget Act of 1997 provides that 
hospitals can request geographic reclassification for the 
purposes of receiving additional DSH payments for the period 
ending 30 months after enactment.

         HOSPITALS EXCLUDED FROM THE PROSPECTIVE PAYMENT SYSTEM

                          PPS-Exempt Hospitals

    The following hospitals are by law excluded from the 
prospective payment system and are paid on the basis of 
reasonable costs, subject to the Tax Equity and Fiscal 
Responsibility Act of 1982 (TEFRA) rate of increase limits: 
psychiatric hospitals, rehabilitation hospitals, psychiatric or 
rehabilitation units which are distinct parts of a hospital, 
alcohol and drug abuse hospitals and such distinct units of 
hospitals (for cost reporting periods beginning before October 
1, 1987), children's hospitals (with patients averaging under 
18 years of age), long-term hospitals (with an average 
inpatient length of stay greater than 25 days), and cancer 
hospitals (hospitals extensively involved in treatment for and 
research on cancer) classified as such before December 31, 
1990. In addition, the act provides an exemption for any 
hospital classified as a cancer hospital before December 31, 
1991, that is located in a State that has a PPS waiver under 
section 1814(b). In addition, there are special cases in which 
the prospective payment system is not applied, such as 
emergency services provided to Medicare beneficiaries in 
hospitals not participating in Medicare.
    OBRA 1990 increased the cost limits imposed on hospitals 
exempt from PPS. Under prior law, hospitals with costs in 
excess of the cost limits imposed by the Tax Equity and Fiscal 
Responsibility Act (TEFRA) would be reimbursed for their cost 
up to the TEFRA limit. Under OBRA 1990, hospitals with costs in 
excess of the cost limits imposed by TEFRA receive 50 percent 
of the costs that are in excess of the limit, up to a maximum 
of 110 percent of the limit. In addition, the Secretary is 
directed to develop a new prospective payment methodology for 
exempt hospitals, or to substantially modify the current 
target-rate system.
    OBRA 1993 provided for an update factor to the cost limits 
of market basket minus 1.0 percentage point for fiscal years 
1994 through 1997. Hospitals with operating costs in fiscal 
year 1990 that exceeded the target amount by more than 10 
percent are exempt from the update reduction, with partial 
reductions applied to hospitals near the threshold. Hospitals 
reimbursed under approved State cost control systems are also 
excluded from the prospective rates.
     For PPS-exempt facilities, the Balanced Budget Act of 1997 
sets the fiscal year 1998 update at 0 percent, and for fiscal 
years 1999-2002, the update factor will vary depending on a 
hospital's target amount and costs. For hospitals (1) with 
costs that equal or exceed their target amounts by 10 percent 
or more, the update will be equal to the market basket; (2) 
that exceed their target, but by less than 10 percent, the 
update factor will be equal to zero or, if greater, the market 
basket minus 0.25 percentage points for each percentage point 
by which costs are less than 10 percent over the target; (3) 
that are either at their target, or below (but not below \2/3\ 
of the target amount for the hospital), the update factor will 
be equal to zero or, if greater, the market basket percentage 
minus 2.5 percentage points; or (4) that do not exceed \2/3\ of 
their target amount, the update factor will be equal to 0 
percent.
     In addition, the Balanced Budget Act of 1997 includes 
several provisions affecting Medicare payments to PPS-exempt 
hospitals and units. The Balanced Budget Act of 1997 reduces 
the capital payment update amount for PPS-exempt hospitals and 
units by 15 percent for fiscal years 1998-2002. The Balanced 
Budget Act of 1997 establishes a cap on PPS-exempt TEFRA 
limits, also known as target amounts, for PPS-exempt hospitals 
or units for cost reporting periods beginning on or after 
October 1, 1997 and before October 1, 2002. The Secretary is 
required to estimate the 75th percentile of the target amounts 
for hospitals for cost reporting periods ending during fiscal 
year 1996, and then update the amount up to the first cost 
reporting period beginning on or after October 1, 1997, by a 
factor equal to the market basket percentage increase. For cost 
reporting periods beginning during each of fiscal years 1999-
2002, the Secretary is required to update the amount by a 
factor equal to the market basket increase.
     The Balanced Budget Act of 1997 provides for changing 
bonus payments to PPS-exempt facilities to equal the lesser of: 
(1) 15 percent of the amount by which the target amount exceeds 
the amount of operating costs, or (2) 2 percent of the target 
amount. In addition, for cost reporting periods beginning on or 
after October 1, 1997, the Balanced Budget Act of 1997 provides 
for continuous improvement bonus payments for certain eligible 
hospitals. The Balanced Budget Act of 1997 establishes 
different payment and target amount rules for new PPS-exempt 
hospitals or distinct-part units within hospitals that first 
received Medicare payments on or after October 1, 1997. The 
Balanced Budget Act of 1997 provides PPS-exempt hospitals and 
distinct units of hospitals that received Medicare payments for 
services furnished before January 1, 1990, with the option of 
rebasing the hospital's target amount for the 12-month cost 
reporting period beginning during fiscal year 1998.
     The Balanced Budget Act of 1997 also requires the 
Secretary to establish a case-mix adjusted PPS for 
rehabilitation hospitals and distinct-part units, effective 
beginning in fiscal year 2001. The Secretary is required to 
establish: (1) classes of discharges of rehabilitation 
facilities by patient case-mix groups based on impairment, age, 
related prior hospitalization, comorbidities, and functional 
capability of the discharged individual and other appropriate 
factors; and (2) a method of classifying specific discharges 
from rehabilitation facilities within these groups. The 
Secretary is further required to collect data to develop, 
establish, administer, and evaluate a case-mix adjusted 
prospective payment system for long-term care hospitals.

                             State Systems

    Section 1886(c) of the Social Security Act (as added by 
TEFRA) gave the HHS Secretary discretion to reimburse hospitals 
in a State according to the State's hospital reimbursement 
control system rather than according to Medicare's 
reimbursement methods if the State requests this change and if 
HHS determines that the State system meets certain 
requirements. Currently, only Maryland has a waiver to operate 
its own system. New York has a waiver covering four counties 
participating in the Finger Lakes Area Hospital Corporation 
rural hospital payment demonstration.
    Public Laws 98-21 and 98-369 added several more 
requirements for State systems. According to final regulations 
published by HHS on April 24, 1986 (51 F.R. 15481) implementing 
these legislative changes, HHS has the discretion to allow 
Medicare hospital reimbursement to be made in accordance with a 
State reimbursement control system if the chief executive 
officer of the State requests approval of the State system, and 
provided that the State system:
 1. Applies to substantially all non-Federal acute care 
        hospitals in the State;
 2. Applies to at least 75 percent of all inpatient revenues or 
        expenses for the State;
 3. Provides assurances that payers, hospital employees and 
        patients in the State will be treated equitably under 
        its system;
 4. Provides assurances that its system will not result in 
        greater Medicare expenditures over 36-month periods;
 5. Does not preclude health maintenance organizations (HMOs) 
        or competitive medical plans (CMPs) from negotiating 
        directly with hospitals concerning payment for 
        inpatient services;
 6. Limits hospital charges to Medicare beneficiaries to 
        deductibles, coinsurance, and services for which the 
        beneficiary would not be entitled to have payment made 
        under Medicare part A; and prohibits payment under part 
        B of Medicare for nonphysician services provided to 
        hospital inpatients unless this prohibition is waived.
    Public Law 101-239 (OBRA 1989) required the Secretary's 
test of effectiveness of a State cost containment system to be 
based on the aggregate rate of increase from October 1, 1984, 
to the most recent date for which annual data are available. 
This provision also extended the waiver for the New York rural 
hospital payment demonstration.
    Special provisions apply to States that have existing 
demonstration projects approved by HCFA under section 402 of 
the Social Security Amendments of 1967 or section 222(a) of the 
Social Security Amendment of 1972 for the operation of State 
reimbursement control systems. HHS approval of a State's 
application to continue the operation of a system upon 
expiration of the demonstration project is mandatory if, and 
for so long as, the system meets the minimum requirements 
described in the six items listed above.
    Public Law 101-508 revised the Secretary's test of 
effectiveness of a State cost containment system to be based on 
the rate of increase in costs per hospital inpatient admission 
as compared to the rate of increase in such costs with respect 
to all hospitals between January 1, 1981, and the present. In 
addition, OBRA 1990 provided that a State no longer qualifying 
for a PPS waiver be provided with a reasonable period, not to 
exceed 2 years, for transition from the State system to the 
national payment system, and required restoration of the waiver 
if the State returned to compliance during the transition 
period.

                             ADMINISTRATION

  Prospective Payment Assessment Commission/Medicare Payment Advisory 
                               Commission

    The Prospective Payment Assessment Commission (ProPAC) was 
a commission composed of 17 independent experts charged with 
advising the Congress on PPS and Medicare payment policies. The 
Balanced Budget Act of 1997 replaces ProPAC and the Physician 
Payment Review Commission with a 15-member Medicare Payment 
Advisory Commission (MedPAC). MedPAC is required to submit 
annual reports to Congress on March 1 and June 1 concerning the 
Medicare Program.

                   Administrative and Judicial Review

    Administrative and judicial appeals are allowed under 
procedures and authorities already established under the 
Medicare Program. However, the law precludes administrative and 
judicial review of: (1) the ``budget neutrality'' adjustment 
(see above), and (2) the DRG payment amounts, including the 
establishment of DRGs, the methodology for classifying 
discharges within DRGs, and the DRG weighting factors.

                           Review Activities

    Public Law 97-248, the Tax Equity and Fiscal Responsibility 
Act of 1982 (known as TEFRA), replaced the existing 
Professional Standards Review Organization (PSRO) Program with 
the Utilization and Quality Control Peer Review Program. The 
Secretary of the Department of Health and Human Services was 
required to enter into performance-based contracts with 
physician-sponsored or physician-access organizations known as 
peer review organizations (PROs). As a condition of receiving 
payments under the prospective payment system, hospitals are 
required to enter into an agreement with a PRO under which the 
PRO reviews the validity of diagnostic and procedural 
information provided by the hospitals; the completeness, 
adequacy and quality of care provided; and the appropriateness 
of admissions patterns, discharges, lengths of stay, transfers, 
and services furnished in outlier cases.
    Since 1982, the statute governing the PRO Program has been 
amended numerous times, and as of October 1996 the PROs are 
operating under the fifth ``scope of work.''

         HISTORICAL TRENDS IN PPS PAYMENTS, COSTS, AND MARGINS

                     Medicare Payments to Hospitals

    In fiscal year 1997, hospitals will be paid an estimated 
$124.7 billion for Medicare-covered services, as shown in table 
D-8. The largest share of this amount, $78.9 billion, will be 
for PPS inpatient operating costs. The Medicare Program will 
provide about 90 percent of these payments and the other 10 
percent will come from beneficiaries for deductibles and 
coinsurance. PPS hospitals will also receive some $8.0 billion 
in capital payments. Another $13.2 billion will be paid for 
operating and capital costs related to services provided in 
PPS-excluded facilities, which include psychiatric and 
rehabilitation hospitals and distinct-part units as well as 
long-term and children's hospitals. Payments for Medicare-
covered hospital outpatient services will be $20.9 billion, 
with almost 40 percent coming from beneficiaries. Hospitals 
will also receive $2.5 billion for the direct costs of training 
programs, including those for interns and residents and for 
nursing and allied health personnel. Hospital-based postacute 
care facilities will be paid an estimated $9.2 billion.

               Policy Changes and PPS Operating Payments

    Since the implementation of PPS, the distribution of 
Medicare payments to hospitals has changed. Some redistribution 
has resulted from changes in hospital behavior, but much of it 
is attributable to policy decisions. These include the 
transition to national average payment rates, reductions in 
teaching hospital payments, the addition of a disproportionate 
share adjustment and increases in the size of that adjustment 
for many hospitals, and larger update factors for rural 
hospitals in recent years.
     Table D-9 shows the factors affecting the PPS payment rate 
for different types of hospitals. The average standardized 
amount is somewhat higher for hospitals in large urban areas 
than other hospitals; the first column of data in this table 
shows the variation in payments if hospitals were paid only 
based on the standardized amount for the area in which they are 
located. The wage index reflects the average hourly wage for 
hospitals located there; if hospitals' payments were adjusted 
by the wage index for the area in which they were located, 
their payments would be adjusted as indicated in the second 
column of the table.

TABLE D-8.--TOTAL MEDICARE PAYMENTS TO HOSPITALS BY PAYMENT TYPE, FISCAL
                                YEAR 1997                               
------------------------------------------------------------------------
                                                                 Amount 
                       Payment category                           (in   
                                                               billions)
------------------------------------------------------------------------
 PPS.........................................................      $78.9
     Program.................................................       72.0
         Operating...........................................       64.0
         Capital.............................................        8.0
     Beneficiary copayments..................................        6.9
 PPS-excluded................................................       13.2
     Program.................................................       12.0
         Operating...........................................       11.2
         Capital.............................................        0.8
     Beneficiary copayments..................................        1.2
 Outpatient..................................................       20.9
     Program.................................................       12.6
     Beneficiary copayments..................................        8.3
Postacute \1\................................................        9.2
     Program \1\.............................................        9.0
     Beneficiary copayments \1\..............................        0.2
 Direct medical education....................................        2.5
     Interns and residents...................................        2.2
    Nursing and allied health................................        0.3
                                                              ----------
             Total...........................................     124.7 
------------------------------------------------------------------------
\1\ Estimate based on Prospective Payment Assessment Commission analysis
  of data from the Health Care Financing Administration and the         
  Congressional Budget Office.                                          
                                                                        
 Source: Prospective Payment Assessment Commission analysis of          
  Congressional Budget Office March 1997 estimates.                     

     Certain hospitals receive other adjustments to their base 
payment rates under PPS. Hospitals in Alaska and Hawaii have a 
cost-of-living adjustment to recognize the higher cost of 
nonlabor input there. In addition, sole community hospitals 
have the option of payments based on their own updated base-
year costs or the PPS rate. Hospitals also can be reclassified 
into areas where they are not located for the purpose of 
qualifying for a higher standardized payment amount or wage 
index. These factors may substantially increase payments to 
some hospitals, although by definition they have no impact on 
total PPS payments.
     PPS payments also depend on the mix of cases treated by 
the hospital; this can vary widely across hospitals and groups 
of hospitals. Moreover, additional payments are made for cases 
that are exceptionally costly relative to others in the same 
category; these cases and these payments are not distributed 
evenly across hospitals. Finally, the PPS payment is adjusted 
for teaching hospitals and hospitals that treat a 
disproportionate share of low-income patients; these two 
adjustments substantially affect the distribution of payments.

  TABLE D-9.--FACTORS AFFECTING FISCAL YEAR 1997 PPS OPERATING PAYMENTS PER CASE, BY HOSPITAL GROUP, FISCAL YEAR
                                                      1995                                                      
----------------------------------------------------------------------------------------------------------------
                                                                                                          PPS   
                                    Average    Average   Other      Base    Average                     payments
         Hospital group          standardized    wage   payment   payment    case-   Outlier  IME/DSH   per case
                                  amount (in    index     rate    rate (in    mix     factor   factor     (in   
                                   dollars)             factors   dollars)   index                      dollars)
----------------------------------------------------------------------------------------------------------------
 Urban.........................       $3,882      1.02     1.00     $3,935     1.50     1.06     1.17     $7,281
 Rural.........................        3,847      0.79     1.04      3,416     1.21     1.03     1.02      4,392
 Large urban...................        3,908      1.09     1.00      4,137     1.50     1.06     1.19      7,836
 Other urban...................        3,847      0.93     1.00      3,671     1.50     1.06     1.13      6,550
 Rural referral................        3,847      0.79     1.07      3,510     1.37     1.03     1.04      5,261
 Sole community................        3,847      0.80     1.09      3,631     1.16     1.01     1.02      4,476
 Other rural...................        3,847      0.78     1.01      3,294     1.18     1.03     1.02      4,081
 Major teaching................        3,895      1.12     1.00      4,208     1.66     1.07     1.49     11,083
 Other teaching................        3,879      1.00     1.00      3,880     1.55     1.06     1.14      7,225
 Nonteaching...................        3,868      0.93     1.01      3,746     1.33     1.04     1.05      5,474
 DSH:                                                                                                           
     Large urban...............        3,908      1.10     1.00      4,168     1.52     1.06     1.31      8,747
     Other urban...............        3,847      0.92     1.00      3,645     1.52     1.06     1.18      6,919
     Rural.....................        3,847      0.76     1.03      3,324     1.21     1.03     1.07      4,504
 Non-DSH.......................        3,874      0.96     1.01      3,833     1.39     1.05     1.04      5,810
 Teaching and DSH..............        3,883      1.03     1.00      3,963     1.59     1.06     1.32      8,817
 Teaching only.................        3,885      1.04     1.01      4,004     1.56     1.06     1.10      7,283
 DSH only......................        3,867      0.94     1.00      3,719     1.37     1.05     1.11      5,960
 No teaching or DSH............        3,869      0.93     1.01      3,741     1.31     1.04     1.00      5,125
 Urban <100 beds...............        3,877      1.00     0.99      3,861     1.21     1.04     1.01      4,915
 Urban 100-199 beds............        3,881      1.03     1.00      3,938     1.36     1.04     1.11      6,198
 Urban 200-299 beds............        3,880      1.02     1.00      3,931     1.47     1.05     1.11      6,752
 Urban 300-399 beds............        3,880      1.01     1.00      3,902     1.55     1.06     1.16      7,451
 Urban 400-499 beds............        3,884      1.02     1.00      3,945     1.59     1.06     1.23      8,210
 Urban 500+ beds...............        3,887      1.04     1.00      3,994     1.70     1.07     1.30      9,438
 Rural <50 beds................        3,847      0.79     1.01      3,304     1.06     1.01     1.01      3,605
 Rural 50-99 beds..............        3,847      0.79     1.03      3,383     1.16     1.02     1.01      4,079
 Rural 100-149 beds............        3,847      0.79     1.05      3,437     1.26     1.03     1.02      4,581
 Rural 150-199 beds............        3,847      0.79     1.05      3,433     1.27     1.04     1.03      4,712
 Rural 200+ beds...............        3,847      0.78     1.08      3,528     1.39     1.04     1.06      5,511
 New England...................        3,887      1.14     1.00      4,299     1.42     1.04     1.17      7,439
 Middle Atlantic...............        3,888      1.10     1.00      4,197     1.42     1.07     1.21      7,704
 South Atlantic................        3,868      0.91     1.01      3,654     1.46     1.05     1.13      6,342
 East North Central............        3,876      0.96     1.01      3,813     1.43     1.05     1.13      6,479
 East South Central............        3,855      0.81     1.01      3,377     1.38     1.06     1.11      5,490
 West North Central............        3,865      0.86     1.02      3,568     1.44     1.04     1.10      5,901
 West South Central............        3,867      0.85     1.01      3,494     1.45     1.06     1.13      6,080
 Mountain......................        3,873      0.94     1.02      3,795     1.48     1.04     1.09      6,400
 Pacific.......................        3,887      1.20     1.00      4,453     1.49     1.04     1.16      8,063
 Voluntary.....................        3,877      1.00     1.01      3,905     1.46     1.05     1.14      6,852
 Proprietary...................        3,875      0.95     1.01      3,770     1.44     1.05     1.09      6,254
 Urban government..............        3,874      0.99     1.00      3,837     1.48     1.06     1.32      7,995
 Rural government..............        3,847      0.77     1.02      3,306     1.15     1.03     1.02      4,030
         All hospitals.........        3,875      0.98     1.01      3,856     1.44     1.05     1.15     6,709 
----------------------------------------------------------------------------------------------------------------
Note.--PPS payments are estimated using rules in effect on October 1, 1996. Excludes hospitals in Maryland.     
  Averages are weighted by the number of Medicare cases in each hospital. The other factors category is the     
  combined effect of cost-of-living adjustments for hospitals in Alaska and Hawaii, geographic reclassification,
  and payment adjustments for sole community hospitals. IME = indirect medical education. DSH = disproportionate
  share.                                                                                                        
                                                                                                                
 Source: ProPAC PPS payment model and MedPAR data for fiscal year 1995 from the Health Care Financing           
  Administration.                                                                                               

      Distribution of PPS Hospitals, Cases, and Operating Payments

    Table D-10 shows estimated PPS operating payments by 
hospital group for fiscal year 1997. The distribution of 
payments varies widely across hospital groups. For example, 
although 56 percent of all PPS hospitals are located in urban 
areas, these hospitals account for 80 percent of all PPS 
discharges and receive 87 percent of all PPS operating 
payments. By contrast, rural hospitals account for 44 percent 
of PPS hospitals, but only 20 percent of PPS discharges and 13 
percent of PPS operating payments.
    The indirect medical education (IME) adjustment is intended 
to recognize hospitals' indirect costs of operating approved 
graduate medical education programs. The disproportionate share 
(DSH) adjustment is intended to compensate hospitals that treat 
large proportions of low-income patients. These two adjustments 
account for $9.1 billion in 1997. Almost all of these payments 
go to hospitals located in urban areas.
    Outlier payments are intended to protect hospitals from the 
risk of financial losses due to cases with exceptionally long 
stays or high costs. Large urban hospitals and teaching 
hospitals and those located in the Middle Atlantic region 
receive the highest proportion of outlier payments. Small urban 
hospitals and all rural hospitals receive the lowest percentage 
of outlier payments.
    For all PPS hospitals, the basic DRG payment is estimated 
to account for 83 percent of fiscal year 1997 PPS operating 
payments. IME, DSH, and outlier payments are expected to 
account for 17 percent of the total, or about $12.2 billion. 
Rural hospitals receive only 5 percent of their total PPS 
operating payments through these provisions, while urban 
hospitals count on these mechanisms for 19 percent of their PPS 
operating payments. This is because teaching and 
disproportionate share hospitals are much more likely to be 
located in cities and urban hospitals are much more likely to 
treat more complex cases that become outliers.

