Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2009, 22674-22714 [08-1174]

Download as PDF 22674 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 412 [CMS–1554–P] RIN 0938–AP19 Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2009 Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. rwilkins on PROD1PC63 with PROPOSALS2 AGENCY: SUMMARY: This proposed rule would update the prospective payment rates for inpatient rehabilitation facilities (IRFs) for Federal fiscal year (FY) 2009 (for discharges occurring on or after October 1, 2008 and on or before September 30, 2009) as required under section 1886(j)(3)(C) of the Social Security Act (the Act). Section 1886(j)(5) of the Act requires the Secretary to publish in the Federal Register on or before the August 1 that precedes the start of each fiscal year, the classification and weighting factors for the IRF prospective payment system’s (PPS) case-mix groups and a description of the methodology and data used in computing the prospective payment rates for that fiscal year. We are proposing to revise existing policies regarding the PPS within the authority granted under section 1886(j) of the Act. DATES: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on June 20, 2008. ADDRESSES: In commenting, please refer to file code CMS–1554–P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions for ‘‘Comment or Submission’’ and enter the filecode to find the document accepting comments. 2. By regular mail. You may mail written comments (one original and two copies) to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–1554– P, P.O. Box 8012, Baltimore, MD 21244– 8012. VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS–1554–P, Mail Stop C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–8012. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to either of the following addresses. a. Room 445–G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201 (Because access to the interior of the HHH Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. 7500 Security Boulevard, Baltimore, MD 21244–1850. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786– 7195 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Susanne Seagrave, (410) 786–0044, for information regarding the payment policies. Jeanette Kranacs, (410) 786– 9385, for information regarding the wage index. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http:// www.regulations.gov. Follow the search instructions on that Web site to view public comments. Comments received timely will also be available for public inspection as PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1–800–743–3951. Table of Contents I. Background A. Historical Overview of the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) B. Operational Overview of the Current IRF PPS C. Brief Summary of Proposed Revisions to the IRF PPS for Federal Fiscal Year (FY) 2009 II. Proposed Update to the Case-Mix Group (CMG) Relative Weights and Average Length of Stay Values for FY 2009 III. Proposed FY 2009 IRF PPS Federal Prospective Payment Rates A. Increase Factor for FY 2009 and Proposed FY 2009 Labor-Related Share B. Proposed Area Wage Adjustment C. Description of the Proposed IRF Standard Payment Conversion Factor and Proposed Payment Rates for FY 2009 D. Example of the Methodology for Adjusting the Proposed Federal Prospective Payment Rates IV. Proposed Update to Payments for HighCost Outliers Under the IRF PPS A. Proposed Update to the Outlier Threshold Amount for FY 2009 B. Update to the IRF Cost-to-Charge Ratio Ceilings V. Revisions to the Regulation Text in Response to the Medicare, Medicaid, and SCHIP Extension Act of 2007 VI. Post Acute Care Payment Reform VII. Provisions of the Proposed Rule VIII. Collection of Information Requirements IX. Response to Public Comments X. Regulatory Impact Statement Regulation Text Addendum Acronyms Because of the many terms to which we refer by acronym in this proposed rule, we are listing the acronyms used and their corresponding terms in alphabetical order below. ASCA Administrative Simplification Compliance Act, Pub. L. 107–105 BBA Balanced Budget Act of 1997, Pub. L. 105–33 BBRA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 106–113 BIPA Medicare, Medicaid, and SCHIP [State Children’s Health Insurance Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106–554 CBSA Core-Based Statistical Area CCR Cost-to-Charge Ratio CFR Code of Federal Regulations CMG Case-Mix Group DRA Deficit Reduction Act of 2005, Pub. L. 109–171 E:\FR\FM\25APP2.SGM 25APP2 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules DSH Disproportionate Share Hospital ECI Employment Cost Index FI Fiscal Intermediary FR Federal Register FY Federal Fiscal Year GDP Gross Domestic Product HHH Hubert H. Humphrey Building HIPAA Health Insurance Portability and Accountability Act, Pub. L. 104–191 IFMC Iowa Foundation for Medical Care IPF Inpatient Psychiatric Facility IPPS Inpatient Prospective Payment System IRF Inpatient Rehabilitation Facility IRF–PAI Inpatient Rehabilitation FacilityPatient Assessment Instrument IRF PPS Inpatient Rehabilitation Facility Prospective Payment System IRVEN Inpatient Rehabilitation Validation and Entry LIP Low-Income Percentage LTCH Long-Term Care Hospital MAC Medicare Administrative Contractor MEDPAR Medicare Provider Analysis and Review MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108–173 MSA Metropolitan Statistical Area NAICS North American Industrial Classification System OMB Office of Management and Budget PAI Patient Assessment Instrument PPS Prospective Payment System RAND RAND Corporation RFA Regulatory Flexibility Act, Pub. L. 96– 354 RIA Regulatory Impact Analysis RIC Rehabilitation Impairment Category RPL Rehabilitation, Psychiatric, and LongTerm Care Hospital Market Basket SCHIP State Children’s Health Insurance Program SIC Standard Industrial Code TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248 rwilkins on PROD1PC63 with PROPOSALS2 I. Background A. Historical Overview of the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) Section 4421 of the Balanced Budget Act of 1997 (BBA, Pub. L. 105–33), as amended by section 125 of the Medicare, Medicaid, and SCHIP (State Children’s Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106–113), and by section 305 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA, Pub. L. 106–554), provides for the implementation of a per discharge prospective payment system (PPS) under section 1886(j) of the Social Security Act (the Act) for inpatient rehabilitation hospitals and inpatient rehabilitation units of a hospital (hereinafter referred to as IRFs). Payments under the IRF PPS encompass inpatient operating and capital costs of furnishing covered rehabilitation services (that is, routine, VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 ancillary, and capital costs) but not direct graduate medical education costs, costs of approved nursing and allied health education activities, bad debts, and other services or items outside the scope of the IRF PPS. Although a complete discussion of the IRF PPS provisions appears in the original, FY 2002 IRF PPS final rule (66 FR 41316) as revised in the FY 2006 IRF PPS final rule (70 FR 47880), we are providing below a general description of the IRF PPS for fiscal years (FYs) 2002 through 2005. Under the IRF PPS from FY 2002 through FY 2005, as described in the FY 2002 IRF PPS final rule (66 FR 41316), the Federal prospective payment rates were computed across 100 distinct casemix groups (CMGs). We constructed 95 CMGs using rehabilitation impairment categories (RICs), functional status (both motor and cognitive), and age (in some cases, cognitive status and age may not be a factor in defining a CMG). In addition, we constructed five special CMGs to account for very short stays and for patients who expire in the IRF. For each of the CMGs, we developed relative weighting factors to account for a patient’s clinical characteristics and expected resource needs. Thus, the weighting factors accounted for the relative difference in resource use across all CMGs. Within each CMG, we created tiers based on the estimated effects that certain comorbidities would have on resource use. We established the Federal PPS rates using a standardized payment conversion factor (formerly referred to as the budget neutral conversion factor). For a detailed discussion of the budget neutral conversion factor, please refer to our FY 2004 IRF PPS final rule (68 FR 45684 through 45685). In the FY 2006 IRF PPS final rule (70 FR 47880), we discussed in detail the methodology for determining the standard payment conversion factor. We applied the relative weighting factors to the standard payment conversion factor to compute the unadjusted Federal prospective payment rates under the IRF PPS from FYs 2002 through 2005. We then applied adjustments for geographic variations in wages (wage index), the percentage of low-income patients, and location in a rural area (if applicable) to the IRF’s unadjusted Federal prospective payment rates. In addition, we made adjustments to account for short-stay transfer cases, interrupted stays, and high cost outliers. For cost reporting periods that began on or after January 1, 2002 and before October 1, 2002, we determined the final prospective payment amounts PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 22675 using the transition methodology prescribed in section 1886(j)(1) of the Act. Under this provision, IRFs transitioning into the PPS were paid a blend of the Federal IRF PPS rate and the payment that the IRF would have received had the IRF PPS not been implemented. This provision also allowed IRFs to elect to bypass this blended payment and immediately be paid 100 percent of the Federal IRF PPS rate. The transition methodology expired as of cost reporting periods beginning on or after October 1, 2002 (FY 2003), and payments for all IRFs now consist of 100 percent of the Federal IRF PPS rate. We established a CMS Web site as a primary information resource for the IRF PPS. The Web site URL is http:// www.cms.hhs.gov/InpatientRehabFac PPS/ and may be accessed to download or view publications, software, data specifications, educational materials, and other information pertinent to the IRF PPS. Section 1886(j) of the Act confers broad statutory authority upon the Secretary to propose refinements to the IRF PPS. In the FY 2006 IRF PPS final rule (70 FR 47880) and in correcting amendments to the FY 2006 IRF PPS final rule (70 FR 57166) that we published on September 30, 2005, we finalized a number of refinements to the IRF PPS case-mix classification system (the CMGs and the corresponding relative weights) and the case-level and facility-level adjustments. Any reference to the FY 2006 IRF PPS final rule in this proposed rule also includes the provisions effective in the correcting amendments. For a detailed discussion of the final key policy changes for FY 2006, please refer to the FY 2006 IRF PPS final rule (70 FR 47880 and 70 FR 57166). In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined the IRF PPS case-mix classification system (the CMG relative weights) and the caselevel adjustments, to ensure that IRF PPS payments continue to reflect as accurately as possible the costs of care. For a detailed discussion of the FY 2007 policy revisions, please refer to the FY 2007 IRF PPS final rule (71 FR 48354). In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the Federal prospective payment rates and the outlier threshold, revised the IRF wage index policy, and clarified how we determine high-cost outlier payments for transfer cases. For more information on the policy changes implemented for FY 2008, please refer to the FY 2008 IRF PPS final rule (72 FR 44284), in which we published the final FY 2008 IRF Federal prospective payment rates. E:\FR\FM\25APP2.SGM 25APP2 22676 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules rwilkins on PROD1PC63 with PROPOSALS2 After publication of the FY 2008 IRF PPS final rule (72 FR 44284), section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110–173, amended section 1886(j)(3)(C) of the Act to apply a zero percent increase factor for FYs 2008 and 2009, effective for IRF discharges occurring on or after April 1, 2008. Section 1886(j)(3)(C) of the Act requires the Secretary to develop an increase factor to update the IRF Federal prospective payment rates for each FY. Based on the legislative change to the increase factor, we revised the FY 2008 Federal prospective payment rates for IRF discharges occurring on or after April 1, 2008. Thus, the final FY 2008 IRF Federal prospective payment rates that were published in the FY 2008 IRF PPS final rule (72 FR 44284) were effective for discharges occurring on or after October 1, 2007 and on or before March 31, 2008; and the revised FY 2008 IRF Federal prospective payment rates will be effective for discharges occurring on or after April 1, 2008 and on or before September 30, 2008. The revised FY 2008 Federal prospective payment rates are available on the CMS Web site at http://www.cms.hhs.gov/ InpatientRehabFacPPS/07_DataFiles. asp#TopOfPage. B. Operational Overview of the Current IRF PPS As described in the FY 2002 IRF PPS final rule, upon the admission and discharge of a Medicare Part A fee-forservice patient, the IRF is required to complete the appropriate sections of a patient assessment instrument, the Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF–PAI). All required data must be electronically encoded into the IRF–PAI software product. Generally, the software product includes patient grouping programming called the GROUPER software. The GROUPER software uses specific IRF– PAI data elements to classify (or group) patients into distinct CMGs and account for the existence of any relevant comorbidities. The GROUPER software produces a five-digit CMG number. The first digit is an alpha-character that indicates the comorbidity tier. The last four digits represent the distinct CMG number. Free downloads of the Inpatient Rehabilitation Validation and Entry (IRVEN) software product, including the GROUPER software, are available on the CMS Web site at http:// www.cms.hhs.gov/InpatientRehabFac PPS/06_Software.asp. Once a patient is discharged, the IRF submits a Medicare claim (a Health Insurance Portability and VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 Accountability Act (HIPAA, Pub. L. 104–191) compliant electronic claim or, if the Administrative Compliance Act (ASCA, Pub. L. 107–105,) permits a paper claim, a UB–04 or a CMS–1450, as appropriate) using the five-digit CMG number and sends it to the appropriate Medicare fiscal intermediary (FI) or Medicare Administrative Contractor (MAC). Claims submitted to Medicare must comply with both ASCA and HIPAA. Section 3 of the ASCA amends section 1862(a) of the Act by adding paragraph (22) which requires the Medicare program, subject to section 1862(h) of the Act, to deny payment under Part A or Part B for any expenses for items or services ‘‘for which a claim is submitted other than in an electronic form specified by the Secretary.’’ Section 1862(h) of the Act, in turn, provides that the Secretary shall waive such denial in situations in which there is no method available for the submission of claims in an electronic form or the entity submitting the claim is a small provider. In addition, the Secretary also has the authority to waive such denial ‘‘in such unusual cases as the Secretary finds appropriate.’’ See also the final rule, ‘‘Medicare Program; Electronic Submission of Medicare Claims’’ (70 FR 71008, November 25, 2005). Section 3 of the ASCA operates in the context of the administrative simplification provisions of HIPAA, which include, among others, the requirements for transaction standards and code sets codified in 45 CFR, parts 160 and 162, subparts A and I through R (generally known as the Transactions Rule). The Transactions Rule requires covered entities, including covered healthcare providers, to conduct covered electronic transactions according to the applicable transaction standards. (See the program claim memoranda issued and published by CMS at: http://www.cms.hhs.gov/ ElectronicBillingEDITrans/ and listed in the addenda to the Medicare Intermediary Manual, Part 3, section 3600. CMS instructions for the limited number of Medicare claims submitted on paper are available at: http:// www.cms.hhs.gov/manuals/downloads/ clm104c25.pdf.) The Medicare FI or MAC processes the claim through its software system. This software system includes pricing programming called the ‘‘PRICER’’ software. The PRICER software uses the CMG number, along with other specific claim data elements and providerspecific data, to adjust the IRF’s prospective payment for interrupted stays, transfers, short stays, and deaths, and then applies the applicable adjustments to account for the IRF’s PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 wage index, percentage of low-income patients, rural location, and outlier payments. For discharges occurring on or after October 1, 2005, the IRF PPS payment also reflects the new teaching status adjustment that became effective as of FY 2006, as discussed in the FY 2006 IRF PPS final rule (70 FR 47880). C. Brief Summary of Proposed Revisions to the IRF PPS for FY 2009 In this proposed rule, we are proposing to make the following updates to the IRF PPS: • Update the FY 2009 IRF PPS relative weights and average length of stay values using the most current and complete Medicare claims and cost report data, as discussed in section II. • Update the FY 2009 IRF PPS payment rates by the proposed wage index and labor related share in a budget neutral manner, as discussed in sections III.A and B. • Update the outlier threshold amount for FY 2009, as discussed in section IV.A. • Update the cost-to-charge ratio ceiling and the national average urban and rural cost-to-charge ratios for purposes of determining outlier payments under the IRF PPS, as discussed in section IV.B. II. Proposed Update to the CMG Relative Weights and Average Length of Stay Values for FY 2009 As specified in 42 CFR 412.620(b)(1), we calculate a relative weight for each CMG that is proportional to the resources needed by an average inpatient rehabilitation case in that CMG. For example, cases in a CMG with a relative weight of 2, on average, will cost twice as much as cases in a CMG with a relative weight of 1. Relative weights account for the variance in cost per discharge due to the variance in resource utilization among the payment groups, and their use helps to ensure that IRF PPS payments support beneficiary access to care as well as provider efficiency. In this proposed rule, we propose to update the CMG relative weights and average length of stay values using the most recent available data (FY 2006). We propose to do this using the same methodology, with one change, that was described in the original, FY 2002 IRF PPS final rule (66 FR 41316) and the FY 2006 IRF PPS final rule (70 FR 47880, 47887 through 47888). The proposed change to the methodology involves using new, more detailed cost-to-charge ratio (CCR) data from the cost reports of IRF subprovider units of primary acute care hospitals, instead of CCR data from the associated primary acute care E:\FR\FM\25APP2.SGM 25APP2 22677 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules hospitals, to calculate IRFs’ average costs per case. For freestanding IRFs, we propose to continue using CCR data from the freestanding IRF’s (that is, the primary hospital’s) cost report. Previously, we were only able to use the CCR data from the cost reports of the primary acute care hospitals to estimate the relationship between costs and charges for the IRF subprovider units because those were the best data we had available. However, conceptually, the relationship between costs and charges in the primary acute care hospital could differ from the relationship between costs and charges in the IRF subprovider units. Since the two types of facilities provide a different range of services and treat different populations of patients, it might not be as precise to use the data from the primary acute care hospital to estimate the relationship between costs and charges in the IRF subprovider unit. When we analyzed the CMG relative weights for FY 2009, using both the primary acute care hospital CCRs and the IRF subprovider unit CCRs, we found that the CCRs we used made very little difference in the CMG relative weights. Since the data needed to calculate the IRF subprovider units’ CCRs are now