[Federal Register: July 31, 1998 (Volume 63, Number 147)] [Rules and Regulations] [Page 41003-41052] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr31jy98-26] [[pp. 41003-41052]] Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1999 Rates [[Continued from page 41002]] [[Page 41003]] incurred by the nonhospital site for the educational activities associated with patient care services of an approved program, subject to the redistribution and community support principles in Sec. 413.85(c). (i) The following costs are allowable direct graduate medical education costs to the extent that they are reasonable-- (A) The costs of the residents' salaries and fringe benefits (including travel and lodging expenses where applicable). (B) The portion of teaching physicians' salaries and fringe benefits that are related to the time spent teaching and supervising residents. (C) Facility overhead costs that are allocated to direct graduate medical education. (ii) The following costs are not allowable graduate medical education costs-- (A) Costs associated with training, but not related to patient care services. (B) Normal operating and capital-related costs. (C) The marginal increase in patient care costs that the RHC or FQHC experiences as a result of having an approved program. (D) The costs associated with activities described in Sec. 413.85(d) of this chapter. (7) Payment is equal to the product of-- (i) The RHC's or the FQHC's allowable direct graduate medical education costs; and (ii) Medicare's share, which is equal to the ratio of Medicare visits to the total number of visits (as defined in Sec. 405.2463). (8) Direct graduate medical education payments to RHCs and FQHCs made under this section are made from the Federal Supplementary Medical Insurance Trust Fund. B. Part 412 is amended as set forth below: PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES 1. The authority citation for part 412 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1895hh). Subpart A--General Provisions 2. Section 412.4 is revised to read as follows: Sec. 412.4 Discharges and transfers. (a) Discharges. Subject to the provisions of paragraphs (b) and (c) of this section, a hospital inpatient is considered discharged from a hospital paid under the prospective payment system when-- (1) The patient is formally released from the hospital; or (2) The patient dies in the hospital. (b) Transfer--Basic rule. A discharge of a hospital inpatient is considered to be a transfer for purposes of payment under this part if the discharge is made under any of the following circumstances: (1) From a hospital to the care of another hospital that is-- (i) Paid under the prospective payment system; or (ii) Excluded from being paid under the prospective payment system because of participation in an approved Statewide cost control program as described in subpart C of part 403 of this chapter. (2) From one inpatient area or unit of a hospital to another inpatient area or unit of the hospital that is paid under the prospective payment system. (c) Transfers--Special 10 DRG rule. For discharges occurring on or after October 1, 1998, a discharge of a hospital inpatient is considered to be a transfer for purposes of this part when the patient's discharge is assigned, as described in Sec. 412.60(c), to one of the qualifying diagnosis-related groups (DRGs) listed in paragraph (d) of this section and the discharge is made under any of the following circumstances-- (1) To a hospital or distinct part hospital unit excluded from the prospective payment system under subpart B of this part. (2) To a skilled nursing facility. (3) To home under a written plan of care for the provision of home health services from a home health agency and those services begin within 3 days after the date of discharge. (d) Qualifying DRGs. The qualifying DRGs for purposes of paragraph (c) of this section are DRGs 14, 113, 209, 210, 211, 236, 263, 264, 429, and 483. (e) Payment for discharges. The hospital discharging an inpatient (under paragraph (a) of this section) is paid in full, in accordance with Sec. 412.2(b). (f) Payment for transfers. (1) General rule. Except as provided in paragraph (f)(2) or (f)(3) of this section, a hospital that transfers an inpatient under the circumstances described in paragraph (b) or (c) of this section, is paid a graduated per diem rate for each day of the patient's stay in that hospital, not to exceed the amount that would have been paid under subparts D and M of this part if the patient had been discharged to another setting. The per diem rate is determined by dividing the appropriate prospective payment rate (as determined under subparts D and M of this part) by the geometric mean length of stay for the specific DRG to which the case is assigned. Payment is graduated by paying twice the per diem amount for the first day of the stay, and the per diem amount for each subsequent day, up to the full DRG payment. (2) Special rule for DRGs 209, 210, and 211. A hospital that transfers an inpatient under the circumstances described in paragraph (c) of this section and the transfer is assigned to DRGs 209, 210 or 211 is paid as follows: (i) 50 percent of the appropriate prospective payment rate (as determined under subparts D and M of this part) for the first day of the stay; and (ii) 50 percent of the amount calculated under paragraph (f)(1) of this section for each day of the stay, up to the full DRG payment. (3) Transfer assigned to DRG 385. If a transfer is classified into DRG 385 (Neonates, died or transferred) the transferring hospital is paid in accordance with Sec. 412.2(e). (4) Outliers. Effective with discharges occurring on or after October 1, 1984, a transferring hospital may qualify for an additional payment for extraordinarily high-cost cases that meet the criteria for cost outliers as described in subpart F of this part. Subpart F--Payment for Outlier Cases 3. In Sec. 412.80, paragraph (b) is revised to read as follows: Sec. 412.80 General provisions * * * * * (b) Outlier cases in transferring hospitals. HCFA provides cost outlier payments to a transferring hospital for cases paid in accordance with Sec. 412.4(f), if the hospital's charges for covered services furnished to the beneficiary, adjusted to costs by applying cost-to-charge ratios as described in Sec. 412.84(h), exceed the DRG payment for the case plus a fixed dollar amount (adjusted for geographic variation in costs) as specified by HCFA, divided by the geometric mean length of stay for the DRG, and multiplied by an applicable factor determined as follows: (1) For transfer cases paid in accordance with Sec. 412.4(f)(1), the applicable factor is equal to the length of stay plus 1 day. (2) For transfer cases paid in accordance with Sec. 412.4(f)(2), the applicable factor is equal to 0.5 plus the product of the length of stay plus 1 day multiplied by 0.5. * * * * * [[Page 41004]] Subpart G--Special Treatment of Certain Facilities Under the Prospective Payment System for Inpatient Operating Costs Sec. 412.105 [Amended] 4. In Sec. 412.105(f)(1)(ii)(C), the reference to ``413.86(f)(1)(iii)'' is revised to read ``413.86(f)(4).'' 5. In Sec. 412.106, paragraph (b)(4) is revised to read as follows: Sec. 412.106 Special treatment: Hospitals that serve a disproportionate share of low-income patients. * * * * * (b) * * * (4) Second computation. The fiscal intermediary determines, for the same cost reporting period used for the first computation, the number of the hospital's patient days of service for which patients were eligible for Medicaid but not entitled to Medicare Part A, and divides that number by the total number of patient days in the same period. For purposes of this second computation, the following requirements apply: (i) A patient is deemed eligible for Medicaid on a given day if the patient is eligible for medical assistance under an approved State Medicaid plan on such day, regardless of whether particular items or services were covered or paid under the State plan. (ii) The hospital has the burden of furnishing data adequate to prove eligibility for each Medicaid patient day claimed under this paragraph, and of verifying with the State that a patient was eligible for Medicaid during each claimed patient hospital day. * * * * * Subpart M--Prospective Payment System for Inpatient Hospital Capital Costs 6. In Sec. 412.322, paragraph (a)(3) is revised to read as follows: Sec. 412.322 Indirect medical education adjustment factor. (a) * * * (3) The measurement of teaching activity is the ratio of the hospital's full-time equivalent residents to average daily census. This ratio cannot exceed 1.5. * * * * * 7. In Sec. 412.331, paragraphs (a) and (b) are redesignated as paragraphs (b) and (c) respectively, a new paragraph (a) is added and the first sentence of the introductory text of newly redesignated paragraph (b) is revised to read as follows: Sec. 412.331 Determining hospital-specific rates in cases of hospital merger, consolidation, or dissolution. (a) New hospital merger or consolidation. If, after a new hospital accepts its first patient but before the end of its base year, it merges with one or more existing hospitals, and two or more separately located hospital campuses are maintained, the hospital-specific rate and payment determination for the merged entity are determined as follows-- (1) Post-merger base year payment methodology. The new campus is paid based on reasonable costs until the end of its base year. The existing campus remains on its previous payment methodology until the end of the new campus' base year. Effective with the first cost reporting period beginning after the the end of the new campus' base year, the intermediary determines a hospital-specific rate applicable to the new campus in accordance with Sec. 412.328, and then determines a revised hospital-specific rate for the merged entity in accordance with paragraph (a)(2) of this section. (2) Revised hospital-specific rate. Using each hospital's base period data, the intermediary determines a combined average discharge- weighted hospital-specific rate. (3) Post-base year payment determination. To determine the applicable payment methodology under Sec. 412.336 and for payment purposes under Sec. 412.340 or Sec. 412.344, the discharge-weighted hospital-specific rate determined by the intermediary is compared to the Federal rate. The revised payment methodology is effective on the first day of the cost reporting period beginning after the end of the new campus' base year. (b) Existing hospital merger or consolidation. If, after the base year, two or more hospitals merge or consolidate into one hospital as provided for under Sec. 413.134(k) of this chapter and the provisions of paragraph (a) of this section do not apply, the intermediary determines a revised hospital-specific rate applicable to the combined facility under Sec. 412.328, which is effective beginning with the date of merger or consolidation. * * * * * * * * C. Part 413 is amended as set forth below: PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED PAYMENT FOR SKILLED NURSING FACILITIES 1. The authority citation for part 413 is revised to read as follows: Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i) and (n), 1861(v), 1871, 1881, 1883, and 1866 of the Social Security Act (42 U.S.C. 1302, 1395f(b), 1395g, 1395l, 1395l(a), (i) and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww). Subpart C--Limits on Cost Reimbursement 2. In Sec. 413.40, paragraph (c)(4)(iv) is redesignated as paragraph (c)(4)(v), a new paragraph (c)(4)(iv) is added, and paragraph (g)(1) is revised to read as follows: Sec. 413.40 Ceiling on the rate of increase in hospital inpatient costs. * * * * * (c) * * * (4) * * * (iv) For purposes of the limits on target amounts established under paragraph (c)(4)(iii) of this section, each hospital or unit that qualifies for exclusion as a member of only one class of excluded facility (psychiatric hospital or unit, rehabilitation hospital or unit, or long-term care hospital) will be subject to the limit applicable to that class. If a hospital or unit qualifies to be classified in more than one way under the exclusion criteria in subpart B of part 412 of this chapter, the hospital's or unit's target amount may not exceed the lowest applicable limit. * * * * * (g) Adjustments--(1) General rule. HCFA may adjust the amount of the operating costs considered in establishing the rate-of-increase ceiling for one or more cost reporting periods, including both periods subject to the ceiling and the hospital's base period, under the circumstances specified in paragraphs (g)(2), (g)(3), and (g)(4) of this section. When an adjustment is requested by the hospital, HCFA makes an adjustment only to the extent that the hospital's operating costs are reasonable, attributable to the circumstances specified separately identified by the hospital, and verified by the intermediary. HCFA may grant an adjustment requested by the hospital only if the hospital's operating costs exceed the rate-of-increase ceiling imposed under this section. In the case of a psychiatric hospital or unit, [[Page 41005]] rehabilitation hospital or unit, or long-term care hospital, the amount of payment made to a hospital after an adjustment under paragraph (g)(3) of this section may not exceed the applicable limit based on 75th percentile of the target amounts for hospitals of the same class as described in Sec. 413.40(c)(4)(iii). * * * * * Subpart F--Specific Categories of Costs 3. In Sec. 413.80, paragraph (h) is redesignated as paragraph (i), and a new paragraph (h) is added to read as follows: Sec. 413.80 Bad debts, charity, and courtesy allowances. * * * * * (h) Limitations on bad debts. In determining reasonable costs for hospitals, the amount of bad debts otherwise treated as allowable costs (as defined in paragraph (e) of this section) is reduced-- (1) For cost reporting periods beginning during fiscal year 1998, by 25 percent; (2) For cost reporting periods beginning during fiscal year 1999, by 40 percent; and (3) For cost reporting periods beginning during a subsequent fiscal year, by 45 percent. * * * * * 4. In Sec. 413.85, a new paragraph (h) is added to read as follows: Sec. 413.85 Cost of educational activities. * * * * * (h) Medicare+Choice organizations. (1) Effective January 1, 1999, Medicare+Choice organizations may receive direct graduate medical education payments for the time that residents spend in nonhospital provider settings such as freestanding clinics, nursing homes, and physicians' offices in connection with approved programs. (2) Medicare+Choice organizations may receive direct graduate medical education payments if all of the following conditions are met: (i) The resident spends his or her time in patient care activities. (ii) The Medicare+Choice organization incurs ``all or substantially all'' of the costs for the training program in the nonhospital setting as defined in Sec. 413.86(b). (iii) There is a written agreement between the Medicare+Choice organization and the nonhospital site that indicates the Medicare+Choice organization will incur the costs of the resident's