               Trends in PPS Operating Payments and Costs

    The increase in PPS operating payments per case has 
differed from the update factor in every year, as shown in 
table D-11. In the first 2 years of prospective payment, 
payments per discharge rose sharply, by 18.5 percent and 10.5 
percent, respectively. This is attributable to two factors: 
overestimation of the base year hospital costs upon which the 
initial PPS rates were set due to the use of unaudited Medicare 
Cost Reports, and a large increase in the aggregate CMI in the 
early years because of more emphasis on accurate DRG coding and 
complete documentation of the medical record.

            TABLE D-10.--DISTRIBUTION OF PPS HOSPITALS AND DISCHARGES AND ESTIMATED FISCAL YEAR 1997 PPS OPERATING PAYMENTS BY HOSPITAL GROUP           
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     PPS operating payments (in billions of dollars)    
                                                           Number of    Percent of   Percent of --------------------------------------------------------
                     Hospital group                           PPS          PPS          PPS                                  Indirect                   
                                                           hospitals    discharges   operating      Total       Outlier      medical    Disproportionate
                                                                                      payments                              education    share hospitals
--------------------------------------------------------------------------------------------------------------------------------------------------------
Urban...................................................        2,832           80           87        $61.7         $2.8         $4.5              $4.3
Rural...................................................        2,243           20           13          9.2          0.2          0.1               0.2
Large urban.............................................        1,567           46           53         37.7          1.7          3.3               2.8
Other urban.............................................        1,265           35           34         24.0          1.1          1.1               1.5
Rural referral..........................................          130            4            3          2.1          0.1          0.0             (\1\)
Sole community..........................................          648            4            3          2.0        (\1\)        (\1\)             (\1\)
Other rural.............................................        1,465           12            7          5.1          0.1        (\1\)               0.1
Major teaching..........................................          263           12           20         14.1          0.6          3.1               1.5
Other teaching..........................................          811           32           34         24.3          1.1          1.5               1.5
Nonteaching.............................................        4,001           56           46         32.5          1.3          0.0               1.5
Disproportionate share large urban......................          786           25           32         22.8          0.9          2.5               2.8
Disproportionate share other urban......................          679           22           23         16.2          0.8          0.9               1.5
Disproportionate share rural............................          448            5            4          2.6          0.1        (\1\)               0.2
Nondisproportionate share...............................        3,162           48           41         29.4          1.3          1.1               0.0
Teaching and disproportionate share.....................          701           29           38         26.8          1.1          3.5               3.0
Teaching only...........................................          373           15           16         11.7          0.6          1.1               0.0
Disproportionate share only.............................        1,212           23           21         14.8          0.6          0.0               1.5
Nonteaching nondisproportionate share...................        2,789           33           25         17.7          0.7          0.0               0.0
Urban <100 beds.........................................          700            4            3          2.3          0.1        (\1\)             (\1\)
Urban 100-199 beds......................................          925           18           16         11.5          0.4          0.2               0.9
Urban 200-299 beds......................................          567           20           20         14.5          0.6          0.6               0.9
Urban 300-399 beds......................................          316           15           17         12.0          0.6          0.8               0.8
Urban 400-499 beds......................................          157            9           11          7.7          0.4          0.8               0.6
Urban 500+ beds.........................................          167           14           19         13.6          0.7          2.0               1.1
Rural <50 beds..........................................        1,175            4            2          1.5        (\1\)        (\1\)             (\1\)
Rural 50-99 beds........................................          656            6            4          2.6          0.1        (\1\)             (\1\)
Rural 100-149 beds......................................          240            4            3          2.1          0.1        (\1\)             (\1\)
Rural 150-199 beds......................................           97            3            2          1.3        (\1\)        (\1\)             (\1\)
Rural 200+ beds.........................................           75            3            2          1.7          0.1        (\1\)             (\1\)
New England.............................................          213            6            6          4.4          0.1          0.5               0.1
Middle Atlantic.........................................          519           17           20         13.9          0.7          1.4               1.0
South Atlantic..........................................          719           18           17         12.0          0.5          0.5               0.8
East North Central......................................          796           18           17         12.2          0.5          0.9               0.5
East South Central......................................          441            8            7          4.9          0.2          0.1               0.3
West North Central......................................          704            8            7          4.9          0.2          0.3               0.1
West South Central......................................          726           11           10          6.8          0.3          0.2               0.6
Mountain................................................          338            4            4          2.9          0.1          0.1               0.1
Pacific.................................................          619           10           13          8.9          0.3          0.4               0.9
Voluntary...............................................        2,946           74           76         53.7          2.3          3.7               2.9
Proprietary.............................................          692           11           10          7.4          0.3          0.1               0.5
Urban government........................................          420            9           10          7.2          0.3          0.8               1.0
Rural government........................................          966            6            4          2.6          0.1        (\1\)               0.1
      All hospitals.....................................        5,075          100          100         70.9          3.1          4.6              4.5 
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Less than $0.05 billion.                                                                                                                            
                                                                                                                                                        
 Note.--PPS payments are estimated using rules in effect as of October 1, 1996. Excludes hospitals in Maryland.                                         
                                                                                                                                                        
 Source: Prospective Payment Assessment Commission PPS payment model, MedPAR data for fiscal year 1995 from the Health Care Financing Administration and
  Congressional Budget Office March 1997 estimates.                                                                                                     


              TABLE D-11.--ANNUAL CHANGE IN PPS OPERATING COSTS AND PAYMENTS, FIRST 12 YEARS OF PPS             
                                                  [In percent]                                                  
----------------------------------------------------------------------------------------------------------------
                                                                    PPS costs and payments                      
                                           ---------------------------------------------------------------------
                                                                                                                
                 Year \1\                                         Operating  Operating      Market       Update 
                                            Operating  Operating  costs per   payments     basket     factor \3\
                                              costs     payments     case     per case  forecast \2\            
----------------------------------------------------------------------------------------------------------------
1984......................................       -4.6       11.1        1.8       18.5         4.9          4.7 
1985......................................        4.7        4.2       11.0       10.5         3.9          4.5 
1986......................................        5.6       -0.6        9.6        3.2         3.9          0.5 
1987......................................        7.4        3.8        9.1        5.4         3.5          1.2 
1988......................................        9.8        6.7        9.0        6.0         4.7          1.5 
1989......................................       10.4        7.7        9.2        6.6         5.5          3.3 
1990......................................       10.7        8.2        8.9        6.5         4.6          4.7 
1991......................................        9.1        8.0        7.0        5.9         4.3          3.4 
1992......................................        6.9        7.4        4.7        5.2         3.1          3.0 
1993......................................        3.5        6.1        1.2        3.8         3.0          2.7 
1994......................................        0.4        5.2       -1.1        3.6         2.4          2.0 
1995......................................        0.1        5.2       -1.1        4.0         3.0         2.0  
----------------------------------------------------------------------------------------------------------------
\1\ Data on PPS operating costs and payments are for hospital accounting years beginning during each Federal    
  fiscal year. Data on the market basket and update factor are for the corresponding Federal fiscal year.       
\2\ As of September 1 of the previous year.                                                                     
\3\ Update factor for 1990 adjusted for 1.22 percent across-the-board reduction in diagnosis-related group      
  weights.                                                                                                      
                                                                                                                
 Note.--Changes based on cohorts of hospitals with Medicare Cost Reports in two consecutive years. Hospitals in 
  Massachusetts and New York excluded from data in 1984 and 1985; hospitals in New Jersey excluded from data in 
  1984 through 1988; hospitals in Maryland excluded from data in all years.                                     
                                                                                                                
 Source: Prospective Payment Assessment Commission analysis of Medicare Cost Report data from the Health Care   
  Financing Administration.                                                                                     

     After an increase of 3.2 percent in 1986, payments per 
case grew at an annual rate of 5.9 percent from 1987 through 
1992, as a result of large increases in both the PPS market 
basket index and the aggregate Medicare case-mix index. From 
1993 through 1995, the PPS update was lower, resulting in the 
smallest 3-year increase in payments per case since the 
beginning of PPS. Despite this better control over payment 
rates in recent years, chart D-1 indicates that the increase in 
operating payments per case during the first 12 years of PPS is 
almost three times as great as the cumulative value of the 
annual update factor.
    Following an increase of only 1.8 percent in the first year 
of PPS, PPS operating costs per discharge rose by about 11 
percent in the second year, and about 9 percent from 1986 
through 1990. However, the 7.0-percent growth in operating 
costs per case in 1991 was the smallest since the first year of 
PPS, and the rise of 1.2 percent in 1993 was below general 
inflation. Costs per case actually decreased in 1994 and 1995.
    Cost growth experience has not been uniform across 
hospitals, as shown in table D-12. Through 1990, urban and 
rural hospitals had about the same rate of increase. In the 
first year, both groups reacted to prospective payment by 
holding their cost growth far below the rates prevailing before 
PPS, while annual cost increases in the following 6 years were 
much higher for both groups. From 1991 through 1995, however, 
urban hospitals held their cost growth to 1.9 percent annually, 
while rural hospital costs rose at a 3.4-percent rate.

 CHART D-1. CUMULATIVE INCREASES IN PPS MARKET BASKET, UPDATE FACTOR, 
  AND PAYMENTS AND COSTS PER CASE, FIRST 12 YEARS OF PPS (IN PERCENT) 





    Source: Prospective Payment Assessment Commission analysis 
of Medicare Cost Report data from the Health Care Financing 
Administration.


    The recent low rate of cost growth among hospitals in large 
urban areas may reflect the fact that the most rapid changes in 
the health care system appear to be occurring in the largest 
cities. From 1991 through 1995, these hospitals' costs per 
discharge rose at a rate 0.9 percentage points below that for 
other urban hospitals and 1.9 percentage points below that for 
rural hospitals.
    The pattern of cost increases also varies substantially by 
ownership. In the first year of PPS, when hospitals perceived 
potential pressure to control costs, proprietary facilities had 
by far the smallest increase of any group. Once this pressure 
lessened, costs increased sharply through 1990 for all groups, 
including the proprietaries. However, from 1991 on, proprietary 
hospitals reined in their costs to a far greater extent than 
the other groups.

  TABLE D-12.--ANNUAL RATE OF CHANGE IN PPS OPERATING COSTS PER CASE BY 
                   HOSPITAL GROUP AND PERIOD, 1984-95                   
                              [In percent]                              
------------------------------------------------------------------------
                                                       Period           
              Hospital group               -----------------------------
                                              1984     1985-90   1991-95
------------------------------------------------------------------------
Urban.....................................       1.6       9.4       1.9
Rural.....................................       1.5       9.2       3.4
                                                                        
Large urban...............................       0.6       9.2       1.5
Other urban...............................       3.2       9.8       2.4
Rural referral............................       1.5       9.7       3.4
Sole community............................       1.3       8.6       3.6
Other rural...............................       1.4       9.2       3.3
                                                                        
Major teaching............................       1.3       9.1       1.7
Other teaching............................       1.3       9.4       2.2
Nonteaching...............................       1.9       9.5       2.0
                                                                        
Disproportionate share large urban........       0.0       9.0       1.4
Disproportionate share other urban........       3.2       9.7       2.6
Disproportionate share rural..............       0.3       9.7       3.4
Nondisproportionate share.................       2.4       9.6       2.2
                                                                        
Teaching and disproportionate share.......       0.7       9.2       2.0
Teaching only.............................       2.6       9.7       2.4
Disproportionate share only...............       1.8       9.5       1.8
Nonteaching nondisproportionate share.....       2.0       9.4       2.1
                                                                        
Voluntary.................................       1.8       9.3       2.2
Proprietary...............................       0.7      10.0       0.3
Urban government..........................       2.4       9.6       2.1
Rural government..........................       1.5       9.3       3.9
                                                                        
      All hospitals.......................       1.8       9.5      2.1 
------------------------------------------------------------------------
Note.--Data on PPS operating costs and payments are for hospital        
  accounting years beginning during each Federal fiscal year. Changes   
  based on cohorts of hospitals with Medicare Cost Reports in two       
  consecutive years. Hospitals in Massachusetts and New York excluded   
  from data in 1984 and 1985; hospitals in New Jersey excluded from data
  in 1984 through 1988; hospitals in Maryland excluded from data in all 
  years.                                                                
                                                                        
 Source: Prospective Payment Assessment Commission analysis of Medicare 
  Cost Report data from the Health Care Financing Administration.       

                         PPS Inpatient Margins

    The PPS inpatient margin compares combined Medicare 
operating and capital payments with the corresponding costs. In 
1995, the aggregate PPS margin rose for the fourth consecutive 
year to 10.0 percent, as shown in table D-13. This contrasts 
with a declining trend through the first 8 years of prospective 
payment, during which the margin fell to a low of -2.4 percent. 
The turnaround is attributable to the sharp slowdown in 
hospital cost growth. If current trends continue, the aggregate 
PPS inpatient margin for 1997 would be 14.2 percent. This would 
be the highest PPS inpatient margin in the 14 years of 
prospective payment.

                          TABLE D-13.--PPS INPATIENT (OPERATING PLUS CAPITAL) MARGINS, BY HOSPITAL GROUP, FIRST 12 YEARS OF PPS                         
                                                                      [In percent]                                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Hospital group                        1984    1985    1986    1987    1988    1989    1990    1991    1992    1993    1994    1995 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Urban...................................................    14.5    13.9     9.8     6.8     3.3     0.8    -1.2    -2.2    -0.9     1.3     5.7    10.7
Rural...................................................     7.7     7.4     2.2     0.2    -1.2    -2.9    -3.7    -3.7    -1.4    -0.7     0.2     5.1
                                                                                                                                                        
Large urban.............................................    15.0    13.9    10.0     6.8     3.1     0.7    -0.7    -1.4     0.4     2.8     7.8    12.7
Other urban.............................................    13.8    14.0     9.4     6.8     3.7     0.9    -1.9    -3.4    -2.9    -1.0     2.5     7.8
Rural referral..........................................     9.9    12.9     7.9     6.1     3.9     1.2     0.0    -0.6     2.9     2.6     2.8     6.1
Sole community..........................................     8.0     6.4     2.1     0.3    -1.2    -2.6    -1.2    -0.8     2.5     3.8     4.4     7.3
Other rural.............................................     7.0     6.0     0.3    -1.9    -3.2    -4.5    -6.0    -6.0    -4.8    -3.8    -2.5     3.7
                                                                                                                                                        
Major teaching..........................................    18.6    19.9    15.2    12.9    10.0     7.9     7.2     7.5     9.3    10.9    16.4    20.5
Other teaching..........................................    14.9    14.5    10.5     7.2     3.9     1.4    -1.0    -2.2    -1.2     0.8     4.6     9.3
Nonteaching.............................................    11.2    10.0     5.2     2.5    -0.7    -3.3    -5.2    -6.4    -5.0    -3.0     0.4     6.0
                                                                                                                                                        
Disproportionate share large urban......................    15.3    14.2    10.8     8.3     5.5     3.5     3.0     2.8     5.0     7.8    13.1    17.6
Disproportionate share other urban......................    13.5    14.2    10.0     7.8     5.0     2.4     0.0    -1.3    -1.0     0.9     4.5    10.0
Disproportionate share rural............................     8.5     8.2     2.8     0.4    -0.5    -2.1    -2.2    -1.8     0.2     0.5     2.2     7.6
Nondisproportionate share...............................    12.6    11.9     7.0     3.6    -0.3    -2.9    -5.5    -6.7    -5.5    -4.0    -0.7     4.4
                                                                                                                                                        
Teaching and disproportionate share.....................    15.8    15.9    12.4    10.0     7.6     5.3     4.1     3.6     5.0     7.3    11.8    16.2
Teaching only...........................................    16.1    16.3    11.3     7.0     2.2    -0.1    -3.2    -4.0    -2.9    -1.7     2.2     7.0
Disproportionate share only.............................    11.6    10.7     6.1     3.6     0.6    -1.6    -3.0    -3.7    -2.3    -0.1     3.9    10.0
Nonteaching nondisproportionate share...................    10.8     9.5     4.5     1.5    -1.8    -4.6    -6.9    -8.4    -7.2    -5.4    -2.5     2.7
                                                                                                                                                        
Voluntary...............................................    14.0    13.7     9.6     6.5     3.1     0.7    -1.3    -2.5    -1.1     0.6     4.3     9.0
Proprietary.............................................    12.9    11.0     6.3     3.4     0.0    -3.9    -5.7    -4.4    -2.2     1.8     8.6    15.6
Urban government........................................    13.5    14.1     9.1     7.6     4.8     3.6     2.7     1.4     2.2     4.9     9.7    14.5
Rural government........................................     6.6     5.1    -0.6    -2.3    -2.3    -3.7    -4.0    -4.4    -2.6    -2.0    -2.6     2.5
                                                                                                                                                        
      All hospitals.....................................    13.4    13.0     8.7     5.9     2.7     0.3    -1.5    -2.4    -1.0     1.0     5.0   10.0 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--Data on PPS operating and capital costs and payments are for hospital accounting years beginning during each Federal fiscal year. Hospitals in   
  Massachusetts and New York excluded from data in 1984 and 1985; hospitals in New Jersey excluded from data in 1984 through 1988; hospitals in Maryland
  excluded from data in all years.                                                                                                                      
                                                                                                                                                        
 Source: Prospective Payment Assessment Commission analysis of Medicare Cost Report data from the Health Care Financing Administration.                 

    Table D-14 shows that, even with the high aggregate PPS 
inpatient margin in 1995, more than a third of all PPS 
hospitals have negative PPS inpatient margins. The PPS margin, 
however, does not represent the bottom line for the hospital 
industry. The total margin, which includes expenses and 
revenues related to Medicare and other inpatient and outpatient 
care as well as other facility activities, increased steadily 
from the early 1970s to the early 1980s, peaking in 1984. In 
subsequent years--as Medicare tightened its control over 
inpatient payment rate increases--the total margin began to 
fall. In the late 1980s, however, this decline leveled off at 
3.3 percent, and by 1991 the total margin had risen to 4.4 
percent. It remained steady through 1993, and then increased to 
5.0 percent in 1994 and 5.8 percent in 1995, the highest level 
since 1986 and above levels experienced before PPS began.