available in enough detail, and since conceptually it is more appropriate to use the cost report data from the IRF subprovider units to estimate the relationship between costs and charges in these IRF subprovider units, we are proposing this change to the methodology. As indicated previously, for freestanding IRFs, we propose to continue using CCR data from the freestanding IRF’s (that is, the primary hospital’s) cost report. In future years, we would continue to estimate the CMG relative weights using both the primary acute care hospital CCRs and the IRF subprovider unit CCRs to ensure that we continue to use the most appropriate data in updating the CMG relative weights. In calculating the CMG relative weights, we use a hospital-specific relative value method to estimate operating (routine and ancillary services) and capital costs of IRFs. To estimate these costs for FY 2009, we propose to use the CCRs from the IRF subprovider units of primary acute care hospitals, except for the freestanding IRFs (for which we will continue to use the data from the cost report of the primary hospital, as discussed above). For FY 2009, we propose to use the same methodology we used to compute the CMG relative weights for FYs 2002 through 2008, with the one change described above, to update the CMG relative weights to reflect the most recent available data (FY 2006). The process used to calculate the CMG relative weights for this proposed rule follows below: Step 1. We calculate the CMG relative weights by estimating the effects that comorbidities have on costs. Step 2. We adjust the cost of each Medicare discharge (case) to reflect the effects found in the first step. Step 3. We use the adjusted costs from the second step to calculate CMG relative weights, using the hospitalspecific relative value method. Step 4. We normalize to the same average CMG relative weight from the CMG relative weights implemented in the FY 2002 IRF PPS final rule (66 FR 41316), the FY 2006 IRF PPS final rule (70 FR 47880), and the FY 2007 IRF PPS final rule (71 FR 48354). (Note that we did not revise the CMG relative weights in the FY 2008 IRF PPS final rule (72 FR 44284)). Consistent with the way we implemented changes to the IRF classification system in the FY 2006 IRF PPS final rule (70 FR 47880 and 70 FR 57166) and the FY 2007 IRF PPS final rule (71 FR 48354), we are proposing to make the revisions to the CMG relative weights for FY 2009 in such a way that total estimated aggregate payments to IRFs for FY 2009 are the same with or without the proposed changes (that is, in a budget neutral manner) by applying a budget neutrality factor to the standard payment amount. To calculate the appropriate proposed budget neutrality factor to apply to the standard payment amount, we propose to use the following steps: Step 1. Calculate the estimated total amount of IRF PPS payments for FY 2009 (with no proposed changes to the CMG relative weights). Step 2. Apply the proposed changes to the CMG relative weights (as discussed above) to calculate the estimated total amount of IRF PPS payments for FY 2009. Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2 to determine the proposed factor (0.9969) that would maintain the same total estimated aggregate payments in FY 2009 with and without the proposed changes to the CMG relative weights. Step 4. Apply the proposed budget neutrality factor (0.9969) to the FY 2008 IRF PPS standard payment amount after the application of the budget-neutral wage adjustment factor. In section III.C of this proposed rule, we discuss the proposed methodology for calculating the standard payment conversion factor for FY 2009. Table 1 below, ‘‘Proposed Relative Weights and Average Lengths of Stay for Case-Mix Groups,’’ presents the CMGs, the comorbidity tiers, the proposed corresponding relative weights, and the proposed average length of stay values for each CMG and tier for FY 2009. The average length of stay for each CMG is used to determine when an IRF discharge meets the definition of a short-stay transfer, which results in a per diem case level adjustment. The proposed relative weights and average length of stay values shown in Table 1 are subject to change for the final rule based on analysis of updated data. TABLE 1.— PROPOSED RELATIVE WEIGHTS AND AVERAGE LENGTHS OF STAY FOR CASE-MIX GROUPS CMG 0101 ......... 0102 ......... rwilkins on PROD1PC63 with PROPOSALS2 0103 ......... 0104 0105 0106 0107 0108 0109 ......... ......... ......... ......... ......... ......... 0110 ......... VerDate Aug<31>2005 CMG Description (M = motor, C = cognitive, A = age) Proposed relative weight Tier 1 Stroke M>51.05 ......................... Stroke M>44.45 and M<51.05 and C>18.5. Stroke M>44.45 and M<51.05 and C<18.5. Stroke M>38.85 and M<44.45 ... Stroke M>34.25 and M<38.85 ... Stroke M>30.05 and M<34.25 ... Stroke M>26.15 and M<30.05 ... Stroke M<26.15 and A>84.5 ...... Stroke M>22.35 and M<26.15 and A<84.5. Stroke M<22.35 and A<84.5 ...... 18:48 Apr 24, 2008 Jkt 214001 PO 00000 Tier 2 Tier 3 Proposed average length of stay None Tier 1 Tier 2 Tier 3 None 0.7741 0.9569 0.7243 0.8953 0.6463 0.7989 0.6222 0.7691 8 11 9 11 9 11 9 10 1.1184 1.0465 0.9338 0.8990 13 15 12 12 1.2008 1.4207 1.6395 1.8826 2.2430 2.1639 1.1235 1.3293 1.5341 1.7615 2.0987 2.0247 1.0025 1.1861 1.3688 1.5718 1.8726 1.8066 0.9651 1.1419 1.3178 1.5132 1.8028 1.7393 14 16 17 19 29 22 15 17 19 22 27 25 13 15 17 20 24 22 13 15 17 19 23 22 2.6983 2.5247 2.2528 2.1688 30 31 27 27 Frm 00005 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2 22678 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules TABLE 1.— PROPOSED RELATIVE WEIGHTS AND AVERAGE LENGTHS OF STAY FOR CASE-MIX GROUPS—Continued CMG 0201 ......... 0202 ......... 0203 ......... 0204 ......... 0205 ......... 0206 ......... 0207 ......... 0301 ......... 0302 ......... 0303 ......... 0304 ......... 0401 ......... 0402 ......... 0403 ......... 0404 ......... 0405 ......... 0501 ......... 0502 ......... 0503 ......... 0504 ......... 0505 ......... 0506 ......... 0601 ......... 0602 ......... 0603 ......... 0604 ......... 0701 ......... 0702 ......... 0703 ......... 0704 ......... 0801 ......... rwilkins on PROD1PC63 with PROPOSALS2 0802 ......... 0803 ......... 0804 ......... 0805 ......... VerDate Aug<31>2005 CMG Description (M = motor, C = cognitive, A = age) Proposed relative weight Tier 1 Traumatic brain injury M>53.35 and C>23.5. Traumatic brain injury M>44.25 and M<53.35 and C>23.5. Traumatic brain injury M>44.25 and C<23.5. Traumatic brain injury M>40.65 and M<44.25. Traumatic brain injury M>28.75 and M<40.65. Traumatic brain injury M>22.05 and M<28.75. Traumatic brain injury M<22.05 Non-traumatic brain injury M>41.05. Non-traumatic brain injury M>35.05 and M<41.05. Non-traumatic brain injury M>26.15 and M<35.05. Non-traumatic brain injury M<26.15. Traumatic spinal cord injury M>48.45. Traumatic spinal cord injury M>30.35 and M<48.45. Traumatic spinal cord injury M>16.05 and M<30.35. Traumatic spinal cord injury M<16.05 and A>63.5. Traumatic spinal cord injury M<16.05 and A<63.5. Non-traumatic spinal cord injury M>51.35. Non-traumatic spinal cord injury M>40.15 and M<51.35. Non-traumatic spinal cord injury M>31.25 and M<40.15. Non-traumatic spinal cord injury M>29.25 and M<31.25. Non-traumatic spinal cord injury M>23.75 and M<29.25. Non-traumatic spinal cord injury M<23.75. Neurological M>47.75 ................ Neurological M>37.35 and M<47.75. Neurological M>25.85 and M<37.35. Neurological M<25.85 ................ Fracture of lower extremity M>42.15. Fracture of lower extremity M>34.15 and M<42.15. Fracture of lower extremity M>28.15 and M<34.15. Fracture of lower extremity M<28.15. Replacement of lower extremity joint M>49.55. Replacement of lower extremity joint M>37.05 and M<49.55. Replacement of lower extremity joint M>28.65 and M<37.05 and A>83.5. Replacement of lower extremity joint M>28.65 and M<37.05 and A<83.5. Replacement of lower extremity joint M>22.05 and M<28.65. 18:48 Apr 24, 2008 Jkt 214001 PO 00000 Tier 2 Tier 3 Proposed average length of stay None Tier 1 Tier 2 Tier 3 None 0.7957 0.6567 0.5947 0.5509 10 9 8 8 1.0090 0.8327 0.7541 0.6985 13 12 10 10 1.2165 1.0040 0.9092 0.8422 14 13 12 12 1.3278 1.0959 0.9924 0.9193 15 15 13 13 1.6060 1.3255 1.2004 1.1119 17 17 16 15 2.0505 1.6923 1.5326 1.4197 21 21 20 19 2.6905 1.0947 2.2205 0.9303 2.0109 0.8501 1.8627 0.7640 36 12 27 12 25 11 23 10 1.4084 1.1969 1.0937 0.9829 14 15 14 13 1.6925 1.4384 1.3144 1.1812 17 18 16 15 2.3001 1.9548 1.7862 1.6053 28 24 21 20 0.9524 0.8236 0.7692 0.7107 12 11 10 10 1.3448 1.1629 1.0862 1.0035 17 16 15 13 2.2969 1.9863 1.8552 1.7140 30 25 23 22 4.1471 3.5864 3.3497 3.0946 66 44 38 36 3.3687 2.9132 2.7209 2.5138 42 30 30 32 0.7485 0.6643 0.5859 0.5236 9 9 8 8 1.0121 0.8982 0.7922 0.7080 12 12 11 10 1.3269 1.1777 1.0387 0.9282 15 15 14 12 1.6143 1.4327 1.2637 1.1293 19 19 17 15 1.9083 1.6936 1.4938 1.3349 21 19 19 17 2.6059 2.3127 2.0399 1.8229 30 29 24 23 0.9507 1.2627 0.7701 1.0228 0.7182 0.9539 0.6558 0.8710 11 14 11 13 9 12 9 12 1.6055 1.3005 1.2129 1.1075 16 16 15 15 2.1200 0.9081 1.7172 0.7815 1.6016 0.7372 1.4624 0.6629 25 10 21 10 20 10 18 9 1.1867 1.0212 0.9633 0.8662 14 14 13 12 1.4492 1.2471 1.1765 1.0579 16 16 15 14 1.8522 1.5939 1.5037 1.3520 19 20 19 18 0.6786 0.5637 0.5166 0.4690 8 8 7 7 0.9002 0.7477 0.6853 0.6221 10 10 9 9 1.2808 1.0639 0.9750 0.8851 13 13 13 12 1.1331 0.9412 0.8625 0.7830 13 12 11 11 1.4300 1.1879 1.0886 0.9882 16 15 14 13 Frm 00006 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2 22679 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules TABLE 1.— PROPOSED RELATIVE WEIGHTS AND AVERAGE LENGTHS OF STAY FOR CASE-MIX GROUPS—Continued CMG 0806 ......... 0901 ......... 0902 ......... 0903 ......... 0904 ......... 1001 ......... 1002 ......... 1003 ......... 1101 ......... 1102 ......... 1201 ......... 1202 ......... 1203 ......... 1301 ......... 1302 ......... 1303 ......... 1401 1402 1403 1404 1501 1502 ......... ......... ......... ......... ......... ......... 1503 ......... 1504 ......... 1601 ......... 1602 ......... 1603 ......... 1701 ......... 1702 ......... 1703 ......... 1704 ......... 1801 ......... 1802 ......... rwilkins on PROD1PC63 with PROPOSALS2 1803 ......... 1901 ......... 1902 ......... 1903 ......... 2001 ......... 2002 ......... 2003 ......... VerDate Aug<31>2005 CMG Description (M = motor, C = cognitive, A = age) Proposed relative weight Tier 1 Replacement of lower extremity joint M<22.05. Other orthopedic M>44.75 ......... Other orthopedic M>34.35 and M<44.75. Other orthopedic M>24.15 and M<34.35. Other orthopedic M<24.15 ......... Amputation, lower extremity M>47.65. Amputation, lower extremity M>36.25 and M<47.65. Amputation, lower extremity M<36.25. Amputation, non-lower extremity M>36.35. Amputation, non-lower extremity M<36.35. Osteoarthritis M>37.65 .............. Osteoarthritis M>30.75 and M<37.65. Osteoarthritis M<30.75 .............. Rheumatoid, other arthritis M>36.35. Rheumatoid, other arthritis M>26.15 and M<36.35. Rheumatoid, other arthritis M<26.15. Cardiac M>48.85 ....................... Cardiac M>38.55 and M<48.85 Cardiac M>31.15 and M<38.55 Cardiac M<31.15 ....................... Pulmonary M>49.25 ................... Pulmonary M>39.05 and M<49.25. Pulmonary M>29.15 and M<39.05. Pulmonary M<29.15 ................... Pain syndrome M>37.15 ............ Pain syndrome M>26.75 and M<37.15. Pain syndrome M<26.75 ............ Major multiple trauma without brain or spinal cord injury M>39.25. Major multiple trauma without brain or spinal cord injury M>31.05 and M<39.25. Major multiple trauma without brain or spinal cord injury M>25.55 and M<31.05. Major multiple trauma without brain or spinal cord injury M<25.55. Major multiple trauma with brain or spinal cord injury M>40.85. Major multiple trauma with brain or spinal cord injury M>23.05 and M<40.85. Major multiple trauma with brain or spinal cord injury M<23.05. Guillain Barre M>35.95 .............. Guillain Barre M>18.05 and M<35.95. Guillain Barre M<18.05 .............. Miscellaneous M>49.15 ............. Miscellaneous M>38.75 and M<49.15. Miscellaneous M>27.85 and M<38.75. 18:48 Apr 24, 2008 Jkt 214001 PO 00000 Tier 2 Tier 3 Proposed average length of stay None Tier 1 Tier 2 Tier 3 None 1.7498 1.4535 1.3320 1.2092 21 19 16 15 0.8724 1.1764 0.7428 1.0016 0.6672 0.8997 0.5950 0.8023 12 13 9 13 10 12 9 11 1.5455 1.3159 1.1821 1.0541 16 17 15 14 1.9922 0.9530 1.6963 0.9074 1.5238 0.7850 1.3588 0.7218 23 11 21 16 20 10 18 10 1.2690 1.2083 1.0452 0.9611 14 15 13 13 1.8511 1.7625 1.5246 1.4019 19 21 19 18 1.1511 1.0159 0.9562 0.8734 12 13 12 12 1.7909 1.5805 1.4877 1.3589 19 21 18 16 1.0383 1.3069 0.8996 1.1323 0.8403 1.0576 0.7356 0.9258 12 13 11 15 11 13 10 12 1.6806 1.2933 1.4561 0.9197 1.3600 0.8468 1.1906 0.7603 16 13 18 12 17 11 16 10 1.7330 1.2324 1.1347 1.0188 18 15 14 14 2.2338 1.5885 1.4625 1.3132 18 21 19 17 0.8468 1.1260 1.4026 1.7824 0.8979 1.1288 0.7331 0.9748 1.2142 1.5430 0.8644 1.0867 0.6541 0.8697 1.0833 1.3767 0.7627 0.9588 0.5895 0.7838 0.9764 1.2407 0.7277 0.9149 10 13 14 19 10 12 10 13 15 19 11 14 10 12 14 17 10 12 9 11 13 16 10 12 1.3885 1.3367 1.1795 1.1254 16 15 15 14 1.7937 0.9517 1.3184 1.7267 0.8382 1.1611 1.5236 0.7807 1.0815 1.4537 0.6881 0.9532 22 13 15 20 11 15 19 11 13 17 10 13 1.6571 1.0571 1.4593 0.9515 1.3593 0.8114 1.1981 0.7336 15 12 19 14 17 12 16 10 1.4300 1.2870 1.0976 0.9924 16 15 14 13 1.6793 1.5114 1.2889 1.1654 20 19 16 15 2.1809 1.9629 1.6740 1.5135 25 23 20 20 0.9865 0.9494 0.7674 0.7313 14 13 11 10 1.6484 1.5864 1.2823 1.2221 20 19 17 16 2.8473 2.7401 2.2149 2.1108 38 33 27 25 1.1894 2.3954 0.8847 1.7817 0.8847 1.7817 0.8847 1.7817 18 30 11 23 13 21 12 22 3.8382 0.8681 1.1547 2.8549 0.7274 0.9676 2.8549 0.6556 0.8721 2.8549 0.5908 0.7859 40 10 12 36 10 12 34 9 11 36 8 11 1.4947 1.2525 1.1288 1.0173 16 15 14 13 Frm 00007 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2 22680 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules TABLE 1.— PROPOSED RELATIVE WEIGHTS AND AVERAGE LENGTHS OF STAY FOR CASE-MIX GROUPS—Continued CMG 2004 ......... 2101 ......... 5001 ......... 5101 ......... 5102 ......... 5103 ......... 5104 ......... CMG Description (M = motor, C = cognitive, A = age) Miscellaneous M<27.85 ............. Burns M>0 ................................. Short-stay cases, length of stay is 3 days or fewer. Expired, orthopedic, length of stay is 13 days or fewer. Expired, orthopedic, length of stay is 14 days or more. Expired, not orthopedic, length of stay is 15 days or fewer. Expired, not orthopedic, length of stay is 16 days or more. Generally, updates to the CMG relative weights result in some increases and some decreases to the CMG relative weight values. Table 2 shows, overall, how the proposed revisions in this proposed rule would affect particular Proposed relative weight Tier 1 Tier 2 Tier 3 1.9862 2.0633 ................ 1.6644 1.8370 ................ 1.5000 1.8370 ................ ................ ................ ................ Proposed average length of stay None Tier 1 Tier 2 Tier 3 1.3518 1.3345 0.1503 23 33 ................ 20 23 ................ 19 18 ................ 17 16 3 ................ 0.6577 ................ ................ ................ 8 ................ ................ 1.6370 ................ ................ ................ 20 ................ ................ ................ 0.6924 ................ ................ ................ 8 ................ ................ ................ 1.9305 ................ ................ ................ 23 CMG relative weight values, which affect the overall distribution of payments within CMGs and tiers. Note that, because we propose to implement the CMG relative weight revisions in a budget neutral manner, total estimated None aggregate payments to IRFs for FY 2009 would not be affected. However, the proposed revisions would affect the distribution of payments within CMGs and tiers. TABLE 2.—DISTRIBUTIONAL EFFECTS OF THE PROPOSED CHANGES TO THE CMG RELATIVE WEIGHTS (FY 2008 VALUES COMPARED WITH FY 2009 VALUES) Number of cases affected Percentage change rwilkins on PROD1PC63 with PROPOSALS2 Increased by 15% or more ...................................................................................................................................... Increased by between 5% and 15% ....................................................................................................................... Changed by less than 5% ....................................................................................................................................... Decreased by between 5% and 15% ...................................................................................................................... Decreased by 15% or more .................................................................................................................................... As Table 2 shows, over 96 percent of all IRF cases are in CMGs and tiers that would experience less than a 5 percent change (either increase or decrease) in the CMG relative weight value as a result of the proposed revisions. The most significant increase in the proposed CMG relative weight values, in terms of the largest number of cases affected, would be a 3.3 percent increase in the CMG relative weight value for CMG A0802—Replacement of lower extremity joint, motor score greater than 37.05 and motor score less than 49.55— in the ‘‘no-comorbidity’’ tier. In the FY 2006 data, 25,822 IRF discharges were classified into this CMG and tier. We believe that the higher costs reported in this CMG and tier in FY 2006, compared with those reported for this CMG and tier in FY 2003, may reflect recent IRF case mix changes caused, at least in part, by the phase-in of the ‘‘75 percent’’ rule and increased medical review of IRF discharges. These changes to the system have likely increased the complexity of patients being admitted to IRFs, especially among the lowerextremity joint replacement cases with no comorbidities, which do not meet the VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 75 percent rule criteria and have been the focus of a lot of the medical review activities. These same trends explain the most significant decrease in the proposed CMG relative weight values, in terms of the largest number of cases affected. The proposed revisions would reduce the CMG relative weight value for CMG 5001—Short-stay cases, length of stay is 3 days or fewer—by 31.7 percent. This decrease is associated with a substantial decrease in the number of cases classified into this extremely short-stay CMG, from 10,222 IRF discharges in FY 2003 to 2,376 IRF discharges in FY 2006. We believe that increases in the complexity of IRF patients resulting from the ‘‘75 percent’’ rule and the IRF medical review activities may mean that fewer IRF patients can effectively be treated in IRFs for 3 days or fewer. The changes in the proposed average length of stay values in this proposed rule, compared with the current (FY 2008) average length of stay values, are small and primarily distributional. Some values increase and some decrease, compared with the FY 2008 values. The only notable changes are in PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 Percentage of cases affected 65 4,979 390,600 1,706 2,531 0.0 1.2 96.1 0.4 2.3 3 of the CMGs for traumatic spinal cord injuries, B0403, B0404, and B0405 (all in tier 1), for which the proposed average length of stay values increased by 8.55 days, 14.92 days, and 9.72 days, respectively. This may, again, be due to increases in the complexity of IRF patients resulting from the ‘‘75 percent’’ rule and the IRF medical review activities. The overall average length of stay in IRFs also increased from 12.8 days in FY 2003 to 13.9 days in FY 2006, which may be attributable to increases in IRFs’ case mix over this period. Given the recent changes in IRFs’ case mix, we believe that it is especially important to update the CMG relative weights and average length of stay values at this time to reflect these changes. III. Proposed FY 2009 IRF PPS Federal Prospective Payment Rates A. Increase Factor for FY 2009 and Proposed FY 2009 Labor-Related Share Section 1886(j)(3)(C) of the Act requires the Secretary to establish an increase factor that reflects changes over time in the prices of an appropriate mix E:\FR\FM\25APP2.SGM 25APP2 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules of goods and services included in the covered IRF services, which is referred to as a market basket index. According to section 1886(j)(3)(A)(i) of the Act, the increase factor shall be used to update the IRF Federal prospective payment rates for each FY. However, section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, Public Law 110– 173, amended section 1886(j)(3)(C) of the Act to apply a zero percent increase factor for FYs 2008 and 2009, effective for IRF discharges occurring on or after April 1, 2008. In accordance with section 1886(j)(3)(C) of the Act, as amended by the legislation, we are applying an increase factor of zero percent to update the proposed IRF Federal prospective payment rates for FY 2009 in this proposed rule. We continue to use the methodology described in the FY 2006 IRF PPS final rule to update the labor-related share for FY 2009. In FY 2004, we updated the 1992 market basket data to 1997 based on the methodology described in the FY 2004 IRF PPS final rule (68 FR 45688 through 45689). As discussed in the FY 2006 IRF PPS final rule (70 FR 47915 through 47917), we rebased and revised the market basket for FY 2006 using the 2002-based cost structures for IRFs, inpatient psychiatric facilities (IPFs), and long-term care hospitals (LTCHs) to determine the FY 2006 labor-related share. For FYs 2007 and 2008, we used the same methodology discussed in the FY 2006 IRF PPS final rule (70 FR at 47908 through 47917) to determine the IRF labor-related share. For FY 2009, we 22681 continue to use the same methodology discussed in the FY 2006 IRF PPS final rule. The labor-related share for FY 2009 is the sum of the FY 2009 relative importance of each labor-related cost category, and reflects the different rates of price change for these cost categories between the base year (FY 2002) and FY 2009. For this proposed rule, the laborrelated share reflects Global Insight’s first quarter 2008 forecast. As shown in Table 3, the total FY 2009 Rehabilitation, Psychiatric, and LongTerm Care Hospital Market Basket (RPL) labor-related share in this proposed rule is 75.691 percent. We propose to update the labor-related share with the most recent available data for the final rule. TABLE 3.