salary and fringe benefits and provide reasonable compensation to the nonhospital site for teaching activities. (3) A Medicare+Choice organization's allowable direct graduate medical education costs, subject to the redistribution and community support principles in Sec. 413.85(c), consist of-- (i) Residents' salaries and fringe benefits (including travel and lodging where applicable); and (ii) Reasonable compensation to the nonhospital site for teaching activities related to the training of medical residents. (4) The direct graduate medical education payment is equal to the product of-- (i) The lower of-- (A) The Medicare+Choice organization's allowable direct graduate medical education costs per resident as defined in paragraph (h)(3) of this section; or (B) The national average per resident amount; and (ii) Medicare's share, which is equal to the ratio of the number of Medicare beneficiaries enrolled to the total number of individuals enrolled in the Medicare+Choice organization. (5) Direct graduate medical education payments made to Medicare+Choice organizations under this section are made from the Federal Supplementary Medical Insurance Trust Fund. 5. In Sec. 413.86, the introductory text of paragraph (b) is republished, a new definition in alphabetical order is added to paragraph (b), paragraphs (i) and (j) are redesignated as paragraphs (j)and (k) respectively, paragraph (f)(2) is redesignated as new paragraph (i), paragraphs (f)(2)(i) through (vii) are redesignated as paragraphs (i)(1) through (7) respectively, the introductory text of paragraph (f)(1) is redesignated as the introductory text of paragraph (f), paragraphs (f)(1)(i) through (iii) are redesignated as paragraphs (f)(1) through (3) respectively, paragraphs (f)(1)(iii)(A) and (B) are redesignated as (f)(3)(i) and (ii) respectively, new paragraphs (f)(2) and (f)(3) introductory text are revised, and a new paragraph (f)(4) is added to read as follows: Sec. 413.86 Direct graduate medical education payments. * * * * * (b) Definitions. For purposes of this section, the following definitions apply: * * * * * All or substantially all of the costs for the training program in the nonhospital setting means the residents' salaries and fringe benefits (including travel and lodging where applicable) and the portion of the cost of teaching physicians' salaries and fringe benefits attributable to direct graduate medical education. * * * * * (f) * * * (2) No individual may be counted as more than one FTE. Except as provided in paragraphs (f)(3) and (4) of this section, if a resident spends time in more than one hospital or, in a nonprovider setting, the resident counts as partial FTE based on the proportion of time worked at the hospital to the total time worked. A part-time resident counts as a partial FTE based on the proportion of allowable time worked compared to the total time necessary to fill a full-time internship or residency slot. (3) On or after July, 1, 1987 and for portions of cost reporting periods occurring before January 1, 1999, the time residents spend in nonprovider settings such as freestanding clinics, nursing homes, and physicians' offices in connection with approved programs is not excluded in determining the number of FTE residents in the calculation of a hospital's resident count if the following conditions are met-- * * * * * (4) For portions of cost reporting periods occurring on or after January 1, 1999, the time residents spend in nonprovider settings such as freestanding clinics, nursing homes, and physicians' offices in connection with approved programs may be included in determining the number of FTE residents in the calculation of a hospital's resident count if the following conditions are met-- (i) The resident spends his or her time in patient care activities. (ii) The written agreement between the hospital and the nonhospital site must indicate that the hospital will incur the cost of the resident's salary and fringe benefits while the resident is training in the nonhospital site and the hospital is providing reasonable compensation to the nonhospital site for supervisory teaching activities. The agreement must indicate the compensation the hospital is providing to the nonhospital site for supervisory teaching activities. * * * * * (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare--Hospital Insurance; and Program No. 93.774, Medicare-- Supplementary Medical Insurance) [[Page 41006]] Dated: July 23, 1998. Nancy-Ann Min DeParle, Administrator, Health Care Financing Administration. Dated: July 27, 1998. Donna E. Shalala, Secretary. [Editorial Note: The following addendum and appendixes will not appear in the Code of Federal Regulations.] Addendum--Schedule of Standardized Amounts Effective With Discharges Occurring On or After October 1, 1998, Payment Amounts for Blood Clotting Factor Effective for Discharges Occurring On or After October 1, 1998, and Update Factors and Rate-of-Increase Percentages Effective With Cost Reporting Periods Beginning On or After October 1, 1998 I. Summary and Background In this addendum, we set forth the amounts and factors for determining prospective payment rates for Medicare inpatient operating costs and Medicare inpatient capital-related costs. In addition, we set forth the updated add-on payment amounts for blood clotting factors. We also set forth rate-of-increase percentages for updating the target amounts for hospitals and hospital units excluded from the prospective payment system. For discharges occurring on or after October 1, 1998, except for sole community hospitals, Medicare-dependent, small rural hospitals, and hospitals located in Puerto Rico, each hospital's payment per discharge under the prospective payment system will be based on 100 percent of the Federal national rate. Sole community hospitals are paid based on whichever of the following rates yield the greatest aggregate payment: the Federal national rate, the updated hospital-specific rate based on FY 1982 cost per discharge, or the updated hospital-specific rate based on FY 1987 cost per discharge. Medicare-dependent, small rural hospitals are paid based on the Federal national rate or, if higher, the Federal national rate plus 50 percent of the difference between the Federal national rate and the updated hospital-specific rate based on FY 1982 or FY 1987 cost per discharge, whichever is higher. For hospitals in Puerto Rico, the payment per discharge is based on the sum of 50 percent of a Puerto Rico rate and 50 percent of a national rate. As discussed below in section II, we are making changes in the determination of the prospective payment rates for Medicare inpatient operating costs. The changes, to be applied prospectively, affect the calculation of the Federal rates. In section III, we are updating the payments per unit for blood clotting factor provided to hospital inpatients who have hemophilia. In section IV of this addendum, we discuss our changes for determining the prospective payment rates for Medicare inpatient capital-related costs. Section V of this addendum sets forth our changes for determining the rate-of-increase limits for hospitals excluded from the prospective payment system. The tables to which we refer in the preamble to this final rule are presented at the end of this addendum in section VI. II. Changes to Prospective Payment Rates For Inpatient Operating Costs for FY 1999 The basic methodology for determining prospective payment rates for inpatient operating costs is set forth at Sec. 412.63 for hospitals located outside of Puerto Rico. The basic methodology for determining the prospective payment rates for inpatient operating costs for hospitals located in Puerto Rico is set forth at Secs. 412.210 and 412.212. Below, we discuss the factors used for determining the prospective payment rates. The Federal and Puerto Rico rate changes will be effective with discharges occurring on or after October 1, 1998. As required by section 1886(d)(4)(C) of the Act, we must also adjust the DRG classifications and weighting factors for discharges in FY 1999. In summary, the standardized amounts set forth in Tables 1A and 1C of section VI of this addendum reflect-- Updates of 0.5 percent for all areas (that is, the market basket percentage increase of 2.4 percent minus 1.9 percentage points); An adjustment to ensure budget neutrality as provided for in sections 1886(d)(4)(C)(iii) and (d)(3)(E) of the Act by applying new budget neutrality adjustment factors to the large urban and other standardized amounts; An adjustment to ensure budget neutrality as provided for in section 1886(d)(8)(D) of the Act by removing the FY 1998 budget neutrality factor and applying a revised factor; and An adjustment to apply the revised outlier offset by removing the FY 1998 outlier offset and applying a new offset. The standardized amounts set forth in Tables 1E and 1F of section VI of this addendum, which apply to ``temporary relief'' hospitals (see 62 FR 46001 for a discussion of these hospitals), reflect updates of 0.8 percent for all areas but otherwise reflect the same adjustments as the national standardized amounts. As described in Sec. 412.107, these hospitals receive an update that is 0.3 percentage points more than the update factor applicable to all other prospective payment hospitals for FY 1999. A. Calculation of Adjusted Standardized Amounts 1. Standardization of Base-Year Costs or Target Amounts Section 1886(d)(2)(A) of the Act required the establishment of base-year cost data containing allowable operating costs per discharge of inpatient hospital services for each hospital. The preamble to the September 1, 1983 interim final rule (48 FR 39763) contains a detailed explanation of how base-year cost data were established in the initial development of standardized amounts for the prospective payment system and how they are used in computing the Federal rates. Section 1886(d)(9)(B)(i) of the Act required that Medicare target amounts be determined for each hospital located in Puerto Rico for its cost reporting period beginning in FY 1987. The September 1, 1987 final rule contains a detailed explanation of how the target amounts were determined and how they are used in computing the Puerto Rico rates (52 FR 33043, 33066). The standardized amounts are based on per discharge averages of adjusted hospital costs from a base period or, for Puerto Rico, adjusted target amounts from a base period, updated and otherwise adjusted in accordance with the provisions of section 1886(d) of the Act. Sections 1886(d)(2) (B) and (C) of the Act required that the base- year per discharge costs be updated for FY 1984 and then standardized in order to remove from the cost data the effects of certain sources of variation in cost among hospitals. These include case mix, differences in area wage levels, cost of living adjustments for Alaska and Hawaii, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients. Under sections 1886(d)(2)(H) and (d)(3)(E) of the Act, in making payments under the prospective payment system, the Secretary estimates from time to time the proportion of costs that are wages and wage- related costs. Since October 1, 1997, when the market basket was last revised, we have considered 71.1 percent of costs to be labor-related for purposes of the prospective payment system. For the Puerto Rico standardized amounts, the labor share is 71.3 percent. We are revising the discharge-weighted national standardized amount for Puerto Rico to reflect the proportion of discharges in large urban and other areas from the FY 1997 MedPAR file. [[Page 41007]] 2. Computing Large Urban and Other Area Averages Sections 1886(d)(2)(D) and (3) of the Act require the Secretary to compute two average standardized amounts for discharges occurring in a fiscal year: one for hospitals located in large urban areas and one for hospitals located in other areas. In addition, under sections 1886(d)(9)(B)(iii) and (C)(i) of the Act, the average standardized amount per discharge must be determined for hospitals located in urban and other areas in Puerto Rico. Hospitals in Puerto Rico are paid a blend of 50 percent of the applicable Puerto Rico standardized amount and 50 percent of a national standardized payment amount. Section 1886(d)(2)(D) of the Act defines ``urban area'' as those areas within a Metropolitan Statistical Area (MSA). A ``large urban area'' is defined as an urban area with a population of more than 1,000,000. In addition, section 4009(i) of Public Law 100-203 provides that a New England County Metropolitan Area (NECMA) with a population of more than 970,000 is classified as a large urban area. As required by section 1886(d)(2)(D) of the Act, population size is determined by the Secretary based on the latest population data published by the Bureau of the Census. Urban areas that do not meet the definition of a ``large urban area'' are referred to as ``other urban areas.'' Areas that are not included in MSAs are considered ``rural areas'' under section 1886(d)(2)(D) of the Act. Payment for discharges from hospitals located in large urban areas will be based on the large urban standardized amount. Payment for discharges from hospitals located in other urban and rural areas will be based on the other standardized amount. Based on 1997 population estimates published by the Bureau of the Census, 61 areas meet the criteria to be defined as large urban areas for FY 1999. These areas are identified by a footnote in Table 4A. We note that on June 23, 1998, the Office of Management and Budget announced the designation of the Missoula, Montana MSA. We have incorporated this change in this final rule. 3. Updating the Average Standardized Amounts Under section 1886(d)(3)(A) of the Act, we update the area average standardized amounts each year. In accordance with section 1886(d)(3)(A)(iv) of the Act, we are updating the large urban and the other areas average standardized amounts for FY 1999 using the applicable percentage increases specified in section 1886(b)(3)(B)(i) of the Act. Section 1886(b)(3)(B)(i)(XIV) of the Act specifies that, for hospitals in all areas, the update factor for the standardized amounts for FY 1999 is equal to the market basket percentage increase minus 1.9 percentage points. The ``temporary relief'' provision under section 4401 of Public Law 105-33 provides for an update equal to the market basket percentage increase minus 1.6 percentage points for hospitals that are not Medicare-dependent, small rural hospitals, that receive no IME or DSH payments, that are located in a state in which aggregate Medicare operating payments for such hospitals were less than their aggregate allowable Medicare operating costs for their cost reporting periods beginning during FY 1995, and whose Medicare operating payments are less than their allowable Medicare operating costs for their cost reporting period beginning during FY 1999. The percentage change in the market basket reflects the average change in the price of goods and services purchased by hospitals to furnish inpatient care. The most recent forecast of the hospital market basket increase for FY 1999 is 2.4 percent. Thus, for FY 