                        Margins by Hospital Type

    PPS inpatient margins vary by hospital group. The margin 
for urban hospitals was 14.5 percent in the first year--
exceeding that for rural hospitals by 6.8 percentage points. 
Beginning in fiscal year 1986, the Congress enacted a series of 
policy changes designed to increase payment for rural 
hospitals. By 1988, although the difference between the two 
groups had decreased to 3.7 percentage points, rural hospitals 
had negative margins while urban ones were still receiving 
payments that exceeded their costs. The disparity narrowed to 
0.5 percentage points by 1992, but has widened as urban 
hospitals have constrained their costs more than rural 
hospitals.
    Major teaching hospitals consistently have had the highest 
aggregate inpatient margin of any hospital group. Moreover, the 
difference in the margins for major teaching and nonteaching 
hospitals has grown. For major teaching hospitals, the 
inpatient margin fell from 19.9 percent in the second year of 
PPS to a low of 7.2 percent in 1990, while the drop for other 
teaching and nonteaching hospitals was much sharper. By 1995, 
all three groups had higher margins than in the early years of 
the decade, with the largest increase seen in the major 
teaching group. Their margin was 20.5 percent--11.2 percentage 
points higher than for other teaching hospitals and 14.5 
percentage points higher than for the nonteaching group. These 
differences had been 3.7 percentage points and 7.4 percentage 
points, respectively, in the first PPS year.
    The trend in inpatient margins by ownership category also 
reflects changes in payment policy and degree of success in 
controlling costs. In the first year, voluntary, proprietary, 
and urban government hospitals all had inpatient margins around 
13-14 percent, while rural government hospitals lagged behind. 
In 1990, the inpatient margin for the proprietary group, which 
had fallen by more than 18 percentage points since the 
beginning of PPS to -5.7 percent, was the lowest of the four 
groups. However, as these hospitals held down their cost 
growth, their margin increased by more than 20 percentage 
points, to 15.6 percent in 1995.

    TABLE D-14.--DISTRIBUTION OF PPS INPATIENT (OPERATING PLUS CAPITAL) MARGINS AND PERCENT OF HOSPITALS WITH NEGATIVE MARGIN, FIRST 12 YEARS OF PPS    
                                                                      [In Percent]                                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               PPS margin                                               
                Percentile \1\                 ---------------------------------------------------------------------------------------------------------
                                                 1984    1985     1986     1987     1988     1989     1990     1991     1992     1993     1994     1995 
--------------------------------------------------------------------------------------------------------------------------------------------------------
10th..........................................    -5.8    -8.2    -15.6    -18.5    -22.6    -24.7    -26.1    -27.3    -26.6    -23.6    -22.4    -16.8
25th..........................................     3.1     1.3     -4.2     -6.8     -9.7    -11.9    -13.6    -15.4    -14.3    -12.1     -9.9     -4.6
Median........................................    10.3     9.2      4.5      2.6      0.6     -1.7     -3.3     -4.4     -2.7     -0.7      1.6      6.5
75th..........................................    16.2    16.0     11.8     10.4      9.4      7.9      6.6      5.9      7.7      9.5     12.2     17.1
90th..........................................    21.5    22.3     18.1     17.4     17.5     16.3     15.8     15.0     16.9     19.3     22.9     27.4
Percent with negative PPS inpatient margin....    18.2    21.8     35.6     42.2     48.3     54.7     59.0     61.2     57.1     51.8     45.8    34.1 
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Table entries are the margins of hospitals at the 10th percentile, 25th percentile, median, 75th percentile, and 90th percentile.                   
                                                                                                                                                        
Note.--Data on PPS operating and capital costs and payments are for hospital accounting years beginning during each Federal fiscal year. Hospitals in   
  Massachusetts and New York excluded from data in 1984 and 1985; hospitals in New Jersey excluded from data in 1984 through 1988; hospitals in Maryland
  excluded from data in all years.                                                                                                                      
                                                                                                                                                        
 Source: Prospective Payment Assessment Commission analysis of Medicare Cost Report data from the Health Care Financing Administration.                 


                              TABLE D-15.--TOTAL MARGINS BY HOSPITAL GROUP, 1984-95                             
----------------------------------------------------------------------------------------------------------------
       Hospital group          1984   1985   1986   1987   1988   1989   1990   1991   1992   1993   1994   1995
----------------------------------------------------------------------------------------------------------------
Urban.......................    7.7    6.9    4.5    3.7    3.6    3.5    3.5    4.3    4.2    4.4    4.9    5.7
Rural.......................    5.0    4.7    3.0    2.9    3.3    4.2    4.7    5.1    5.3    5.1    5.5    6.6
Large urban.................    7.5    6.6    4.0    3.2    3.0    2.9    2.4    3.6    3.5    3.8    4.2    4.9
Other urban.................    8.1    7.2    5.4    4.6    4.5    4.7    5.2    5.6    5.3    5.2    6.1    6.9
Rural referral..............    7.4    8.4    5.7    5.7    5.1    6.5    6.5    6.5    6.7    6.8    7.1    8.6
Sole community..............    4.8    4.1    2.7    2.3    2.7    3.3    4.3    5.4    5.6    5.6    5.9    6.3
Other rural.................    4.4    3.7    2.2    2.1    3.0    3.7    4.2    4.5    4.6    4.3    4.7    5.9
Major teaching..............    5.2    5.7    2.2    2.1    2.4    1.8    0.9    3.5    3.2    3.3    3.1    4.2
Other teaching..............    8.4    7.3    5.6    4.4    4.3    4.5    4.4    4.7    4.4    4.7    5.3    6.2
Nonteaching.................    7.3    6.4    4.5    3.8    3.6    3.9    4.4    4.8    4.9    4.9    5.9    6.4
Disproportionate share:                                                                                         
    Large urban.............    6.6    5.7    3.2    2.4    2.2    2.0    1.3    3.1    3.0    3.5    3.7    4.3
    Other urban.............    7.9    7.1    5.4    4.7    4.6    4.7    5.3    5.9    5.8    5.4    6.2    7.0
    Rural...................    5.8    5.7    2.5    2.8    3.5    4.4    5.7    7.4    7.7    6.0    6.0    7.8
Nondisproportionate share...    7.7    7.0    4.9    4.2    4.2    4.4    4.5    4.6    4.4    4.6    5.4    8.2
Teaching and DSH............    6.7    6.1    3.6    3.0    2.9    3.0    2.4    4.0    3.9    4.0    4.1    4.9
Teaching only...............    9.0    8.5    5.9    4.7    5.0    4.6    4.5    4.7    3.9    4.4    5.1    6.5
DSH only....................    7.7    6.5    4.6    3.7    3.5    3.4    4.2    5.1    5.2    5.1    6.3    6.8
No teaching or DSH..........    7.0    6.2    4.4    4.0    3.7    4.3    4.5    4.5    4.7    4.7    5.5    6.1
Voluntary...................    7.7    7.0    4.9    3.8    3.8    3.9    3.9    4.3    4.0    4.1    4.8    5.7
Proprietary.................    8.8    7.5    5.6    4.6    3.6    2.9    3.9    5.2    6.6    7.2    9.6    9.3
Urban government............    4.4    4.4    0.9    2.3    2.2    2.5    1.7    4.4    4.2    4.4    3.4    4.4
Rural government............    4.6    2.9    2.0    1.5    2.4    3.3    4.0    4.8    5.2    4.5    4.7    5.7
      All hospitals.........    7.3    6.6    4.3    3.6    3.5    3.6    3.6    4.4    4.3    4.5    5.0    5.8
----------------------------------------------------------------------------------------------------------------
Note.--Data are percentages. Data on total revenues and expenses are for hospital accounting years beginning    
  during each Federal fiscal year. Hospitals in Massachusetts and New York excluded from data in 1984 and 1985; 
  hospitals in New Jersey excluded from data in 1984-88; hospitals in Maryland excluded from data in all years. 
                                                                                                                
Source: ProPAC analysis of Medicare Cost Report data from the Health Care Financing Administration.             

                        Additional Hospital Data

    Table D-16 displays summary characteristics of hospitals 
participating in the Medicare prospective payment system. These 
data are derived from PPS payment simulations by CBO. Table D-
17 provides historical trends in factors affecting PPS rates 
and average payments per case, based on data and estimates 
provided by HCFA's Office of the Actuary.

                           TABLE D-16.--FACTORS AFFECTING FISCAL YEAR 1997 PPS OPERATING PAYMENTS PER CASE, BY HOSPITAL GROUP                           
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Other             Average                           
                                                    Number of   Number of      Average    Average  payment    Base     case-   Outlier   IME/      PPS  
                  Hospital group                       PPS         PPS      standardized    wage     rate    payment    mix     factor    DSH   payments
                                                    hospitals   discharges     amount      index   factors    rate     index            factor  per case
--------------------------------------------------------------------------------------------------------------------------------------------------------
Urban.............................................     2,832     8,662,319      $3,882      1.02     1.00     $3,935    1.50     1.06     1.17    $7,281
Rural.............................................     2,243     2,139,471       3,847      0.79     1.04      3,416    1.21     1.03     1.02     4,392
Large urban.......................................     1,567     4,923,543       3,908      1.09     1.00      4,137    1.50     1.06     1.19     7,836
Other urban.......................................     1,265     3,738,776       3,847      0.93     1.00      3,671    1.50     1.06     1.13     6,550
Rural referral....................................       130       407,577       3,847      0.79     1.07      3,510    1.37     1.03     1.04     5,261
Sole community....................................       648       465,468       3,847      0.80     1.09      3,631    1.16     1.01     1.02     4,476
Other rural.......................................     1,465     1,266,426       3,847      0.78     1.01      3,294    1.18     1.03     1.02     4,081
Major teaching....................................       263     1,304,199       3,895      1.12     1.00      4,208    1.66     1.07     1.49    11,083
Other teaching....................................       811     3,437,521       3,879      1.00     1.00      3,880    1.55     1.06     1.14     7,225
Nonteaching.......................................     4,001     6,060,070       3,868      0.93     1.01      3,746    1.33     1.04     1.05     5,474
Disproportionate share:                                                                                                                                 
    Large urban...................................       786     2,659,569       3,908      1.10     1.00      4,168    1.52     1.06     1.31     8,747
    Other urban...................................       679     2,396,608       3,847      0.92     1.00      3,645    1.52     1.06     1.18     6,919
    Rural.........................................       448       582,226       3,847      0.76     1.03      3,324    1.21     1.03     1.07     4,504
Nondisproportionate share.........................     3,162     5,163,387       3,874      0.96     1.01      3,833    1.39     1.05     1.04     5,810
Teaching and DSH..................................       701     3,102,055       3,883      1.03     1.00      3,963    1.59     1.06     1.32     8,817
Teaching only.....................................       373     1,639,665       3,885      1.04     1.01      4,004    1.56     1.06     1.10     7,283
DSH only..........................................     1,212     2,536,348       3,867      0.94     1.00      3,719    1.37     1.05     1.11     5,960
No teaching or DSH................................     2,789     3,523,722       3,869      0.93     1.01      3,741    1.31     1.04     1.00     5,125
Urban, less than 100 beds.........................       700       481,873       3,877      1.00     0.99      3,861    1.21     1.04     1.01     4,915
Urban, 100-199....................................       925     1,898,324       3,881      1.03     1.00      3,938    1.36     1.04     1.11     6,198
Urban, 200-299....................................       567     2,195,938       3,880      1.02     1.00      3,931    1.47     1.05     1.11     6,752
Urban, 300-399....................................       316     1,645,493       3,880      1.01     1.00      3,902    1.55     1.06     1.16     7,451
Urban, 400-499....................................       157       964,132       3,884      1.02     1.00      3,945    1.59     1.06     1.23     8,210
Urban, 500+ beds..................................       167     1,476,559       3,887      1.04     1.00      3,994    1.70     1.07     1.30     9,438
Rural, less than 50 beds..........................     1,175       422,328       3,847      0.79     1.01      3,304    1.06     1.01     1.01     3,605
Rural, 50-99......................................       656       653,095       3,847      0.79     1.03      3,383    1.16     1.02     1.01     4,079
Rural, 100-149....................................       240       466,878       3,847      0.79     1.05      3,437    1.26     1.03     1.02     4,581
Rural, 150-199....................................        97       274,834       3,847      0.79     1.05      3,433    1.27     1.04     1.03     4,712
Rural, 200+ beds..................................        75       322,336       3,847      0.78     1.08      3,528    1.39     1.04     1.06     5,511
New England.......................................       213       600,267       3,887      1.14     1.00      4,299    1.42     1.04     1.17     7,439
Middle Atlantic...................................       519     1,849,999       3,888      1.10     1.00      4,197    1.42     1.07     1.21     7,704
South Atlantic....................................       719     1,936,834       3,868      0.91     1.01      3,654    1.46     1.05     1.13     6,342
East North Central................................       796     1,919,107       3,876      0.96     1.01      3,813    1.43     1.05     1.13     6,479
East South Central................................       441       914,371       3,855      0.81     1.01      3,377    1.38     1.06     1.11     5,490
West North Central................................       704       844,212       3,865      0.86     1.02      3,568    1.44     1.04     1.10     5,901
West South Central................................       726     1,147,927       3,867      0.85     1.01      3,494    1.45     1.06     1.13     6,080
Mountain..........................................       338       458,342       3,873      0.94     1.02      3,795    1.48     1.04     1.09     6,400
Pacific...........................................       619     1,130,731       3,887      1.20     1.00      4,453    1.49     1.04     1.16     8,063
Voluntary.........................................     2,946     8,004,924       3,877      1.00     1.01      3,905    1.46     1.05     1.14     6,852
Proprietary.......................................       692     1,206,343       3,875      0.95     1.01      3,770    1.44     1.05     1.09     6,254
Urban government..................................       420       920,619       3,874      0.99     1.00      3,837    1.48     1.06     1.32     7,995
Rural government..................................       966       657,913       3,847      0.77     1.02      3,306    1.15     1.03     1.02     4,030
      All hospitals...............................     5,075    10,801,790       3,875      0.98     1.01      3,856    1.44     1.05     1.15    6,709 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office estimates based on data from the Health Care Financing Administration.                                              


                                             TABLE D-17.--TRENDS IN FACTORS AFFECTING PPS RATES AND AVERAGE PAYMENTS PER CASE, FISCAL YEARS 1983-98                                             
                                                                             [Percentage change from previous year]                                                                             
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Fiscal year                                                         
                       Rate impact factor                        -------------------------------------------------------------------------------------------------------------------------------
                                                                   1983    1984    1985    1986    1987    1988    1989    1990    1991    1992    1993    1994    1995    1996    1997    1998 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Market basket index \1\.........................................     5.5     4.9     4.1     2.9     3.2     4.7     5.4     5.5     5.2  \2\ 4.                                                
                                                                                                                                               4  \3\ 4.                                        
                                                                                                                                                       1     4.3  \4\ 3.                        
                                                                                                                                                                       6  \5\ 3.                
                                                                                                                                                                               5     2.5     2.8
Annual update factor \6\........................................  ......  ......  ......  ......  ......     1.7    3.33    5.71    2.83    2.90    2.75    2.11    1.89    1.64     2.0     3.1
Case-mix index \7\..............................................  ......  ......     3.1     2.5     2.1     3.2     2.5    0.85     2.5     1.5    0.85    0.85    1.00    1.50    1.50     1.0
Average payments per discharge \8\..............................    10.2    10.8    15.0     8.0     3.6     5.0    10.1     8.4     7.2     8.9     4.6     2.5     6.1     6.7     2.9     4.8
Average payments per beneficiary \8\............................    11.4     7.8     6.6     1.5    -0.3     3.9     6.5     8.0     5.9    11.5     4.0     5.9     4.3     7.4     3.9    5.9 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimates as published in the Federal Register for fiscal years 1983-97; fiscal year 1998 President's Budget assumptions shown for fiscal year 1998.                                        
\2\ 4.7 for hospitals excluded from the prospective payment system.                                                                                                                             
\3\ 4.2 for hospitals excluded from the prospective payment system.                                                                                                                             
\4\ 3.7 for hospitals excluded from the prospective payment system.                                                                                                                             
\5\ 3.4 for hospitals excluded from the prospective payment system.                                                                                                                             
\6\ Estimates as published in the Federal Register for fiscal years 1989-97; fiscal year 1997 President's Budget assumptions used for fiscal year 1998.                                         
\7\ Estimates based on historical data for fiscal years 1985-97; fiscal year 1998 President's Budget assumptions shown for fiscal years 1996-98.                                                
\8\ Estimates based on historical data and fiscal year 1997 President's Budget assumptions; estimates for fiscal years 1989 and 1990 include the effect of provisions of the Medicare           
  Catastrophic Coverage Act of 1988.                                                                                                                                                            
                                                                                                                                                                                                
 Source: Health Care Financing Administration, Office of the Actuary.                                                                                                                           