—PROPOSED FY 2009 IRF RPL LABOR-RELATED SHARE RELATIVE IMPORTANCE Proposed FY 2009 IRF labor-related share relative importance Cost category Wages and salaries ............................................................................................................................................................. Employee benefits ............................................................................................................................................................... Professional fees ................................................................................................................................................................. All other labor intensive services ......................................................................................................................................... 52.683 14.039 2.896 2.137 Subtotal: ........................................................................................................................................................................ 71.755 Labor-related share of capital costs (.46) ........................................................................................................................... 3.936 Total: ............................................................................................................................................................................. 75.691 Source: GLOBAL INSIGHT, INC, 1st QTR, 2008; @USMACRO/CONTROL0308 @CISSIM/TL0208.SIM Historical Data through 4th QTR, 2007. rwilkins on PROD1PC63 with PROPOSALS2 B. Proposed Area Wage Adjustment Section 1886(j)(6) of the Act requires the Secretary to adjust the proportion (as estimated by the Secretary from time to time) of rehabilitation facilities’ costs attributable to wages and wage-related costs by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the rehabilitation facility compared to the national average wage level for those facilities. The Secretary is required to update the IRF PPS wage index on the basis of information available to the Secretary on the wages and wage-related costs to furnish rehabilitation services. Any adjustments or updates made under section 1886(j)(6) of the Act for a FY are made in a budget neutral manner. In the FY 2008 IRF PPS final rule (72 FR 44299), we maintained the methodology described in the FY 2006 IRF PPS final rule to determine the wage index, labor market area definitions, and hold harmless policy consistent with the rationale outlined in the FY 2006 IRF PPS final rule (70 FR 47917 through 47933). VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 For FY 2009, we propose to maintain the policies and methodologies described in the FY 2008 IRF PPS final rule relating to the labor market area definitions and the wage index methodology for areas with wage data. Therefore, this proposed rule continues to use the Core-Based Statistical Area (CBSA) labor market area definitions and the pre-reclassification and prefloor hospital wage index data based on 2004 cost report data. When adopting new labor market designations made by the Office of Management and Budget (OMB), we identified some geographic areas where there were no hospitals and, thus, no hospital wage index data on which to base the calculation of the IRF PPS wage index. We continue to use the same methodology discussed in the FY 2008 IRF PPS final rule (72 FR 44299) to address those geographic areas where there are no hospitals and, thus, no hospital wage index data on which to base the calculation of the FY 2009 IRF PPS wage index. Additionally, this proposed rule incorporates the CBSA changes PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 published in the most recent OMB bulletin that applies to the hospital wage data used to determine the current IRF PPS wage index. The changes were nomenclature and did not represent substantive changes to the CBSA-based designations. Specifically, OMB added or deleted certain CBSA numbers and revised certain titles. The OMB bulletins are available online at http:// www.whitehouse.gov/omb/bulletins/ index.html. Finally, as discussed in the FY 2008 IRF PPS final rule (72 FR 44298), FY 2008 was the third and final year of the 3-year phase-out of the budget neutral hold harmless policy. For FY 2008 and beyond, we no longer apply an adjustment for IRFs that meet the criteria described in the FY 2006 final rule (70 FR 47923 through 47926). 1. Clarification of New England Deemed Counties We are taking this opportunity to address the change in the treatment of ‘‘New England deemed counties’’ (that is, those counties in New England listed in § 412.64(b)(1)(ii)(B) that were deemed E:\FR\FM\25APP2.SGM 25APP2 rwilkins on PROD1PC63 with PROPOSALS2 22682 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules to be parts of urban areas under section 601(g) of the Social Security Amendments of 1983) that was made in the FY 2008 Inpatient Prospective Payment System (IPPS) final rule with comment period (72 FR 47337). These counties include the following: Litchfield County, CT; York County, ME; Sagadahoc County, ME; Merrimack County, NH; and Newport County, RI. Of these five ‘‘New England deemed counties,’’ three (York County, ME, Sagadahoc County, ME, and Newport County, RI) are also included in metropolitan statistical areas (MSAs) defined by OMB and are considered urban under both the current IPPS and IRF PPS labor market area definitions in § 412.64(b)(1)(ii)(A). The remaining two, Litchfield County, CT and Merrimack County, NH, are geographically located in areas that are considered rural under the current IPPS (and IRF PPS) labor market area definitions, but have been previously deemed urban under the IPPS in certain circumstances, as discussed below. In the FY 2008 IPPS final rule with comment period, (72 FR 47337 through 47338), § 412.64(b)(1)(ii)(B) was revised that the two ‘‘New England deemed counties’’ that are still considered rural under the OMB definitions (Litchfield County, CT and Merrimack County, NH), are no longer considered urban, effective for discharges occurring on or after October 1, 2007, and, therefore, are considered rural in accordance with § 412.64(b)(1)(ii)(C). However, for purposes of payment under the IPPS, acute care hospitals located within those areas are treated as being reclassified to their deemed urban area effective for discharges occurring on or after October 1, 2007 (see 72 FR 47337 through 47338). We note that the IRF PPS does not provide for geographic reclassification. Also, in the FY 2008 IPPS final rule with comment period (72 FR 47338), we explained that we limited this policy change for the ‘‘New England deemed counties’’ only to IPPS hospitals, and any change to non-IPPS provider wage indexes would be addressed in the respective payment system rules. Accordingly, as stated above, we are taking this opportunity to clarify the treatment of ‘‘New England deemed counties’’ under the IRF PPS in this proposed rule. As discussed above, the IRF PPS has consistently used the IPPS definition of ‘‘urban’’ and ‘‘rural’’ with regard to the wage index used in the IRF PPS. Under existing § 412.602, an IRF’s wage index is determined based on the location of the IRF in an urban or rural area as VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 defined in §§ 412.64(b)(1)(ii)(A) through (C). Historical changes to the labor market area/geographic classifications and annual updates to the wage index values under the IRF PPS are made effective October 1 each year. When we established the most recent IRF PPS payment rate update, effective for discharges occurring on or after October 1, 2007 through September 30, 2008, we considered the ‘‘New England deemed counties’’ (including Litchfield County, CT and Merrimack County, NH) as urban for FY 2008, as evidenced by the inclusion of Litchfield County, CT as one of the constituent counties of urban CBSA 25540 (Hartford-West HartfordEast Hartford, CT), and the inclusion of Merrimack County, NH as one of the constituent counties of urban CBSA 31700 (Manchester-Nashua, NH). As noted above, § 412.602 indicates that the terms ‘‘rural’’ and ‘‘urban’’ are defined according to the definitions of those terms in §§ 412.64(b)(1)(ii)(A) through (C). Applying the IPPS definitions, Litchfield County, CT and Merrimack County, NH are not considered ‘‘urban’’ under §§ 412.64(b)(1)(ii)(A) and (B) as revised under the FY 2008 IPPS final rule and, therefore, are considered ‘‘rural’’ under § 412.64(b)(1)(ii)(C). Accordingly, reflecting our policy to use the IPPS definitions of ‘‘urban’’ and ‘‘rural’’, these two counties would be considered ‘‘rural’’ under the IRF PPS effective with the next update of the IRF PPS payment rates, October 1, 2008, and would no longer be included in urban CBSA 25540 (Hartford-West Hartford-East Hartford, CT) and urban CBSA 31700 (Manchester-Nashua, NH), respectively. We note that this policy is consistent with our policy of not taking into account IPPS geographic reclassifications in determining payments under the IRF PPS. We do not need to make any changes to our regulations to effectuate this change. There is one IRF (in Merrimack County, NH) that greatly benefits from treating these counties as rural. This IRF would begin to receive a higher wage index value and the 21.3 percent adjustment that is applied to IRF PPS payments for rural facilities. Currently, there are no IRFs in the following areas: Litchfield County, CT; rural Connecticut; or rural New Hampshire. 2. Multi-Campus Hospital Wage Index Data In the FY 2008 IRF PPS final rule (72 FR 44284, August 7, 2007), we established IRF PPS wage index values for FY 2008 calculated from the same data (collected from cost reports PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 submitted by hospitals for cost reporting periods beginning during FY 2003) used to compute the FY 2007 acute care hospital inpatient wage index, without taking into account geographic reclassification under sections 1886(d)(8) and (d)(10) of the Act. The IRF PPS wage index values applicable for discharges occurring on or after October 1, 2007 through September 30, 2008 are shown in Table 1 (for urban areas) and Table 2 (for rural areas) in the addendum to the FY 2008 IRF PPS final rule (72 FR 44312 through 44335). We are continuing to use IPPS wage data for the FY 2009 IRF PPS Wage Index, because we believe that using the hospital inpatient wage data is appropriate and reasonable for the IRF PPS. We note that the IPPS wage data used to determine the FY 2009 IRF wage index values reflect our policy that was adopted under the IPPS beginning in FY 2008, which apportions the wage data for multi-campus hospitals located in different labor market areas (CBSAs) to each CBSA where the campuses are located (see the FY 2008 IPPS final rule with comment period (72 FR 47317 through 47320)). We computed the FY 2009 IRF PPS wage index values presented in this notice consistent with our pre-reclassified IPPS wage index policy (that is, our historical policy of not taking into account IPPS geographic reclassifications in determining payments under the IRF PPS). For the FY 2009 IRF PPS, we computed the wage index from IPPS wage data (submitted by hospitals for cost reporting periods beginning in FY 2004 and used in the FY 2008 IPPS wage index), which allocated salaries and hours to the campuses of two multicampus hospitals with campuses that are located in different labor areas, one in Massachusetts and another in Illinois. Thus, the proposed FY 2009 IRF PPS wage index values for the following CBSAs are affected by this policy: Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-Falls River, RI–MA (CBSA 39300), ChicagoNaperville-Joliet, IL (CBSA 16974) and Lake County-Kenosha County, IL–WI (CBSA 29404) (please refer to Table 1 in the addendum of this proposed rule). 3. Methodology for Applying the Proposed Revisions to the Area Wage Adjustment for FY 2009 in a BudgetNeutral Manner To calculate the wage-adjusted facility payment for the payment rates set forth in this proposed rule, we multiply the unadjusted Federal prospective payment by the proposed FY 2009 RPL labor-related share (75.691 percent) to determine the labor-related portion of E:\FR\FM\25APP2.SGM 25APP2 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules the Federal prospective payments. We then multiply this labor-related portion by the applicable proposed IRF wage index shown in Table 1 for urban areas and Table 2 for rural areas in the addendum. Adjustments or updates to the IRF wage index made under section 1886(j)(6) of the Act must be made in a budget neutral manner; therefore, we calculated a budget neutral wage adjustment factor as established in the FY 2004 IRF PPS final rule and codified at § 412.624(e)(1), and described in the steps below. We propose to use the following steps to ensure that the FY 2009 IRF standard payment conversion factor reflects the update to the proposed wage indexes (based on the FY 2004 pre-reclassified and pre-floor hospital wage data) and the proposed labor-related share in a budget neutral manner: Step 1. Determine the total amount of the estimated FY 2008 IRF PPS rates, using the FY 2008 standard payment conversion factor and the labor-related share and the wage indexes from FY 2008 (as published in the FY 2008 IRF PPS final rule). Step 2. Calculate the total amount of estimated IRF PPS payments, using the FY 2008 standard payment conversion factor and the proposed FY 2009 laborrelated share and proposed CBSA urban and rural wage indexes. Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2, which equals the FY 2009 budget neutral wage adjustment factor of 1.0004. Step 4. Apply the FY 2009 budget neutral wage adjustment factor from step 3 to the FY 2008 IRF PPS standard payment conversion factor after the application of the estimated market basket update to determine the FY 2009 standard payment conversion factor. C. Description of the Proposed IRF Standard Payment Conversion Factor and Proposed Payment Rates for FY 2009 To calculate the proposed standard payment conversion factor for FY 2009, as illustrated in Table 5 below, we begin with the standard payment conversion factor for FY 2008. To explain how we determined the standard payment conversion factor for FY 2008, we include Table 4 below. The final FY 2008 IRF standard payment conversion factor that we show in Tables 4 and 5 below is different than the IRF standard payment conversion factor that we finalized in the FY 2008 IRF PPS final rule (72 FR 44284) because we adjusted the IRF standard payment conversion factor for IRF discharges occurring on or after April 1, 2008 to reflect the changes codified in section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173). Section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 amended section 1886(j)(3)(C) of the Act to require the Secretary to apply a zero percent increase factor for FYs 2008 and 2009, effective for discharges occurring on or after April 1, 2008. Section 1886(j)(3)(C) of the Act requires the Secretary to develop an increase factor to update the IRF Federal prospective payment rates for each FY. For a discussion of the increase factor the Secretary typically 22683 uses to update the IRF Federal prospective payment rates, see the FY 2008 IRF PPS final rule (72 FR 44284). In the FY 2008 IRF PPS final rule, we used the RPL market basket estimate described in that final rule (3.2 percent) to update the IRF standard payment conversion factor. As shown in Table 3 of the FY 2008 IRF PPS final rule, applying this market basket estimate to the standard payment amount resulted in a final standard payment conversion factor for FY 2008 of $13,451. However, section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 had the effect of changing the increase factor for FY 2008 from 3.2 percent to zero percent for discharges occurring on or after April 1, 2008. This, in turn, had the effect of decreasing the IRF standard payment conversion factor for discharges occurring on or after April 1, 2008. As shown in Table 4, to develop the FY 2008 standard payment conversion factor for discharges beginning on or after April 1, 2008, we started with the FY 2007 standard payment conversion factor that was finalized in the FY 2007 IRF PPS final rule (71 FR 48354). We then multiplied this by the zero percent increase factor, as described above. Then, we applied the same FY 2008 budget neutrality factor (1.0041) for the Wage Index, Labor-Related Share, and the Hold Harmless Provision that was published in the FY 2008 IRF PPS Final Rule (72 FR 44284). This resulted in the final FY 2008 standard payment conversion factor, effective for discharges occurring on or after April 1, 2008, of $13,034. TABLE 4.—CALCULATIONS TO DETERMINE THE FY 2008 IRF STANDARD PAYMENT CONVERSION FACTOR FOR DISCHARGES BEGINNING ON OR AFTER APRIL 1, 2008 Explanation for adjustment Calculations rwilkins on PROD1PC63 with PROPOSALS2 FY 2007 Standard Payment Conversion Factor (published in the FY 2007 IRF PPS Final Rule (71 FR 48354)) ........................... Zero Percent Increase Factor for Discharges Occurring on or after April 1, 2008 ............................................................................ Budget Neutrality Factor for the Wage Index, Labor-Related Share, and the Hold Harmless Provision that was published in the FY 2008 IRF PPS Final Rule (72 FR 44284) .................................................................................................................................. Standard Payment Conversion Factor for Discharges Occurring on or After April 1, 2008 ............................................................... As a result, the IRF standard payment conversion factor changed from $13,451 for discharges occurring on or after October 1, 2007 to $13,034 for discharges occurring on or after April 1, 2008. Further, as required by section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, we apply an increase factor of zero percent to the standard payment conversion factor for FY 2009, meaning that it does not change from the current value of $13,034. Next, we apply the proposed combined budget neutrality factor for the FY 2009 wage index and labor $12,981 × 1.0000 × 1.0041 = $13,034 related share of 1.0004, which would result in a standard payment amount of $13,039. Finally, we apply the proposed budget neutrality factor for the revised CMG relative weights of 0.9969, which would result in the proposed FY 2009 standard payment conversion factor of $12,999. TABLE 5.