1999, the update to the average standardized amounts equals 0.5 percent (0.8 percent for those hospitals qualifying under the ``temporary relief'' provision of Public Law 105-33). As in the past, we are adjusting the FY 1998 standardized amounts to remove the effects of the FY 1998 geographic reclassifications and outlier payments before applying the FY 1999 updates. That is, we are increasing the standardized amounts to restore the reductions that were made for the effects of geographic reclassification and outliers. We then apply the new offsets to the standardized amounts for outliers and geographic reclassifications for FY 1999. Although the update factor for FY 1999 is set by law, we are required by section 1886(e)(4)(A) of the Act to report to Congress on our final recommendation of update factors for FY 1999 for both prospective payment hospitals and hospitals excluded from the prospective payment system. We have included our final recommendations in Appendix C to this final rule. 4. Other Adjustments to the Average Standardized Amounts a. Recalibration of DRG Weights and Updated Wage Index--Budget Neutrality Adjustment. Section 1886(d)(4)(C)(iii) of the Act specifies that beginning in FY 1991, the annual DRG reclassification and recalibration of the relative weights must be made in a manner that ensures that aggregate payments to hospitals are not affected. As discussed in section II of the preamble, we normalized the recalibrated DRG weights by an adjustment factor, so that the average case weight after recalibration is equal to the average case weight prior to recalibration. Section 1886(d)(3)(E) of the Act specifies that the hospital wage index must be updated on an annual basis beginning October 1, 1993. This provision also requires that any updates or adjustments to the wage index must be made in a manner that ensures that aggregate payments to hospitals are not affected by the change in the wage index. To comply with the requirement of section 1886(d)(4)(C)(iii) of the Act that DRG reclassification and recalibration of the relative weights be budget neutral, and the requirement in section 1886(d)(3)(E) of the Act that the updated wage index be budget neutral, and the requirement in section 4410 of Public law 105-33 that application of the floor on the wage index be budget neutral, we used historical discharge data to simulate payments and compared aggregate payments using the FY 1998 relative weights and wage index to aggregate payments using the FY 1999 relative weights and wage index. The same methodology was used for the FY 1998 budget neutrality adjustment. (See the discussion in the September 1, 1992 final rule (57 FR 39832).) Based on this comparison, we computed a budget neutrality adjustment factor equal to 0.999006. We adjust the Puerto Rico-specific standardized amounts for the effect of DRG reclassification and recalibration. We computed a budget neutrality adjustment factor for Puerto Rico-specific standardized amounts equal to 0.998912. These budget neutrality adjustment factors are applied to the standardized amounts without removing the effects of the FY 1998 budget neutrality adjustments. We do not remove the prior budget neutrality adjustment because estimated aggregate payments after the changes in the DRG relative weights and wage index should equal estimated aggregate payments prior to the changes. If we removed the prior year adjustment, we would not satisfy this condition. In addition, we will continue to apply the same FY 1999 adjustment factor to the hospital-specific rates that are effective for cost reporting periods beginning on or after October 1, 1998, in [[Page 41008]] order to ensure that we meet the statutory requirement that aggregate payments neither increase nor decrease as a result of the implementation of the FY 1999 DRG weights and updated wage index. (See the discussion in the September 4, 1990 final rule (55 FR 36073).) b. Reclassified hospitals--budget neutrality adjustment. Section 1886(d)(8)(B) of the Act provides that certain rural hospitals are deemed urban effective with discharges occurring on or after October 1, 1988. In addition, section 1886(d)(10) of the Act provides for the reclassification of hospitals based on determinations by the Medicare Geographic Classification Review Board (MGCRB). Under section 1886(d)(10) of the Act, a hospital may be reclassified for purposes of the standardized amount or the wage index, or both. Under section 1886(d)(8)(D) of the Act, the Secretary is required to adjust the standardized amounts so as to ensure that total aggregate payments under the prospective payment system after implementation of the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the aggregate prospective payments that would have been made absent these provisions. To calculate this budget neutrality factor, we used historical discharge data to simulate payments, and compared total prospective payments (including IME and DSH payments) prior to any reclassifications to total prospective payments after reclassifications. In the proposed rule, we applied an adjustment factor of 0.994019 to ensure that the effects of reclassification are budget neutral. The final budget neutrality adjustment factor is 0.993433. The adjustment factor is applied to the standardized amounts after removing the effects of the FY 1998 budget neutrality adjustment factor. We note that the proposed FY 1999 adjustment reflected wage index and standardized amount reclassifications approved by the MGCRB or the Administrator as of February 27, 1998. The effects of any additional reclassification changes resulting from appeals and reviews of the MGCRB decisions for FY 1999 or from a hospital's request for the withdrawal of a reclassification request are reflected in the final budget neutrality adjustment that is required under section 1886(d)(8)(D) of the Act and that is published in this final rule. c. Outliers. Section 1886(d)(5)(A) of the Act provides for payments in addition to the basic prospective payments for ``outlier'' cases, cases involving extraordinarily high costs (cost outliers). Section 1886(d)(3)(B) of the Act requires the Secretary to adjust both the large urban and other area national standardized amounts by the same factor to account for the estimated proportion of total DRG payments made to outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary to adjust the large urban and other standardized amounts applicable to hospitals in Puerto Rico to account for the estimated proportion of total DRG payments made to outlier cases. Furthermore, under section 1886(d)(5)(A)(iv) of the Act, outlier payments for any year must be projected to be not less than 5 percent nor more than 6 percent of total payments based on DRG prospective payment rates. i. FY 1999 Outlier Thresholds. For FY 1998, the fixed loss cost outlier threshold is equal to the prospective payment for the DRG plus the IME and DSH payments plus $11,050 ($10,080 for hospitals that have not yet entered the prospective payment system for capital-related costs). The marginal cost factor for cost outliers (the percent of costs paid after costs for the case exceed the threshold) is 80 percent. We applied an outlier adjustment to the FY 1998 standardized amounts of 0.948840 for the large urban and other areas rates and 0.9382 for the capital Federal rate. We proposed to establish a fixed loss cost outlier threshold for FY 1999 equal to the prospective payment rate for the DRG plus the IME and DSH payments plus $11,350 ($10,355 for hospitals that have not yet entered the prospective payment system for capital-related costs). In addition, we proposed to maintain the marginal cost factor for cost outliers at 80 percent. In setting the final FY 1999 outlier thresholds, we used updated data and a revised cost inflation factor. In this final rule, we are establishing a fixed loss cost outlier threshold for FY 1999 equal to the prospective payment rate for the DRG plus IME and DSH payments plus $11,100 ($10,129 for hospitals that have not yet entered the prospective payment system for capital-related costs). In addition, we are maintaining the marginal cost factor for cost outliers at 80 percent. In FY 1994, we began using a cost inflation factor rather than a charge inflation factor to update billed charges for purposes of estimating outlier payments. This refinement was made to improve our estimation methodology. For FY 1998, we used a cost inflation factor of minus 2.005 percent (a cost per case decrease of 2.005 percent). In the proposed rule, based on data then available, we used a cost inflation factor of minus 1.831 percent to set outlier thresholds for FY 1999. Based on the most recent data available, we are using a cost inflation factor of minus 1.724 percent to set the final FY 1999 outlier thresholds. ii. Other changes concerning outliers. In accordance with section 1886(d)(5)(A)(iv) of the Act, we calculated outlier thresholds so that outlier payments are projected to equal 5.1 percent of total payments based on DRG prospective payment rates. In accordance with section 1886(d)(3)(E), we reduced the FY 1999 standardized amounts by the same percentage to account for the projected proportion of payments paid to outliers. As stated in the September 1, 1993 final rule (58 FR 46348), we establish outlier thresholds that are applicable to both inpatient operating costs and inpatient capital-related costs. When we modeled the combined operating and capital outlier payments, we found that using a common set of thresholds resulted in a higher percentage of outlier payments for capital-related costs than for operating costs. We project that the thresholds for FY 1999 will result in outlier payments equal to 5.1 percent of operating DRG payments and 6.1 percent of capital payments based on the Federal rate. The proposed outlier adjustment factors applied to the standardized amounts for FY 1999 were as follows: ------------------------------------------------------------------------ Operating Capital standardized federal amounts rate ------------------------------------------------------------------------ National....................................... 0.948819 0.9378 Puerto Rico.................................... 0.972962 0.9626 ------------------------------------------------------------------------ The final outlier adjustment factors applied to the standardized amounts for FY 1999 are as follows: ------------------------------------------------------------------------ Operating Capital standardized federal amounts rate ------------------------------------------------------------------------ National....................................... 0.948740 0.9392 Puerto Rico.................................... 0.972959 0.9634 ------------------------------------------------------------------------ As in the proposed rule, we apply the outlier adjustment factors after removing the effects of the FY 1998 outlier adjustment factors on the standardized amounts. Table 8A in section VI of this addendum contains the updated Statewide average operating cost-to-charge ratios for urban hospitals and for rural hospitals to be used in calculating cost outlier payments for those hospitals for which the intermediary is unable to compute a reasonable hospital-specific cost-to-charge ratio. These Statewide [[Page 41009]] average ratios would replace the ratios published in the August 29, 1997 final rule with comment period (62 FR 46113), effective October 1, 1998. Table 8B contains comparable Statewide average capital cost-to- charge ratios. These average ratios would be used to calculate cost outlier payments for those hospitals for which the intermediary computes operating cost-to-charge ratios lower than 0.217484 or greater than 1.27282 and capital cost-to-charge ratios lower than 0.01313 or greater than 0.17490. This range represents 3.0 standard deviations (plus or minus) from the mean of the log distribution of cost-to-charge ratios for all hospitals. We note that the cost-to-charge ratios in Tables 8A and 8B will be used during FY 1999 when hospital-specific cost-to-charge ratios based on the latest settled cost report are either not available or outside the three standard deviations range. iii. FY 1997 and FY 1998 outlier payments. In the August 29, 1997 final rule with comment period (62 FR 46041), we stated that, based on available data, we estimated that actual FY 1997 outlier payments would be approximately 4.8 percent of actual total DRG payments. This was computed by simulating payments using actual FY 1996 bill data available at the time. That is, the estimate of actual outlier payments did not reflect actual FY 1997 bills but instead reflected the application of FY 1997 rates and policies to available FY 1996 bills. Our current estimate, using available FY 1997 bills, is that actual outlier payments for FY 1997 were approximately 5.5 percent of actual total DRG payments. We note that the MedPAR file for FY 1997 discharges continues to be updated. We currently estimate that actual outlier payments for FY 1998 will be approximately 5.4 percent of actual total DRG payments, slightly higher than the 5.1 percent we projected in setting outlier policies for FY 1998. This estimate is based on simulations using the March 1998 update of the provider-specific file and the March 1998 update of the FY 1997 MedPAR file (discharge data for FY 1997 bills). We used these data to calculate an estimate of the actual outlier percentage for FY 1998 by applying FY 1998 rates and policies to available FY 1997 bills. We received one comment on outliers, which commended us for improving our outlier estimation methodology. 5. FY 1999 Standardized Amounts The adjusted standardized amounts are divided into labor and nonlabor portions. Table 1A (Table 1E for ``temporary relief'' hospitals) contains the two national standardized amounts that are applicable to all hospitals, except for hospitals in Puerto Rico. Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of the Puerto Rico payment rate is based on the discharge-weighted average of the national large urban standardized amount and the national other standardized amount (as set forth in Table 1A and 1E). The labor and nonlabor portions of the national average standardized amounts for Puerto Rico hospitals are set forth in Table 1C (Table 1F for ``temporary relief'' hospitals). These tables also include the Puerto Rico standardized amounts. B. Adjustments for Area Wage Levels and Cost of Living Tables 1A, 1C, 1E and 1F, as set forth in section VI of this addendum, contain the labor-related and nonlabor-related shares used to calculate the prospective payment rates for hospitals located in the 50 States, the District of Columbia, and Puerto Rico. This section addresses two types of adjustments to the standardized amounts that are made in determining the prospective payment rates as described in this addendum. 