        TABLE D-18.--WAGE INDEX FOR URBAN AREAS, FISCAL YEAR 1996       
------------------------------------------------------------------------
  Urban area (constituent counties or county equivalents)     Wage index
------------------------------------------------------------------------
Abilene, TX (Taylor, TX)...................................       0.8287
Aguadilla, PR (Aquada, PR, Aguadilla, PR, Moca, PR)........       0.4224
Akron, OH (Portage, OH, Summit, OH)........................       0.9728
Albany, GA (Dougherty, GA, Lee, GA)........................       0.7914
Albany-Schenectady-Troy, NY (Albany, NY, Montgomery, NY,                
 Rensselaer, NY, Saratoga, NY, Schenectady, NY, Schoharie,              
 NY).......................................................       0.8480
Albuquerque, NM (Bernalillo, NM, Sandoval, NM, Valencia,                
 NM).......................................................       0.9329
Alexandria, LA (Rapides, LA)...............................       0.8269
Allentown-Bethlehem-Easton, PA (Carbon, PA, Lehigh, PA,                 
 Northampton, PA)..........................................       1.0086
Altoona, PA (Blair, PA)....................................       0.9137
Amarillo, TX (Potter, TX, Randall, TX).....................       0.9425
Anchorage, AK (Anchorage, AK)..............................       1.2998
Ann Arbor, MI (Lenawee, MI, Livingston, MI, Washtenaw, MI).       1.1785
Anniston, AL (Calhourn, AL)................................       0.8266
Appleton-Oshkosh-Neenah, WI (Calumet, WI, Outagami, WI,                 
 Winnebago, WI)............................................       0.8996
Arecibo, PR (Arecibo, PR, Camuy, PR, Hatillo, PR)..........       0.4224
Asheville, NC (Buncombie, NC, Madison, NC).................       0.9072
Athens, GA (Clarke, GA, Madison, GA, Oconee, GA)...........       0.9087
Atlanta, GA (Barrow, GA, Bartow, GA, Carroll, GA, Cherokee,             
 GA, Clayton, GA, Cobb, GA, Coweta, GA, DeKalb, GA,                     
 Douglas, GA, Fayette, GA, Forsyth, GA, Fulton, GA,                     
 Gwinnett, GA, Henry, GA, Newton, GA, Paulding, GA,                     
 Pickens, GA, Rockdale, GA, Spalding, GA, Walton, GA)......       0.9823
Atlantic City-Cape May, NJ (Atlantic City, NJ, Cape May,                
 NJ).......................................................       1.0724
Augusta-Aiken, GA-SC (Columbia, GA, McDuffie, GA, Richmond,             
 GA, Aiken, SC, Edgefield, SC).............................       0.9333
Austin-San Marcos, TX (Bastrop, TX, Caldwell, TX, Hays, TX,             
 Travis, TX, Williamson, TX)...............................       0.9133
Bakersfield, CA (Kern, CA).................................       1.0014
Baltimore, MD (Anne Arundel, MD, Baltimore, MD, Baltimore               
 City, MD, Carroll, MD, Harford, MD, Howard, MD, Queen                  
 Annes, MD)................................................       0.9689
Bangor, ME (Penobscot, ME).................................       0.9478
Barnstable-Yarmouth, MA (Barnstable, MA)...................       1.4291
Baton Rouge, LA (Ascension, LA, East Baton Rouge, LA,                   
 Livingston, LA, West Baton Rouge, LA).....................       0.8382
Beaumont-Port Arthur, TX (Hardin, TX, Jefferson, TX,                    
 Orange, TX)...............................................       0.8593
Bellingham, WA (Whatcom, WA)...............................       1.1221
Benton Harbor, MI (Berrien, MI)............................       0.8923
Bergen-Passaic, NJ (Bergen, NJ, Passaic, NJ)...............       1.1570
Billings, MT (Yellowstone, MT).............................       0.9783
Biloxi-Gulfport-Pascagoula, MS (Hancock, MS, Harrison, MS,              
 Jackson, MS)..............................................       0.8415
Binghamton, NY (Broome, NY, Tioga, NY).....................       0.8914
Birmingham, AL (Blount, AL, Jefferson, AL, St. Clair, AL,               
 Shelby, AL)...............................................       0.9005
Bismark, ND (Burleigh, ND, Morton, ND).....................       0.7859
Bloomington, IN (Monroe, IN)...............................       0.9128
Bloomington-Normal, IL (McLean, IL)........................       0.8733
Boise City, ID (Ada, ID, Canyon, ID).......................       0.8887
Boston-Brockton-Nashua, MA-NH (Bristol, MA, Essex, MA,                  
 Middlesex, MA, Norfolk, MA, Plymouth, MA, Suffolk, MA,                 
 Worcester, MA, Hillsborough, NH, Merrimack, NH,                        
 Rockingham, NH, Strafford, NH)............................       1.1436
Boulder-Longmont, CO (Boulder, CO).........................       1.0015
Brazoria, TX (Brazoria, TX)................................       0.9129
Bremerton, WA (Kitsap, WA).................................       1.0999
Brownsville-Harlingen-San Benito, TX (Cameron, TX).........       0.8740
Bryan-College Station, TX (Brazos, TX).....................       0.8571
Buffalo-Niagara Falls, NY (Erie, NY, Niagara, NY)..........       0.9272
Burlington, VT (Chittenden, VT, Franklin, VT, Grand Isle,               
 VT).......................................................       1.0142
Caguas, PR (Caguas, PR, Cayey, PR, Cidra, PR, Gurabo, PR,               
 San Lorenzo, PR)..........................................       0.4508
Canton-Massilon, OH (Carroll, OH, Stark, OH)...............       0.8961
Casper, WY (Natrona, WY)...................................       0.9013
Cedar Rapids, IA (Linn, IA)................................       0.8529
Champaign-Urbana, IL (Champaign, IL).......................       0.8824
Charleston-North Charleston, SC (Berkeley, SC, Charleston,              
 SC, Dorchester, SC).......................................       0.8807
Charleston, WV (Kanawha, WV, Putnam, WV)...................       0.9142
Charlotte-Gastonia-Rock Hill, NC-SC (Cabarrus, NC, Gaston,              
 NC, Lincoln, NC, Mecklenburg, NC, Rowan, NC, Stanly, NC,               
 Union, NC, York, SC)......................................       0.9710
Charlottesville, VA (Albemarle, VA, Charlottesville City,               
 VA, Fluvanna, VA, Greene, VA).............................       0.9051
Chattanooga, TN-GA (Catoosa, GA, Dade, GA, Walker, GA,                  
 Hamilton, TN, Marion, TN).................................       0.8658
Cheyenne, WY (Laramie, WY).................................       0.8247
Chicago, IL (Cook, IL, DeKalb, IL, Du Page, IL, Grundy, IL,             
 Kane, IL, Kendall, IL, Lake, IL, McHenry, IL, Will, IL)...       1.0860
Chico-Paradise, CA (Butte, CA).............................       1.0429
Cincinnati, OH-KY-IN (Dearborn, IN, Ohio, IN, Boone, KY,                
 Campbell, KY, Gallatin, KY, Grant, KY, Kenton, KY,                     
 Pendleton, KY, Brown, OH, Clermont, OH, Hamilton, OH,                  
 Warren, OH)...............................................       0.9521
Clarksville-Hopkinsville, TN-KY (Christian, KY, Montgomery,             
 TN).......................................................       0.7852
Cleveland-Lorain-Elyria, OH (Ashtabula, OH, Cuyahoga, OH,               
 Geauga, OH, Lake, OH, Lorain, OH, Medina, OH).............       0.9804
Colorado Springs, CO (El Paso, CO).........................       0.9316
Columbia, MO (Boone, MO)...................................       0.9001
Columbia, SC (Lexington, SC, Richland, SC).................       0.9192
Columbus, GA-AL (Russell, AL, Chattahoochee, GA, Harris,                
 GA, Muscogee GA)..........................................       0.8288
Columbus, OH (Delaware, OH, Fairfield, OH, Franklin, OH,                
 Licking, OH, Madison, OH, Pickaway, OH)...................       0.9793
Corpus Christi, TX (Nueces, TX, San Patricio, TX)..........       0.8945
Cumberland, MD-WV (Allegany, MD, Mineral, WV)..............       0.8822
Dallas, TX (Collin, TX, Dallas, TX, Denton, TX, Ellis, TX,              
 Henderson, TX, Hunt, TX, Kaufman, TX, Rockwall, TX).......       0.9674
Danville, VA (Danville City, VA, Pittsylvania, VA).........       0.8146
Davenport-Rock Island-Moline, IA-IL (Scott, IA, Henry, IL,              
 Rock Island, IL)..........................................       0.8405
Dayton-Springfield, OH (Clark, OH, Greene, OH, Miami, OH,               
 Montgomery, OH)...........................................       0.9279
Daytona Beach, FL (Flagler, FL, Volusia, FL)...............       0.8838
Decatur, AL (Lawrence, AL, Morgan, AL).....................       0.8286
Decatur, IL (Macon, IL)....................................       0.7915
Denver, CO (Adams, CO, Arapahoe, CO, Denver, CO, Douglas,               
 CO, Jefferson, CO)........................................       1.0386
Des Moines, IA (Dallas, IA, Polk, IA, Warren, IA)..........       0.8837
Detroit, MI (Lapeer, MI, Macomb, MI, Monroe, MI, Oakland,               
 MI, St. Clair, MI, Wayne, MI).............................       1.0840
Dothan, AL (Dale, AL, Houston, AL).........................       0.8070
Dover, DE (Kent, DE).......................................       0.9303
Dubuque, IA (Dubuque, IA)..................................       0.8088
Duluth-Superior, MN-WI (St. Louis, MN, Douglas, WI)........       0.9779
Dutchess County, NY (Dutchess, NY).........................       1.0632
Eau Claire, WI (Chippewa, WI, Eau Claire, WI)..............       0.8764
El Paso, TX (El Paso, TX)..................................       1.0123
Elkhart-Goshen, IN (Elkhart, IN)...........................       0.9081
Elmira, NY (Chemung, NY)...................................       0.8401
Enid, OK (Garfield, OK)....................................       0.7962
Erie, PA (Erie, PA)........................................       0.8862
Eugene-Springfield, OR (Lane, OR)..........................       1.1659
Evansville, IN-KY (Posey, IN, Vanderburgh, IN, Warrick, IN,             
 Henderson, KY)............................................       0.8641
Fargo-Moorhead, ND-MN (Clay, MN, Cass, ND).................       0.8837
Fayetteville, NC (Cumberland, NC)..........................       0.8734
Fayetteville-Springdale-Rogers, AR (Benton, AR, Washington,             
 AR).......................................................       0.7461
Flagstaff, AZ-UT (Coconino, AZ, Kane, UT)..................       0.9115
Flint, MI (Genesee, MI)....................................       1.1171
Florence, AL (Colbert, AL, Lauderdale, AL).................       0.7716
Florence, SC (Florence, SC)................................       0.8711
Fort Collins-Loveland, CO (Larimer, CO)....................       1.0248
Fort Lauderdale, FL (Broward, FL)..........................       1.0487
Fort Myers-Cape Coral, FL (Lee, FL)........................       0.8838
Fort Pierce-Port St. Lucie, FL (Martin, FL, St. Lucie, FL).       1.0257
Fort Smith, AR-OK (Crawford, AR, Sebastian, AR, Sequoyah,               
 OK).......................................................       0.7769
Fort Walton Beach, FL (Okaloosa, FL).......................       0.8838
Fort Wayne, IN (Adams, IN, Allen, IN, De Kalb, IN,                      
 Huntington, IN, Wells, IN, Whitley, IN)...................       0.8901
Fort Worth-Arlington, TX (Hood, TX, Johnson, TX, Parker,                
 TX, Tarrant, TX)..........................................       0.9997
Fresno, CA (Fresno, CA, Madera, CA)........................       1.0607
Gadsden, AL (Etowah, AL)...................................       0.8815
Gainesville, FL (Alachua, FL)..............................       0.9616
Galveston-Texas City, TX (Galveston, TX)...................       1.0564
Gary, IN (Lake, IN, Porter, IN)............................       0.9270
Glens Falls, NY (Warren, NY, Washington, NY)...............       0.8401
Goldsboro, NC (Wayne, NC)..................................       0.8443
Grand Forks, ND-MN (Polk, MN, Grand Forks, ND).............       0.8815
Grand Junction, CO (Mesa, CO)..............................       0.9491
Grand Rapids-Muskegon-Holland, MI (Allegan, MI, Kent, MI,               
 Muskegon, MI, Ottawa, MI).................................       1.0147
Great Falls, MT (Cascade, MT)..............................       0.9306
Greeley, CO (Weld, CO).....................................       1.0097
Green Bay, WI (Brown, WI)..................................       0.9585
Greensboro-Winston-Salem-High Point, NC (Alamance, NC,                  
 Davidson, NC, Davie, NC, Forsyth, NC, Guilford, NC,                    
 Randolph, NC Stokes, NC, Yadkin, NC)......................       0.9351
Greenville, NC (Pitt, NC)..................................       0.9064
Greenville-Spartanburg-Andersen, SC (Anderson, SC,                      
 Cherokee, SC, Greenville, SC, Pickens, SC, Spartanburg,                
 SC).......................................................       0.9059
Hagerstown, MD (Washington, MD)............................       0.9681
Hamilton-Middletown, OH (Butler, OH).......................       0.8767
Harrisburg-Lebanon-Carlisle, PA (Cumberland, PA, Dauphin,               
 PA, Lebanon, PA, Perry, PA)...............................       1.0187
Hartford, CT (Hartford, CT, Litchfield, CT, Middlesex, CT,              
 Tolland, CT)..............................................       1.2617
Hattiesburg, MS (Forrest, MS, Lamar, MS)...................       0.7192
Hickory-Morganton-Lenoir, NC (Alexander, NC, Burke, NC,                 
 Caldwell, NC, Catawba, NC)................................       0.8285
Honolulu, HI (Honolulu, HI)................................       1.1817
Houma, LA (Lafourche, LA, Terrebonne, LA)..................       0.7854
Houston, TX (Chambers, TX, Fort Bend, TX, Harris, TX,                   
 Liberty, TX, Montgomery, TX, Waller, TX)..................       0.9855
Huntington-Ashland, WV-KY-OH (Boyd, KY, Carter, KY,                     
 Greenup, KY, Lawrence, OH, Cabell, WV, Wayne, WV).........       0.9160
Huntsville, AL (Limestone, AL, Madison, AL)................       0.8485
Indianapolis, IN (Boone, IN, Hamilton, IN, Hancock, IN,                 
 Hendricks, IN, Johnson, IN, Madison, IN, Marion, IN,                   
 Morgan, IN, Shelby, IN)...................................       0.9848
Iowa City, IA (Johnson, IA)................................       0.9401
Jackson, MI (Jackson, MI)..................................       0.9052
Jackson, MS (Hinds, MS, Madison, MS, Rankin, MS)...........       0.7790
Jackson, TN (Madison, TN)..................................       0.8522
Jacksonville, FL (Clay, FL, Duval, FL, Nassau, FL, St.                  
 Johns, FL)................................................       0.8969
Jacksonville, NC (Onslow, NC)..............................       0.7939
Jamestown, NY (Chautauqua, NY).............................       0.8401
Janesville-Beloit, WI (Rock, WI)...........................       0.8824
Jersey City, NJ (Hudson, NJ)...............................       1.1412
Johnson City-Kingsport-Bristol, TN-VA (Carter, TN, Hawkins,             
 TN, Sullivan, TN, Unicoi, TN, Washington, TN, Bristol                  
 City, VA, Scott, VA, Washington, VA)......................       0.9114
Johnstown, PA (Cambria, PA, Somerset, PA)..................       0.8421
Jonesboro, AR (Craighead, AR)..............................       0.7443
Joplin, MO (Jasper, MO, Newton, MO)........................       0.7541
Kalamazoo-Battlecreek, MI (Calhoun, MI, Kalamazoo, MI, Van              
 Buren, MI)................................................       1.0668
Kankakee, IL (Kankakee, IL)................................       0.8653
Kansas City, KS-MO (Johnson, KS, Leavenworth, KS, Miami,                
 KS, Wyandotte, KS, Cass, MO, Clay, MO, Clinton, MO,                    
 Jackson, MO, Lafayette, MO, Platte, MO, Ray, MO)..........       0.9564
Kenosha, WI (Kenosha, WI)..................................       0.9196
Killeen-Temple, TX (Bell, TX, Coryell, TX).................       1.0252
Knoxville, TN (Anderson, TN, Blount, TN, Knox, TN, Loudon,              
 TN, Sevier, TN, Union, TN)................................       0.8831
Kokomo, IN (Howard, IN, Tipton, IN)........................       0.8416
La Crosse, WI-MN (Houston, MN, La Crosse, WI)..............       0.8749
LaFayette, LA (Acadia, LA, Lafayette, LA, St. Landry, LA,               
 St. Martin, LA)...........................................       0.8227
LaFayette, IN (Clinton, IN, Tippecanoe, IN)................       0.9174
Lake Charles, LA (Calcasieu, LA)...........................       0.7776
Lakeland-Winter Haven, FL (Polk, FL).......................       0.8838
Lancaster, PA (Lancaster, PA)..............................       0.9481
Lansing-East Lansing, MI (Clinton, MI, Eaton, MI, Ingham,               
 MI).......................................................       1.0088
Laredo, TX (Webb, TX)......................................       0.7404
Las Cruces, NM (Dona Ana, NM)..............................       0.8658
Las Vegas, NV-AZ (Mohave, AZ, Clark, NV, Nye, NV)..........       1.0592
Lawrence, KS (Douglas, KS).................................       0.8608
Lawton, OK (Comanche, OK)..................................       0.9045
Lewiston-Auburn, ME (Androscoggin, ME).....................       0.9536
Lexington, KY (Bourbon, KY, Clark, KY, Fayett, KY,                      
 Jessamine, KY, Madison, KY, Scott, KY, Woodford, KY)......       0.8416
Lima, OH (Allen, OH, Auglaize, OH).........................       0.9185
Lincoln, NE (Lancaster, NE)................................       0.9231
Little Rock-North Little Rock, AR (Faulkner, AR, Lonoke,                
 AR, Pulaski, AR, Saline, AR)..............................       0.8490
Longview-Marshall, TX (Gregg, TX, Harrison, TX, Upshur, TX)       0.8613
Los Angeles-Long Beach, CA (Los Angeles, CA)...............       1.2268
Louisville, KY-IN (Clark, IN, Floyd, IN, Harrison, IN,                  
 Scott, IN, Bullitt, KY, Jefferson, KY, Oldham, KY)........       0.9507
Lubbock, TX (Lubbock, TX)..................................       0.8400
Lynchburg, VA (Amherst, VA, Bedford City, VA, Bedford, VA,              
 Campbell, VA, Lynchburg City, VA).........................       0.8228
Macon, GA (Bibb, GA, Houston, GA, Jones, GA, Peach, GA,                 
 Twiggs, GA)...............................................       0.9227
Madison, WI (Dane, WI).....................................       1.0055
Mansfield, OH (Crawford, OH, Richfield, OH)................       0.8639
Mayaguez, PR (Anasco, PR, Cabo Rojo, PR, Hormigueros, PR,               
 Mayaguez, PR, Sabana Grande, PR, San German, PR)..........       0.4475
McAllen-Edinburg-Mission, TX (Hidalgo, TX).................       0.8371
Medford-Ashland, OR (Jackson, OR)..........................       1.0354
Melbourne-Titusville-Palm Bay, FL (Brevard, FL)............       0.8838
Memphis, TN-AR-MS (Crittenden, AR, De Soto, MS, Fayette,                
 TN, Shelby, TN, Tipton, TN)...............................       0.8589
Merced, CA (Merced, CA)....................................       1.0947
Miami, FL (Dade, FL).......................................       0.9859
Middlesex-Somerset-Hunterdon, NJ (Hunterdon, NJ, Middlesex,             
 NJ, Somerset, NJ).........................................       1.0875
Milwaukee, WI (Milwaukee, WI, Ozaukee, WI, Washington, WI,              
 Waukesha, WI).............................................       0.9819
Minneapolis-St. Paul, MN-WI (Anoka, MN, Carver, MN,                     
 Chisago, MN, Dakota, MN, Hennepin, MN, Isanti, MN, Ramsey,             
 MN, Scott, MN, Sherburne, MN, Washington, MN, Wright, MN,              
 Pierce, WI, St. Croix, WI)................................       1.0733
Mobile, AL (Baldwin, AL, Mobile, AL).......................       0.8455
Modesto, CA (Stanislaus, CA)...............................       1.0377
Monmouth-Ocean, NJ (Monmouth, NJ, Ocean, NJ)...............       1.0934
Monroe, LA (Ouachita, LA)..................................       0.8414
Montgomery, AL (Autauga, AL, Elmore, AL, Montgomery, AL)...       0.7813
Muncie, IN (Delaware, IN)..................................       0.9173
Myrtle Beach, SC (Horry, SC)...............................       0.8072
Naples, FL (Collier, FL)...................................       1.0109
Nashville, TN (Cheatham, TN, Davidson, TN, Dickson, TN,                 
 Robertson, TN, Rutherford, TN, Sumner, TN, Williamson, TN,             
 Wilson, TN)...............................................       0.9182
Nassau-Suffolk, NY (Nassau, NY, Suffolk, NY)...............       1.3807
New Haven-Bridgeport-Stamford-Danbury-Waterbury, CT                     
 (Fairfield, CT, New Haven, CT)............................       1.2619
New London-Norwich, CT (New London, CT)....................       1.2617
New Orleans, LA (Jefferson, LA, Orleans, LA, Plaquemines,               
 LA, St. Bernard, LA, St. Charles, LA, St. James, LA, St.               
 John the Baptist, LA, St. Tammany, LA)....................       0.9566
New York, NY (Bronx, NY, Kings, NY, New York, NY, Putnam,               
 NY, Queens, NY, Richmond, NY, Rockland, NY, Westchester,               
 NY).......................................................       1.3982
Newark, NJ (Essex, NJ, Morris, NJ, Sussex, NJ, Union, NJ,               
 Warren, NJ)...............................................       1.1111
Newburgh, NY-PA (Orange, NY, Pike, PA).....................       1.1283
Norfolk-Virginia Beach-Newport News, VA-NC (Currituck, NC,              
 Chesapeake City, VA, Gloucester, VA, Hampton City, VA,                 
 Isle of Wight, VA, James City, VA, Mathews, VA, Newport                
 News City, VA, Norfolk City, VA, Poquoson City, VA,                    
 Portsmouth City, VA, Suffolk City, VA, Virginia Beach                  
 City, VA, Williamsburg City, VA, York, VA)................       0.8316
Oakland, CA (Alameda, CA, Contra Costa, CA)................       1.5158
Ocala, FL (Marion, FL).....................................       0.9032
Odessa-Midland, TX (Ector, TX, Midland, TX)................       0.8660
Oklahoma City, OK (Canadian, OK, Cleveland, OK, Logan, OK,              
 McClain, OK, Oklahoma, OK, Pottawatomie, OK)..............       0.8481
Olympia, WA (Thurston, WA).................................       1.0901
Omaha, NE-IA (Pottawattamie, IA, Cass, NE, Douglas, NE,                 
 Sarpy, NE, Washington, NE)................................       0.9421
Orange County, CA (Orange, CA).............................       1.1532
Orlando, FL, (Lake, FL, Orange, FL, Osceola, FL, Seminole,              
 FL).......................................................       0.9397
Owensboro, KY (Daviess, KY)................................       0.7772
Panama City, FL (Bay, FL)..................................       0.8838
Parkersburg-Marietta, WV-OH (Washington, OH, Wood, WV).....       0.8046
Pensacola, FL (Escambia, FL, Santa Rosa, FL)...............       0.8838
Peoria-Pekin, IL (Peoria, IL, Tazewell, IL, Woodford, IL)..       0.8586
Philadelphia, PA-NJ (Burlington, NJ, Camden, NJ,                        
 Gloucester, NJ, Salem, NJ, Bucks, PA, Chester, PA,                     
 Delaware, PA, Montgomery, PA, Philadelphia, PA)...........       1.1379
Phoenix-Mesa, AZ (Maricopa, AZ, Pinal, AZ).................       0.9606
Pine Bluff, AR (Jefferson, AR).............................       0.7826
 Pittsburgh, PA (Allegheny, PA, Beaver, PA, Butler, PA,                 
 Fayette, PA, Washington, PA, Westmoreland, PA)............       0.9725
 Pittsfield, MA (Berkshire, MA)............................       1.0960
Pocatello, ID (Bannock, ID)................................       0.9586
 Ponce, PR (Guayanilla, PR, Juana Diaz, PR, Penuelas, PR,               
 Ponce, PR, Villalba, PR, Yauco, PR).......................       0.4589
 Portland, ME (Cumberland, ME, Sagadahoc, ME, York, ME)....       0.9627
 Portland-Vancouver, OR-WA (Clackamas, OR, Columbia, OR,                
 Multnomah, OR, Washington, OR, Yamhill, OR, Clark, WA)....       1.1344
 Providence-Warwick, RI (Bristol, RI, Kent, RI, Newport,                
 RI, Providence, RI, Washington, RI).......................       1.1049
 Provo-Orem, UT (Utah, UT).................................       1.0073
Pueblo, CO (Pueblo, CO)....................................       0.8450
Punta Gorda, FL (Charlotte, FL)............................       0.8838
Racine, WI (Racine, WI)....................................       0.8934
Raleigh-Durham-Chapel Hill, NC (Chatham, NC, Durham, NC,                
 Franklin, NC, Johnston, NC, Orange, NC, Wake, NC).........       0.9818
Rapid City, SD (Pennington, SD)............................       0.8345
Reading, PA (Berks, PA)....................................       0.9516
Redding, CA (Shasta, CA)...................................       1.1790
Reno, NV (Washoe, NV)......................................       1.0768
Richland-Kennewick-Pasco, WA (Benton, WA, Franklin, WA)....       1.0221
Richmond-Petersburg, VA (Charles City County, VA,                       
 Chesterfield, VA, Colonial Heights City, VA, Dinwiddie,                
 VA, Goochland, VA, Hanover, VA, Henrico, VA, Hopewell                  
 City, VA, New Kent, VA, Petersburg City, VA, Powhatan, VA,             
 Prince George, VA, Richmond City, VA).....................       0.9152
Riverside-San Bernardino, CA (Riverside, CA, San                        
 Bernardino, CA)...........................................       1.1145
Roanoke, VA (Botetourt, VA, Roanoke, VA, Roanoke City, VA,              
 Salem City, VA)...........................................       0.8402
Rochester, MN (Olmstead, MN)...............................       1.0502
Rochester, NY (Genesee, NY, Livingston, NY, Monroe, NY,                 
 Ontario, NY, Orleans, NY, Wayne, NY)......................       0.9524
Rockford, IL (Boone, IL, Ogle, IL, Winnebago, IL)..........       0.9081
Rocky Mount, NC (Edgecombe, NC, Nash, NC)..................       0.9029
Sacramento, CA (El Dorado, CA, Placer, CA, Sacramento, CA).       1.2202
Saginaw-Bay City-Midland, MI (Bay, MI, Midland, MI,                     
 Saginaw, MI)..............................................       0.9564
St. Cloud, MN (Benton, MN, Stearns, MN)....................       0.9544
St. Joseph, MO (Andrews, MO, Buchanan, MO).................       0.8366
St. Louis, MO-IL (Clinton, IL, Jersey, IL, Madison, IL,                 
 Monroe, IL, St. Clair, IL, Franklin, MO, Jefferson, MO,                
 Lincoln, MO, St. Charles, MO, St. Louis, MO, St. Louis                 
 City, MO, Warren, MO).....................................       0.9130
Salem, OR (Marion, OR, Polk, OR)...........................       0.9976
Salinas, CA (Monterey, CA).................................       1.4513
Salt Lake City-Ogden, UT (Davis, UT, Salt Lake, UT, Weber,              
 UT).......................................................       0.9862
San Angelo, TX (Tom Green, TX).............................       0.7780
San Antonio, TX (Bexar, TX, Comal, TX, Guadalupe, TX,                   
 Wilson, TX)...............................................       0.8499
San Diego, CA (San Diego, CA)..............................       1.2225
San Francisco, CA (Marin, CA, San Francisco, CA, San Mateo,             
 CA).......................................................       1.4091
San Jose, CA (Santa Clara, CA).............................       1.4332
San Juan-Bayamon, PR (Aguas Buenas, PR, Barceloneta, PR,                
 Bayamon, PR, Canovanas, PR, Carolina, PR, Catano, PR,                  
 Ceiba, PR, Comerio, PR, Corozal, PR, Dorado, PR, Fajardo,              
 PR, Florida, PR, Guaynabo, PR, Humacao, PR, Juncos, PR,                
 Los Piedras, PR, Loiza, PR, Luguillo, PR, Manati, PR,                  
 Naranjito, PR, Rio Grande, PR, San Juan, PR, Toa Alta, PR,             
 Toa Baja, PR, Trujillo Alto, PR, Vega Alta, PR, Vega Baja,             
 PR, Yabucoa, PR)..........................................       0.4618
San Luis Obispo-Atascadero-Pasa Robles, CA (San Luis                    
 Obispo, CA)...............................................       1.1374
Santa Barbara-Santa Maria-Lompoc, CA (Santa Barbara, CA)...       1.0688
Santa Cruz-Watsonville, CA (Santa Cruz, CA)................       1.4187
Santa Fe, NM (Los Alamos, NM, Santa Fe, NM)................       1.0332
Santa Rosa, CA (Sonoma, CA)................................       1.2267
Sarasota-Bradenton, FL (Manatee, FL, Sarasota, FL).........       0.9757
Savannah, GA (Bryan, GA, Chatham, GA, Effingham, GA).......       0.8638
Scranton-Wilkes Barre-Hazleton, PA (Columbia, PA,                       
 Lackawanna, PA, Luzerne, PA, Wyoming, PA).................       0.8539
Seattle-Bellevue-Everett, WA (Island, WA, King, WA,                     
 Snohomish, WA)............................................       1.1375
Sharon, PA (Mercer, PA)....................................       0.8783
Sheboygan, WI (Sheboygan, WI)..............................       0.8471
Sherman-Denison, TX (Grayson, TX)..........................       0.8499
Shreveport-Bossier City, LA (Bossier, LA, Caddo, LA,                    
 Webster, LA)..............................................       0.9381
Sioux City, IA-NE (Woodbury, IA, Dakota, NE)...............       0.8031
Sioux Falls, SD (Lincoln, SD, Minnehaha, SD)...............       0.8712
South Bend, IN (St. Joseph, IN)............................       0.9880
Spokane, WA (Spokane, WA)..................................       1.0486
Springfield, IL (Menard, IL, Sangamon, IL).................       0.8713
Springfield, MO (Christian, MO, Greene, MO, Webster, MO)...       0.8036
Springfield, MA (Hampden, MA, Hampshire, MA)...............       1.0718
State College, PA (Centre, PA).............................       0.9635
Steubenville-Weirton, OH-WV (Jefferson, OH, Brook, WV,                  
 Hancock, WV)..............................................       0.8645
Stockton-Lodi, CA (San Joaquin, CA)........................       1.1518
Sumter, SC (Sumter, SC)....................................       0.7921
Syracuse, NY (Cayuga, NY, Madison, NY, Onondaga, NY,                    
 Oswego, NY)...............................................       0.9480
Tacoma, WA (Pierce, WA)....................................       1.1016
Tallahassee, FL (Gadsden, FL, Leon, FL)....................       0.8838
Tampa-St. Petersburg-Clearwater, FL (Hernando, FL,                      
 Hillsborough, FL, Pasco, FL, Pinellas, FL)................       0.9196
Terre-Haute, IN (Clay, IN, Vermillion, IN, Vigo, IN).......       0.8614
Texarkana, AK-Texarkana, TX (Miller, AR, Bowie, TX)........       0.8699
Toledo, OH (Fulton, OH, Lucas, OH, Wood, OH)...............       1.0140
Topeka, KS (Shawnee, KS)...................................       0.9438
Trenton, NJ (Mercer, NJ)...................................       1.0380
Tucson, AZ (Pima, AZ)......................................       0.9180
Tulsa, OK (Creek, OK, Osage, OK, Rogers, OK, Tulsa, OK,                 
 Wagoner, OK)..............................................       0.8074
Tuscaloosa, AL (Tuscaloosa, AL)............................       0.8187
Tyler, TX (Smith, TX)......................................       0.9567
Utica-Rome, NY (Herkimer, NY, Oneida, NY)..................       0.8401
Vallejo-Fairfield-Napa, CA (Napa, CA, Solano, CA)..........       1.3528
Ventura, CA (Ventura, CA)..................................       1.0544
Victoria, TX (Victoria, TX)................................       0.8474
Vineland-Millville-Bridgeton, NJ (Cumberland, NJ)..........       1.0110
Visalia-Tulare-Porterville, CA (Tulare, CA)................       0.9977
Waco, TX (McLennan, TX)....................................       0.7696
Washington, DC-MD-VA-WV (District of Columbia, DC, Calvert,             
 MD, Charles, MD, Frederick, MD, Montgomery, MD, Prince                 
 Georges, MD, Alexandria City, VA, Arlington, VA, Clarke,               
 VA, Culpepper, VA, Fairfax, VA, Fairfax City, VA, Falls                
 Church City, VA, Fauquier, VA, Fredericksburg City, VA,                
 King George, VA, Loudoun, VA, Manassas City, VA, Manassas              
 Park City, VA, Prince William, VA, Spotsylvania, VA,                   
 Stafford, VA, Warren, VA, Berkeley, WV, Jefferson, WV)....       1.0780
Waterloo-Cedar Falls, IA (Black Hawk, IA)..................       0.8643
Wausau, WI (Marathon, WI)..................................       1.0545
West Palm Beach-Boca Raton, FL (Palm Beach, FL)............       1.0309
Wheeling, OH-WV (Belmont, OH, Marshall, WV, Ohio, WV)......       0.7707
Wichita, KS (Butler, KS, Harvey, KS, Sedgwick, KS).........       0.9403
Wichita Falls, TX (Archer, TX, Wichita, TX)................       0.7646
Williamsport, PA (Lycoming, PA)............................       0.8548
Wilmington-Newark, DE-MD (New Castle, DE, Cecil, MD).......       1.1538
Wilmington, NC (New Hanover, NC, Brunswick, NC)............       0.9322
Yakima, WA (Yakima, WA)....................................       1.0221
Yolo, CA (Yolo, CA)........................................       1.1431
York, PA (York, PA)........................................       0.9415
Youngstown-Warren, OH (Columbiana, OH, Mahoning, OH,                    
 Trumbull, OH).............................................       0.9937
Yuba City, CA (Sutter, CA, Yuba, CA).......................       1.0324
Yuma, AZ (Yuma, AZ)........................................      0.9732 
------------------------------------------------------------------------
Source: Health Care Financing Administration.                           