—CALCULATIONS TO DETERMINE THE PROPOSED FY 2009 STANDARD PAYMENT CONVERSION FACTOR Explanation for adjustment Calculations Standard Payment Conversion Factor for Discharges Occurring on or After April 1, 2008 ............................................................... VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2 $13,034 22684 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules TABLE 5.—CALCULATIONS TO DETERMINE THE PROPOSED FY 2009 STANDARD PAYMENT CONVERSION FACTOR— Continued Explanation for adjustment Calculations Zero Percent Increase Factor for FY 2009 ......................................................................................................................................... Proposed Budget Neutrality Factor for the Wage Index and Labor-Related Share ........................................................................... Proposed Budget Neutrality Factor for the Revisions to the CMG Relative Weights ........................................................................ Proposed FY 2009 Standard Payment Conversion Factor ................................................................................................................. After the application of the CMG relative weights described in section II of this proposed rule, the resulting proposed unadjusted IRF prospective payment rates for FY 2009 are shown × 1.0000 × 1.0004 × 0.9969 = $12,999 below in Table 6, ‘‘Proposed FY 2009 Payment Rates.’’ TABLE 6.—PROPOSED FY 2009 PAYMENT RATES Payment rate tier 1 rwilkins on PROD1PC63 with PROPOSALS2 CMG 0101 0102 0103 0104 0105 0106 0107 0108 0109 0110 0201 0202 0203 0204 0205 0206 0207 0301 0302 0303 0304 0401 0402 0403 0404 0405 0501 0502 0503 0504 0505 0506 0601 0602 0603 0604 0701 0702 0703 0704 0801 0802 0803 0804 0805 0806 0901 0902 0903 0904 1001 1002 1003 1101 1102 ......................................................................................... ......................................................................................... ......................................................................................... 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VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 PO 00000 Frm 00012 Payment rate tier 2 Payment rate tier 3 $10,062.53 12,438.74 14,538.08 15,609.20 18,467.68 21,311.86 24,471.92 29,156.76 28,128.54 35,075.20 10,343.30 13,115.99 15,813.28 17,260.07 20,876.39 26,654.45 34,973.81 14,230.01 18,307.79 22,000.81 29,899.00 12,380.25 17,481.06 29,857.40 53,908.15 43,789.73 9,729.75 13,156.29 17,248.37 20,984.29 24,805.99 33,874.09 12,358.15 16,413.84 20,869.89 27,557.88 11,804.39 15,425.91 18,838.15 24,076.75 8,821.12 11,701.70 16,649.12 14,729.17 18,588.57 22,745.65 11,340.33 15,292.02 20,089.95 25,896.61 12,388.05 16,495.73 24,062.45 14,963.15 23,279.91 $9,415.18 11,638.00 13,603.45 14,604.38 17,279.57 19,941.77 22,897.74 27,281.00 26,319.08 32,818.58 8,536.44 10,824.27 13,051.00 14,245.60 17,230.17 21,998.21 28,864.28 12,092.97 15,558.50 18,697.76 25,410.45 10,705.98 15,116.54 25,819.91 46,619.61 37,868.69 8,635.24 11,675.70 15,308.92 18,623.67 22,015.11 30,062.79 10,010.53 13,295.38 16,905.20 22,321.88 10,158.72 13,274.58 16,211.05 20,719.11 7,327.54 9,719.35 13,829.64 12,234.66 15,441.51 18,894.05 9,655.66 13,019.80 17,105.38 22,050.20 11,795.29 15,706.69 22,910.74 13,205.68 20,544.92 $8,401.25 10,384.90 12,138.47 13,031.50 15,418.11 17,793.03 20,431.83 24,341.93 23,483.99 29,284.15 7,730.51 9,802.55 11,818.69 12,900.21 15,604.00 19,922.27 26,139.69 11,050.45 14,217.01 17,085.89 23,218.81 9,998.83 14,119.51 24,115.74 43,542.75 35,368.98 7,616.11 10,297.81 13,502.06 16,426.84 19,417.91 26,516.66 9,335.88 12,399.75 15,766.49 20,819.20 9,582.86 12,521.94 15,293.32 19,546.60 6,715.28 8,908.21 12,674.03 11,211.64 14,150.71 17,314.67 8,672.93 11,695.20 15,366.12 19,807.88 10,204.22 13,586.55 19,818.28 12,429.64 19,338.61 Fmt 4701 Sfmt 4702 E:\FR\FM\25APP2.SGM 25APP2 Payment rate no comorbidity $8,087.98 9,997.53 11,686.10 12,545.33 14,843.56 17,130.08 19,670.09 23,434.60 22,609.16 28,192.23 7,161.15 9,079.80 10,947.76 11,949.98 14,453.59 18,454.68 24,213.24 9,931.24 12,776.72 15,354.42 20,867.29 9,238.39 13,044.50 22,280.29 40,226.71 32,676.89 6,806.28 9,203.29 12,065.67 14,679.77 17,352.37 23,695.88 8,524.74 11,322.13 14,396.39 19,009.74 8,617.04 11,259.73 13,751.64 17,574.65 6,096.53 8,086.68 11,505.41 10,178.22 12,845.61 15,718.39 7,734.41 10,429.10 13,702.25 17,663.04 9,382.68 12,493.34 18,223.30 11,353.33 17,664.34 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules 22685 TABLE 6.—PROPOSED FY 2009 PAYMENT RATES—Continued Payment rate tier 1 CMG rwilkins on PROD1PC63 with PROPOSALS2 1201 1202 1203 1301 1302 1303 1401 1402 1403 1404 1501 1502 1503 1504 1601 1602 1603 1701 1702 1703 1704 1801 1802 1803 1901 1902 1903 2001 2002 2003 2004 2101 5001 5101 5102 5103 5104 Payment rate tier 2 Payment rate tier 3 13,496.86 16,988.39 21,846.12 16,811.61 22,527.27 29,037.17 11,007.55 14,636.87 18,232.40 23,169.42 11,671.80 14,673.27 18,049.11 23,316.31 12,371.15 17,137.88 21,540.64 13,741.24 18,588.57 21,829.22 28,349.52 12,823.51 21,427.55 37,012.05 15,461.01 31,137.80 49,892.76 11,284.43 15,009.95 19,429.61 25,818.61 26,820.84 0.00 0.00 0.00 0.00 0.00 11,693.90 14,718.77 18,927.84 11,955.18 16,019.97 20,648.91 9,529.57 12,671.43 15,783.39 20,057.46 11,236.34 14,126.01 17,375.76 22,445.37 10,895.76 15,093.14 18,969.44 12,368.55 16,729.71 19,646.69 25,515.74 12,341.25 20,621.61 35,618.56 11,500.22 23,160.32 37,110.85 9,455.47 12,577.83 16,281.25 21,635.54 23,879.16 0.00 0.00 0.00 0.00 0.00 10,923.06 13,747.74 17,678.64 11,007.55 14,749.97 19,011.04 8,502.65 11,305.23 14,081.82 17,895.72 9,914.34 12,463.44 15,332.32 19,805.28 10,148.32 14,058.42 17,669.54 10,547.39 14,267.70 16,754.41 21,760.33 9,975.43 16,668.62 28,791.49 11,500.22 23,160.32 37,110.85 8,522.14 11,336.43 14,673.27 19,498.50 23,879.16 0.00 0.00 0.00 0.00 0.00 ......................................................................................... ......................................................................................... 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D. Example of the Methodology for Adjusting the Proposed Federal Prospective Payment Rates Table 7 illustrates the proposed methodology for adjusting the Federal prospective payments (as described in sections III.A through III.C of this proposed rule). The examples below are based on two hypothetical Medicare beneficiaries, both classified into CMG 0110 (without comorbidities). The unadjusted Federal prospective payment rate for CMG 0110 (without comorbidities) appears in Table 6 above. One beneficiary is in Facility A, an IRF located in rural Spencer County, Indiana, and another beneficiary is in Facility B, an IRF located in urban Harrison County, Indiana. Facility A, a non-teaching hospital, has a disproportionate share hospital (DSH) percentage of 5 percent (which results in a low-income percentage (LIP) adjustment of 1.0309), a wage index of 0.8576, and an applicable rural adjustment of 21.3 percent. Facility B, a VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 teaching hospital, has a DSH percentage of 15 percent (which results in a LIP adjustment of 1.0910), a wage index of 0.9065, and an applicable teaching status adjustment of 0.109. To calculate each IRF’s labor and nonlabor portion of the Federal prospective payment, we begin by taking the unadjusted Federal prospective payment rate for CMG 0110 (without comorbidities) from Table 6 above. Then, we multiply the estimated laborrelated share (75.691) described in section III.A by the unadjusted Federal prospective payment rate. To determine the non-labor portion of the Federal prospective payment rate, we subtract the labor portion of the Federal payment from the unadjusted Federal prospective payment. To compute the wage-adjusted Federal prospective payment, we multiply the result of the labor portion of the Federal payment by the appropriate wage index found in the addendum in Tables 1 and 2, which PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 Payment rate no comorbidity 9,562.06 12,034.47 15,476.61 9,883.14 13,243.38 17,070.29 7,662.91 10,188.62 12,692.22 16,127.86 9,459.37 11,892.79 14,629.07 18,896.65 8,944.61 12,390.65 15,574.10 9,536.07 12,900.21 15,149.03 19,673.99 9,506.17 15,886.08 27,438.29 11,500.22 23,160.32 37,110.85 7,679.81 10,215.91 13,223.88 17,572.05 17,347.17 1,953.75 8,549.44 21,279.36 9,000.51 25,094.57 would result in the wage-adjusted amount. Next, we compute the wageadjusted Federal payment by adding the wage-adjusted amount to the non-labor portion. Adjusting the Federal prospective payment by the facility-level adjustments involves several steps. First, we take the wage-adjusted Federal prospective payment and multiply it by the appropriate rural and LIP adjustments (if applicable). Second, to determine the appropriate amount of additional payment for the teaching status adjustment (if applicable), we multiply the teaching status adjustment (0.109, in this example) by the wageadjusted and rural-adjusted amount (if applicable). Finally, we add the additional teaching status payments (if applicable) to the wage, rural, and LIPadjusted Federal prospective payment rates. Table 7 illustrates the components of the proposed adjusted payment calculation. E:\FR\FM\25APP2.SGM 25APP2 22686 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules TABLE 7.—EXAMPLE OF COMPUTING AN IRF-PROPOSED FY 2009 FEDERAL PROSPECTIVE PAYMENT Rural Facility A (Spencer Co., IN) Steps 1 ................... 2 ................... 3 ................... 4 ................... 5 ................... 6 ................... 7 ................... 8 ................... 9 ................... 10 ................. 11 ................. 12 ................. 13 ................. 14 ................. 15 ................. 16 ................. Unadjusted Federal Prospective Payment ........................................................................ Labor Share ....................................................................................................................... Labor Portion of Federal Payment .................................................................................... CBSA Based Wage Index (shown in the Addendum, Tables 1 and 2) ............................ Wage-Adjusted Amount ..................................................................................................... Non-labor Amount ............................................................................................................. Wage-Adjusted Federal Payment ..................................................................................... Rural Adjustment ............................................................................................................... Wage- and Rural-Adjusted Federal Payment ................................................................... LIP Adjustment .................................................................................................................. FY 2009 Wage-, Rural- and LIP-Adjusted Federal Prospective Payment Rate ............... FY 2009 Wage- and Rural-Adjusted Federal Prospective Payment ................................ Teaching Status Adjustment ............................................................................................. Teaching Status Adjustment Amount ................................................................................ FY 2009 Wage-, Rural-, and LIP-Adjusted Federal Prospective Payment Rate .............. Total FY 2009 Adjusted Federal Prospective Payment .................................................... Thus, the proposed adjusted payment for Facility A would be $31,454.07 and the proposed adjusted payment for Facility B would be $31,436.44. rwilkins on PROD1PC63 with PROPOSALS2 IV. Proposed Update to Payments for High-Cost Outliers Under the IRF PPS A. Proposed Update to the Outlier Threshold Amount for FY 2009 Section 1886(j)(4) of the Act provides the Secretary with the authority to make payments in addition to the basic IRF prospective payments for cases incurring extraordinarily high costs. A case qualifies for an outlier payment if the estimated cost of the case exceeds the adjusted outlier threshold. We calculate the adjusted outlier threshold by adding the IRF PPS payment for the case (that is, the CMG payment adjusted by all of the relevant facility-level adjustments) and the adjusted threshold amount (also adjusted by all of the relevant facility-level adjustments). Then, we calculate the estimated cost of a case by multiplying the IRF’s overall CCR by the Medicare allowable covered charge. If the estimated cost of the case is higher than the adjusted outlier threshold, we make an outlier payment for the case equal to 80 percent of the difference between the estimated cost of the case and the outlier threshold. In the FY 2002 IRF PPS final rule (66 FR 41316, 41362 through 41363), we discussed our rationale for setting the outlier threshold amount for the IRF PPS so that estimated outlier payments would equal 3 percent of total estimated payments. Subsequently, we updated the IRF outlier threshold amount in the FYs 2006, 2007, and 2008 IRF PPS final rules (70 FR 47880, 70 FR 57166, 71 FR 48354, and 72 FR 44284) to maintain estimated outlier payments at 3 percent of total estimated payments, and we also stated that we would continue to VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 analyze the estimated outlier payments for subsequent years and adjust the outlier threshold amount as appropriate to maintain the 3 percent target. For this proposed rule, we performed an updated analysis of FY 2006 claims and IRF–PAI data using the same methodology that we used to set the initial outlier threshold amount when we first implemented the IRF PPS in the FY 2002 IRF PPS final rule (66 FR 41316), which is also the same methodology we used to update the outlier threshold amounts for FYs 2006, 2007, and 2008. (Note that the methodology that we use to calculate the appropriate outlier threshold amount for each FY requires us to simulate Medicare payments for that FY, which requires the use of IRF–PAI data. The CMGs and tiers in effect for FY 2009 would be slightly different than those that were in effect for FY 2006, due to revisions that were implemented in the FY 2007 IRF PPS final rule (71 FR 48354). Thus, we use the IRF–PAI data rather than the IRF claims data to classify the FY 2006 patients into the appropriate CMGs and tiers for FY 2009 to simulate payments and thereby calculate the appropriate outlier threshold amount.) We did not update the outlier threshold amounts for FYs 2003, 2004, and 2005 because data from the FYs immediately after we implemented the IRF PPS were not yet available to perform the analysis of the outlier threshold amount for these FYs. For FY 2009, based on an analysis of updated FY 2006 claims and IRF–PAI data, we estimate that IRF outlier payments as a percentage of total estimated payments would be 3.7 percent without the proposed change to the outlier threshold amount. The reason for this change is discussed below. PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 Urban Facility B (Harrison Co., IN) $28,192.23 × 0.75691 = $21,338.98 × 0.8576 = $18,300.31 + $6,853.25 = $25,153.56 × 1.213 = $30,511.27 × 1.0309 = $31,454.07 $30,511.27 × 0.000 = $0.00 + $31,454.07 = $31,454.07 $28,192.23 × 0.75691 = $21,338.98 × 0.9065 = $19,343.79 + $6,853.25 = $26,197.04 × 1.000 = $26,197.04 × 1.0910 = $28,580.97 $26,197.04 × 0.109 = $2,855.48 + $28,580.97 = $31,436.44 In the FY 2008 IRF PPS final rule (72 FR 44284), we established an outlier threshold amount for FY 2008 that would maintain estimated IRF outlier payments equal to 3 percent of total estimated IRF payments. However, the estimate of the outlier threshold amount for a given FY is dependent upon the estimated total IRF PPS payments for that FY. If estimated total IRF PPS payments for a FY decrease, then the outlier threshold amount must increase to maintain estimated outlier payments at 3 percent of total estimated payments. Further, we use the IRF market basket estimate to project IRF cost increases for each FY. If we project IRF cost increases for a given FY that are larger than the projected increase in IRF PPS payments in that FY, then the outlier threshold amount must increase for that FY to maintain estimated outlier payments at 3 percent of total estimated payments. As discussed previously in this proposed rule, section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110– 173), which amended section 1886(j)(3)(C) of the Social Security Act, required the Secretary to apply a zero percent increase factor for FYs 2008 and 2009, effective for discharges occurring on or after April 1, 2008. The effect of this change was to decrease projected IRF PPS payments after we implemented what would have been the appropriate outlier threshold amount for FY 2008 if the increase factor had not been adjusted mid-year. We estimate that total IRF PPS payments for FY 2008 decreased from approximately $6.5 billion to approximately $6.4 billion as a result of the changes codified in section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173). This reduction in estimated total payments for FY 2008, and lack of E:\FR\FM\25APP2.SGM 25APP2 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules rwilkins on PROD1PC63 with PROPOSALS2 increase to estimated total payments for FY 2009 that is an effect of the legislative adjustment to the increase factor for FY 2009 (described above), had the indirect effect of increasing our estimates of outlier payments as a percentage of total estimated payments for FYs 2008 and 2009. We estimate that IRF outlier payments as a percentage of total estimated payments for FY 2008 would exceed 3 percent, because of the change in estimated aggregate IRF PPS payments for FY 2008 that is described above. In addition, we estimate that IRF costs would increase by 3.0 percent (the FY 2009 IRF market basket estimate) between FY 2008 and FY 2009. The combined effect of the estimated decrease in IRF PPS payments for FY 2008, the lack of increase to IRF PPS payments for FY 2009 that is an effect of the legislative adjustment to the increase factor for FY 2009 (described above), and the projected 3.0 percent increase in IRF costs for FY 2009 is to increase estimated IRF outlier payments to 3.7 percent of total estimated payments for FY 2009. This increase in estimated IRF outlier payments as a percentage of total estimated payments for FY 2009 results in a larger than anticipated increase in the outlier threshold amount for FY 2009 to maintain estimated outlier payments at 3 percent of total estimated payments. Based on the updated analysis of FY 2006 claims and IRF–PAI data and the revised estimates of total IRF PPS payments for FYs 2008 and 2009 (as discussed above), we propose to update the outlier threshold amount to $9,191 to maintain estimated outlier payments at 3 percent of total estimated aggregate IRF payments for FY 2009. The outlier threshold amount for FY 2009 is subject to change in the final rule based on analysis of updated data. B. Update to the IRF Cost-to-Charge Ratio Ceilings In accordance with the methodology stated in the FY 2004 IRF PPS final rule (68 FR 45692 through 45694), we apply a ceiling to IRFs’ CCRs. Using the methodology described in that final rule, we propose to update the national urban and rural CCRs for IRFs. We apply the national urban and rural CCRs in the following situations: • New IRFs that have not yet submitted their first Medicare cost report. • IRFs whose overall CCR is in excess of the proposed national CCR ceiling for FY 2009, as discussed below. • Other IRFs accurate data which to calculate an overall CCR are not available. VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 Specifically, for FY 2009, we estimate a proposed national average CCR of 0.616 for rural IRFs, which we calculate by taking an average of the CCRs for all rural IRFs for which we have sufficient cost report data. Similarly, we estimate a proposed national CCR of 0.486 for urban IRFs, which we calculate by taking an average of the CCRs for all urban IRFs for which we have sufficient cost report data. We weight both of these averages by the IRFs’ estimated costs, meaning that the CCRs of IRFs with higher costs factor more heavily into the averages than the CCRs of IRFs with lower costs. For new IRFs, we use these national CCRs until the facility’s actual