1. Adjustment for Area Wage Levels Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require that an adjustment be made to the labor-related portion of the prospective payment rates to account for area differences in hospital wage levels. This adjustment is made by multiplying the labor-related portion of the adjusted standardized amounts by the appropriate wage index for the area in which the hospital is located. In section III of the preamble, we discuss certain revisions we are making to the wage index. The wage index is set forth in Tables 4A through 4F of this addendum. 2. Adjustment for Cost of Living in Alaska and Hawaii Section 1886(d)(5)(H) of the Act authorizes an adjustment to take into account the unique circumstances of hospitals in Alaska and Hawaii. Higher labor-related costs for these two States are taken into account in the adjustment for area wages described above. For FY 1999, we are adjusting the payments for hospitals in Alaska and Hawaii by multiplying the nonlabor portion of the standardized amounts by the appropriate adjustment factor contained in the table below. Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii Hospitals ------------------------------------------------------------------------ ------------------------------------------------------------------------ Alaska--All areas............................................. 1.25 Hawaii: ........ County of Honolulu.......................................... 1.225 County of Hawaii............................................ 1.15 County of Kauai............................................. 1.225 County of Maui.............................................. 1.225 County of Kalawao........................................... 1.225 ------------------------------------------------------------------------ (The above factors are based on data obtained from the U.S. Office of Personnel Management.) C. DRG Relative Weights As discussed in section II of the preamble, we have developed a classification system for all hospital discharges, assigning them into DRGs, and have developed relative weights for each DRG that reflect the resource utilization of cases in each DRG relative to Medicare cases in other DRGs. Table 5 of section VI of this addendum contains the relative weights that we will use for discharges occurring in FY 1999. These factors have been recalibrated as explained in section II.C of the preamble. D. Calculation of Prospective Payment Rates for FY 1999 General Formula for Calculation of Prospective Payment Rates for FY 1999 Prospective payment rate for all hospitals located outside of Puerto Rico except sole community hospitals and Medicare-dependent, small rural hospitals = Federal rate. Prospective payment rate for sole community hospitals = Whichever of the following rates yields the greatest aggregate payment: 100 percent of the Federal rate, 100 percent of the updated FY 1982 hospital-specific rate, or 100 percent of the updated FY 1987 hospital- specific rate. Prospective payment rate for Medicare-dependent, small rural hospitals = 100 percent of the Federal rate plus, if the greater of the updated FY 1982 hospital-specific rate or the updated FY 1987 hospital- specific rate is higher than the Federal rate, 50 percent of the difference between the applicable hospital-specific rate and the Federal rate. Prospective payment rate for Puerto Rico = 50 percent of the Puerto Rico rate + 50 percent of a discharge-weighted average of the national large urban standardized amount and the national other standardized amount. 1. Federal Rate For discharges occurring on or after October 1, 1998 and before October 1, [[Page 41010]] 1999, except for sole community hospitals, Medicare-dependent, small rural hospitals, and hospitals in Puerto Rico, the hospital's payment is based exclusively on the Federal national rate. The payment amount is determined as follows: Step 1--Select the appropriate national standardized amount considering the type of hospital and designation of the hospital as large urban or other (see Table 1A or 1E, in section VI of this addendum). Step 2--Multiply the labor-related portion of the standardized amount by the applicable wage index (see Tables 4A, 4B, and 4C in section VI of this addendum). Step 3--For hospitals in Alaska and Hawaii, multiply the nonlabor- related portion of the standardized amount by the appropriate cost-of- living adjustment factor. Step 4--Add the amount from Step 2 and the nonlabor-related portion of the standardized amount (adjusted if appropriate under Step 3). Step 5--Multiply the final amount from Step 4 by the relative weight corresponding to the appropriate DRG (see Table 5 in section VI of this addendum). 2. Hospital-Specific Rate (Applicable Only to Sole Community Hospitals and Medicare-Dependent, Small Rural Hospitals) Sections 1886(d)(5)(D)(i) and (b)(3)(C) of the Act provide that sole community hospitals are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal rate, the updated hospital-specific rate based on FY 1982 cost per discharge, or the updated hospital-specific rate based on FY 1987 cost per discharge. Sections 1886(d)(5)(G) and (b)(3)(D) of the Act provide that Medicare-dependent, small rural hospitals are paid based on whichever of the following rates yields the greatest aggregate payment: the Federal rate or the Federal rate plus 50 percent of the difference between the Federal rate and the greater of the updated hospital- specific rate based on FY 1982 and FY 1987 cost per discharge. Hospital-specific rates have been determined for each of these hospitals based on both the FY 1982 cost per discharge and the FY 1987 cost per discharge. For a more detailed discussion of the calculation of the FY 1982 hospital-specific rate and the FY 1987 hospital-specific rate, we refer the reader to the September 1, 1983 interim final rule (48 FR 39772); the April 20, 1990 final rule with comment (55 FR 15150); and the September 4, 1990 final rule (55 FR 35994). a. Updating the FY 1982 and FY 1987 hospital-specific rates for FY 1999. We are increasing the hospital-specific rates by 0.5 percent (the hospital market basket percentage increase of 2.4 percent minus 1.9 percentage points) for sole community hospitals and Medicare-dependent, small rural hospitals located in all areas for FY 1999. Section 1886(b)(3)(C)(iv) of the Act provides that the update factor applicable to the hospital-specific rates for sole community hospitals equals the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for FY 1999, is the market basket rate of increase minus 1.9 percentage points. Section 1886(b)(3)(D) of the Act provides that the update factor applicable to the hospital-specific rates for Medicare- dependent, small rural hospitals equals the update factor provided under section 1886(b)(3)(B)(iv) of the Act, which, for FY 1999, is the market basket rate of increase minus 1.9 percentage points. b. Calculation of hospital-specific rate. For sole community hospitals and Medicare-dependent, small rural hospitals, the applicable FY 1999 hospital-specific rate would be calculated by increasing the hospital's hospital-specific rate for the preceding fiscal year by the applicable update factor (0.5 percent), which is the same as the update for all prospective payment hospitals except ``temporary relief'' hospitals. In addition, the hospital-specific rate would be adjusted by the budget neutrality adjustment factor (that is, 0.999006) as discussed in section II.A.4.a of this Addendum. This resulting rate would be used in determining under which rate a sole community hospital or Medicare-dependent, small rural hospital is paid for its discharges beginning on or after October 1, 1998, based on the formula set forth above. 3. General Formula for Calculation of Prospective Payment Rates for Hospitals Located in Puerto Rico Beginning on or After October 1, 1998 and Before October 1, 1999 a. Puerto Rico rate. The Puerto Rico prospective payment rate is determined as follows: Step 1--Select the appropriate adjusted average standardized amount considering the large urban or other designation of the hospital (see Table 1C or 1F of section VI of this addendum). Step 2--Multiply the labor-related portion of the standardized amount by the appropriate Puerto Rico-specific wage index (see Table 4F in section VI of this addendum). Step 3--Add the amount from Step 2 and the nonlabor-related portion of the standardized amount. Step 4--Multiply the result in Step 3 by 50 percent. Step 5--Multiply the amount from Step 4 by the appropriate DRG relative weight (see Table 5 in section VI of this addendum). b. National rate. The national prospective payment rate is determined as follows: Step 1--Multiply the labor-related portion of the national average standardized amount (see Table 1C or 1F of section VI of the addendum) by the appropriate national wage index (see Tables 4A and 4B in section VI of this addendum). Step 2--Add the amount from Step 1 and the nonlabor-related portion of the national average standardized amount. Step 3--Multiply the result in Step 2 by 50 percent. Step 4--Multiply the amount from Step 3 by the appropriate DRG relative weight (see Table 5 in section VI of this addendum). The sum of the Puerto Rico rate and the national rate computed above equals the prospective payment for a given discharge for a hospital located in Puerto Rico. III. Changes to the Payment Rates for Blood Clotting Factor for Hemophilia Inpatients As discussed in our August 29, 1997 final rule with comment period (62 FR 46002) and our May 12, 1998 final rule (63 FR 26327), section 4452 of Public Law 105-33 amended section 6011(d) of Public Law 101-239 to reinstate the add-on payment for the costs of administering blood clotting factor to Medicare beneficiaries who have hemophilia and who are hospital inpatients for discharges occurring on or after October 1, 1997. We are calculating the add-on payment for FY 1999 using the same methodology we described in the August 29, 1997 and May 12, 1998 final rules. That is, we are establishing a price per unit of clotting factor based on the average wholesale price (AWP). To identify the AWP, we are using the most recent data available from First Databank. The add-on payment amount for each clotting factor, as described by HCFA's Common Procedure Coding System (HCPCS), is based on the median AWP of the several products available in that category of factor, discounted by 15 percent. [[Page 41011]] Based on this methodology, the prices per unit of factor for FY 1999 are as follows: J7190 Factor VIII (antihemophilic factor, human)............... 0.78 J7192 Factor VIII (antihemophilic factor, recombinant)......... 1.00 J7194 Factor IX (complex)...................................... 0.38 J7196 Other hemophilia clotting factors (e.g., anti-inhibitors) 1.10 Q0160 Factor IX (antihemophilic factor, purified, nonrecombinant)............................................... 0.93 Q0161 Factor IX (antihemophilic factor, purified, recombinant). 1.00 These prices for blood clotting factor administered to inpatients who have hemophilia will be effective for discharges beginning on or after October 1, 1998 through September 30, 1999. Payment will be made for blood clotting factor only if there is an ICD-9-CM diagnosis code for hemophilia included on the bill. IV. Changes to Payment Rates for Inpatient Capital-Related Costs for FY 1999 The prospective payment system for hospital inpatient capital- related costs was implemented for cost reporting periods beginning on or after October 1, 1991. Effective with that cost reporting period and during a 10-year transition period extending through FY 2001, hospital inpatient capital-related costs are paid on the basis of an increasing proportion of the capital prospective payment system Federal rate and a decreasing proportion of a hospital's historical costs for capital. The basic methodology for determining Federal capital prospective rates is set forth at Secs. 412.308 through 412.352. Below we discuss the factors that we used to determine the Federal rate and the hospital-specific rates for FY 1999. The rates will be effective for discharges occurring on or after October 1, 1998. For FY 1992, we computed the standard Federal payment rate for capital-related costs under the prospective payment system by updating the FY 1989 Medicare inpatient capital cost per case by an actuarial estimate of the increase in Medicare inpatient capital costs per case. Each year after FY 1992 we update the standard Federal rate, as provided in Sec. 412.308(c)(1), to account for capital input price increases and other factors. Also, Sec. 412.308(c)(2) provides that the Federal rate is adjusted annually by a factor equal to the estimated proportion of outlier payments under the Federal rate to total capital payments under the Federal rate. In addition, Sec. 412.308(c)(3) requires that the Federal rate be reduced by an adjustment factor equal to the estimated proportion of payments for exceptions under Sec. 412.348. Furthermore, Sec. 412.308(c)(4)(ii) requires that the Federal rate be adjusted so that the annual DRG reclassification and the recalibration of DRG weights and changes in the geographic adjustment factor are budget neutral. For FYs 1992 through 1995, Sec. 412.352 required that the Federal rate also be adjusted by a budget neutrality factor so that aggregate payments for inpatient hospital capital costs were projected to equal 90 percent of the payments that would have been made for capital-related costs on a reasonable cost basis during the fiscal year. That provision expired in FY 1996. Section 412.308(b)(2) describes the 7.4 percent reduction to the rate made in FY 1994, and Sec. 412.308(b)(3) describes the 0.28 percent reduction to the rate made in FY 1996 as a result of the revised policy of paying for transfers. In the FY 1998 final rule with comment period (62 FR 45966) we implemented section 4402 of the BBA, which required that for discharges occurring on or after October 1, 1997 and before October 1, 2002, the unadjusted standard Federal rate is reduced by 17.78 percent. A small part of that reduction will be restored effective October 1, 2002. For each hospital, the hospital-specific rate was calculated by dividing the hospital's Medicare inpatient capital-related costs for a specified base year by its Medicare discharges (adjusted for transfers), and dividing the result by the hospital's case mix index (also adjusted for transfers). The resulting case-mix adjusted average cost per discharge was then updated to FY 1992 based on the national average increase in Medicare's inpatient capital cost per discharge and adjusted by the exceptions payment adjustment factor and the budget neutrality adjustment factor to yield the FY 1992 hospital-specific rate. Since FY 1992, the hospital-specific rate has been updated annually for inflation and for changes in the exceptions payment adjustment factor. For FYs 1992 through 1995, the hospital-specific rate was also adjusted by a budget neutrality adjustment factor. In the FY 1998 final rule with comment period (62 FR 46012) we implemented section 4402 of the BBA, which required that for discharges occurring on or after October 1, 1997 and before October 1, 2002, the unadjusted hospital-specific rate is reduced by 17.78 percent. A small part of that reduction will also be restored effective October 1, 