        TABLE D-19.--WAGE INDEX FOR RURAL AREAS, FISCAL YEAR 1998       
------------------------------------------------------------------------
            State               Wage index       State        Wage index
------------------------------------------------------------------------
Alabama......................       0.7260  Nebraska.......       0.7401
Alaska.......................       1.2302  Nevada.........       0.8914
Arizona......................       0.7989  New Hampshire..       0.9724
Arkansas.....................       0.6995  New Jersey.....        (\1\)
California...................       0.9977  New Mexico.....       0.8110
Colorado.....................       0.8129  New York.......       0.8401
Connecticut..................       1.2617  North Carolina.       0.7939
Delaware.....................       0.8925  North Dakota...       0.7360
Florida......................       0.8838  Ohio...........       0.8434
Georgia......................       0.7761  Oklahoma.......       0.7072
Hawaii.......................       1.0229  Oregon.........       0.9976
Idaho........................       0.8221  Pennsylvania...       0.8421
Illinois.....................       0.7644  Puerto Rico....       0.4224
Indiana......................       0.8161  Rhode Island...        (\1\)
Iowa.........................       0.7391  South Carolina.       0.7921
Kansas.......................       0.7203  South Dakota...       0.6983
Kentucky.....................       0.7772  Tennessee......       0.7353
Louisiana....................       0.7383  Texas..........       0.7404
Maine........................       0.8468  Utah...........       0.8926
Maryland.....................       0.8617  Vermont........       0.9314
Massachusetts................       1.0718  Virginia.......       0.7782
Michigan.....................       0.8923  Washington.....       1.0221
Minnesota....................       0.8180  West Virginia..       0.7966
Mississippi..................       0.6911  Wisconsin......       0.8471
Missouri.....................       0.7207  Wyoming........       0.8247
Montana......................      0.8302                               
------------------------------------------------------------------------
\1\ All counties within this State are classified as urban.             
                                                                        
 Source: Health Care Financing Administration.                          


TABLE D-20.--WAGE INDEX FOR HOSPITALS THAT ARE RECLASSIFIED, FISCAL YEAR
                                  1996                                  
------------------------------------------------------------------------
                    Area reclassified to                      Wage index
------------------------------------------------------------------------
Abilene, TX................................................       0.8287
Albuquerque, NM............................................       0.9329
Alexandria, LA.............................................       0.8269
Amarillo, TX...............................................       0.9277
Anchorage, AK..............................................       1.2998
Asheville, NC..............................................       0.9072
Athens, GA.................................................       0.9087
Atlanta, GA................................................       0.9823
Austin-San Marcos, TX......................................       0.9133
Bangor, ME.................................................       0.9478
Barnstable-Yarmouth, MA....................................       1.3827
Baton Rouge, LA............................................       0.8382
Benton Harbor, MI..........................................       0.8923
Bergen-Passaic, NJ.........................................       1.1570
Billings, MT...............................................       0.9609
Birmingham, AL.............................................       0.9005
Bismarck, ND...............................................       0.7859
Boise City, ID.............................................       0.8887
Boston-Worcester-Lawrence-Lowel-Brockton, MA-NH............       1.1436
Caguas, PR.................................................       0.4508
Casper, WY.................................................       0.9013
Champaign-Urbana, IL.......................................       0.8706
Charlotte-Gastonia-Rock Hill, NC...........................       0.9710
Charlottesville, VA........................................       0.8885
Chattanooga, TN-GA.........................................       0.8658
Chicago, IL................................................       1.0759
Cincinnati, OH-KY-IN.......................................       0.9521
Cleveland-Lorain-Elyria, OH................................       0.9804
Columbia, MO...............................................       0.8759
Columbus, OH...............................................       0.9793
Dallas, TX.................................................       0.9674
Davenport-Rock Island-Moline, IA-IL........................       0.8405
Denver, CO.................................................       1.0386
Des Moines, IA.............................................       0.8837
Detroit, MI................................................       1.0840
Duluth-Superior, MN-WI.....................................       0.9779
Dutchess County, NY........................................       1.0364
Eugene-Springfield, OR.....................................       1.1659
Fargo-Moorhead, ND-MN......................................       0.8729
Fayetteville, NC...........................................       0.8491
Flint, MI..................................................       1.1171
Florence, AL...............................................       0.7716
Florence, SC...............................................       0.8711
Fort Lauderdale, FL........................................       1.0487
Fort Pierce-Port St. Lucie, FL.............................       1.0008
Fort Walton Beach, FL......................................       0.8653
Fort Worth-Arlington, TX...................................       0.9997
Gadsden, AL................................................       0.8815
Gainesville, FL............................................       0.9616
Gary, IN...................................................       0.9114
Grand Forks, ND-MN.........................................       0.8815
Grand Junction, CO.........................................       0.9491
Great Falls, MT............................................       0.9306
Greeley, CO................................................       0.9791
Green Bay, WI..............................................       0.9585
Greensboro-Winston-Salem-High Point, NC....................       0.9351
Harrisburg-Lebanon-Carlisle, PA............................       1.0076
Honolulu, HI...............................................       1.1817
Houma, LA..................................................       0.7854
Houston, TX................................................       0.9855
Huntington-Ashland, WV-KY-OH...............................       0.9160
Huntsville, AL.............................................       0.8485
Indianapolis, IN...........................................       0.9848
Iowa City..................................................       0.9198
Jackson, MS................................................       0.7790
Johnson City-Kingsport-Bristol, TN.........................       0.9114
Jonesboro, AR..............................................       0.7443
Joplin, MO.................................................       0.7541
Kalamazoo-Battle Creek, MI.................................       1.0668
Kansas City, MO-KS.........................................       0.9564
Knoxville, TN..............................................       0.8831
Lafayette, LA..............................................       0.8227
Lafayette, IN..............................................       0.9174
Lansing-East Lansing, MI...................................       1.0088
Las Cruces, NM.............................................       0.8658
Las Vegas, NV-AZ...........................................       1.0592
Lexington, KY..............................................       0.8416
Lima, OH...................................................       0.9185
Lincoln, NE................................................       0.9035
Little Rock-North Little Rock, AR..........................       0.8490
Longview-Marshall, TX......................................       0.8509
Los Angeles-Long Beach, CA.................................       1.2268
Louisville, KY-IN..........................................       0.9507
Macon, GA..................................................       0.9227
Madison, WI................................................       1.0055
Mansfield, OH..............................................       0.8639
Medford-Ashland, OR........................................       1.0354
Memphis, TN-AR-MS..........................................       0.8589
Milwaukee-Waukesha, WI.....................................       0.9819
Minneapolis-St. Paul, MN-WI................................       1.0733
Monroe, LA.................................................       0.8414
Montgomery, AL.............................................       0.7813
Nashville, TN..............................................       0.9182
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT........       1.2619
New London-Norwich, CT.....................................       1.2258
New Orleans, LA............................................       0.9566
New York-Newark, NY-NJ-PA..................................       1.3982
Newark, NJ.................................................       1.1111
Newburgh, NY-PA............................................       1.1283
Oakland, CA................................................       1.5158
Odessa-Midland, TX.........................................       0.8516
Oklahoma City, OK..........................................       0.8481
Omaha, NE-IA...............................................       0.9421
Orange County, CA..........................................       1.1532
Peoria-Pekin, IL...........................................       0.8586
Philadelphia, PA-NJ........................................       1.1379
Pittsburgh, PA.............................................       0.9583
Pocatello, ID..............................................       0.9000
Portland, ME...............................................       0.9627
Portland-Vancouver, OR-WA..................................       1.1344
Provo-Orem, UT.............................................       1.0073
Raleigh-Durham-Chapel Hill, NC.............................       0.9818
Rapid City, SD.............................................       0.8345
Rochester, MN..............................................       1.0502
Rockford, IL...............................................       0.9081
Sacramento, CA.............................................       1.2202
Saginaw-Bay City-Midland, MI...............................       0.9564
St. Cloud, MN..............................................       0.9544
St. Louis, MO-IL...........................................       0.9130
Salinas, CA................................................       1.4299
Salt Lake City-Ogden, UT...................................       0.9862
San Diego, CA..............................................       1.2225
San Francisco, CA..........................................       1.4091
Santa Fe, NM...............................................       1.0007
Santa Rosa, CA.............................................       1.2146
Seattle-Bellevue-Everett, WA...............................       1.1375
Sherman-Denison, TX........................................       0.8324
Sioux City, IA-NE..........................................       0.8031
Sioux Falls, SD............................................       0.8607
South Bend, IN.............................................       0.9880
Spokane, WA................................................       1.0311
Springfield, IL............................................       0.8610
Springfield, MO............................................       0.8036
Stockton-Lodi, CA..........................................       1.1518
Syracuse, NY...............................................       0.9480
Tampa-St. Petersburg-Clearwater, FL........................       0.9196
Texarkana, TX-Texarkana, AR................................       0.8699
Topeka, KS.................................................       0.9310
Tucson, AZ.................................................       0.9180
Tulsa, OK..................................................       0.8074
Tyler, TX..................................................       0.9421
Vallejo-Fairfield-Napa, CA.................................       1.3528
Washington, DC-MD-VA-WV....................................       1.0780
Waterloo-Cedar Falls, IA...................................       0.8643
Wausau, WI.................................................       0.9845
Wichita, KS................................................       0.9157
Wichita Falls, TX..........................................       0.7646
Rural Florida..............................................       0.8838
Rural Louisiana............................................       0.7383
Rural Minnesota............................................       0.8180
Rural Missouri.............................................       0.7207
Rural New Hampshire........................................       0.9724
Rural New Mexico...........................................       0.8110
Rural North Carolina.......................................       0.7939
Rural Oregon...............................................       0.9976
Rural Washington...........................................       1.0221
Rural West Virginia........................................       0.7966
Rural Wyoming..............................................      0.8247 
------------------------------------------------------------------------
Source: Health Care Financing Administration.                           