CCR can be computed using the first settled cost report (either tentative or final, whichever is earlier). In addition, we propose to set the national CCR ceiling at 1.58 for FY 2009. This means that, if an individual IRF’s CCR exceeds this ceiling of 1.58 for FY 2009, we would replace the IRF’s CCR with the appropriate national average CCR (either rural or urban, depending on the geographic location of the IRF). We estimate the national CCR ceiling by: Step 1. Taking the national average CCR of all IRFs for which we have sufficient cost report data (both rural and urban IRFs combined); Step 2. Estimating the standard deviation of the national average CCR computed in step 1; Step 3. Multiplying the standard deviation of the national average CCR computed in step 2 by a factor of 3; and Step 4. Adding the result from step 3 to the national average CCR of all IRFs for which we have sufficient cost report data, from step 1. We note that the proposed national average rural and urban CCRs and our estimate of the national CCR ceiling in this section are subject to change in the final rule based on analysis of updated data. V. Revisions to the Regulation Text in Response to the Medicare, Medicaid, and SCHIP Extension Act of 2007 Section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173) amended section 5005 of the Deficit Reduction Act of 2005 (DRA, Pub. L. 109–171) to revise the following elements of the 75 percent rule that are used to classify IRFs: • The compliance rate that IRFs must meet to be excluded from the IPPS and to be paid under the IRF PPS shall be no greater than the 60 percent compliance rate that became effective for cost reporting periods beginning on or after July 1, 2006. PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 22687 • Patient comorbidities that satisfy the criteria specified in 42 CFR 412.23(b)(2)(i) shall be included in the calculations used to determine whether an IRF meets the 60 percent compliance percentage for cost reporting periods beginning on or after July 1, 2007. Although section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173) grants the Secretary broad discretion to implement compliance criteria up to 60 percent, we are setting the compliance rate at 60 percent, the highest level possible within current statutory authority, for the reasons discussed below. In addition, we will monitor the impact of the new compliance criteria to ensure that IRFs predominantly treat patients who benefit most from this level of care. We believe that a 60 percent compliance rate implements the provisions of the statute with minimal disruption to IRF operations. The 60 percent compliance rate has been in effect for cost reporting periods beginning on or after July 1, 2005, and the overwhelming majority of IRFs have already adjusted operations to meet or exceed the 60 percent compliance rate. Fewer than 20 IRFs out of approximately 1,250 IRFs nationwide have been declassified since the May 7, 2004 final rule (69 FR 25752) became effective. Thus, a conservative estimate is that over 98 percent of IRFs have been able to meet or exceed the 60 percent compliance rate. Maintaining the 60 percent compliance rate also allows us to more effectively analyze changes in IRF operations and admissions patterns that would be needed to comply with the current statutory requirement to analyze IRF utilization and issue a report to Congress. Finally, we believe that setting the compliance rate at 60 percent, the highest level possible within current statutory authority, will help to ensure that IRFs predominantly treat patients who benefit most from this level of care. Prior to the implementation of section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173), the Medicare regulations in 42 CFR § 412.23(b)(2) specified that a 75 percent compliance rate would become effective, and that comorbidities would no longer be used to determine whether an IRF met the 75 percent rule requirements, for cost reporting periods beginning on or after July 1, 2008. We note that the FY 2009 President’s budget proposes a repeal of the provisions in section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173) that require that the compliance rate be E:\FR\FM\25APP2.SGM 25APP2 22688 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules rwilkins on PROD1PC63 with PROPOSALS2 set no higher than 60 percent for cost reporting periods beginning on or after July 1, 2006 and that patient comorbidities continue to be used in the calculations for determining whether an IRF meets the compliance percentage for cost reporting periods beginning on or after July 1, 2007. For these reasons, we propose the following revisions to the regulation text in § 412.23(b). Specifically, we propose to remove the following phrases from the first sentence of § 412.23(b)(2)(i): • ‘‘and before July 1, 2007;’’ and • ‘‘and for cost reporting periods beginning on or after July 1, 2007 and before July 1, 2008, the hospital has served an inpatient population of whom at least 65 percent,’’ We also propose to remove § 412.23(b)(2)(ii) in its entirety, redesignate the existing § 412.23(b)(2)(iii) to § 412.23(b)(2)(ii), and revise all references to the previously numbered § 412.23(b)(2)(iii) accordingly. As noted above, we will continue to monitor trends in IRF utilization and spending to ensure that IRFs are treating the types of patients who benefit most from the intensive rehabilitation therapies provided in IRFs. In this regard, we will also continue to work with the Medicare contractors to review the medical necessity of IRF claims. With the IRF compliance rate set below 75 percent, it is particularly important for the Medicare contractors to review the medical necessity of IRF stays, regardless of whether the primary reason for admission is 1 or more of the 13 conditions listed in § 412.23(b)(2)(iii) (which is being redesignated as § 412.23(b)(2)(ii) in this proposed rule). We also believe that it is important for us to work with stakeholders to review the IRF medical necessity criteria to ensure that they reflect the current practice of medicine, and that they are consistently interpreted and applied by the stakeholders. VI. Post Acute Care Payment Reform Under current law, Medicare covers post-acute care (PAC) services in various care settings, including skilled nursing facilities (SNFs), home health agencies (HHAs), long-term care hospitals (LTCHs), and IRFs. Each of the PAC sites has a separate payment system that relies on different patient assessment instruments, although there is no mandated assessment instrument for LTCHs. The current model is based on provider-oriented ‘‘silos’’ with significant payment differentials existing between provider types that treat similar patients and provide similar services. VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 In the FY 2007 IRF PPS proposed rule (71 FR at 28134), we described our plans to explore refinements to the existing PAC payment methodologies to create a more seamless system for the delivery and payment of PAC services under Medicare. The new model will focus on beneficiary needs rather than provider type and will be characterized by more consistent payments for the same type of care across different sites of service, quality driven pay-forperformance incentives, and collection of uniform clinical assessment information to support quality and discharge planning functions. We also noted in the FY 2007 IRF PPS proposed rule (71 FR at 28134) that section 5008 of the Deficit Reduction Act (DRA) of 2005 mandates a PAC payment reform demonstration for purposes of understanding costs and outcomes across different PAC sites. To meet this mandate, CMS implemented the PAC Payment Reform Demonstration (PAC–PRD) to examine differences in costs and outcomes for PAC patients of similar case mix who use different types of PAC providers and to develop a standardized patient assessment tool for use at acute care hospital discharge and at PAC admission and discharge. This tool, the Continuity Assessment Record and Evaluation (CARE) tool, will measure the health and functional status of Medicare acute discharges. During the demonstration, CARE will be completed upon a patient’s discharge from the acute care hospital and upon admission and discharge from a PAC setting. The CARE instrument consists of a core set of assessment items that are common to all patients and care settings and are organized under several major domains: Medical, Functional, Cognitive, Social, and Continuity of Care, in addition to supplemental items for specific conditions and care settings. Additional information on the PAC– PRD is available at: http:// www.cms.hhs.gov/DemoProjectsEval Rpts/MD/itemdetail.asp?filter Type=dual,%20keyword&filter Value=post%20acute%20care& filterByDID=0&sortByDID=3&sort Order=descending&item ID=CMS1201325&intNumPerPage=10. We are interested in receiving public comments on the CARE instrument, and specifically invite comments on how CARE might advance the use of Health Information Technology (HIT) in automating the process for collecting and submitting quality data. The CARE tool is available at http:// www.cms.hhs.gov/ paperworkreductionactof1995/pral/ list.asp. Viewers should scroll down to PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 the entry for CMS–10243, ‘‘Data Collection for Administering the Medicare Continuity Assessment Record and Evaluation (CARE) Instrument.’’ Viewers can then click on the link to CMS–10243, click on the link to ‘‘Downloads,’’ and open Appendix A (‘‘CARE Tool Item Matrix,’’ a .pdf file) and Appendix B (‘‘CARE Tool Master Document,’’ in Microsoft Word). In addition, we wish to take this opportunity to discuss recent developments in the related area of value-based purchasing (VBP). VBP ties payment to performance through the use of incentives based on measures of quality and cost of care. The implementation of VBP is rapidly transforming CMS from being a passive payer of claims to an active purchaser of higher quality, more efficient health care for Medicare beneficiaries. Our VBP initiatives include hospital pay for reporting (the Reporting Hospital Quality Data for the Annual Payment Update Program), physician pay for reporting (the Physician Quality Reporting Initiative), home health pay for reporting, the Hospital VBP Plan Report to Congress, and various VBP demonstration programs across payment settings, including the Premier Hospital Quality Incentive Demonstration and the Physician Group Practice Demonstration. The preventable hospital-acquired conditions (HAC) payment provision for IPPS hospitals is another of CMS’ valuebased purchasing initiatives. Section 1886(d)(4)(D) of the Act required the Secretary to select for the HAC IPPS payment provision conditions that: (a) Are high cost, high volume, or both; (b) are assigned to a higher-paying diagnosis-related group (DRG) when present as a secondary diagnosis; and (c) could reasonably have been prevented through the application of evidencebased guidelines. Beginning October 1, 2008, Medicare can no longer assign an inpatient hospital discharge to a higherpaying MS–DRG if a selected HAC condition was not present on admission. That is, the case will be paid as though the preventable condition that becomes a secondary diagnosis were not present. (Medicare will continue to assign a discharge to a higher-paying MS–DRG in those instances where the selected condition was, in fact, present on admission). The broad principle articulated in the HAC payment provision for IPPS hospitals—of Medicare not paying for these types of preventable conditions— could potentially be applied to other Medicare payment systems for similar conditions that occur in settings other than IPPS hospitals. Other possible E:\FR\FM\25APP2.SGM 25APP2 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules settings of care might include hospital outpatient departments, SNFs, HHAs, end-stage renal disease facilities, and physician practices. The implementation would be different for each setting, as each payment system is different and the reasonable preventability through the application of evidence-based guidelines would vary for candidate conditions over the different settings. However, alignment of incentives across settings of care is an important goal for all of CMS’ VBP initiatives, including the HAC provision. A related application of the broad principle behind the HAC payment provision for IPPS hospitals could be considered through Medicare secondary payer policy by requiring the provider that failed to prevent the occurrence of a preventable condition in one setting to pay for all or part of the necessary follow-up care in a second setting. This would help shield the Medicare program from inappropriately paying for the downstream effects of a preventable condition acquired in the first setting but treated in the second setting. We note that we are not proposing new Medicare policy in this discussion of the possible application of HACs payment policy for IPPS hospitals to other settings, as some of these approaches may require new statutory authority. Rather, we are seeking public comment on the application of the preventable HACs payment provision for IPPS hospitals to other Medicare payment systems and settings. We look forward to working with stakeholders in the fight against these preventable conditions. rwilkins on PROD1PC63 with PROPOSALS2 VII. Provisions of the Proposed Rule We are proposing to make revisions to the regulation text in response to section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110–173). Specifically, we are proposing to revise 42 CFR part 412. We discuss these proposed revisions and others in detail below. A. Section 412.23 Excluded Hospitals: Classifications As discussed in section V of this proposed rule, we propose to revise the regulation text in paragraph (b)(2)(i) and remove paragraph (b)(2)(ii) in response to section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007. To summarize, for cost reporting periods— (1) Beginning on or after July 1, 2005, the hospital has served an inpatient population of whom at least 60 percent require intensive rehabilitation services for treatment of one or more of the VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 conditions specified at paragraph (b)(2)(ii) of this section. (2) A comorbidity that meets the criteria as specified in § 412.23(b)(2)(i) (as amended by removing former (b)(2)(ii) and redesignating former (b)(2)(iii) as the new (b)(2)(ii)) may continue to be used to determine the compliance threshold. B. Additional Proposed Changes • Update the FY 2009 IRF PPS relative weights and average length of stay values using the most current and complete Medicare claims and cost report data, as discussed in section II. • Update the FY 2009 IRF PPS payment rates by the proposed wage index and labor related share in a budget neutral manner, as discussed in section III.A and B. • Update the outlier threshold amount for FY 2009, as discussed in section IV.A. • Update the cost-to-charge ratio ceiling and the national average urban and rural cost-to-charge ratios for purposes of determining outlier payments under the IRF PPS, as discussed in section IV.B. VIII. Collection of Information Requirements This document does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995. IX. Response to Public Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this preamble and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document. X. Regulatory Impact Statement We have examined the impact of this proposed rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA, September 19, 1980, Pub. L. 96–354), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). Executive Order 12866 (as amended by Executive Order 13258, which PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 22689 merely reassigns responsibility of duties) directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any one year). This proposed rule does not reach the $100 million economic threshold and thus is not considered a major rule. We estimate that the total impact of the proposed changes in this proposed rule would be a decrease of approximately $20 million (this reflects a $20 million decrease due to the proposed update to the outlier threshold amount to decrease estimated outlier payments from approximately 3.3 percent in FY 2008 to 3 percent in FY 2009). The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most IRFs and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $6.5 million to $31.5 million in any one year. (For details, see the Small Business Administration’s final rule that set forth size standards for health care industries, at 65 FR 69432, November 17, 2000.) Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary IRFs or the proportion of IRFs’ revenue that is derived from Medicare payments. Therefore, we assume that all IRFs (an approximate total of 1,200 IRFs, of which approximately 60 percent are nonprofit facilities) are considered small entities and that Medicare payment constitutes the majority of their revenues. The Department of Health and Human Services generally uses a revenue impact of 3 to 5 percent as a significance threshold under the RFA. Medicare fiscal intermediaries and carriers are not considered to be small entities. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the RFA because we have determined, and the Secretary certifies, that this proposed rule would not have a significant economic impact on a substantial number of small entities. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural E:\FR\FM\25APP2.SGM 25APP2 22690 Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / Proposed Rules rwilkins on PROD1PC63 with PROPOSALS2 hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this proposed rule would not have a significant impact on the operations of a substantial number of small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any one year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $130 million. This proposed rule would not mandate any requirements for State, local, or tribal governments, nor would it affect private sector costs. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. As stated above, this proposed rule would not have a substantial effect on State and local governments. In accordance with the provisions of Executive Order 12866, this regulation VerDate Aug<31>2005 18:48 Apr 24, 2008 Jkt 214001 was reviewed by the Office of Management and Budget. List of Subjects in 42 CFR Part 412 Administrative practice and procedure, Health facilities, Medicare, Puerto Rico, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR chapter IV as follows: PART 412—PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SERVICES 1. The authority citation for part 412 continues to read as follows: Authority: Sections 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). Subpart B—Hospital Services Subject to and Excluded From the Prospective Payment Systems for Inpatient Operating Costs and Inpatient Capital—Related Costs 2. Section 412.23 is amended by— A. Revising paragraph (b)(2)(i). B. Removing paragraph (b)(2)(ii). C. Redesignating paragraph (b)(2)(iii) as (b)(2)(ii). The revision reads as follows: § 412.23 Excluded hospitals: Classifications. * PO 00000 * * (b) * * * (2) * * * Frm 00018 * * (i) For cost reporting periods beginning on or after July 1, 2004 and before July 1, 2005, the hospital has served an inpatient population of whom at least 50 percent, and for cost reporting periods beginning on or after July 1, 2005, the hospital has served an inpatient population of whom at least 60 percent required intensive rehabilitation services for treatment of one or more of the conditions specified at paragraph (b)(2)(ii) of this section. A patient with a comorbidity, as defined at § 412.602, may be included in the inpatient population that counts toward the required applicable percentage if— (A) The patient is admitted for inpatient rehabilitation for a condition that is not one of the conditions specified in paragraph (b)(2)(ii) of this section; (B) The patient has a comorbidity that falls in one of the conditions specified in paragraph (b)(2)(ii) of this section; and * * * * * (Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital Insurance; and Program No. 93.774, Medicare—Supplemental Medical Insurance Program) Dated: March 20, 2008. Kerry Weems, Acting Administrator, Centers for Medicare & Medicaid Services. Approved: April 10, 2008. Michael O. Leavitt, Secretary. 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Agencies