2002. To determine the appropriate budget neutrality adjustment factor and the exceptions payment adjustment factor, we developed a dynamic model of Medicare inpatient capital-related costs, that is, a model that projects changes in Medicare inpatient capital-related costs over time. With the expiration of the budget neutrality provision, the model is still used to estimate the exceptions payment adjustment and other factors. The model and its application are described in greater detail in Appendix B of this final rule. In accordance with section 1886(d)(9)(A) of the Act, under the prospective payment system for inpatient operating costs, hospitals located in Puerto Rico are paid for operating costs under a special payment formula. Prior to FY 1998, hospitals in Puerto Rico were paid a blended rate that consisted of 75 percent of the applicable standardized amount specific to Puerto Rico hospitals and 25 percent of the applicable national average standardized amount. However, effective October 1, 1997, as a result of section 4406 of the BBA, operating payments to hospitals in Puerto Rico are based on a blend of 50 percent of the applicable standardized amount specific to Puerto Rico hospitals and 50 percent of the applicable national average standardized amount. In conjunction with this change to the operating blend percentage, effective with discharges on or after October 1, 1997, we compute capital payments to hospitals in Puerto Rico based on a blend of 50 percent of the Puerto Rico rate and 50 percent of the Federal rate. Section 412.374 provides for the use of this blended payment system for payments to Puerto Rico hospitals under the prospective payment system for inpatient capital-related costs. Accordingly, for capital-related costs we compute a separate payment rate specific to Puerto Rico hospitals using the same methodology used to compute the national Federal rate for capital. A. Determination of Federal Inpatient Capital-Related Prospective Payment Rate Update For FY 1998, the Federal rate was $371.51. In the proposed rule, we stated that the proposed FY 1999 Federal rate was $377.25. In this final rule, we are establishing a FY 1999 Federal rate of $378.05. In the discussion that follows, we explain the factors that were used to determine the FY 1999 Federal rate. In particular, we explain why the FY 1999 Federal rate has increased 1.76 percent compared to the FY 1998 Federal rate. Even though we estimate that Medicare hospital inpatient discharges will decline by approximately 2.25 percent between FY 1998 and FY 1999, we also estimate that aggregate capital payments [[Page 41012]] will increase by 2.78 percent during this same period. This aggregate increase is primarily due to the change in the federal rate blend percentage from 70 percent to 80 percent, the 1.76 percent increase in the rate, and a projected increase in case mix. The major factor contributing to the increase in the capital Federal rate for FY 1999 relative to FY 1998 is that the FY 1999 exceptions reduction factor is 1.28 percent higher than the factor for FY 1998. The exceptions reduction factor equals 1 minus the projected percentage of exceptions payments. We estimate that the projected percentage of exceptions payments for FY 1999 will be lower than the projected percentage for FY 1998; accordingly, the FY 1999 rate reflects less of a reduction to account for exceptions than the FY 1998 rate. Total payments to hospitals under the prospective payment system are relatively unaffected by changes in the capital prospective payments. Since capital payments constitute about 10 percent of hospital payments, a 1 percent change in the capital Federal rate yields only about 0.1 percent change in actual payments to hospitals. Aggregate payments under the capital prospective payment transition system are estimated to increase in FY 1999 compared to FY 1998. 1. Standard Federal Rate Update a. Description of the update framework. Under section 412.308(c)(1), the standard Federal rate is updated on the basis of an analytical framework that takes into account changes in a capital input price index (CIPI) and other factors. The update framework consists of a CIPI and several policy adjustment factors. Specifically, we have adjusted the projected CIPI rate of increase as appropriate each year for case-mix index related changes, for intensity, and for errors in previous CIPI forecasts. The proposed rule reflected an update factor of 0.2 percent, based on data available at that time. Under the update framework the final update factor for FY 1999 is 0.1 percent. This update factor is based on a projected 0.7 percent increase in the CIPI, policy adjustment factors of -0.2, and a forecast error correction of -0.4 percent. We explain the basis for the FY 1999 CIPI projection in section D of this addendum. Here we describe the policy adjustments that have been applied. The case-mix index is the measure of the average DRG weight for cases paid under the prospective payment system. Because the DRG weight determines the prospective payment for each case, any percentage increase in the case-mix index corresponds to an equal percentage increase in hospital payments. The case-mix index can change for any of several reasons: The average resource use of Medicare patients changes (``real'' case-mix change); Changes in hospital coding of patient records result in higher weight DRG assignments (``coding effects''); and The annual DRG reclassification and recalibration changes may not be budget neutral (``reclassification effect''). We define real case-mix change as actual changes in the mix (and resource requirements) of Medicare patients as opposed to changes in coding behavior that result in assignment of cases to higher-weighted DRGs but do not reflect higher resource requirements. In the update framework for the prospective payment system for operating costs, we adjust the update upwards to allow for real case-mix change, but remove the effects of coding changes on the case-mix index. We also remove the effect on total payments of prior changes to the DRG classifications and relative weights, in order to retain budget neutrality for all case-mix index-related changes other than patient severity. (For example, we adjusted for the effects of the FY 1992 DRG reclassification and recalibration as part of our FY 1994 update recommendation.) The operating adjustment consists of a reduction for total observed case-mix change, an increase for the portion of case-mix change that we determine is due to real case-mix change rather than coding modifications, and an adjustment for the effect of prior DRG reclassification and recalibration changes. We have adopted this case- mix index adjustment in the capital update framework as well. For FY 1999, we are projecting a 1.0 percent increase in the case- mix index. We estimate that real case-mix increase will equal 0.8 percent in FY 1999. Therefore, the net adjustment for case-mix change in FY 1999 is--0.2 percentage points. We estimate that DRG reclassification and recalibration result in a 0.0 percent change in the case mix when compared with the case-mix index that would have resulted if we had not made the reclassification and recalibration changes to the DRGs. The capital update framework contains an adjustment for forecast error. The input price index forecast is based on historical trends and relationships ascertainable at the time the update factor is established for the upcoming year. In any given year there may be unanticipated price fluctuations that may result in differences between the actual increase in prices faced by hospitals and the forecast used in calculating the update factors. In setting a prospective payment rate under the framework, we make an adjustment for forecast error only if our estimate of the capital input price index rate of increase for any year is off by 0.25 percentage points or more. There is a 2-year lag between the forecast and the measurement of the forecast error. We estimate a forecast error of -0.4 percentage points in the update for FY 1997. That is, current data indicate that the FY 1997 CIPI used in calculating the FY 1997 update factor overstated price increases by 0.4 percent. Therefore we are making a -0.4 percent adjustment for forecast error in the update for FY 1999. Under the capital prospective payment system framework, we also make an adjustment for changes in intensity. We calculate this adjustment using the same methodology and data as in the framework for the operating prospective payment system. The intensity factor for the operating update framework reflects how hospital services are utilized to produce the final product, that is, the discharge. This component accounts for changes in the use of quality-enhancing services, changes in within-DRG severity, and expected modification of practice patterns to remove cost-ineffective services. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI hospital component), and changes in real case mix. The use of total charges in the calculation of the intensity factor makes it a total intensity factor, that is, charges for capital services are already built into the calculation of the factor. We have, therefore, incorporated the intensity adjustment from the operating update framework into the capital update framework. Without reliable estimates of the proportions of the overall annual intensity increases that are due, respectively, to ineffective practice patterns and to the combination of quality-enhancing new technologies and within-DRG complexity, we assume, as in the revised operating update framework, that one-half of the annual increase is due to each of these factors. The capital update framework thus provides an add-on to the input price index rate of increase of one-half of the estimated annual increase in intensity to allow for within-DRG severity increases and the adoption of quality-enhancing technology. [[Page 41013]] For FY 1999, we have developed a Medicare-specific intensity measure based on a 5-year average using FY 1993-1997 data. In determining case-mix constant intensity, we found that observed case- mix increase was 0.9 percent in FY 1993, 0.8 percent in FY 1994, 1.7 percent in FY 1995, 1.6 percent in FY 1996, and 0.3 percent in FY 1997. For FY 1995 and FY 1996, we estimate that real case-mix increase was 1.0 to 1.4 percent each year. The estimate for those years is supported by past studies of case-mix change by the RAND Corporation. The most recent study was ``Has DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 and 1988'' by G. M. Carter, J. P. Newhouse, and D. A. Relles, R-4098-HCFA/ProPAC (1991). The study suggested that real case-mix change was not dependent on total change, but was usually a fairly steady 1.0 to 1.5 percent per year. We use 1.4 percent as the upper bound because the RAND study did not take into account that hospitals may have induced doctors to document medical records more completely in order to improve payment. Following that study, we consider up to 1.4 percent of observed case-mix change as real for FY 1992 through FY 1997. Based on this analysis, we believe that all of the observed case-mix increase for FY 1993, FY 1994 and FY 1997 is real. We calculate case-mix constant intensity as the change in total charges per admission, adjusted for price level changes (the CPI hospital component), and changes in real case-mix. Given estimates of real case mix of 0.9 percent for FY 1993, 0.8 percent for FY 1994, 1.0 percent for FY 1995, and 1.0 percent for FY 1996, and 0.3 percent for FY 1997, we estimate that case-mix constant intensity declined by an average 1.5 percent during FYs 1993 through 1997, for a cumulative decrease of 7.3 percent. If we assume that real case-mix increase was 0.9 percent for FY 1993, 0.8 percent for FY 1994, 1.4 percent for FY 1995, 1.4 percent for FY 1996 and 0.3 percent for FY 1997, we estimate that case-mix constant intensity declined by an average 1.6 percent during FYs 1993 through 1997, for a cumulative decrease of 7.7 percent. Since we estimate that intensity has declined during that period, we are making a 0.0 percent intensity adjustment for FY 1999. In summary, the FY 1999 final update under our framework is 0.1 percent. This update factor is based on a projected 0.7 percent increase in the CIPI, policy adjustment factors of -0.2, and a forecast error correction of -0.4 percent. b. Comparison of HCFA and MedPAC update recommendations. As discussed in the proposed rule, MedPAC recommended a 0.0 to 0.7 percent update to the standard Federal rate and we recommended a 0.2 percent update. (See the May 8, 1998 proposed rule for a discussion of the differences between the MedPAC and HCFA update frameworks (63 FR 25615)). In this final rule, as discussed in the previous section, we are implementing a 0.1 percent update to the capital Federal rate. Comment: MedPAC noted our update recommendation of 0.2 percent was within the range of the 0.0 percent to 0.7 percent update which they had recommended. They also restated a comment from their March report, that although the operating and capital payment rates are determined separately, they are related to the costs generated by providing hospital services to the same Medicare patients, and distinguishing between them for payment purposes is arbitrary and does not foster efficient hospital decision-making about resource allocation. Since the transition to fully prospective payment for capital will end on September 30, 2001, the objective of combining the two payment systems should be kept in mind. Response: Several years ago ProPAC made a similar comment recommending the adoption of a single update framework for adjusting operating and capital prospective payment rates when the transition to full Federal rate capital payments is complete. In the September 1, 1995 prospective payment system final rule (60 FR 45816) we responded that our long term goal was to develop a single update framework and that we would begin development of a unified framework. We stated that in the meantime we would maintain as much consistency as possible with the current operating framework in order to facilitate the eventual development of a unified framework. We believe that because of the similarities in the operating and capital update frameworks, they could be combined without too much difficulty. We maintain our goal of combining the update frameworks at the end of the capital transition period and may examine combining the payment systems post transition. 