               TABLE D-21.--DIAGNOSIS-RELATED GROUPS RELATIVE WEIGHTS, FISCAL YEARS 1997 AND 1998               
----------------------------------------------------------------------------------------------------------------
                                                                                                        Percent 
     DRG        MDC            Type                       Title                  1997        1998       change  
----------------------------------------------------------------------------------------------------------------
1                  1  SURG                   Craniotomy age >17 except for        3.0486      3.0907         1.4
                                              trauma.                                                           
2                  1  SURG                   Craniotomy for trauma age >17..      3.0134      3.0511         1.3
3                  1  SURG \1\               Craniotomy age 0-17............      1.9167      1.9484         1.7
4                  1  SURG                   Spinal procedures..............      2.3399      2.3858         2.0
5                  1  SURG                   Extracranial vascular                1.5143      1.5041        -0.7
                                              procedures.                                                       
6                  1  SURG                   Carpal tunnel release..........      0.7419      0.7582         2.2
7                  1  SURG                   Periph and cranial nerve and         2.4886      2.4717        -0.7
                                              other nerv syst proc with CC.                                     
8                  1  SURG                   Periph and cranial nerve and         1.0962      1.2142        10.8
                                              other nerv syst proc without                                      
                                              CC.                                                               
9                  1  MED                    Spinal disorders and injuries..      1.2677      1.2646        -0.2
10                 1  MED                    Nervous system neoplasms with        1.2196      1.2184        -0.1
                                              CC.                                                               
11                 1  MED                    Nervous system neoplasms             0.8000      0.7879        -1.5
                                              without CC.                                                       
12                 1  MED                    Degenerative nervous system          0.9457      0.9370        -0.9
                                              disorders.                                                        
13                 1  MED                    Multiple sclerosis and               0.7770      0.7832         0.8
                                              cerebellar ataxia.                                                
14                 1  MED                    Specific cerebrovascular             1.1999      1.1889        -0.9
                                              disorders except TIA.                                             
15                 1  MED                    Transient ischemic attack and        0.7231      0.7241         0.1
                                              precerebral occlusions.                                           
16                 1  MED                    Nonspecific cerebrovascular          1.0371      1.0452         0.8
                                              disorders with CC.                                                
17                 1  MED                    Nonspecific cerebrovascular          0.6331      0.6161        -2.7
                                              disorders without CC.                                             
18                 1  MED                    Cranial and peripheral nerve         0.9319      0.9399         0.9
                                              disorders with CC.                                                
19                 1  MED                    Cranial and peripheral nerve         0.6230      0.6293         1.0
                                              disorders without CC.                                             
20                 1  MED                    Nervous system infection except      2.4854      2.5786         3.7
                                              viral meningitis.                                                 
21                 1  MED                    Viral meningitis...............      1.4910      1.4866        -0.3
22                 1  MED                    Hypertensive encephalopathy....      0.8353      0.8594         2.9
23                 1  MED                    Nontraumatic stupor and coma...      0.8089      0.7777        -3.9
24                 1  MED                    Seizure and headache age >17         0.9694      0.9578        -1.2
                                              with CC.                                                          
25                 1  MED                    Seizure and headache age >17         0.5793      0.5821         0.5
                                              without CC.                                                       
26                 1  MED                    Seizure and headache age 0-17..      0.7387      0.9601        30.0
27                 1  MED                    Traumatic stupor and coma, coma      1.3060      1.2670        -3.0
                                              >1 HR.                                                            
28                 1  MED                    Traumatic stupor and coma, coma      1.2033      1.1707        -2.7
                                              <1 HR age >17 with CC.                                            
29                 1  MED                    Traumatic stupor and coma, coma      0.6371      0.6383         0.2
                                              <1 HR age >17 without CC.                                         
30                 1  MED \1\                Traumatic stupor and coma, coma      0.3241      0.3295         1.7
                                              <1 HR age 0-17.                                                   
31                 1  MED                    Concussion age >17 with CC.....      0.8412      0.8369        -0.5
32                 1  MED                    Concussion age >17 without CC..      0.4861      0.5109         5.1
33                 1  MED \1\                Concussion age 0-17............      0.2037      0.2071         1.7
34                 1  MED                    Other disorders of nervous           1.0673      1.0385        -2.7
                                              system with CC.                                                   
35                 1  MED                    Other disorders of nervous           0.6149      0.5941        -3.4
                                              system, without CC.                                               
36                 2  SURG                   Retinal procedures.............      0.6134      0.6265         2.1
37                 2  SURG                   Orbital procedures.............      0.9323      0.9725         4.3
38                 2  SURG                   Primary iris procedures........      0.4282      0.4826        12.7
39                 2  SURG                   Lens procedures with or without      0.5184      0.5406         4.3
                                              vitrectomy.                                                       
40                 2  SURG                   Extraocular procedures except        0.7072      0.7341         3.8
                                              orbit age >17.                                                    
41                 2  SURG \1\               Extraocular procedures except        0.3299      0.3354         1.7
                                              orbit age 0-17.                                                   
42                 2  SURG                   Introcular procedures except         0.5816      0.5676        -2.4
                                              retina, iris and lens.                                            
43                 2  MED                    Hyphema........................      0.4520      0.4119        -8.9
44                 2  MED                    Acute major eye infections.....      0.6237      0.6072        -2.6
45                 2  MED                    Neurological eye disorders.....      0.6525      0.6730         3.1
46                 2  MED                    Other disorders of the eye age       0.7656      0.7234        -5.5
                                              >17 with CC.                                                      
47                 2  MED                    Other disorders of the eye age       0.4664      0.4623        -0.9
                                              >17 without CC.                                                   
48                 2  MED \1\                Other disorders of the eye age       0.2907      0.2955         1.7
                                              0-17.                                                             
49                 3  SURG                   Major head and neck procedures.      1.7245      1.8074         4.8
50                 3  SURG                   Sialoadenectomy................      0.7686      0.8143         5.9
51                 3  SURG                   Salivary gland procedures            0.7345      0.8367        13.9
                                              except sialoadenectomy.                                           
52                 3  SURG                   Cleft lip and palate repair....      1.0271      1.2768        24.3
53                 3  SURG                   Sinus and mastoid procedures         1.0128      1.0682         5.5
                                              age >17.                                                          
54                 3  SURG \1\               Sinus and mastoid procedures         0.4712      0.4790         1.7
                                              age 0-17.                                                         
55                 3  SURG                   Miscellaneous ear, nose, mouth       0.7880      0.8366         6.2
                                              and throat procedures.                                            
56                 3  SURG                   Rhinoplasty....................      0.8283      0.8830         6.6
57                 3  SURG                   T&A proc, except tonsillectomy       0.9325      1.0182         9.2
                                              and/or adenoidectomy only age                                     
                                              >17.                                                              
58                 3  SURG \1\               T&A proc, except tonsillectomy       0.2676      0.2720         1.6
                                              and/or adenoidectomy only age                                     
                                              0-17.                                                             
59                 3  SURG                   Tonsillectomy and/or                 0.7439      0.8238        10.7
                                              adenoidectomy only age >17.                                       
60                 3  SURG \1\               Tonsillectomy and/or                 0.2038      0.2072         1.7
                                              adenoidectomy only age 0-17.                                      
61                 3  SURG                   Myringotomy with tube insertion      1.1960      1.1181        -6.5
                                              age >17.                                                          
62                 3  SURG \1\               Myringotomy with tube insertion      0.2885      0.2933         1.7
                                              age 0-17.                                                         
63                 3  SURG                   Other ear, nose, mouth and           1.2168      1.2444         2.3
                                              throat O.R. procedures.                                           
64                 3  MED                    Ear, nose, mouth and throat          1.1737      1.1568        -1.4
                                              malignancy.                                                       
65                 3  MED                    Dysequilibrium.................      0.5195      0.5177        -0.3
66                 3  MED                    Epistaxis......................      0.5366      0.5605         4.5
67                 3  MED                    Epiglottitis...................      0.8397      0.7866        -6.3
68                 3  MED                    Otitis media and uri age >17         0.7098      0.6831        -3.8
                                              with CC.                                                          
69                 3  MED                    Otitis media and uri age >17         0.5239      0.5160        -1.5
                                              without CC.                                                       
70                 3  MED                    Otitis media and uri age 0-17..      0.3727      0.3892         4.4
71                 3  MED                    Laryngotracheitis..............      0.7702      0.6688       -13.2
72                 3  MED                    Nasal trauma and deformity.....      0.6532      0.6364        -2.6
73                 3  MED                    Other ear, nose, mouth and           0.7505      0.7660         2.1
                                              throat diagnoses age >17.                                         
74                 3  MED \1\                Other ear, nose, mouth and           0.3278      0.3332         1.6
                                              throat diagnoses age 0-17.                                        
75                 4  SURG                   Major chest procedures.........      3.1951      3.1958         0.0
76                 4  SURG                   Other resp system O.R.               2.6036      2.6427         1.5
                                              procedures with CC.                                               
77                 4  SURG                   Other resp system O.R.               1.1593      1.1150        -3.8
                                              procedures without CC.                                            
78                 4  MED                    Pulmonary embolism.............      1.4292      1.4264        -0.2
79                 4  MED                    Respiratory infections and           1.6300      1.6258        -0.3
                                              inflammations age 17 with CC.                                     
80                 4  MED                    Respiratory infections and           0.9436      0.9121        -3.3
                                              inflammations age 17 without                                      
                                              CC.                                                               
81                 4  MED \1\                Respiratory infections and           1.4845      1.5091         1.7
                                              inflammations age 0-17.                                           
82                 4  MED                    Respiratory neoplasms..........      1.3319      1.3329         0.1
83                 4  MED                    Major chest trauma with CC.....      0.9782      0.9716        -0.7
84                 4  MED                    Major chest trauma without CC..      0.5319      0.5260        -1.1
85                 4  MED                    Pleural effusion with CC.......      1.2200      1.2212         0.1
86                 4  MED                    Pleural effusion without CC....      0.7117      0.6715        -5.6
87                 4  MED                    Pulmonary edema and respiratory      1.3615      1.3639         0.2
                                              failure.                                                          
88                 4  MED                    Chronic obstructive pulmonary        0.9846      0.9705        -1.4
                                              disease.                                                          
89                 4  MED                    Simple pneumonia and pleurisy        1.1156      1.1006        -1.3
                                              age >17 with CC.                                                  
90                 4  MED                    Simple pneumonia and pleurisy        0.6978      0.6773        -2.9
                                              age >17 without CC.                                               
91                 4  MED                    Simple pneumonia and pleurisy        0.7524      0.7940         5.5
                                              age 0-17.                                                         
92                 4  MED                    Interstitial lung diseases with      1.2029      1.1947        -0.7
                                              CC.                                                               
93                 4  MED                    Interstitial lung disease            0.7498      0.7423        -1.0
                                              without CC.                                                       
94                 4  MED                    Pneumothorax with CC...........      1.1780      1.1857         0.7
95                 4  MED                    Pneumothorax without CC........      0.5996      0.5974        -0.4
96                 4  MED                    Bronchitis and asthma age >17        0.8272      0.8005        -3.2
                                              with CC.                                                          
97                 4  MED                    Bronchitis and asthma age >17        0.6035      0.5887        -2.5
                                              without CC.                                                       
98                 4  MED                    Bronchitis and asthma age 0-17.      0.7807      0.6298       -19.3
99                 4  MED                    Respiratory signs and symptoms       0.6869      0.6710        -2.3
                                              with CC.                                                          
100                4  MED                    Respiratory signs and symptoms       0.5113      0.5109        -0.1
                                              without CC.                                                       
101                4  MED                    Other respiratory system             0.8748      0.8518        -2.6
                                              diagnoses with CC.                                                
102                4  MED                    Other respiratory system             0.5335      0.5295        -0.7
                                              diagnoses without CC.                                             
103                5  SURG                   Heart transplant...............     15.3358     16.5746         8.1
104                5  SURG                   Cardiac valve procedures with        7.3199      7.3563         0.5
                                              cardiac cath.                                                     
105                5  SURG                   Cardiac valve procedures             5.5998      5.7109         2.0
                                              without cardiac cath.                                             
106                5  SURG                   Coronary bypass with cardiac         5.5564      5.5843         0.5
                                              cath.                                                             
107                5  SURG                   Coronary bypass without cardiac      4.0685      4.0812         0.3
                                              cath.                                                             
108                5  SURG                   Other cardiothoracic procedures      5.9135      6.1282         3.6
109            .....  .....................  No longer valid................  ..........  ..........  ..........
110                5  SURG                   Major cardiovascular procedures      4.1589      4.1964         0.9
                                              with CC.                                                          
111                5  SURG                   Major cardiovascular procedures      2.2875      2.2409        -2.0
                                              without CC.                                                       
112                5  SURG                   Percutaneous cardiovascular          2.0946      2.0025        -4.4
                                              procedures.                                                       
113                5  SURG                   Amputation for circ system           2.6935      2.6579        -1.3
                                              disorders except upper limb                                       
                                              and toe.                                                          
114                5  SURG                   Upper limb and toe amputation        1.5152      1.5363         1.4
                                              for circ system disorders.                                        
115                5  SURG                   Perm cardiac pacemaker implant       3.6827      3.5476        -3.7
                                              with ami, Heart failure or                                        
                                              shock.                                                            
116                5  SURG                   Other perm cardiac pacemaker         2.4150      2.5321         4.8
                                              implant or aicd lead or                                           
                                              generator proc.                                                   
117                5  SURG                   Cardiac pacemaker revision           1.1764      1.1950         1.6
                                              except device replacement.                                        
118                5  SURG                   Cardiac pacemaker device             1.5825      1.5889         0.4
                                              replacement.                                                      
119                5  SURG                   Vein ligation and stripping....      1.1435      1.1997         4.9
120                5  SURG                   Other circulatory system O.R.        1.9318      1.9158        -0.8
                                              procedures.                                                       
121                5  MED                    Circulatory disorders with ami       1.6482      1.6537         0.3
                                              and c.v. comp disch alive.                                        
122                5  MED                    Circulatory disorders with ami       1.1617      1.1446        -1.5
                                              without c.v. comp disch alive.                                    
123                5  MED                    Circulatory disorders with ami,      1.4555      1.4695         1.0
                                              expired.                                                          
124                5  MED                    Circulatory disorders except         1.3258      1.3565         2.3
                                              ami, with card cath and                                           
                                              complex diag.                                                     
125                5  MED                    Circulatory disorders except         0.9246      0.9738         5.3
                                              ami, with card cath without                                       
                                              complex diag.                                                     
126                5  MED                    Acute and subacute endocarditis      2.5379      2.4879        -2.0
127                5  MED                    Heart failure and shock........      1.0265      1.0199        -0.6
128                5  MED                    Deep vein thrombophlebitis.....      0.7861      0.7807        -0.7
129                5  MED                    Cardiac arrest, unexplained....      1.1316      1.1414         0.9
130                5  MED                    Peripheral vascular disorders        0.9352      0.9410         0.6
                                              with CC.                                                          
131                5  MED                    Peripheral vascular disorders        0.6038      0.6040         0.0
                                              without CC.                                                       
132                5  MED                    Atherosclerosis with CC........      0.6840      0.6749        -1.3
133                5  MED                    Atherosclerosis without CC.....      0.5537      0.5360        -3.2
134                5  MED                    Hypertension...................      0.5787      0.5760        -0.5
135                5  MED                    Cardiac congenital and valvular      0.8838      0.8336        -5.7
                                              disorders age 17 with CC.                                         
136                5  MED                    Cardiac congenital and valvular      0.5629      0.5709         1.4
                                              disorders age 17 without CC.                                      
137                5  MED \1\                Cardiac congenital and valvular      0.7999      0.8131         1.7
                                              disorders age 0-17.                                               
138                5  MED                    Cardiac arrhythmia and               0.8008      0.7962        -0.6
                                              conduction disorders with CC.                                     
139                5  MED                    Cardiac arrhythmia and               0.4971      0.4982         0.2
                                              conduction disorders without                                      
                                              CC.                                                               
140                5  MED                    Angina pectoris................      0.6205      0.5993        -3.4
141                5  MED                    Syncope and collapse with CC...      0.7128      0.7005        -1.7
142                5  MED                    Syncope and collapse without CC      0.5288      0.5231        -1.1
143                5  MED                    Chest pain.....................      0.5223      0.5200        -0.4
144                5  MED                    Other circulatory system             1.0857      1.0904         0.4
                                              diagnoses with CC.                                                
145                5  MED                    Other circulatory system             0.6208      0.6401         3.1
                                              diagnoses without CC.                                             
146                6  SURG                   Rectal resection with CC.......      2.6363      2.7356         3.8
147                6  SURG                   Rectal resection without CC....      1.6018      1.5885        -0.8
148                6  SURG                   Major small and large bowel          3.3710      3.3883         0.5
                                              procedures with CC.                                               
149                6  SURG                   Major small and large bowel          1.5999      1.5495        -3.2
                                              procedures without CC.                                            
150                6  SURG                   Peritoneal adhesiolysis with CC      2.6828      2.7109         1.0
151                6  SURG                   Peritoneal adhesiolysis without      1.2910      1.2645        -2.1
                                              CC.                                                               
152                6  SURG                   Minor small and large bowel          1.9311      1.9139        -0.9
                                              procedures with CC.                                               
153                6  SURG                   Minor small and large bowel          1.1568      1.1634         0.6
                                              procedures without CC.                                            
154                6  SURG                   Stomach, esophageal and              4.1817      4.1851         0.1
                                              duodenal procedures age >17                                       
                                              with CC.                                                          
155                6  SURG                   Stomach, esophageal and              1.4059      1.3350        -5.0
                                              duodenal procedures age >17                                       
                                              without CC.                                                       
156                6  SURG \1\               Stomach, esophageal and              0.8238      0.8374         1.7
                                              duodenal procedures age 0-17.                                     
157                6  SURG                   Anal and stomal procedures with      1.1352      1.1824         4.2
                                              CC.                                                               
158                6  SURG                   Anal and stomal procedures           0.6077      0.6272         3.2
                                              without CC.                                                       
159                6  SURG                   Hernia procedures except             1.2268      1.2548         2.3
                                              inguinal and femoral age >17                                      
                                              with CC.                                                          
160                6  SURG                   Hernia procedures except             0.7026      0.7177         2.1
                                              inguinal and femoral age >17                                      
                                              without CC.                                                       
161                6  SURG                   Inguinal and femoral hernia          1.0066      1.0573         5.0
                                              procedures age >17 with CC.                                       
162                6  SURG                   Inguinal and femoral hernia          0.5707      0.5856         2.6
                                              procedures age >17 without CC.                                    
163                6  SURG                   Hernia procedures age 0-17.....      0.7706      0.8660        12.4
164                6  SURG                   Appendectomy with complicated        2.3386      2.3412         0.1
                                              principal diag with CC.                                           
165                6  SURG                   Appendectomy with complicated        1.2582      1.2270        -2.5
                                              principal diag without CC.                                        
166                6  SURG                   Appendectomy without                 1.4497      1.4582         0.6
                                              complicated principal diag                                        
                                              with CC.                                                          
167                6  SURG                   Appendectomy without                 0.8431      0.8373        -0.7
                                              complicated principal diag                                        
                                              without CC.                                                       
168                3  SURG                   Mouth procedures with CC.......      1.0929      1.1187         2.4
169                3  SURG                   Mouth procedures without CC....      0.6717      0.6903         2.8
170                6  SURG                   Other digestive system O.R.          2.7453      2.7587         0.5
                                              procedures with CC.                                               
171                6  SURG                   Other digestive system O.R.          1.1202      1.1146        -0.5
                                              procedures without CC.                                            
172                6  MED                    Digestive malignancy with CC...      1.2920      1.2867        -0.4
173                6  MED                    Digestive malignancy without CC      0.6769      0.6744        -0.4
174                6  MED                    G.I. Hemorrhage with CC........      0.9952      0.9925        -0.3
175                6  MED                    G.I. Hemorrhage without CC.....      0.5485      0.5366        -2.2
176                6  MED                    Complicated peptic ulcer.......      1.0856      1.1011         1.4
177                6  MED                    Uncomplicated peptic ulcer with      0.8335      0.8556         2.7
                                              CC.                                                               
178                6  MED                    Uncomplicated peptic ulcer           0.6091      0.6241         2.5
                                              without CC.                                                       
179                6  MED                    Inflammatory bowel disease.....      1.1188      1.1100        -0.8
180                6  MED                    G.I. obstruction with CC.......      0.9194      0.9153        -0.4
181                6  MED                    G.I. obstruction without CC....      0.5338      0.5204        -2.5
182                6  MED                    Esophagitis, gastroent and misc      0.7789      0.7664        -1.6
                                              digest disorders age >17 with                                     
                                              CC.                                                               
183                6  MED                    Esophagitis, gastroent and misc      0.5553      0.5496        -1.0
                                              digest disorders age >17                                          
                                              without CC.                                                       
184                6  MED                    Esophagitis, gastroent and misc      0.5414      0.5930         9.5
                                              digest disorders age 0-17.                                        
185                3  MED                    Dental and oral dis except           0.8424      0.8424         0.0
                                              extractions and restorations                                      
                                              age >17.                                                          
186                3  MED \1\                Dental and oral dis except           0.3140      0.3192         1.7
                                              extractions and restorations                                      
                                              age 0-17.                                                         
187                3  MED                    Dental extractions and               0.7104      0.7049        -0.8
                                              restorations.                                                     
188                6  MED                    Other digestive system               1.0591      1.0727         1.3
                                              diagnoses age >17 with CC.                                        
189                6  MED                    Other digestive system               0.5640      0.5488        -2.7
                                              diagnoses age >17 without CC.                                     
190                6  MED                    Other digestive system               0.8769      0.8786         0.2
                                              diagnoses age 0-17.                                               
191                7  SURG                   Pancreas, liver and shunt            4.4543      4.3490        -2.4
                                              procedures with CC.                                               
192                7  SURG                   Pancreas, liver and shunt            1.7889      1.7057        -4.7
                                              procedures without CC.                                            
193                7  SURG                   Biliary tract proc except only       3.2878      3.2666        -0.6
                                              cholecyst with or without                                         
                                              C.D.E. with CC.                                                   
194                7  SURG                   Biliary tract proc except only       1.7549      1.6688        -4.9
                                              cholecyst with or without                                         
                                              C.D.E. without CC.                                                
195                7  SURG                   Cholecystectomy with C.D.E.          2.6894      2.7112         0.8
                                              with CC.                                                          
196                7  SURG                   Cholecystectomy with C.D.E.          1.6127      1.6075        -0.3
                                              without CC.                                                       
197                7  SURG                   Cholecystectomy except by            2.2679      2.3085         1.8
                                              laparoscope without C.D.E.                                        
                                              with CC.                                                          
198                7  SURG                   Cholecystectomy except by            1.1738      1.1693        -0.4
                                              laparoscope without C.D.E.                                        
                                              without CC.                                                       
199                7  SURG                   Hepatobiliary diagnostic             2.3728      2.3523        -0.9
                                              procedure for malignancy.                                         
200                7  SURG                   Hepatobiliary diagnostic             3.1772      3.0210        -4.9
                                              procedure for nonmalignancy.                                      
201                7  SURG                   Other hepatobiliary or pancreas      3.7669      3.4752        -7.7
                                              O.R. procedures.                                                  
202                7  MED                    Cirrhosis and alcoholic              1.3675      1.3255        -3.1
                                              hepatitis.                                                        
203                7  MED                    Malignancy of hepatobiliary          1.2486      1.2605         1.0
                                              system or pancreas.                                               
204                7  MED                    Disorders of pancreas except         1.2004      1.2117         0.9
                                              malignancy.                                                       
205                7  MED                    Disorders of liver except            1.2194      1.2144        -0.4
                                              malig, cirr, alc hepa with CC.                                    
206                7  MED                    Disorders of liver except            0.7159      0.6543        -8.6
                                              malig, cirr, alc hepa without                                     
                                              CC.                                                               
207                7  MED                    Disorders of the biliary tract       1.0508      1.0507         0.0
                                              with CC.                                                          
208                7  MED                    Disorders of the biliary tract       0.6045      0.6039        -0.1
                                              without CC.                                                       
209                8  SURG                   Major joint and limb                 2.2606      2.2337        -1.2
                                              reattachment procedures of                                        
                                              lower extremity.                                                  
210                8  SURG                   Hip and femur procedures except      1.8460      1.8265        -1.1
                                              major joint age >17 with CC.                                      
211                8  SURG                   Hip and femur procedures except      1.2740      1.2541        -1.6
                                              major joint age >17 without CC.                                   
212                8  SURG                   Hip and femur procedures except      1.1487      1.1311        -1.5
                                              major joint age 0-17.                                             
213                8  SURG                   Amputation for musculoskeletal       1.7049      1.6513        -3.1
                                              system and conn tissue                                            
                                              disorders.                                                        
214            .....  .....................  No longer valid................      1.9255  ..........  ..........
215            .....  .....................  No longer valid................      1.1119  ..........  ..........
216                8  SURG                   Biopsies of musculoskeletal          2.0784      2.1082         1.4
                                              system and connective tissue.                                     
217                8  SURG                   WND debrid and skin graft            2.8812      2.8033        -2.7
                                              except hand, for muscskelet                                       
                                              and conn tiss dis.                                                
218                8  SURG                   Lower extrem and humer proc          1.4574      1.4576         0.0
                                              except hip, foot, femur age                                       
                                              >17 with CC.                                                      
219                8  SURG                   Lower extrem and humer proc          0.9553      0.9631         0.8
                                              except hip, foot, femur age                                       
                                              >17 without CC.                                                   
220                8  SURG \1\               Lower extrem and humer proc          0.5706      0.5800         1.6
                                              except hip, foot, femur age 0-                                    
                                              17.                                                               
221            .....  .....................  No longer valid................  ..........  ..........  ..........
222            .....  .....................  No longer valid................  ..........  ..........  ..........
223                8  SURG                   Major shoulder/elbow proc, or        0.8720      0.9007         3.3
                                              other upper extremity proc                                        
                                              with CC.                                                          
224                8  SURG                   Shoulder, elbow or forearm           0.7417      0.7466         0.7
                                              proc, exc major joint proc,                                       
                                              without CC.                                                       
225                8  SURG                   Foot procedures................      1.0020      1.0124         1.0
226                8  SURG                   Soft tissue procedures with CC.      1.3831      1.4095         1.9
227                8  SURG                   Soft tissue procedures without       0.7449      0.7729         3.8
                                              CC.                                                               
228                8  SURG                   Major thumb or joint proc, or        0.9349      0.9542         2.1
                                              other hand or wrist proc with                                     
                                              CC.                                                               
229                8  SURG                   Hand or wrist proc, except           0.6512      0.6706         3.0
                                              major joint proc, without CC.                                     
230                8  SURG                   Local excision and removal of        1.0567      1.1296         6.9
                                              int fix devices of hip and                                        
                                              femur.                                                            
231                8  SURG                   Local excision and removal of        1.2263      1.2727         3.8
                                              int fix devices except hip and                                    
                                              femur.                                                            
232                8  SURG                   Arthroscopy....................      1.0884      1.0629        -2.3
233                8  SURG                   Other musculoskelet sys and          2.0170      2.0329         0.8
                                              conn tiss O.R. proc without CC.                                   
234                8  SURG                   Other musculoskelet sys and          1.0675      1.1126         4.2
                                              conn tiss O.R. proc without CC.                                   
235                8  MED                    Fractures of femur.............      0.8395      0.7710        -8.2
236                8  MED                    Fractures of hip and pelvis....      0.7620      0.7338        -3.7
237                8  MED                    Sprains, strains and                 0.5637      0.5952         5.6
                                              dislocations of hip, pelvis                                       
                                              and thigh.                                                        
238                8  MED                    Osteomyelitis..................      1.3796      1.3250        -4.0
239                8  MED                    Pathological fractures and           1.0115      0.9865        -2.5
                                              musculoskeletal and conn tiss                                     
                                              malignancy.                                                       
240                8  MED                    Connective tissue disorders          1.2112      1.2098        -0.1
                                              with CC.                                                          
241                8  MED                    Connective tissue disorders          0.6029      0.5862        -2.8
                                              without CC.                                                       
242                8  MED                    Septic arthritis...............      1.0492      1.0501         0.1
243                8  MED                    Medical back problems..........      0.7241      0.7158        -1.1
244                8  MED                    Bone disease and specific            0.7279      0.7199        -1.1
                                              arthropathies with CC.                                            
245                8  MED                    Bone disease and specific            0.4954      0.5002         1.0
                                              arthropathies without CC.                                         
246                8  MED                    Nonspecific arthropathies......      0.5887      0.5713        -3.0
247                8  MED                    Signs and symptoms of                0.5523      0.5587         1.2
                                              musculoskeletal system and                                        
                                              conn tissue.                                                      
248                8  MED                    Tendonitis, myositis and             0.7325      0.7428         1.4
                                              bursitis.                                                         
249                8  MED                    Aftercare, musculoskeletal           0.6522      0.6559         0.6
                                              system and connective tissue.                                     
250                8  MED                    FX, sprn, strn and disl of           0.6915      0.6995         1.2
                                              forearm, hand, foot age >17                                       
                                              with CC.                                                          
251                8  MED                    FX, sprn, strn and disl of           0.4640      0.4517        -2.7
                                              forearm, hand, foot age >17                                       
                                              without CC.                                                       
252                8  MED \1\                FX, sprn, strn and disl of           0.2479      0.2520         1.7
                                              forearm, hand, foot age 0-17.                                     
253                8  MED                    FX, sprn, strn and disl of           0.7438      0.7265        -2.3
                                              uparm, lowleg ex foot age >17                                     