[Federal Register Volume 73, Number 81 (Friday, April 25, 2008)]
[Proposed Rules]
[Pages 22674-22714]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 08-1174]



[[Page 22673]]

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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid



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42 CFR Part 412



Medicare Program; Inpatient Rehabilitation Facility Prospective Payment 
System for Federal Fiscal Year 2009; Proposed Rule

Federal Register / Vol. 73, No. 81 / Friday, April 25, 2008 / 
Proposed Rules

[[Page 22674]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1554-P]
RIN 0938-AP19


Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2009

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the prospective payment rates 
for inpatient rehabilitation facilities (IRFs) for Federal fiscal year 
(FY) 2009 (for discharges occurring on or after October 1, 2008 and on 
or before September 30, 2009) as required under section 1886(j)(3)(C) 
of the Social Security Act (the Act). Section 1886(j)(5) of the Act 
requires the Secretary to publish in the Federal Register on or before 
the August 1 that precedes the start of each fiscal year, the 
classification and weighting factors for the IRF prospective payment 
system's (PPS) case-mix groups and a description of the methodology and 
data used in computing the prospective payment rates for that fiscal 
year.
    We are proposing to revise existing policies regarding the PPS 
within the authority granted under section 1886(j) of the Act.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 20, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1554-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the filecode to find the document 
accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address only: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1554-P, P.O. Box 8012, Baltimore, MD 21244-8012.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1554-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-8012.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to either of the following addresses.
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201 (Because access to the interior of 
the HHH Building is not readily available to persons without Federal 
Government identification, commenters are encouraged to leave their 
comments in the CMS drop slots located in the main lobby of the 
building. A stamp-in clock is available for persons wishing to retain a 
proof of filing by stamping in and retaining an extra copy of the 
comments being filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Susanne Seagrave, (410) 786-0044, for 
information regarding the payment policies. Jeanette Kranacs, (410) 
786-9385, for information regarding the wage index.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
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inspection as they are received, generally beginning approximately 3 
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Table of Contents

I. Background
    A. Historical Overview of the Inpatient Rehabilitation Facility 
Prospective Payment System (IRF PPS)
    B. Operational Overview of the Current IRF PPS
    C. Brief Summary of Proposed Revisions to the IRF PPS for 
Federal Fiscal Year (FY) 2009
II. Proposed Update to the Case-Mix Group (CMG) Relative Weights and 
Average Length of Stay Values for FY 2009
III. Proposed FY 2009 IRF PPS Federal Prospective Payment Rates
    A. Increase Factor for FY 2009 and Proposed FY 2009 Labor-
Related Share
    B. Proposed Area Wage Adjustment
    C. Description of the Proposed IRF Standard Payment Conversion 
Factor and Proposed Payment Rates for FY 2009
    D. Example of the Methodology for Adjusting the Proposed Federal 
Prospective Payment Rates
IV. Proposed Update to Payments for High-Cost Outliers Under the IRF 
PPS
    A. Proposed Update to the Outlier Threshold Amount for FY 2009
    B. Update to the IRF Cost-to-Charge Ratio Ceilings
V. Revisions to the Regulation Text in Response to the Medicare, 
Medicaid, and SCHIP Extension Act of 2007
VI. Post Acute Care Payment Reform
VII. Provisions of the Proposed Rule
VIII. Collection of Information Requirements
IX. Response to Public Comments
X. Regulatory Impact Statement
Regulation Text
Addendum
Acronyms

    Because of the many terms to which we refer by acronym in this 
proposed rule, we are listing the acronyms used and their 
corresponding terms in alphabetical order below.
ASCA Administrative Simplification Compliance Act, Pub. L. 107-105
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 
106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Benefits Improvement and Protection Act of 2000, 
Pub. L. 106-554
CBSA Core-Based Statistical Area
CCR Cost-to-Charge Ratio
CFR Code of Federal Regulations
CMG Case-Mix Group
DRA Deficit Reduction Act of 2005, Pub. L. 109-171

[[Page 22675]]