2. Outlier Payment Adjustment Factor Section 412.312(c) establishes a unified outlier methodology for inpatient operating and inpatient capital-related costs. A single set of thresholds is used to identify outlier cases for both inpatient operating and inpatient capital-related payments. Outlier payments are made only on the portion of the Federal rate that is used to calculate the hospital's inpatient capital-related payments (for example, 80 percent for cost reporting periods beginning in FY 1999 for hospitals paid under the fully prospective methodology). Section 412.308(c)(2) provides that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of outlier payments under the Federal rate to total inpatient capital-related payments under the Federal rate. The outlier thresholds are set so that operating outlier payments are projected to be 5.1 percent of total operating DRG payments. The inpatient capital- related outlier reduction factor reflects the inpatient capital-related outlier payments that would be made if all hospitals were paid 100 percent of the Federal rate. For purposes of calculating the outlier thresholds and the outlier reduction factor, we model payments as if all hospitals were paid 100 percent of the Federal rate because, as explained above, outlier payments are made only on the portion of the Federal rate that is included in the hospital's inpatient capital- related payments. In the August 29, 1997 final rule with comment period, we estimated that outlier payments for capital in FY 1998 would equal 6.18 percent of inpatient capital-related payments based on the Federal rate. Accordingly, we applied an outlier adjustment factor of 0.9382 to the Federal rate. For FY 1999, we estimate that outlier payments for capital will equal 6.08 percent of inpatient capital-related payments based on the Federal rate. We are, therefore, establishing an outlier adjustment factor of 0.9392 to the Federal rate. Thus, estimated capital outlier payments for FY 1999 represent a smaller percentage of total capital standard payments than in FY 1998. The outlier reduction factors are not built permanently into the rates; that is, they are not applied cumulatively in determining the Federal rate. Therefore, the net change in the outlier adjustment to the Federal rate for FY 1999 is 1.0011 (0.9392/0.9382). Thus, the outlier adjustment increases the FY 1999 Federal rate by 0.11 percent (1.0011-1) compared with the FY 1998 outlier adjustment. 3. Budget Neutrality Adjustment Factor for Changes in DRG Classifications and Weights and the Geographic Adjustment Factor Section 412.308(c)(4)(ii) requires that the Federal rate be adjusted so that [[Page 41014]] aggregate payments for the fiscal year based on the Federal rate after any changes resulting from the annual DRG reclassification and recalibration and changes in the GAF are projected to equal aggregate payments that would have been made on the basis of the Federal rate without such changes. We use the actuarial model, described in Appendix B, to estimate the aggregate payments that would have been made on the basis of the Federal rate without changes in the DRG classifications and weights and in the GAF. We also use the model to estimate aggregate payments that would be made on the basis of the Federal rate as a result of those changes. We then use these figures to compute the adjustment required to maintain budget neutrality for changes in DRG weights and in the GAF. For FY 1998, we calculated a GAF/DRG budget neutrality factor of 0.9989. In the proposed rule for FY 1999, we proposed a GAF/DRG budget neutrality factor of 1.0032. In this final rule, based on calculations using updated data, we are applying a factor of 1.0027. The GAF/DRG budget neutrality factors are built permanently into the rates; that is, they are applied cumulatively in determining the Federal rate. This follows from the requirement that estimated aggregate payments each year be no more than they would have been in the absence of the annual DRG reclassification and recalibration and changes in the GAF. The incremental change in the adjustment from FY 1998 to FY 1999 is 1.0027. The cumulative change in the rate due to this adjustment is 1.0028 (the product of the incremental factors for FY 1993, FY 1994, FY 1995, FY 1996, FY 1997, FY 1998, and FY 1999: 0.9980 x 1.0053 x 0.9998 x 0.9994 x 0.9987 x 0.9989 x 1.0027 = 1.0028). This factor accounts for DRG reclassifications and recalibration and for changes in the GAF. It also incorporates the effects on the GAF of FY 1999 geographic reclassification decisions made by the MGCRB compared to FY 1998 decisions. However, it does not account for changes in payments due to changes in the disproportionate share and indirect medical education adjustment factors or in the large urban add-on. 4. Exceptions Payment Adjustment Factor Section 412.308(c)(3) requires that the standard Federal rate for inpatient capital-related costs be reduced by an adjustment factor equal to the estimated proportion of additional payments for exceptions under Sec. 412.348 relative to total payments under the hospital- specific rate and Federal rate. We use an actuarial model described in Appendix B to determine the exceptions payment adjustment factor. For FY 1998, we estimated that exceptions payments would equal 3.41 percent of aggregate payments based on the Federal rate and the hospital-specific rate. Therefore, we applied an exceptions reduction factor of 0.9659 (1--0.0341) in determining the Federal rate. In the May 8, 1998 proposed rule, we estimated that exceptions payments for FY 1999 would equal 2.39 percent of aggregate payments based on the Federal rate and the hospital-specific rate. Therefore, we proposed an exceptions payment reduction factor of 0.9761 to the Federal rate for FY 1999. For this final rule, based on updated data, we estimate that exceptions payments for FY 1999 will equal 2.17 percent of aggregate payments based on the Federal rate and the hospital-specific rate. We are, therefore, applying an exceptions payment reduction factor of 0.9783 (1--0.0217) to the Federal rate for FY 1999. The final exceptions reduction factor for FY 1999 is 1.28 percent higher than the factor for FY 1998 and .23 percent higher than the factor in the FY 1999 proposed rule. The exceptions reduction factors are not built permanently into the rates; that is, the factors are not applied cumulatively in determining the Federal rate. Therefore, the net adjustment to the FY 1999 Federal rate is 0.9783/0.9659, or 1.0128. 5. Standard Capital Federal Rate for FY 1999 For FY 1998, the capital Federal rate was $371.51. With the changes we proposed to the factors used to establish the Federal rate, we proposed that the FY 1999 Federal rate would be $377.25. In this final rule, we are establishing a FY 1999 Federal rate of $378.05. The Federal rate for FY 1999 was calculated as follows: The FY 1999 update factor is 1.0010, that is, the update is 0.10 percent. The FY 1999 budget neutrality adjustment factor that is applied to the standard Federal payment rate for changes in the DRG relative weights and in the GAF is 1.0027. The FY 1999 outlier adjustment factor is 0.9392. The FY 1999 exceptions payments adjustment factor is 0.9783. Since the Federal rate has already been adjusted for differences in case mix, wages, cost of living, indirect medical education costs, and payments to hospitals serving a disproportionate share of low-income patients, we have made no additional adjustments in the standard Federal rate for these factors other than the budget neutrality factor for changes in the DRG relative weights and the GAF. We are providing a chart that shows how each of the factors and adjustments for FY 1999 affected the computation of the FY 1999 Federal rate in comparison to the FY 1998 Federal rate. The FY 1999 update factor has the effect of increasing the Federal rate by 0.10 percent compared to the rate in FY 1998, while the final geographic and DRG budget neutrality factor has the effect of increasing the Federal rate by 0.27 percent. The FY 1999 outlier adjustment factor has the effect of increasing the Federal rate by 0.11 percent compared to FY 1998. The FY 1999 exceptions reduction factor has the effect of increasing the Federal rate by 1.27 percent compared to the exceptions reduction factor for FY 1998. The combined effect of all the changes is to increase the Federal rate by 1.76 percent compared to the Federal rate for FY 1998. Comparison of Factors and Adjustments--FY 1998 Federal Rate and FY 1999 Federal Rate ---------------------------------------------------------------------------------------------------------------- Percent FY 98 FY 99 Change change ---------------------------------------------------------------------------------------------------------------- Update factor \1\......................................... 1.0090 1.0010 1.0010 0.10 GAF/DRG Adjustment Factor \1\............................. 0.9989 1.0027 1.0027 0.27 Outlier Adjustment Factor \2\............................. 0.9382 0.9392 1.0011 0.11 Exceptions Adjustment Factor \2\.......................... 0.9659 0.9783 1.0128 1.28 Federal Rate.............................................. $371.51 $378.05 1.0176 1.76 ---------------------------------------------------------------------------------------------------------------- \1\ The update factor and the GAF/DRG budget neutrality factors are built permanently into the rates. Thus, for example, the incremental change from FY 1998 to FY 1999 resulting from the application of the GAF/DRG budget neutrality factor for FY 1999 is 1.0027. [[Page 41015]] \2\ The outlier reduction factor and the exceptions reduction factor are not built permanently into the rates; that is, these factors are not applied cumulatively in determining the rates. Thus, for example, the net change resulting from the application of the FY 1999 outlier reduction factor is 0.9392/0.9382, or 1.0011. We are also providing a chart that shows how the final FY 1999 Federal rate differs from the proposed FY 1999 Federal rate. Comparison of Factors and Adjustments--FY 1999 Proposed Federal Rate and FY 1999 Final Federal Rate ---------------------------------------------------------------------------------------------------------------- Proposed FY Percent 99 Final FY 99 Change change ---------------------------------------------------------------------------------------------------------------- Update factor............................................. 1.0020 1.0010 0.9990 -0.10 GAF/DRG Adjustment Factor................................. 1.0032 1.0027 0.9995 -0.05 Outlier Adjustment Factor................................. 0.9378 0.9392 1.0015 0.15 Exceptions Adjustment Factor.............................. 0.9761 0.9783 1.0023 0.23 Federal Rate.............................................. $377.25 $378.05 1.0021 0.21 ---------------------------------------------------------------------------------------------------------------- 6. Special Rate for Puerto Rico Hospitals As explained at the beginning of this section, hospitals in Puerto Rico are paid based on 50 percent of the Puerto Rico rate and 50 percent of the Federal rate. The Puerto Rico rate is derived from the costs of Puerto Rico hospitals only, while the Federal rate is derived from the costs of all acute care hospitals participating in the prospective payment system (including Puerto Rico). To adjust hospitals' capital payments for geographic variations in capital costs, we apply a geographic adjustment factor (GAF) to both portions of the blended rate. The GAF is calculated using the operating PPS wage index and varies depending on the MSA or rural area in which the hospital is located. We use the Puerto Rico wage index to determine the GAF for the Puerto Rico part of the capital blended rate and the national wage index to determine the GAF for the national part of the blended rate. Since we implemented a separate GAF for Puerto Rico, we applied separate budget neutrality adjustments for the national GAF and for the Puerto Rico GAF. We applied the same budget neutrality factor for DRG reclassifications and recalibration nationally and for Puerto Rico. Separate adjustments were unnecessary for FY 1998 since the Puerto Rico specific GAF was implemented that year. For FY 1999 the Puerto Rico GAF budget neutrality factor is 0.9988, while the DRG adjustment is 1.0034, for a combined cumulative adjustment of 1.0022. (For a more detailed explanation of this change see Appendix B.) In computing the payment for a particular Puerto Rico hospital, the Puerto Rico portion of the rate (50%) is multiplied by the Puerto Rico- specific GAF for the MSA in which the hospital is located, and the national portion of the rate (50%) is multiplied by the national GAF for the MSA in which the hospital is located (which is computed from national data for all hospitals in the United States and Puerto Rico). In FY 1998, we implemented a 17.78 percent reduction to the Puerto Rico rate as a result of the BBA. For FY 1998, before application of the GAF, the special rate for Puerto Rico hospitals was $177.57. With the changes we proposed to the factors used to determine the rate, the proposed FY 1999 special rate for Puerto Rico was $180.73. In this final rule, the FY 1999 capital rate for Puerto Rico is $181.10. B. Determination of Hospital-Specific Rate Update Section 412.328(e) of the regulations provides that the hospital- specific rate for FY 1999 be determined by adjusting the FY 1998 hospital-specific rate by the following factors: 1. Hospital-Specific Rate Update Factor The hospital-specific rate is updated in accordance with the update factor for the standard Federal rate determined under Sec. 412.308(c)(1). For FY 1999, we are updating the hospital-specific rate by a factor of 1.0010. 2. Exceptions Payment Adjustment Factor For FYs 1992 through FY 2001, the updated hospital-specific rate is multiplied by an adjustment factor to account for estimated exceptions payments for capital-related costs under Sec. 412.348, determined as a proportion of the total amount of payments under the hospital-specific rate and the Federal rate. For FY 1999, we estimated in the proposed rule that exceptions payments would be 2.39 percent of aggregate payments based on the Federal rate and the hospital-specific rate. Therefore, we proposed that the updated hospital-specific rate be adjusted by a factor of 0.9761. In this final rule, we estimate that exceptions payments will be 2.17 percent of aggregate payments based on the Federal rate and the hospital-specific rate. Accordingly, for FY 1999, we are applying an exceptions reduction factor of 0.9783 to the hospital-specific rate. The exceptions reduction factors are not built permanently into the rates; that is, the factors are not applied cumulatively in determining the hospital-specific rate. The net adjustment to the FY 1999 hospital-specific rate is 0.9783/0.9659, or 1.0128. 3. Net Change to Hospital-Specific Rate We are providing a chart to show the net change to the hospital- specific rate. The chart shows the factors for FY 1998 and FY 1999 and the net adjustment for each factor. It also shows that the cumulative net adjustment from FY 1998 to FY 1999 is 1.0138, which represents a increase of 1.38 percent to the hospital-specific rate. For each hospital, the FY 1999 hospital-specific rate is determined by multiplying the FY 1998 hospital-specific rate by the cumulative net adjustment of 1.0138. FY 1999 Update and Adjustments to Hospital-Specific Rates ---------------------------------------------------------------------------------------------------------------- Net Percent FY 98 FY 99 adjustment change ---------------------------------------------------------------------------------------------------------------- Update Factor............................................... 