                                              with CC.                                                          
254                8  MED                    FX, sprn, strn, and disl of          0.4451      0.4350        -2.3
                                              uparm, lowleg ex foot age >17                                     
                                              without CC.                                                       
255                8  MED \1\                FX, sprn, strn and disl of           0.2886      0.2934         1.7
                                              uparm, lowleg ex foot age 0-17.                                   
256                8  MED                    Other musculoskeletal system         0.7651      0.7826         2.3
                                              and connective tissue                                             
                                              diagnoses.                                                        
257                9  SURG                   Total mastectomy for malignancy      0.9015      0.9276         2.9
                                              with CC.                                                          
258                9  SURG                   Total mastectomy for malignancy      0.7087      0.7162         1.1
                                              without CC.                                                       
259                9  SURG                   Subtotal mastectomy for              0.8640      0.8874         2.7
                                              malignancy with CC.                                               
260                9  SURG                   Subtotal mastectomy for              0.6083      0.6092         0.1
                                              malignancy without CC.                                            
261                9  SURG                   Breast proc for nonmalignancy        0.8286      0.8961         8.1
                                              except biopsy and local                                           
                                              excision.                                                         
262                9  SURG                   Breast biopsy and local              0.7695      0.7820         1.6
                                              excision for nonmalignancy.                                       
263                9  SURG                   Skin graft and/or debrid for         2.1226      2.0221        -4.7
                                              skn ulcer or cellulitis with                                      
                                              CC.                                                               
264                9  SURG                   Skin graft and/or debrid for         1.1270      1.0773        -4.4
                                              skin ulcer or cellulitis                                          
                                              without CC.                                                       
265                9  SURG                   Skin graft and/or debrid except      1.4993      1.5166         1.2
                                              skin ulcer or cellulitis with                                     
                                              CC.                                                               
266                9  SURG                   Skin graft and/or debrid except      0.7629      0.7909         3.7
                                              for skin ulcer or cellulitis                                      
                                              without CC.                                                       
267                9  SURG                   Perianal and pilonidal               0.8330      0.8424         1.1
                                              procedures.                                                       
268                9  SURG                   Skin, subcutaneous tissue and        0.9916      1.0090         1.8
                                              breast plastic procedures.                                        
269                9  SURG                   Other skin, subcut tiss and          1.6416      1.5733        -4.2
                                              breast proc with CC.                                              
270                9  SURG                   Other skin, subcut tiss and          0.7003      0.7061         0.8
                                              breast proc without CC.                                           
271                9  MED                    Skin ulcers....................      1.0816      1.0259        -5.1
272                9  MED                    Major skin disorders with CC...      1.0158      0.9950        -2.0
273                9  MED                    Major skin disorders without CC      0.6346      0.6618         4.3
274                9  MED                    Malignant breast disorders with      1.0760      1.1229         4.4
                                              CC.                                                               
275                9  MED                    Malignant breast disorders           0.5085      0.5882        15.7
                                              without CC.                                                       
276                9  MED                    Nonmalignant breast disorders..      0.6374      0.6122        -4.0
277                9  MED                    Cellulitis age >17 with CC.....      0.8526      0.8322        -2.4
278                9  MED                    Cellulitis age >17 without CC..      0.5774      0.5574        -3.5
279                9  MED \1\                Cellulitis age 0-17............      0.7190      0.7309         1.7
280                9  MED                    Trauma to the skin subcut tiss       0.6750      0.6757         0.1
                                              & breast age >17 with CC.                                         
281                9  MED                    Trauma to the skin subcut tiss       0.4560      0.4558         0.0
                                              & breast age >17 without CC.                                      
282                9  MED \1\                Trauma to the skin subcut tiss       0.2509      0.2551         1.7
                                              & breast age 0-17.                                                
283                9  MED                    Minor skin disorders with CC...      0.6990      0.6936        -0.8
284                9  MED                    Minor skin disorders without CC      0.4340      0.4371         0.7
285               10  SURG                   Amputat of lower limb for            2.2015      2.1556        -2.1
                                              endocrine, nutrit and metabol                                     
                                              disorders.                                                        
286               10  SURG                   Adrenal and pituitary                2.3775      2.2671        -4.6
                                              procedures.                                                       
287               10  SURG                   Skin grafts and wound debrid         1.9765      1.8727        -5.3
                                              for endoc, nutrit and metab                                       
                                              disorders.                                                        
288               10  SURG                   O.R. procedures for obesity....      2.0104      2.0255         0.8
289               10  SURG                   Parathyroid procedures.........      1.0198      0.9827        -3.6
290               10  SURG                   Thyroid procedures.............      0.8798      0.8970         2.0
291               10  SURG                   Thyroglossal procedures........      0.5189      0.7372        42.1
292               10  SURG                   Other endocrine, nutrit and          2.6450      2.5483        -3.7
                                              metab. O.R. proc with CC.                                         
293               10  SURG                   Other endocrine, nutrit and          1.2671      1.2297        -3.0
                                              metab. O.R. proc without CC.                                      
294               10  MED                    Diabetes age >35...............      0.7594      0.7546        -0.6
295               10  MED                    Diabetes age 0-35..............      0.7159      0.7359         2.8
296               10  MED                    Nutritional and misc metabolic       0.8929      0.8657        -3.0
                                              disorders age >17 with CC.                                        
297               10  MED                    Nutritional and misc metabolic       0.5364      0.5188        -3.3
                                              disorders age >17 without CC.                                     
298               10  MED                    Nutritional and misc metabolic       0.5221      0.4207       -19.4
                                              disorders age age 0-17.                                           
299               10  MED                    Inborn errors of metabolism....      0.8330      0.8716         4.6
300               10  MED                    Endocrine disorders with CC....      1.0950      1.0810        -1.3
301               10  MED                    Endocrine disorders without CC.      0.6182      0.5941        -3.9
302               11  SURG                   Kidney transplant..............      3.9047      3.7570        -3.8
303               11  SURG                   Kidney, ureter and major             2.6409      2.6139        -1.0
                                              bladder procedures for                                            
                                              neoplasm.                                                         
304               11  SURG                   Kidney, ureter and major             2.3716      2.3982         1.1
                                              bladder procedures for                                            
                                              nonneopl with CC.                                                 
305               11  SURG                   Kidney, ureter and major             1.1776      1.1695        -0.7
                                              bladder procedures for                                            
                                              nonneopl without CC.                                              
306               11  SURG                   Prostatectomy with CC..........      1.2258      1.2168        -0.7
307               11  SURG                   Prostatectomy without CC.......      0.6708      0.6455        -3.8
308               11  SURG                   Minor bladder procedures with        1.5252      1.5120        -0.9
                                              CC.                                                               
309               11  SURG                   Minor bladder procedures             0.8860      0.8760        -1.1
                                              without CC.                                                       
310               11  SURG                   Transurethral procedures with        1.0015      1.0248         2.3
                                              CC.                                                               
311               11  SURG                   Transurethral procedures             0.5670      0.5866         3.5
                                              without CC.                                                       
312               11  SURG                   Urethral procedures age >17          0.9124      0.9732         6.7
                                              with CC.                                                          
313               11  SURG                   Urethral procedures age >17          0.5223      0.5783        10.7
                                              without CC.                                                       
314               11  SURG \1\               Urethral procedures age 0-17...      0.4836      0.4916         1.7
315               11  SURG                   Other kidney and urinary tract       2.0574      2.0601         0.1
                                              O.R. procedures.                                                  
316               11  MED                    Renal failure..................      1.3034      1.3089         0.4
317               11  MED                    Admit for renal dialysis.......      0.4845      0.5489        13.3
318               11  MED                    Kidney and urinary tract             1.1296      1.1594         2.6
                                              neoplasms with CC.                                                
319               11  MED                    Kidney and urinary tract             0.5772      0.5808         0.6
                                              neoplasms without CC.                                             
320               11  MED                    Kidney and urinary tract             0.9048      0.8782        -2.9
                                              infections age 17W CC.                                            
321               11  MED                    Kidney and urinary tract             0.6077      0.5838        -3.9
                                              infections age >17 without CC.                                    
322               11  MED                    Kidney and urinary tract             0.5133      0.5342         4.1
                                              infections age 0-17.                                              
323               11  MED                    Urinary stones with CC, and/or       0.7496      0.7555         0.8
                                              ESW lithotripsy.                                                  
324               11  MED                    Urinary stones without CC......      0.4159      0.4298         3.3
325               11  MED                    Kidney and urinary tract signs       0.6377      0.6207        -2.7
                                              and symptoms age >17 with CC.                                     
326               11  MED                    Kidney and urinary tract signs       0.4320      0.4188        -3.1
                                              and symptoms age >17 without                                      
                                              CC.                                                               
327               11  MED                    Kidney and urinary tract signs       0.2341      0.3516        50.2
                                              and symptoms age 0-17.                                            
328               11  MED                    Urethral stricture age >17 with      0.6886      0.6878        -0.1
                                              CC.                                                               
329               11  MED                    Urethral stricture age >17           0.4567      0.5080        11.2
                                              without CC.                                                       
330               11  MED \1\                Urethral stricture age 0-17....      0.3115      0.3167         1.7
331               11  MED                    Other kidney and urinary tract       0.9914      1.0009         1.0
                                              diagnoses age >17 with CC.                                        
332               11  MED                    Other kidney and urinary tract       0.6070      0.5964        -1.7
                                              diagnoses age >17 without CC.                                     
333               11  MED                    Other kidney and urinary tract       0.8562      0.8389        -2.0
                                              diagnoses age 0-17.                                               
334               12  SURG                   Major male pelvic procedures         1.6653      1.6359        -1.8
                                              with CC.                                                          
335               12  SURG                   Major male pelvic procedures         1.2610      1.2190        -3.3
                                              without CC.                                                       
336               12  SURG                   Transurethral prostatectomy          0.8848      0.8870         0.2
                                              with CC.                                                          
337               12  SURG                   Transurethral prostatectomy          0.6147      0.6129        -0.3
                                              without CC.                                                       
338               12  SURG                   Testes procedures, for               1.0499      1.0950         4.3
                                              malignancy.                                                       
339               12  SURG                   Testes procedures,                   1.0194      1.0038        -1.5
                                              nonmalignancy age >17.                                            
340               12  SURG \1\               Testes procedures,                   0.2769      0.2815         1.7
                                              nonmalignancy age 0-17.                                           
341               12  SURG                   Penis procedures...............      1.0745      1.1089         3.2
342               12  SURG                   Circumcision age >17...........      0.7578      0.8511        12.3
343               12  SURG \1\               Circumcision age 0-17..........      0.1504      0.1529         1.7
344               12  SURG                   Other male reproductive system       1.0083      1.0298         2.1
                                              O.R. procedures for malignancy.                                   
345               12  SURG                   Other male reproductive system       0.8422      0.8552         1.5
                                              O.R. proc except for                                              
                                              malignancy.                                                       
346               12  MED                    Malignancy, male reproductive        0.9559      0.9573         0.1
                                              system, with CC.                                                  
347               12  MED                    Malignancy, male reproductive        0.5096      0.4603        -9.7
                                              system, without CC.                                               
348               12  MED                    Benign prostatic hypertrophy         0.7107      0.6958        -2.1
                                              with CC.                                                          
349               12  MED                    Benign prostatic hypertrophy         0.3974      0.4154         4.5
                                              without CC.                                                       
350               12  MED                    Inflammation of the male             0.6611      0.6797         2.8
                                              reproductive system.                                              
351               12  MED \1\                Sterilization, male............      0.2309      0.2347         1.6
352               12  MED                    Other male reproductive system       0.5877      0.6263         6.6
                                              diagnoses.                                                        
353               13  SURG                   Pelvic evisceration, radical         1.9174      2.1179        10.5
                                              hysterectomy and radical                                          
                                              vulvectomy.                                                       
354               13  SURG                   Uterine, adnexa proc for             1.4643      1.4963         2.2
                                              nonovarian/adnexal malig with                                     
                                              CC.                                                               
355               13  SURG                   Uterine, adnexa proc for             0.9056      0.9180         1.4
                                              nonovarian/adnexal malig                                          
                                              without CC.                                                       
356               13  SURG                   Female reproductive system           0.7376      0.7701         4.4
                                              reconstructive procedures.                                        
357               13  SURG                   Uterine and adnexa proc for          2.3824      2.4309         2.0
                                              ovarian or adnexal malignancy.                                    
358               13  SURG                   Uterine and adnexa proc for          1.1713      1.2021         2.6
                                              nonmalignancy with CC.                                            
359               13  SURG                   Uterine and adnexa proc for          0.8285      0.8452         2.0
                                              nonmalignancy without CC.                                         
360               13  SURG                   Vagina, cervix and vulva             0.8459      0.8708         2.9
                                              procedures.                                                       
361               13  SURG                   Laparoscopy and incisional           1.1148      1.1872         6.5
                                              tubal interrruption.                                              
362               13  SURG \1\               Endoscopic tubal interruption..      0.2951      0.3000         1.7
363               13  SURG                   D&C, conization and radio-           0.6911      0.7485         8.3
                                              implant for malignancy.                                           
364               13  SURG                   D&C, conization except for           0.6739      0.6985         3.7
                                              malignancy.                                                       
365               13  SURG                   Other female reproductive            1.7237      1.7085        -0.9
                                              system O.R. procedures.                                           
366               13  MED                    Malignancy, female reproductive      1.1941      1.1857        -0.7
                                              system with CC.                                                   
367               13  MED                    Malignancy, female reproductive      0.5216      0.5309         1.8
                                              system without CC.                                                
368               13  MED                    Infections, female reproductive      1.0230      0.9698        -5.2
                                              system.                                                           
369               13  MED                    Menstrual and other female           0.5454      0.5367        -1.6
                                              reproductive system disorders.                                    
370               14  SURG                   Cesarean section with CC.......      1.0401      1.0587         1.8
371               14  SURG                   Cesarean section without CC....      0.6838      0.7054         3.2
372               14  MED                    Vaginal delivery with                0.5439      0.5590         2.8
                                              complicating diagnoses.                                           
373               14  MED                    Vaginal delivery without             0.3602      0.3987        10.7
                                              complicating diagnoses.                                           
374               14  SURG                   Vaginal delivery with                0.6775      0.7625        12.5
                                              sterilization and diagnoses                                       
                                              and/or D&C.                                                       
375               14  SURG \1\               Vaginal delivery with O.R. proc      0.6698      0.6809         1.7
                                              except steril and/or D&C.                                         
376               14  MED                    Postpartum and post abortion         0.5638      0.4822       -14.5
                                              diagnoses without O.R.                                            
                                              procedure.                                                        
377               14  SURG                   Postpartum and post abortion         0.8188      1.0517        28.4
                                              diagnosis with O.R. procedure.                                    
378               14  MED                    Ectopic pregnancy..............      0.8054      0.8126         0.9
379               14  MED                    Threatened abortion............      0.3591      0.4028        12.2
380               14  MED                    Abortion without D&C...........      0.4775      0.3501       -26.7
381               14  SURG                   Abortion with D&C, aspiration        0.5151      0.4809        -6.6
                                              curettage or hysterotomy.                                         
382               14  MED                    False labor....................      0.2013      0.2086         3.6
383               14  MED                    Other antepartum diagnosis with      0.4655      0.4636        -0.4
                                              medical complications.                                            
384               14  MED                    Other antepartum diagnosis           0.3921      0.3539        -9.7
                                              without medical complications.                                    
385               15  (\1\)                  Neonates, died or transferred        1.3443      1.3665         1.7
                                              to another acute care facility.                                   
386               15  (\1\)                  Extreme immaturity or                4.4329      4.5063         1.7
                                              respiratory distress syndrome,                                    
                                              neonate.                                                          
387               15  (\1\)                  Prematurity with major problems      3.0276      3.0777         1.7
388               15  (\1\)                  Prematurity without major            1.8268      1.8570         1.7
                                              problems.                                                         
389               15  .....................  Full term neonate with major         2.2451      1.4862       -33.8
                                              problems.                                                         
390               15  (\1\)                  Neonate with other significant       1.2845      1.3058         1.7
                                              problems.                                                         
391               15  (\1\)                  Normal newborn.................      0.1490      0.1515         1.7
392               16  SURG                   Splenectomy age >17............      3.2443      3.1695        -2.3
393               16  SURG \1\               Splenectomy age 0-17...........      1.3168      1.3386         1.7
394               16  SURG                   Other O.R. procedures of the         1.5994      1.6479         3.0
                                              blood and blood forming organs.                                   
395               16  MED                    Red blood cell disorders age         0.8362      0.8181        -2.2
                                              >17.                                                              
396               16  MED                    Red blood cell disorders age 0-      0.6966      0.6284        -9.8
                                              17.                                                               
397               16  MED                    Coagulation disorders..........      1.2612      1.2679         0.5
398               16  MED                    Reticuloendothelial and              1.2106      1.2242         1.1
                                              immunity disorders with CC.                                       
399               16  MED                    Reticuloendothelial and              0.7030      0.6836        -2.8
                                              immunity disorders without CC.                                    
400               17  SURG                   Lymphoma and leukemia with           2.5572      2.6402         3.2
                                              major O.R. procedure.                                             
401               17  SURG                   Lymphoma and nonacute leukemia       2.4834      2.5653         3.3
                                              with other O.R. proc with CC.                                     
402               17  SURG                   Lymphoma and nonacute leukemia       1.0255      1.0145        -1.1
                                              with other O.R. proc without                                      
                                              CC.                                                               
403               17  MED                    Lymphoma and nonacute leukemia       1.6925      1.6964         0.2
                                              with CC.                                                          
404               17  MED                    Lymphoma and nonacute leukemia       0.8059      0.7917        -1.8
                                              without CC.                                                       
405               17  (\1\)                  Acute leukemia without major         1.8669      1.8978         1.7
                                              O.R. procedure age 0-17.                                          
406               17  SURG                   Myeloprolif disord or poorly         2.6841      2.6147        -2.6
                                              diff neopl with maj O.R. proc                                     
                                              with CC.                                                          
407               17  SURG                   Myeloprolif disord or poorly         1.1787      1.1516        -2.3
                                              diff neopl with maj O.R. proc                                     
                                              without CC.                                                       
408               17  SURG                   Myeloprolif disord or poorly         1.7393      1.7294        -0.6
                                              diff neopl with other O.R.                                        
                                              proc.                                                             
409               17  MED                    Radiotherapy...................      0.9763      0.9534        -2.3
410               17  MED                    Chemotherapy without acute           0.7514      0.7968         6.0
                                              leukemia as secondary                                             
                                              diagnosis.                                                        
411               17  MED                    History of malignancy without        0.3837      0.4214         9.8
                                              endoscopy.                                                        
412               17  MED                    History of malignancy with           0.4080      0.5175        26.8
                                              endoscopy.                                                        
413               17  MED                    Other myeloprolif dis or poorly      1.3257      1.3777         3.9
                                              diff neopl diag with CC.                                          
414               17  MED                    Other myeloprolif dis or poorly      0.7337      0.7041        -4.0
                                              diff neopl diag without CC.                                       
415               18  SURG                   O.R. procedure for infectious        3.4430      3.5166         2.1
                                              and parasitic diseases.                                           
416               18  MED                    Septicemia age >17.............      1.4838      1.4797        -0.3
417               18  MED                    Septicemia age 0-17............      0.8089      0.7688        -5.0
418               18  MED                    Postoperative and post-              0.9697      0.9679        -0.2
                                              traumatic infections.                                             
419               18  MED                    Fever of unknown origin age >17      0.8991      0.8831        -1.8
                                              with CC.                                                          
420               18  MED                    Fever of unknown origin age >17      0.6264      0.6064        -3.2
                                              without CC.                                                       
421               18  MED                    Viral illness age >17..........      0.7153      0.7069        -1.2
422               18  MED                    Viral illness and fever of           0.5347      0.5347         0.0
                                              unknown origin age 0-17.                                          
423               18  MED                    Other infectious and parasitic       1.5947      1.5690        -1.6
                                              diseases diagnoses.                                               
424               19  SURG                   O.R. procedure with principal        2.3637      2.4581         4.0
                                              diagnoses of mental illness.                                      
425               19  MED                    Acute adjust react and               0.7051      0.6857        -2.8
                                              disturbances of psychosocial                                      
                                              dysfunction.                                                      
426               19  MED                    Depressive neuroses............      0.5680      0.5648        -0.6
427               19  MED                    Neuroses except depressive.....      0.5495      0.5818         5.9
428               19  MED                    Disorders of personality and         0.7303      0.6975        -4.5
                                              impulse control.                                                  
429               19  MED                    Organic disturbances and mental      0.9075      0.8728        -3.8
                                              retardation.                                                      
430               19  MED                    Psychoses......................      0.8391      0.8073        -3.8
431               19  MED                    Childhood mental disorders.....      0.6556      0.8371        27.7
432               19  MED                    Other mental disorder diagnoses      0.7363      0.7647         3.9
433               20  .....................  Alcohol/drug abuse or                0.2986      0.3053         2.2
                                              dependence, left AMA.                                             
434               20  .....................  Alc/drug abuse or depend, detox      0.7141      0.6865        -3.9
                                              or oth sympt treat with CC.                                       
435               20  .....................  Alc/drug abuse or depend, detox      0.4164      0.4015        -3.6
                                              or oth sympt treat without CC.                                    
436               20  .....................  Alc/drug dependence with             0.8183      0.8110        -0.9
                                              rehabilitation therapy.                                           
437               20  .....................  Alc/drug dependence, combined        0.7657      0.7343        -4.1
                                              rehab and detox therapy.                                          
438            .....  .....................  No longer valid................  ..........  ..........  ..........
439               21  SURG                   Skin grafts for injuries.......      1.6144      1.6391         1.5
440               21  SURG                   Wound debridements for injuries      1.7725      1.8456         4.1
441               21  SURG                   Hand procedures for injuries...      0.9294      0.9298         0.0
442               21  SURG                   Other O.R. procedures for            2.1653      2.1818         0.8
                                              injuries with CC.                                                 
443               21  SURG                   Other O.R. procedures for            0.8849      0.9116         3.0
                                              injuries without CC.                                              
444               21  MED                    Traumatic injury age >17 with        0.7312      0.7007        -4.2
                                              CC.                                                               
445               21  MED                    Traumatic injury age >17             0.4845      0.4842        -0.1
                                              without CC.                                                       
446               21  MED \1\                Traumatic injury age 0-17......      0.2894      0.2942         1.7
447               21  MED                    Allergic reactions age >17.....      0.4918      0.4927         0.2
448               21  MED                    Allergic reactions age 0-17....      0.0777      0.0968        24.6
449               21  MED                    Poisoning and toxic effects of       0.7902      0.7860        -0.5
                                              drugs age >17 with CC.                                            
450               21  MED                    Poisoning and toxic effects of       0.4274      0.4406         3.1
                                              drugs age >17 without CC.                                         
451               21  MED \1\                Poisoning and toxic effects of       0.2570      0.2613         1.7
                                              drugs age 0-17.                                                   
452               21  MED                    Complications of treatment with      0.9473      0.9476         0.0
                                              CC.                                                               
453               21  MED                    Complications of treatment           0.4822      0.4960         2.9
                                              without CC.                                                       
454               21  MED                    Other injury, poisoning and          0.8575      0.9035         5.4
                                              toxic effect diag with CC.                                        
455               21  MED                    Other injury, poisoning and          0.4467      0.4453        -0.3
                                              toxic effect diag without CC.                                     
456               22  .....................  Burns, transferred to another        1.8327      1.7396        -5.1
                                              acute care facility.                                              
457               22  MED                    Extensive burns without O.R.         1.4657      1.5860         8.2
                                              procedure.                                                        
458               22  SURG                   Nonextensive burns with skin         3.4991      3.5746         2.2
                                              graft.                                                            
459               22  SURG                   Nonextensive burns with wound        1.6538      1.5588        -5.7
                                              debridement or other O.R. proc.                                   
460               22  MED                    Nonextensive burns without O.R.      0.9547      0.9421        -1.3
                                              procedure.                                                        
461               23  SURG                   O.R. proc with diagnoses of          0.9963      1.0123         1.6
                                              other contact with health                                         
                                              services.                                                         
462               23  MED                    Rehabilitation.................      1.4298      1.4041        -1.8
463               23  MED                    Signs and symptoms with CC.....      0.7101      0.6907        -2.7
464               23  MED                    Signs and symptoms without CC..      0.5028      0.4872        -3.1
465               23  MED                    Aftercare with history of            0.5571      0.5858         5.2
                                              malignancy as secondary                                           
                                              diagnosis.                                                        
466               23  MED                    Aftercare without history of         0.5905      0.6336         7.3
                                              malignancy as secondary                                           
                                              diagnosis.                                                        
467               23  MED                    Other factors influencing            0.4588      0.4669         1.8
                                              health status.                                                    
468            .....  .....................  Extensive O.R. procedure             3.6028      3.6202         0.5
                                              unrelated to principal                                            
                                              diagnosis.                                                        
469            .....  (\2\)                  Principal diagnosis invalid as   ..........  ..........  ..........
                                              discharge diagnosis.                                              
470            .....  (\2\)                  Ungroupable....................  ..........  ..........  ..........
471                8  SURG                   Bilateral or multiple major          3.5980      3.4771        -3.4
                                              joint procs of lower extremity.                                   
472               22  SURG                   Extensive burns with O.R.           10.9989     10.2429        -6.9
                                              procedure.                                                        
473               17  .....................  Acute leukemia without major         3.5740      3.4853        -2.5
                                              O.R. procedure age >17.                                           
474            .....  .....................  No longer valid................  ..........  ..........  ..........
475                4  MED                    Respiratory system diagnosis         3.6765      3.7291         1.4
                                              with ventilator support.                                          
476            .....  SURG                   Prostatic O.R. procedure             2.2479      2.2234        -1.1
                                              unrelated to principal                                            
                                              diagnosis.                                                        
477            .....  SURG                   Nonextensive O.R. procedure          1.7266      1.7461         1.1
                                              unrelated to principal                                            
                                              diagnosis.                                                        
478                5  SURG                   Other vascular procedures with       2.2883      2.2981         0.4
                                              CC.                                                               
479                5  SURG                   Other vascular procedures            1.4080      1.4113         0.2
                                              without CC.                                                       
480            .....  SURG                   Liver transplant...............     13.9424     11.4672       -17.8
481            .....  SURG                   Bone marrow transplant.........     11.2299     11.2821         0.5
482            .....  SURG                   Tracheostomy for face, mouth         3.6578      3.5999        -1.6
                                              and neck diagnoses.                                               
483            .....  SURG                   Tracheostomy except for face,       16.0413     16.0451         0.0
                                              mouth and neck diagnoses.                                         
484               24  SURG                   Craniotomy for multiple              5.6821      5.7762         1.7
                                              significant trauma.                                               
485               24  SURG                   Limb reattachment, hip and           3.2058      3.1562        -1.5
                                              femur proc for multiple                                           
                                              significant TR.                                                   
486               24  SURG                   Other O.R. procedures for            4.7915      4.8882         2.0
                                              multiple significant trauma.                                      
487               24  MED                    Other multiple significant           2.0305      2.0229        -0.4
                                              trauma.                                                           
488               25  SURG                   HIV with extensive O.R.              4.7905      4.5078        -5.9
                                              procedure.                                                        
489               25  MED                    HIV with major related               1.8141      1.8009        -0.7
                                              condition.                                                        
490               25  MED                    HIV with or without other            1.0116      0.9952        -1.6
                                              related condition.                                                
491                8  SURG                   Major joint and limb                 1.6308      1.6579         1.7
                                              reattachment procedures of                                        
                                              upper extremity.                                                  
492               17  MED                    Chemotherapy with acute              4.0299      4.6393        15.1
                                              leukemia as secondary                                             
                                              diagnosis.                                                        
493                7  SURG                   Laparoscopic cholecystectomy         1.7100      1.7561         2.7
                                              without C.D.E. with CC.                                           
494                7  SURG                   Laparoscopic cholecystectomy         0.9169      0.9400         2.5
                                              without C.D.E. without CC.                                        
495            .....  SURG                   Lung transplant................      9.2870      9.5171         2.5
496                8  SURG                   Combined anterior/posterior      ..........      5.5214  ..........
                                              spinal fusion.                                                    
497                8  SURG                   Spinal fusion with CC..........  ..........      2.7692  ..........
498                8  SURG                   Spinal fusion without CC.......  ..........      1.6171  ..........
499                8  SURG                   Back and neck procs except       ..........      1.4827  ..........
                                              spinal fusion with CC.                                            
500                8  SURG                   Back and neck procs except       ..........      0.9708  ..........
                                              spinal fusion without CC.                                         
501                8  SURG                   Knee proc with pdx of infection  ..........      2.5660  ..........
                                              with CC.                                                          
502                8  SURG                   Knee proc with pdx of infection  ..........      1.6004  ..........
                                              without CC.                                                       
503                8  SURG                   Knee procedures without pdx of   ..........      1.2380  ..........
                                              infection.                                                        
----------------------------------------------------------------------------------------------------------------
\1\ Medicare data for low-volume DRGs have been supplemented by data for non-Medicare patients from 19 States.  
\2\ DRGs 469 and 470 contain cases that could not be assigned to valid DRGs.                                    
                                                                                                                