DSH Disproportionate Share Hospital
ECI Employment Cost Index
FI Fiscal Intermediary
FR Federal Register
FY Federal Fiscal Year
GDP Gross Domestic Product
HHH Hubert H. Humphrey Building
HIPAA Health Insurance Portability and Accountability Act, Pub. L. 
104-191
IFMC Iowa Foundation for Medical Care
IPF Inpatient Psychiatric Facility
IPPS Inpatient Prospective Payment System
IRF Inpatient Rehabilitation Facility
IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment 
Instrument
IRF PPS Inpatient Rehabilitation Facility Prospective Payment System
IRVEN Inpatient Rehabilitation Validation and Entry
LIP Low-Income Percentage
LTCH Long-Term Care Hospital
MAC Medicare Administrative Contractor
MEDPAR Medicare Provider Analysis and Review
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MSA Metropolitan Statistical Area
NAICS North American Industrial Classification System
OMB Office of Management and Budget
PAI Patient Assessment Instrument
PPS Prospective Payment System
RAND RAND Corporation
RFA Regulatory Flexibility Act, Pub. L. 96-354
RIA Regulatory Impact Analysis
RIC Rehabilitation Impairment Category
RPL Rehabilitation, Psychiatric, and Long-Term Care Hospital Market 
Basket
SCHIP State Children's Health Insurance Program
SIC Standard Industrial Code
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-
248

I. Background

A. Historical Overview of the Inpatient Rehabilitation Facility 
Prospective Payment System (IRF PPS)

    Section 4421 of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-
33), as amended by section 125 of the Medicare, Medicaid, and SCHIP 
(State Children's Health Insurance Program) Balanced Budget Refinement 
Act of 1999 (BBRA, Pub. L. 106-113), and by section 305 of the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act 
of 2000 (BIPA, Pub. L. 106-554), provides for the implementation of a 
per discharge prospective payment system (PPS) under section 1886(j) of 
the Social Security Act (the Act) for inpatient rehabilitation 
hospitals and inpatient rehabilitation units of a hospital (hereinafter 
referred to as IRFs).
    Payments under the IRF PPS encompass inpatient operating and 
capital costs of furnishing covered rehabilitation services (that is, 
routine, ancillary, and capital costs) but not direct graduate medical 
education costs, costs of approved nursing and allied health education 
activities, bad debts, and other services or items outside the scope of 
the IRF PPS. Although a complete discussion of the IRF PPS provisions 
appears in the original, FY 2002 IRF PPS final rule (66 FR 41316) as 
revised in the FY 2006 IRF PPS final rule (70 FR 47880), we are 
providing below a general description of the IRF PPS for fiscal years 
(FYs) 2002 through 2005.
    Under the IRF PPS from FY 2002 through FY 2005, as described in the 
FY 2002 IRF PPS final rule (66 FR 41316), the Federal prospective 
payment rates were computed across 100 distinct case-mix groups (CMGs). 
We constructed 95 CMGs using rehabilitation impairment categories 
(RICs), functional status (both motor and cognitive), and age (in some 
cases, cognitive status and age may not be a factor in defining a CMG). 
In addition, we constructed five special CMGs to account for very short 
stays and for patients who expire in the IRF.
    For each of the CMGs, we developed relative weighting factors to 
account for a patient's clinical characteristics and expected resource 
needs. Thus, the weighting factors accounted for the relative 
difference in resource use across all CMGs. Within each CMG, we created 
tiers based on the estimated effects that certain comorbidities would 
have on resource use.
    We established the Federal PPS rates using a standardized payment 
conversion factor (formerly referred to as the budget neutral 
conversion factor). For a detailed discussion of the budget neutral 
conversion factor, please refer to our FY 2004 IRF PPS final rule (68 
FR 45684 through 45685). In the FY 2006 IRF PPS final rule (70 FR 
47880), we discussed in detail the methodology for determining the 
standard payment conversion factor.
    We applied the relative weighting factors to the standard payment 
conversion factor to compute the unadjusted Federal prospective payment 
rates under the IRF PPS from FYs 2002 through 2005. We then applied 
adjustments for geographic variations in wages (wage index), the 
percentage of low-income patients, and location in a rural area (if 
applicable) to the IRF's unadjusted Federal prospective payment rates. 
In addition, we made adjustments to account for short-stay transfer 
cases, interrupted stays, and high cost outliers.
    For cost reporting periods that began on or after January 1, 2002 
and before October 1, 2002, we determined the final prospective payment 
amounts using the transition methodology prescribed in section 
1886(j)(1) of the Act. Under this provision, IRFs transitioning into 
the PPS were paid a blend of the Federal IRF PPS rate and the payment 
that the IRF would have received had the IRF PPS not been implemented. 
This provision also allowed IRFs to elect to bypass this blended 
payment and immediately be paid 100 percent of the Federal IRF PPS 
rate. The transition methodology expired as of cost reporting periods 
beginning on or after October 1, 2002 (FY 2003), and payments for all 
IRFs now consist of 100 percent of the Federal IRF PPS rate.
    We established a CMS Web site as a primary information resource for 
the IRF PPS. The Web site URL is http://www.cms.hhs.gov/
InpatientRehabFacPPS/ and may be accessed to download or view 
publications, software, data specifications, educational materials, and 
other information pertinent to the IRF PPS.
    Section 1886(j) of the Act confers broad statutory authority upon 
the Secretary to propose refinements to the IRF PPS. In the FY 2006 IRF 
PPS final rule (70 FR 47880) and in correcting amendments to the FY 
2006 IRF PPS final rule (70 FR 57166) that we published on September 
30, 2005, we finalized a number of refinements to the IRF PPS case-mix 
classification system (the CMGs and the corresponding relative weights) 
and the case-level and facility-level adjustments. Any reference to the 
FY 2006 IRF PPS final rule in this proposed rule also includes the 
provisions effective in the correcting amendments. For a detailed 
discussion of the final key policy changes for FY 2006, please refer to 
the FY 2006 IRF PPS final rule (70 FR 47880 and 70 FR 57166).
    In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined 
the IRF PPS case-mix classification system (the CMG relative weights) 
and the case-level adjustments, to ensure that IRF PPS payments 
continue to reflect as accurately as possible the costs of care. For a 
detailed discussion of the FY 2007 policy revisions, please refer to 
the FY 2007 IRF PPS final rule (71 FR 48354).
    In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the 
Federal prospective payment rates and the outlier threshold, revised 
the IRF wage index policy, and clarified how we determine high-cost 
outlier payments for transfer cases. For more information on the policy 
changes implemented for FY 2008, please refer to the FY 2008 IRF PPS 
final rule (72 FR 44284), in which we published the final FY 2008 IRF 
Federal prospective payment rates.

[[Page 22676]]

    After publication of the FY 2008 IRF PPS final rule (72 FR 44284), 
section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, 
Public Law 110-173, amended section 1886(j)(3)(C) of the Act to apply a 
zero percent increase factor for FYs 2008 and 2009, effective for IRF 
discharges occurring on or after April 1, 2008. Section 1886(j)(3)(C) 
of the Act requires the Secretary to develop an increase factor to 
update the IRF Federal prospective payment rates for each FY. Based on 
the legislative change to the increase factor, we revised the FY 2008 
Federal prospective payment rates for IRF discharges occurring on or 
after April 1, 2008. Thus, the final FY 2008 IRF Federal prospective 
payment rates that were published in the FY 2008 IRF PPS final rule (72 
FR 44284) were effective for discharges occurring on or after October 
1, 2007 and on or before March 31, 2008; and the revised FY 2008 IRF 
Federal prospective payment rates will be effective for discharges 
occurring on or after April 1, 2008 and on or before September 30, 
2008. The revised FY 2008 Federal prospective payment rates are 
available on the CMS Web site at http://www.cms.hhs.gov/
InpatientRehabFacPPS/07_DataFiles.asp#TopOfPage.

B. Operational Overview of the Current IRF PPS

    As described in the FY 2002 IRF PPS final rule, upon the admission 
and discharge of a Medicare Part A fee-for-service patient, the IRF is 
required to complete the appropriate sections of a patient assessment 
instrument, the Inpatient Rehabilitation Facility-Patient Assessment 
Instrument (IRF-PAI). All required data must be electronically encoded 
into the IRF-PAI software product. Generally, the software product 
includes patient grouping programming called the GROUPER software. The 
GROUPER software uses specific IRF-PAI data elements to classify (or 
group) patients into distinct CMGs and account for the existence of any 
relevant comorbidities.
    The GROUPER software produces a five-digit CMG number. The first 
digit is an alpha-character that indicates the comorbidity tier. The 
last four digits represent the distinct CMG number. Free downloads of 
the Inpatient Rehabilitation Validation and Entry (IRVEN) software 
product, including the GROUPER software, are available on the CMS Web 
site at http://www.cms.hhs.gov/InpatientRehabFacPPS/06_Software.asp.
    Once a patient is discharged, the IRF submits a Medicare claim (a 
Health Insurance Portability and Accountability Act (HIPAA, Pub. L. 
104-191) compliant electronic claim or, if the Administrative 
Compliance Act (ASCA, Pub. L. 107-105,) permits a paper claim, a UB-04 
or a CMS-1450, as appropriate) using the five-digit CMG number and 
sends it to the appropriate Medicare fiscal intermediary (FI) or 
Medicare Administrative Contractor (MAC). Claims submitted to Medicare 
must comply with both ASCA and HIPAA. Section 3 of the ASCA amends 
section 1862(a) of the Act by adding paragraph (22) which requires the 
Medicare program, subject to section 1862(h) of the Act, to deny 
payment under Part A or Part B for any expenses for items or services 
``for which a claim is submitted other than in an electronic form 
specified by the Secretary.'' Section 1862(h) of the Act, in turn, 
provides that the Secretary shall waive such denial in situations in 
which there is no method available for the submission of claims in an 
electronic form or the entity submitting the claim is a small provider.
    In addition, the Secretary also has the authority to waive such 
denial ``in such unusual cases as the Secretary finds appropriate.'' 
See also the final rule, ``Medicare Program; Electronic Submission of 
Medicare Claims'' (70 FR 71008, November 25, 2005). Section 3 of the 
ASCA operates in the context of the administrative simplification 
provisions of HIPAA, which include, among others, the requirements for 
transaction standards and code sets codified in 45 CFR, parts 160 and 
162, subparts A and I through R (generally known as the Transactions 
Rule). The Transactions Rule requires covered entities, including 
covered healthcare providers, to conduct covered electronic 
transactions according to the applicable transaction standards. (See 
the program claim memoranda issued and published by CMS at: http://
www.cms.hhs.gov/ElectronicBillingEDITrans/ and listed in the addenda to 
the Medicare Intermediary Manual, Part 3, section 3600. CMS 
instructions for the limited number of Medicare claims submitted on 
paper are available at: http://www.cms.hhs.gov/manuals/downloads/
clm104c25.pdf.)
    The Medicare FI or MAC processes the claim through its software 
system. This software system includes pricing programming called the 
``PRICER'' software. The PRICER software uses the CMG number, along 
with other specific claim data elements and provider-specific data, to 
adjust the IRF's prospective payment for interrupted stays, transfers, 
short stays, and deaths, and then applies the applicable adjustments to 
account for the IRF's wage index, percentage of low-income patients, 
rural location, and outlier payments. For discharges occurring on or 
after October 1, 2005, the IRF PPS payment also reflects the new 
teaching status adjustment that became effective as of FY 2006, as 
discussed in the FY 2006 IRF PPS final rule (70 FR 47880).

C. Brief Summary of Proposed Revisions to the IRF PPS for FY 2009

    In this proposed rule, we are proposing to make the following 
updates to the IRF PPS:
     Update the FY 2009 IRF PPS relative weights and average 
length of stay values using the most current and complete Medicare 
claims and cost report data, as discussed in section II.
     Update the FY 2009 IRF PPS payment rates by the proposed 
wage index and labor related share in a budget neutral manner, as 
discussed in sections III.A and B.
     Update the outlier threshold amount for FY 2009, as 
discussed in section IV.A.
     Update the cost-to-charge ratio ceiling and the national 
average urban and rural cost-to-charge ratios for purposes of 
determining outlier payments under the IRF PPS, as discussed in section 
IV.B.

II. Proposed Update to the CMG Relative Weights and Average Length of 
Stay Values for FY 2009

    As specified in 42 CFR 412.620(b)(1), we calculate a relative 
weight for each CMG that is proportional to the resources needed by an 
average inpatient rehabilitation case in that CMG. For example, cases 
in a CMG with a relative weight of 2, on average, will cost twice as 
much as cases in a CMG with a relative weight of 1. Relative weights 
account for the variance in cost per discharge due to the variance in 
resource utilization among the payment groups, and their use helps to 
ensure that IRF PPS payments support beneficiary access to care as well 
as provider efficiency.
    In this proposed rule, we propose to update the CMG relative 
weights and average length of stay values using the most recent 
available data (FY 2006). We propose to do this using the same 
methodology, with one change, that was described in the original, FY 
2002 IRF PPS final rule (66 FR 41316) and the FY 2006 IRF PPS final 
rule (70 FR 47880, 47887 through 47888). The proposed change to the 
methodology involves using new, more detailed cost-to-charge ratio 
(CCR) data from the cost reports of IRF subprovider units of primary 
acute care hospitals, instead of CCR data from the associated primary 
acute care

[[Page 22677]]

hospitals, to calculate IRFs' average costs per case. For freestanding 
IRFs, we propose to continue using CCR data from the freestanding IRF's 
(that is, the primary hospital's) cost report. Previously, we were only 
able to use the CCR data from the cost reports of the primary acute 
care hospitals to estimate the relationship between costs and charges 
for the IRF subprovider units because those were the best data we had 
available. However, conceptually, the relationship between costs and 
charges in the primary acute care hospital could differ from the 
relationship between costs and charges in the IRF subprovider units. 
Since the two types of facilities provide a different range of services 
and treat different populations of patients, it might not be as precise 
to use the data from the primary acute care hospital to estimate the 
relationship between costs and charges in the IRF subprovider unit. 
When we analyzed the CMG relative weights for FY 2009, using both the 
primary acute care hospital CCRs and the IRF subprovider unit CCRs, we 
found that the CCRs we used made very little difference in the CMG 
relative weights. Since the data needed to calculate the IRF 
subprovider units' CCRs are now available in enough detail, and since 
conceptually it is more appropriate to use the cost report data from 
the IRF subprovider units to estimate the relationship between costs 
and charges in these IRF subprovider units, we are proposing this 
change to the methodology. As indicated previously, for freestanding 
IRFs, we propose to continue using CCR data from the freestanding IRF's 
(that is, the primary hospital's) cost report. In future years, we 
would continue to estimate the CMG relative weights using both the 
primary acute care hospital CCRs and the IRF subprovider unit CCRs to 
ensure that we continue to use the most appropriate data in updating 
the CMG relative weights.
    In calculating the CMG relative weights, we use a hospital-specific 
relative value method to estimate operating (routine and ancillary 
services) and capital costs of IRFs. To estimate these costs for FY 
2009, we propose to use the CCRs from the IRF subprovider units of 
primary acute care hospitals, except for the freestanding IRFs (for 
which we will continue to use the data from the cost report of the 
primary hospital, as discussed above). For FY 2009, we propose to use 
the same methodology we used to compute the CMG relative weights for 
FYs 2002 through 2008, with the one change described above, to update 
the CMG relative weights to reflect the most recent available data (FY 
2006). The process used to calculate the CMG relative weights for this 
proposed rule follows below:
    Step 1. We calculate the CMG relative weights by estimating the 
effects that comorbidities have on costs.
    Step 2. We adjust the cost of each Medicare discharge (case) to 
reflect the effects found in the first step.
    Step 3. We use the adjusted costs from the second step to calculate 
CMG relative weights, using the hospital-specific relative value 
method.
    Step 4. We normalize to the same average CMG relative weight from 
the CMG relative weights implemented in the FY 2002 IRF PPS final rule 
(66 FR 41316), the FY 2006 IRF PPS final rule (70 FR 47880), and the FY 
2007 IRF PPS final rule (71 FR 48354). (Note that we did not revise the 
CMG relative weights in the FY 2008 IRF PPS final rule (72 FR 44284)).
    Consistent with the way we implemented changes to the IRF 
classification system in the FY 2006 IRF PPS final rule (70 FR 47880 
and 70 FR 57166) and the FY 2007 IRF PPS final rule (71 FR 48354), we 
are proposing to make the revisions to the CMG relative weights for FY 
2009 in such a way that total estimated aggregate payments to IRFs for 
FY 2009 are the same with or without the proposed changes (that is, in 
a budget neutral manner) by applying a budget neutrality factor to the 
standard payment amount. To calculate the appropriate proposed budget 
neutrality factor to apply to the standard payment amount, we propose 
to use the following steps:
    Step 1. Calculate the estimated total amount of IRF PPS payments 
for FY 2009 (with no proposed changes to the CMG relative weights).
    Step 2. Apply the proposed changes to the CMG relative weights (as 
discussed above) to calculate the estimated total amount of IRF PPS 
payments for FY 2009.
    Step 3. Divide the amount calculated in step 1 by the amount 
calculated in step 2 to determine the proposed factor (0.9969) that 
would maintain the same total estimated aggregate payments in FY 2009 
with and without the proposed changes to the CMG relative weights.
    Step 4. Apply the proposed budget neutrality factor (0.9969) to the 
FY 2008 IRF PPS standard payment amount after the application of the 
budget-neutral wage adjustment factor.
    In section III.C of this proposed rule, we discuss the proposed 
methodology for calculating the standard payment conversion factor for 
FY 2009.
    Table 1 below, ``Proposed Relative Weights and Average Lengths of 
Stay for Case-Mix Groups,'' presents the CMGs, the comorbidity tiers, 
the proposed corresponding relative weights, and the proposed average 
length of stay values for each CMG and tier for FY 2009. The average 
length of stay for each CMG is used to determine when an IRF discharge 
meets the definition of a short-stay transfer, which results in a per 
diem case level adjustment. The proposed relative weights and average 
length of stay values shown in Table 1 are subject to change for the 
final rule based on analysis of updated data.