1.0090 1.0010 1.0010 0.10 Exceptions Payment Adjustment Factor........................ 0.9659 0.9783 1.0128 1.28 [[Page 41016]] Cumulative Adjustments...................................... 0.9746 0.9880 1.0138 1.38 ---------------------------------------------------------------------------------------------------------------- Note: The update factor for the hospital-specific rate is applied cumulatively in determining the rates. Thus, the incremental increase in the update factor from FY 1998 to FY 1999 is 1.0020. In contrast, the exceptions payment adjustment factor is not applied cumulatively. Thus, for example, the incremental increase in the exceptions reduction factor from FY 1998 to FY 1999 is 0.9783/0.9659, or 1.0128. C. Calculation of Inpatient Capital-Related Prospective Payments for FY 1999 During the capital prospective payment system transition period, a hospital is paid for the inpatient capital-related costs under one of two payment methodologies--the fully prospective payment methodology or the hold-harmless methodology. The payment methodology applicable to a particular hospital is determined when a hospital comes under the prospective payment system for capital-related costs by comparing its hospital-specific rate to the Federal rate applicable to the hospital's first cost reporting period under the prospective payment system. The applicable Federal rate was determined by making adjustments as follows: For outliers by dividing the standard Federal rate by the outlier reduction factor for that fiscal year; and, For the payment adjustment factors applicable to the hospital (that is, the hospital's GAF, the disproportionate share adjustment factor, and the indirect medical education adjustment factor, when appropriate). If the hospital-specific rate is above the applicable Federal rate, the hospital is paid under the hold-harmless methodology. If the hospital-specific rate is below the applicable Federal rate, the hospital is paid under the fully prospective methodology. For purposes of calculating payments for each discharge under both the hold-harmless payment methodology and the fully prospective payment methodology, the standard Federal rate is adjusted as follows: (Standard Federal Rate) x (DRG weight) x (GAF) x (Large Urban Add-on, if applicable) x (COLA adjustment for hospitals located in Alaska and Hawaii) x (1 + Disproportionate Share Adjustment Factor + IME Adjustment Factor, if applicable). The result is the adjusted Federal rate. Payments under the hold-harmless methodology are determined under one of two formulas. A hold-harmless hospital is paid the higher of the following: 100 percent of the adjusted Federal rate for each discharge; or An old capital payment equal to 85 percent (100 percent for sole community hospitals) of the hospital's allowable Medicare inpatient old capital costs per discharge for the cost reporting period plus a new capital payment based on a percentage of the adjusted Federal rate for each discharge. The percentage of the adjusted Federal rate equals the ratio of the hospital's allowable Medicare new capital costs to its total Medicare inpatient capital-related costs in the cost reporting period. Once a hospital receives payment based on 100 percent of the adjusted Federal rate in a cost reporting period beginning on or after October 1, 1994 (or the first cost reporting period after obligated capital that is recognized as old capital under Sec. 412.302(c) is put in use for patient care, if later), the hospital continues to receive capital prospective payment system payments on that basis for the remainder of the transition period. Payment for each discharge under the fully prospective methodology is the sum of the following: The hospital-specific rate multiplied by the DRG relative weight for the discharge and by the applicable hospital-specific transition blend percentage for the cost reporting period; and The adjusted Federal rate multiplied by the Federal transition blend percentage. The blend percentages for cost reporting periods beginning in FY 1999 are 80 percent of the adjusted Federal rate and 20 percent of the hospital-specific rate. Hospitals may also receive outlier payments for those cases that qualify under the thresholds established for each fiscal year. Section 412.312(c) provides for a single set of thresholds to identify outlier cases for both inpatient operating and inpatient capital-related payments. Outlier payments are made only on that portion of the Federal rate that is used to calculate the hospital's inpatient capital-related payments. For fully prospective hospitals, that portion is 80 percent of the Federal rate for discharges occurring in cost reporting periods beginning during FY 1999. Thus, a fully prospective hospital will receive 80 percent of the capital-related outlier payment calculated for the case for discharges occurring in cost reporting periods beginning in FY 1999. For hold-harmless hospitals paid 85 percent of their reasonable costs for old inpatient capital, the portion of the Federal rate that is included in the hospital's outlier payments is based on the hospital's ratio of Medicare inpatient costs for new capital to total Medicare inpatient capital costs. For hold-harmless hospitals that are paid 100 percent of the Federal rate, 100 percent of the Federal rate is included in the hospital's outlier payments. The outlier thresholds for FY 1999 are in section II.A.4.c of this Addendum. For FY 1999, a case qualifies as a cost outlier if the cost for the case (after standardization for the indirect teaching adjustment and disproportionate share adjustment) is greater than the prospective payment rate for the DRG plus $11,100. During the capital prospective payment system transition period, a hospital may also receive an additional payment under an exceptions process if its total inpatient capital-related payments are less than a minimum percentage of its allowable Medicare inpatient capital-related costs. The minimum payment level is established by class of hospital under Sec. 412.348. The minimum payment levels for portions of cost reporting periods beginning in FY 1999 are: Sole community hospitals (located in either an urban or rural area), 90 percent; Urban hospitals with at least 100 beds and a disproportionate share patient percentage of at least 20.2 percent; and Urban hospitals with at least 100 beds that qualify for disproportionate share payments under Sec. 412.106(c)(2), 80 percent; and All other hospitals, 70 percent. Under Sec. 412.348(d), the amount of the exceptions payment is determined by comparing the cumulative payments made to the hospital under the capital prospective payment system to the cumulative minimum payment levels applicable to the hospital for each cost reporting period subject to that system. [[Page 41017]] Any amount by which the hospital's cumulative payments exceed its cumulative minimum payment is deducted from the additional payment that would otherwise be payable for a cost reporting period. New hospitals are exempted from the capital prospective payment system for their first 2 years of operation and are paid 85 percent of their reasonable costs during that period. A new hospital's old capital costs are its allowable costs for capital assets that were put in use for patient care on or before the later of December 31, 1990 or the last day of the hospital's base year cost reporting period, and are subject to the rules pertaining to old capital and obligated capital as of the applicable date. Effective with the third year of operation, we will pay the hospital under either the fully prospective methodology, using the appropriate transition blend in that Federal fiscal year, or the hold-harmless methodology. If the hold-harmless methodology is applicable, the hold-harmless payment for assets in use during the base period would extend for 8 years, even if the hold-harmless payments extend beyond the normal transition period. D. Capital Input Price Index 1. Background Like the prospective payment hospital operating input price index, the Capital Input Price Index (CIPI) is a fixed-weight price index that measures the price changes associated with costs during a given year. The CIPI differs from the operating input price index in one important aspect--the CIPI reflects the vintage nature of capital, which is the acquisition and use of capital over time. Capital expenses in any given year are determined by the stock of capital in that year (that is, capital that remains on hand from all current and prior capital acquisitions). An index measuring capital price changes needs to reflect this vintage nature of capital. Therefore, the CIPI was developed to capture the vintage nature of capital by using a weighted- average of past capital purchase prices up to and including the current year. Using Medicare cost reports, AHA data, and Securities Data Corporation data, a vintage-weighted price index was developed to measure price increases associated with capital expenses. We periodically update the base year for the operating and capital input prices to reflect the changing composition of inputs for operating and capital expenses. Currently, the CIPI is based to FY 1992 and was last rebased in 1997. The most recent explanation of the CIPI was discussed in the final rule with comment period for FY 1998 published in the August 29, 1997 Federal Register (62 FR 46050). The following Federal Register documents also describe development and revisions of the methodology involved with the construction of the CIPI: September 1, 1992 (57 FR 40016), May 26, 1993 (58 FR 30448), September 1, 1993 (58 FR 46490), May 27, 1994 (59 FR 27876), September 1, 1994 (59 FR 45517), June 2, 1995 (60 FR 29229), and September 1, 1995 (60 FR 45815), May 31, 1996 (61 FR 27466), August 30, 1996 (61 FR 46196), and June 2, 1997 (62 FR 29953), August 29, 1997 (67 FR 46050), and May 8, 1998 (63 FR 25619). 2. Forecast of the CIPI for Federal Fiscal Year 1999 DRI forecasts a 0.7 percent increase in the CIPI for FY 1999. This is the outcome of a projected 1.9 percent increase in vintage-weighted depreciation prices (building and fixed equipment, and movable equipment) and a 2.9 percent increase in other capital expense prices in FY 1999, partially offset by a 3.0 percent decline in vintage- weighted interest rates in FY 1999. The weighted average of these three factors produces the 0.7 percent increase for the CIPI as a whole. V. Changes to Payment Rates for Excluded Hospitals and Hospital Units: Rate-of-Increase Percentages A. Rate-of-Increase Percentages for Excluded Hospitals and Hospital Units The inpatient operating costs of hospitals and hospital units excluded from the prospective payment system are subject to rate-of- increase limits established under the authority of section 1886(b) of the Act, which is implemented in Sec. 413.40 of the regulations. Under these limits, an annual target amount (expressed in terms of the inpatient operating cost per discharge) is set for each hospital, based on the hospital's own historical cost experience trended forward by the applicable rate-of-increase percentages (update factors). In the case of a psychiatric hospital or unit, rehabilitation hospital or unit, or long-term care hospital, the target amount may not exceed the 75th percentile of target amounts for hospitals and units in the same class (psychiatric, rehabilitation, and long-term care). The target amount is multiplied by the number of Medicare discharges in a hospital's cost reporting period, yielding the ceiling on aggregate Medicare inpatient operating costs for the cost reporting period. Each hospital's target amount is adjusted annually, at the beginning of its cost reporting period, by an applicable update factor. Section 1886(b)(3)(B) of the Act provides that for cost reporting periods beginning on or after October 1, 1998 and before October 1, 1999, the update factor is the market basket less a percentage point between 0 and 2.5 depending on the hospital's or unit's costs in relation to the ceiling. For hospitals with costs exceeding the ceiling by 10 percent or more, the update factor is the market basket increase. For hospitals with costs exceeding the ceiling by less than 10 percent, the update factor is the greater of 0 percent or the market basket minus .25 percent for each percentage point by which costs are less than 10 percent over the ceiling. For hospitals with costs equal to or less than the ceiling but greater than 66.7 percent of the ceiling, the update factor is the greater of 0 percent or the market basket minus 2.5 percent. For hospitals with costs that do not exceed 66.7 percent of the ceiling, the update factor is 0. The most recent forecast of the market basket increase for FY 1999 for hospitals and hospital units excluded from the prospective payment system is 2.4 percent; therefore, the update to a hospital's target amount for its cost reporting period beginning in FY 1999 would be between 0 and 2.4 percent. In addition, section 1886(b)(3)(H) of the Act provides that for cost reporting periods beginning on or after October 1, 1998 and before October 1, 1999, the target amount for psychiatric hospitals and units, rehabilitation hospitals and units, and long-term care hospitals may not exceed an updated cap that is based on the 75th percentile of target amounts for hospitals in the same class for cost reporting periods ending during FY 1996. The FY 1998 75th percentile target amounts were $10,534 for psychiatric hospitals and units, $19,104 for rehabilitation hospital and units, and $37,688 for long-term care hospitals. As discussed in detail in section VII. of the preamble, for purposes of calculating the caps, the statute requires the Secretary to first calculate the 75th percentile of the target amounts for each class of hospital (psychiatric, rehabilitation, or long-term care) for cost reporting periods ending during FY 1996. The resulting amounts are updated by the market basket percentage to the applicable fiscal year. B. Wage Index Exceptions for Excluded Hospitals and Units In the August 30, 1991 final rule (56 FR 43232), we set forth our policy for target amount adjustments for [[Page 41018]] significant wage increases. Effective with cost reporting periods beginning on or after April 1, 1990, significant increases in wages since the base period are recognized as a basis for an adjustment in the target amount under Sec. 413.40(g). To qualify for an adjustment, the excluded hospital or hospital unit must be located in a labor market area for which the average hourly wage increased significantly more than the national average hourly wage between the hospital's base period and the period subject to the ceiling. We use the hospital wage index for prospective payment hospitals to determine the rate of increase in the average hourly wage in the labor market area. For a hospital to qualify for an adjustment, the wage index value for the cost reporting period subject to the ceiling must be at least 8 percent higher than the wage index based on wage