 Note.--Abbreviations are as follows:                                                                           


                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
aicd = automatic             D&C = dilation & curettage   gastroent =                 nutrit = nutritional      
 implantable cardioverter    debrid = debridement          gastroenteritis            OR = operating room       
 defibrillator               detox = detoxification       G.I. = gastrointestinal     pdx = principal diagnosis 
alc hepa = alcoholic         diag. = diagnosis            HIV = human                 proc = procedures         
 hepatitis                   diff = differentiated         immunodeficiency virus     sprn = sprain             
AMA = against medical        digest = digestive           HR = hour                   strn = strain             
 advice                      dis = diseases               humer = humerus             subcut = subcutaneous     
ami = anterior myocardial    disch = discharge            int = internal              surg = surgical           
 infarction                  disl = dislocation           lowleg = lower leg          syst = system             
amputat = amputation         disord = disorder            malig = malignancy          T&A = tonsillectomy and/or
cath = catheterization       endoc = endocrine            MDC = major diagnostic       adenoidectomy            
CC = complication or         ESW = extracorporeal shock    category                   TIA = transient ischemic  
 comorbidity                  wave                        med = medical                attack                   
C.D.E. = common duct         extrem = extremity           metabol = metabolic         TR = trauma               
 exploration                 fix = fixation               muscskelet =                uparm = upper arm         
cholecyst = cholecystectomy  FX = fracture                 musculoskeletal            WND = wound               
circ = circulatory                                        myeloprolif =                                         
cirr = cirrhosis                                           myeloproliferative                                   
comp = complication                                       neopl = neoplasm                                      
conn = connective                                         nonneopl = nonneoplasm                                
c.v. = cardiovascular                                                                                           
                                                                                                                
Source: Health Care Financing Administration.                                                                   

                               REFERENCES

Prospective Payment Assessment Commission. (1997, March). 
        Report and recommendations to the Secretary. 
        Washington, DC.
Prospective Payment Assessment Commission. (1997, June). 
        Medicare prospective payment and the American health 
        care system. Washington, DC.
Federal Register. Medicare program; Changes to the hospital 
        inpatient prospective payment systems and fiscal year 
        1998 rates, 62(168), pp. 45966-6140.