survey data collected for the base year cost reporting period. If survey data are not available for one (or both) of the cost reporting periods used in the comparison, the wage index based on the latest available survey data collected before that cost reporting period will be used. For example, to make the comparison between a 1983 base period and a hospital's cost reporting period beginning in FY 1996, we would use the rate of increase between the wage index based on 1982 wage data and the wage index based on the FY 1995 data, since the FY 1995 data are the most recent data currently available. Further, the comparison is made without regard to geographic reclassifications made by the MGCRB under sections 1886(d) (8) and (10) of the Act. Therefore, the comparison is made based on the wage index value of the labor market area in which the hospital is actually located. We determine the amount of the adjustment for wage increases by considering three factors for the time between the base period and the period for which an adjustment is requested: The rate of increase in the hospital's average hourly wage; the rate of increase in the average hourly wage in the labor market area in which the hospital is located; and, the rate of increase in the national average hourly wage for hospital workers. The adjustment is limited to the amount by which the lower of the hospital's or the labor market area's rate of increase in average hourly wages significantly exceeds the national increase (that is, exceeds the national rate of increase by more than 8 percent). For purposes of computing the adjustment, the relative rate of increase in the average hourly wage for the labor market area is assumed to have been the same over each of the intervening years between the wage surveys. To determine the rate of increase in the national average hourly wage, we use the average hourly earnings (AHE) for hospital workers produced by the Bureau of Labor Statistics. The average hourly earnings for hospital workers show the following increases: 1992=4.8 percent 1993=3.6 percent 1994=2.7 percent 1995=3.3 percent 1996=3.1 percent 1997=2.0 percent 1998=2.6 percent 1999=2.7 percent We note that this section merely provides updated information with respect to areas that would qualify for the wage index adjustment under Sec. 413.30(g). This information was calculated in accordance with established policy and does not reflect any change in that policy. The geographic areas in which the percentage difference in wage indexes was sufficient to qualify for a wage index adjustment are listed in Table 10 of section VI of the addendum to this final rule. VI. Tables This section contains the tables referred to throughout the preamble to this final rule and in this Addendum. For purposes of this final rule, and to avoid confusion, we have retained the designations of Tables 1 through 5 that were first used in the September 1, 1983 initial prospective payment final rule (48 FR 39844). Tables 1A, 1C, 1D, 1E, 1F, 3C, 4A, 4B, 4C, 4D, 4E, 4F, 5, 6A, 6B, 6C, 6D, 6E, 6F, 6G, 7A, 7B, 8A, 8B, and 10 are presented below. The tables presented below are as follows: Table 1A--National Adjusted Operating Standardized Amounts, Labor/ Nonlabor Table 1C--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor Table 1D--Capital Standard Federal Payment Rate Table 1E--National Adjusted Operating Standardized Amounts for ``Temporary Relief'' Hospitals, Labor/Nonlabor Table 1F--Adjusted Operating Standardized Amounts for ``Temporary Relief'' Hospitals in Puerto Rico, Labor/Nonlabor Table 3C--Hospital Case Mix Indexes for Discharges Occurring in Federal Fiscal Year 1997 and Hospital Average Hourly Wage for Federal Fiscal Year 1999 Wage Index Table 4A--Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas Table 4B--Wage Index and Capital Geographic Adjustment Factor (GAF) for Rural Areas Table 4C--Wage Index and Capital Geographic Adjustment Factor (GAF) for Hospitals That Are Reclassified Table 4D--Average Hourly Wage for Urban Areas Table 4E--Average Hourly Wage for Rural Areas Table 4F--Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF) Table 5--List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric Mean Length of Stay, and Arithmetic Mean Length of Stay Points Used in the Prospective Payment System Table 6A--New Diagnosis Codes Table 6B--New Procedure Codes Table 6C--Invalid Diagnosis Codes Table 6D--Invalid Procedure Codes Table 6E--Revised Diagnosis Code Titles Table 6F--Additions to the CC Exclusions List Table 6G--Deletions to the CC Exclusions List Table 7A--Medicare Prospective Payment System Selected Percentile Lengths of Stay FY 97 MEDPAR Update 03/98 GROUPER V15.0 Table 7B--Medicare Prospective Payment System Selected Percentile Lengths of Stay FY 97 MEDPAR Update 03/98 GROUPER V16.0 Table 8A--Statewide Average Operating Cost-to-Charge Ratios for Urban and Rural Hospitals (Case Weighted) July 1998 Table 8B--Statewide Average Capital Cost-to-Charge Ratios (Case Weighted) July 1998 Table 10--Percentage Difference on Wage Indexes for Areas that Qualify for a Wage Index Exception for Excluded Hospitals and Units [[Page 41019]] Table 1A.--National Adjusted Operating Standardized Amounts, Labor/Nonlabor ---------------------------------------------------------------------------------------------------------------- Large urban areas Other areas ---------------------------------------------------------------------------------------------------------------- Labor-related Nonlabor-related Labor-related Nonlabor-related ---------------------------------------------------------------------------------------------------------------- 2,783.42................... 1,313.41 2,739.36 1,113.47 ---------------------------------------------------------------------------------------------------------------- Table 1C.--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor ---------------------------------------------------------------------------------------------------------------- Large urban areas Other areas --------------------------------------------------- Labor Nonlabor Labor Nonlabor ---------------------------------------------------------------------------------------------------------------- National.................................................... 2,760.01 1,121.87 2,760.01 1,121.87 Puerto Rico................................................. 1,327.81 534.48 1,306.79 526.01 ---------------------------------------------------------------------------------------------------------------- Table 1D.--Capital Standard Federal Payment Rate ------------------------------------------------------------------------ Rate ------------------------------------------------------------------------ National....................................................... 378.05 Puerto Rico.................................................... 181.10 ------------------------------------------------------------------------ Table 1E.--National Adjusted Operating Standardized Amounts for ``Temporary Relief'' Hospitals, Labor/Nonlabor ---------------------------------------------------------------------------------------------------------------- Large urban areas Other areas ---------------------------------------------------------------------------------------------------------------- Labor-related Nonlabor-related Labor-related Nonlabor-related ---------------------------------------------------------------------------------------------------------------- 2,791.73................... 1,134.76 2,747.54 1,116.79 ---------------------------------------------------------------------------------------------------------------- Table 1F.--Adjusted Operating Standardized Amounts for ``Temporary Relief'' Hospitals in Puerto Rico, Labor/ Nonlabor ---------------------------------------------------------------------------------------------------------------- Large urban areas Other areas --------------------------------------------------- Labor Nonlabor Labor Nonlabor ---------------------------------------------------------------------------------------------------------------- National.................................................... 2,768.25 1,125.22 2,768.25 1,125.22 Puerto Rico................................................. 1,331.77 536.08 1,310.69 527.58 ---------------------------------------------------------------------------------------------------------------- BILLING CODE 4120-01-P [[Page 41020]] [GRAPHIC] [TIFF OMITTED] TR31JY98.000 [[Page 41021]] [GRAPHIC] [TIFF OMITTED] TR31JY98.001 [[Page 41022]] [GRAPHIC] [TIFF OMITTED] TR31JY98.002 [[Page 41023]] [GRAPHIC] [TIFF OMITTED] TR31JY98.003 [[Page 41024]] [GRAPHIC] [TIFF OMITTED] TR31JY98.004 [[Page 41025]] [GRAPHIC] [TIFF OMITTED] TR31JY98.005 [[Page 41026]] [GRAPHIC] [TIFF OMITTED] TR31JY98.006 [[Page 41027]] [GRAPHIC] [TIFF OMITTED] TR31JY98.007 [[Page 41028]] [GRAPHIC] [TIFF OMITTED] TR31JY98.008 [[Page 41029]] [GRAPHIC] [TIFF OMITTED] TR31JY98.009 [[Page 41030]] [GRAPHIC] [TIFF OMITTED] TR31JY98.010 [[Page 41031]] [GRAPHIC] [TIFF OMITTED] TR31JY98.011 [[Page 41032]] [GRAPHIC] [TIFF OMITTED] TR31JY98.012 [[Page 41033]] [GRAPHIC] [TIFF OMITTED] TR31JY98.013 [[Page 41034]] [GRAPHIC] [TIFF OMITTED] TR31JY98.014 [[Page 41035]] [GRAPHIC] [TIFF OMITTED] TR31JY98.015 [[Page 41036]] [GRAPHIC] [TIFF OMITTED] TR31JY98.016 [[Page 41037]] [GRAPHIC] [TIFF OMITTED] TR31JY98.017 [[Page 41038]] [GRAPHIC] [TIFF OMITTED] TR31JY98.018 [[Page 41039]] [GRAPHIC] [TIFF OMITTED] TR31JY98.019 [[Page 41040]] [GRAPHIC] [TIFF OMITTED] TR31JY98.020 [[Page 41041]] [GRAPHIC] [TIFF OMITTED] TR31JY98.021 [[Page 41042]] [GRAPHIC] [TIFF OMITTED] TR31JY98.022 [[Page 41043]] [GRAPHIC] [TIFF OMITTED] TR31JY98.023 [[Page 41044]] [GRAPHIC] [TIFF OMITTED] TR31JY98.024 [[Page 41045]] [GRAPHIC] [TIFF OMITTED] TR31JY98.025 [[Page 41046]] [GRAPHIC] [TIFF OMITTED] TR31JY98.026 [[Page 41047]] [GRAPHIC] [TIFF OMITTED] TR31JY98.027 [[Page 41048]] [GRAPHIC] [TIFF OMITTED] TR31JY98.028 [[Page 41049]] [GRAPHIC] [TIFF OMITTED] TR31JY98.029 [[Page 41050]] [GRAPHIC] [TIFF OMITTED] TR31JY98.030 [[Page 41051]] [GRAPHIC] [TIFF OMITTED] TR31JY98.031 BILLING CODE 4120-01-C [[Page 41052]] Table 4A.--Wage Index and Capital Geographic Adjustment Factor (GAF) for Urban Areas ------------------------------------------------------------------------ Wage Urban area (Constituent counties) index GAF ------------------------------------------------------------------------ 0040 Abilene, TX................................... 0.8083 0.8644 Taylor, TX 0060 Aguadilla, PR................................. 0.4738 0.5996 Aguada, PR Aguadilla, PR Moca, PR 0080 Akron, OH..................................... 0.9954 0.9968 Portage, OH Summit, OH 0120 Albany, GA.................................... 0.7993 0.8578 Dougherty, GA Lee, GA 0160 Albany-Schenectady-Troy, NY................... 0.8629 0.9040 Albany, NY Montgomery, NY Rensselaer, NY Saratoga, NY Schenectady, NY Schoharie, NY 0200 Albuquerque, NM............................... 0.8632 0.9042 Bernalillo, NM Sandoval, NM Valencia, NM 0220 Alexandria, LA................................ 0.8544 0.8978 Rapides, LA 0240 Allentown-Bethlehem-Easton, PA................ 1.0226 1.0154 Carbon, PA Lehigh, PA Northampton, PA 0280 Altoona, PA................................... 0.9355 0.9554 Blair, PA 0320 Amarillo, TX.................................. 0.8509 0.8953 Potter, TX Randall, TX 0380 Anchorage, AK................................. 1.3007 1.1973 Anchorage, AK 0440 Ann Arbor, MI................................. 1.1057 1.0712 Lenawee, MI Livingston, MI Washtenaw, MI 0450 Anniston, AL.................................. 0.8676 0.9073 Calhoun, AL 0460 Appleton-Oshkosh-Neenah, WI................... 0.8844 0.9193 Calumet, WI Outagamie, WI Winnebago, WI 0470 Arecibo, PR................................... 0.4878 0.6117 Arecibo, PR Camuy, PR Hatillo, PR 0480 Asheville, NC................................. 0.8960 0.9276 Buncombe, NC Madison, NC 0500 Athens, GA.................................... 0.8692 0.9085 Clarke, GA Madison, GA Oconee, GA 0520 \1\ Atlanta, GA............................... 0.9936 0.9956 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 0560 Atlantic-Cape May, NJ......................... Atlantic, NJ Cape May, NJ 1.0377 1.0257 0600 Augusta-Aiken, GA-SC.......................... 0.9253 0.9482 Columbia, GA McDuffie, GA Richmond, GA Aiken, SC Edgefield, SC 0640 \1\ Austin-San Marcos, TX..................... 0.8442 0.8905 Bastrop, TX Caldwell, TX Hays, TX Travis, TX Williamson, TX 0680 \2\ Bakersfield, CA........................... 0.9959 0.9972 Kern, CA 0720 \1\ Baltimore, MD............................. 0.9663 0.9768 Anne Arundel, MD Baltimore, MD Baltimore City, MD Carroll, MD Harford, MD Howard, MD Queen Anne's, MD 0733 Bangor, ME.................................... 0.9495 0.9651 Penobscot, ME 0743 Barnstable-Yarmouth, MA....................... 1.5415 1.3449 Barnstable, MA 0760 Baton Rouge, LA............................... 0.8891 0.9227 Ascension, LA East Baton Rouge, LA Livingston, LA West Baton Rouge, LA 0840 Beaumont-Port Arthur, TX...................... 0.9071 0.9354 Hardin, TX Jefferson, TX Orange, TX 0860 Bellingham, WA................................ 1.1459 1.0978 Whatcom, WA 0870 \2\ Benton Harbor, MI......................... 0.8903 0.9235 Berrien, MI 0875 \1\ Bergen-Passaic, NJ........................ 1.1774 1.1183 Bergen, NJ Passaic, NJ 0880 Billings, MT.................................. 0.9162 0.9418 Yellowstone, MT 0920 Biloxi-Gulfport-Pascagoula, MS................ 0.8294 0.8798 Hancock, MS Harrison, MS Jackson, MS 0960 Binghamton, NY................................ 0.9078 0.9359 Broome, NY Tioga, NY 1000 Birmingham, AL................................ 0.9092 0.9369 Blount, AL Jefferson, AL St. Clair, AL Shelby, AL 1010 Bismarck, ND.................................. 0.8042 0.8614 Burleigh, ND Morton, ND 1020 Bloomington, IN............................... 0.8984 0.9293 Monroe, IN 1040 Bloomington-Normal, IL........................ 0.8870 0.9212 McLean, IL 1080 Boise City, ID................................ 0.9209 0.9451 Ada, ID Canyon, ID 1123 \1\ Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH.............................................. 1.1307 1.0878 Bristol, MA Essex, MA Middlesex, MA Norfolk, MA Plymouth, MA Suffolk, MA Worcester, MA Hillsborough, NH Merrimack, NH Rockingham, NH Strafford, NH 1125 Boulder-Longmont, CO.......................... 1.0059 1.0040 Boulder, CO 1145 Brazoria, TX.................................. 0.8925 0.9251 Brazoria, TX 1150 Bremerton, WA................................. 1.1079 1.0727 Kitsap, WA 1240 Brownsville-Harlingen-San Benito, TX.......... 0.8255 0.8769 Cameron, TX 1260 Bryan-College Station, TX..................... 0.8084 0.8645 Brazos, TX 1280 \1\ Buffalo-Niagara Falls, NY................. 0.9607 0.9729 Erie, NY Niagara, NY 1303 Burlington, VT................................ 0.9616 0.9735 Chittenden, VT Franklin, VT Grand Isle, VT 1310 Caguas, PR.................................... 0.4419 0.5716 Caguas, PR Cayey, PR Cidra, PR Gurabo, PR San Lorenzo, PR 1320 Canton-Massillon, OH.......................... 0.8827 0.9181 [[Continued on page 41053]]