                                  Table 1.-- Proposed Relative Weights and Average Lengths of Stay for Case-Mix Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Proposed relative weight                 Proposed average length of stay
              CMG                CMG Description (M = motor, C = ---------------------------------------------------------------------------------------
                                       cognitive, A = age)          Tier 1     Tier 2     Tier 3      None      Tier 1     Tier 2     Tier 3      None
--------------------------------------------------------------------------------------------------------------------------------------------------------
0101..........................  Stroke M>51.05..................     0.7741     0.7243     0.6463     0.6222          8          9          9          9
0102..........................  Stroke M>44.45 and M<51.05 and       0.9569     0.8953     0.7989     0.7691         11         11         11         10
                                 C>18.5.
0103..........................  Stroke M>44.45 and M<51.05 and       1.1184     1.0465     0.9338     0.8990         13         15         12         12
                                 C<18.5.
0104..........................  Stroke M>38.85 and M<44.45......     1.2008     1.1235     1.0025     0.9651         14         15         13         13
0105..........................  Stroke M>34.25 and M<38.85......     1.4207     1.3293     1.1861     1.1419         16         17         15         15
0106..........................  Stroke M>30.05 and M<34.25......     1.6395     1.5341     1.3688     1.3178         17         19         17         17
0107..........................  Stroke M>26.15 and M<30.05......     1.8826     1.7615     1.5718     1.5132         19         22         20         19
0108..........................  Stroke M<26.15 and A>84.5.......     2.2430     2.0987     1.8726     1.8028         29         27         24         23
0109..........................  Stroke M>22.35 and M<26.15 and       2.1639     2.0247     1.8066     1.7393         22         25         22         22
                                 A<84.5.
0110..........................  Stroke M<22.35 and A<84.5.......     2.6983     2.5247     2.2528     2.1688         30         31         27         27

[[Page 22678]]

 
0201..........................  Traumatic brain injury M>53.35       0.7957     0.6567     0.5947     0.5509         10          9          8          8
                                 and C>23.5.
0202..........................  Traumatic brain injury M>44.25       1.0090     0.8327     0.7541     0.6985         13         12         10         10
                                 and M<53.35 and C>23.5.
0203..........................  Traumatic brain injury M>44.25       1.2165     1.0040     0.9092     0.8422         14         13         12         12
                                 and C<23.5.
0204..........................  Traumatic brain injury M>40.65       1.3278     1.0959     0.9924     0.9193         15         15         13         13
                                 and M<44.25.
0205..........................  Traumatic brain injury M>28.75       1.6060     1.3255     1.2004     1.1119         17         17         16         15
                                 and M<40.65.
0206..........................  Traumatic brain injury M>22.05       2.0505     1.6923     1.5326     1.4197         21         21         20         19
                                 and M<28.75.
0207..........................  Traumatic brain injury M<22.05..     2.6905     2.2205     2.0109     1.8627         36         27         25         23
0301..........................  Non-traumatic brain injury           1.0947     0.9303     0.8501     0.7640         12         12         11         10
                                 M>41.05.
0302..........................  Non-traumatic brain injury           1.4084     1.1969     1.0937     0.9829         14         15         14         13
                                 M>35.05 and M<41.05.
0303..........................  Non-traumatic brain injury           1.6925     1.4384     1.3144     1.1812         17         18         16         15
                                 M>26.15 and M<35.05.
0304..........................  Non-traumatic brain injury           2.3001     1.9548     1.7862     1.6053         28         24         21         20
                                 M<26.15.
0401..........................  Traumatic spinal cord injury         0.9524     0.8236     0.7692     0.7107         12         11         10         10
                                 M>48.45.
0402..........................  Traumatic spinal cord injury         1.3448     1.1629     1.0862     1.0035         17         16         15         13
                                 M>30.35 and M<48.45.
0403..........................  Traumatic spinal cord injury         2.2969     1.9863     1.8552     1.7140         30         25         23         22
                                 M>16.05 and M<30.35.
0404..........................  Traumatic spinal cord injury         4.1471     3.5864     3.3497     3.0946         66         44         38         36
                                 M<16.05 and A>63.5.
0405..........................  Traumatic spinal cord injury         3.3687     2.9132     2.7209     2.5138         42         30         30         32
                                 M<16.05 and A<63.5.
0501..........................  Non-traumatic spinal cord injury     0.7485     0.6643     0.5859     0.5236          9          9          8          8
                                 M>51.35.
0502..........................  Non-traumatic spinal cord injury     1.0121     0.8982     0.7922     0.7080         12         12         11         10
                                 M>40.15 and M<51.35.
0503..........................  Non-traumatic spinal cord injury     1.3269     1.1777     1.0387     0.9282         15         15         14         12
                                 M>31.25 and M<40.15.
0504..........................  Non-traumatic spinal cord injury     1.6143     1.4327     1.2637     1.1293         19         19         17         15
                                 M>29.25 and M<31.25.
0505..........................  Non-traumatic spinal cord injury     1.9083     1.6936     1.4938     1.3349         21         19         19         17
                                 M>23.75 and M<29.25.
0506..........................  Non-traumatic spinal cord injury     2.6059     2.3127     2.0399     1.8229         30         29         24         23
                                 M<23.75.
0601..........................  Neurological M>47.75............     0.9507     0.7701     0.7182     0.6558         11         11          9          9
0602..........................  Neurological M>37.35 and M<47.75     1.2627     1.0228     0.9539     0.8710         14         13         12         12
0603..........................  Neurological M>25.85 and M<37.35     1.6055     1.3005     1.2129     1.1075         16         16         15         15
0604..........................  Neurological M<25.85............     2.1200     1.7172     1.6016     1.4624         25         21         20         18
0701..........................  Fracture of lower extremity          0.9081     0.7815     0.7372     0.6629         10         10         10          9
                                 M>42.15.
0702..........................  Fracture of lower extremity          1.1867     1.0212     0.9633     0.8662         14         14         13         12
                                 M>34.15 and M<42.15.
0703..........................  Fracture of lower extremity          1.4492     1.2471     1.1765     1.0579         16         16         15         14
                                 M>28.15 and M<34.15.
0704..........................  Fracture of lower extremity          1.8522     1.5939     1.5037     1.3520         19         20         19         18
                                 M<28.15.
0801..........................  Replacement of lower extremity       0.6786     0.5637     0.5166     0.4690          8          8          7          7
                                 joint M>49.55.
0802..........................  Replacement of lower extremity       0.9002     0.7477     0.6853     0.6221         10         10          9          9
                                 joint M>37.05 and M<49.55.
0803..........................  Replacement of lower extremity       1.2808     1.0639     0.9750     0.8851         13         13         13         12
                                 joint M>28.65 and M<37.05 and
                                 A>83.5.
0804..........................  Replacement of lower extremity       1.1331     0.9412     0.8625     0.7830         13         12         11         11
                                 joint M>28.65 and M<37.05 and
                                 A<83.5.
0805..........................  Replacement of lower extremity       1.4300     1.1879     1.0886     0.9882         16         15         14         13
                                 joint M>22.05 and M<28.65.

[[Page 22679]]

 
0806..........................  Replacement of lower extremity       1.7498     1.4535     1.3320     1.2092         21         19         16         15
                                 joint M<22.05.
0901..........................  Other orthopedic M>44.75........     0.8724     0.7428     0.6672     0.5950         12          9         10          9
0902..........................  Other orthopedic M>34.35 and         1.1764     1.0016     0.8997     0.8023         13         13         12         11
                                 M<44.75.
0903..........................  Other orthopedic M>24.15 and         1.5455     1.3159     1.1821     1.0541         16         17         15         14
                                 M<34.35.
0904..........................  Other orthopedic M<24.15........     1.9922     1.6963     1.5238     1.3588         23         21         20         18
1001..........................  Amputation, lower extremity          0.9530     0.9074     0.7850     0.7218         11         16         10         10
                                 M>47.65.
1002..........................  Amputation, lower extremity          1.2690     1.2083     1.0452     0.9611         14         15         13         13
                                 M>36.25 and M<47.65.
1003..........................  Amputation, lower extremity          1.8511     1.7625     1.5246     1.4019         19         21         19         18
                                 M<36.25.
1101..........................  Amputation, non-lower extremity      1.1511     1.0159     0.9562     0.8734         12         13         12         12
                                 M>36.35.
1102..........................  Amputation, non-lower extremity      1.7909     1.5805     1.4877     1.3589         19         21         18         16
                                 M<36.35.
1201..........................  Osteoarthritis M>37.65..........     1.0383     0.8996     0.8403     0.7356         12         11         11         10
1202..........................  Osteoarthritis M>30.75 and           1.3069     1.1323     1.0576     0.9258         13         15         13         12
                                 M<37.65.
1203..........................  Osteoarthritis M<30.75..........     1.6806     1.4561     1.3600     1.1906         16         18         17         16
1301..........................  Rheumatoid, other arthritis          1.2933     0.9197     0.8468     0.7603         13         12         11         10
                                 M>36.35.
1302..........................  Rheumatoid, other arthritis          1.7330     1.2324     1.1347     1.0188         18         15         14         14
                                 M>26.15 and M<36.35.
1303..........................  Rheumatoid, other arthritis          2.2338     1.5885     1.4625     1.3132         18         21         19         17
                                 M<26.15.
1401..........................  Cardiac M>48.85.................     0.8468     0.7331     0.6541     0.5895         10         10         10          9
1402..........................  Cardiac M>38.55 and M<48.85.....     1.1260     0.9748     0.8697     0.7838         13         13         12         11
1403..........................  Cardiac M>31.15 and M<38.55.....     1.4026     1.2142     1.0833     0.9764         14         15         14         13
1404..........................  Cardiac M<31.15.................     1.7824     1.5430     1.3767     1.2407         19         19         17         16
1501..........................  Pulmonary M>49.25...............     0.8979     0.8644     0.7627     0.7277         10         11         10         10
1502..........................  Pulmonary M>39.05 and M<49.25...     1.1288     1.0867     0.9588     0.9149         12         14         12         12
1503..........................  Pulmonary M>29.15 and M<39.05...     1.3885     1.3367     1.1795     1.1254         16         15         15         14
1504..........................  Pulmonary M<29.15...............     1.7937     1.7267     1.5236     1.4537         22         20         19         17
1601..........................  Pain syndrome M>37.15...........     0.9517     0.8382     0.7807     0.6881         13         11         11         10
1602..........................  Pain syndrome M>26.75 and            1.3184     1.1611     1.0815     0.9532         15         15         13         13
                                 M<37.15.
1603..........................  Pain syndrome M<26.75...........     1.6571     1.4593     1.3593     1.1981         15         19         17         16
1701..........................  Major multiple trauma without        1.0571     0.9515     0.8114     0.7336         12         14         12         10
                                 brain or spinal cord injury
                                 M>39.25.
1702..........................  Major multiple trauma without        1.4300     1.2870     1.0976     0.9924         16         15         14         13
                                 brain or spinal cord injury
                                 M>31.05 and M<39.25.
1703..........................  Major multiple trauma without        1.6793     1.5114     1.2889     1.1654         20         19         16         15
                                 brain or spinal cord injury
                                 M>25.55 and M<31.05.
1704..........................  Major multiple trauma without        2.1809     1.9629     1.6740     1.5135         25         23         20         20
                                 brain or spinal cord injury
                                 M<25.55.
1801..........................  Major multiple trauma with brain     0.9865     0.9494     0.7674     0.7313         14         13         11         10
                                 or spinal cord injury M>40.85.
1802..........................  Major multiple trauma with brain     1.6484     1.5864     1.2823     1.2221         20         19         17         16
                                 or spinal cord injury M>23.05
                                 and M<40.85.
1803..........................  Major multiple trauma with brain     2.8473     2.7401     2.2149     2.1108         38         33         27         25
                                 or spinal cord injury M<23.05.
1901..........................  Guillain Barre M>35.95..........     1.1894     0.8847     0.8847     0.8847         18         11         13         12
1902..........................  Guillain Barre M>18.05 and           2.3954     1.7817     1.7817     1.7817         30         23         21         22
                                 M<35.95.
1903..........................  Guillain Barre M<18.05..........     3.8382     2.8549     2.8549     2.8549         40         36         34         36
2001..........................  Miscellaneous M>49.15...........     0.8681     0.7274     0.6556     0.5908         10         10          9          8
2002..........................  Miscellaneous M>38.75 and            1.1547     0.9676     0.8721     0.7859         12         12         11         11
                                 M<49.15.
2003..........................  Miscellaneous M>27.85 and            1.4947     1.2525     1.1288     1.0173         16         15         14         13
                                 M<38.75.

[[Page 22680]]

 
2004..........................  Miscellaneous M<27.85...........     1.9862     1.6644     1.5000     1.3518         23         20         19         17
2101..........................  Burns M>0.......................     2.0633     1.8370     1.8370     1.3345         33         23         18         16
5001..........................  Short-stay cases, length of stay  .........  .........  .........     0.1503  .........  .........  .........          3
                                 is 3 days or fewer.
5101..........................  Expired, orthopedic, length of    .........  .........  .........     0.6577  .........  .........  .........          8
                                 stay is 13 days or fewer.
5102..........................  Expired, orthopedic, length of    .........  .........  .........     1.6370  .........  .........  .........         20
                                 stay is 14 days or more.
5103..........................  Expired, not orthopedic, length   .........  .........  .........     0.6924  .........  .........  .........          8
                                 of stay is 15 days or fewer.
5104..........................  Expired, not orthopedic, length   .........  .........  .........     1.9305  .........  .........  .........         23
                                 of stay is 16 days or more.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Generally, updates to the CMG relative weights result in some 
increases and some decreases to the CMG relative weight values. Table 2 
shows, overall, how the proposed revisions in this proposed rule would 
affect particular CMG relative weight values, which affect the overall 
distribution of payments within CMGs and tiers. Note that, because we 
propose to implement the CMG relative weight revisions in a budget 
neutral manner, total estimated aggregate payments to IRFs for FY 2009 
would not be affected. However, the proposed revisions would affect the 
distribution of payments within CMGs and tiers.

   Table 2.--Distributional Effects of the Proposed Changes to the CMG
     Relative Weights (FY 2008 Values Compared With FY 2009 Values)
------------------------------------------------------------------------
                                             Number of     Percentage of
            Percentage change             cases affected  cases affected
------------------------------------------------------------------------
Increased by 15% or more................              65             0.0
Increased by between 5% and 15%.........           4,979             1.2
Changed by less than 5%.................         390,600            96.1
Decreased by between 5% and 15%.........           1,706             0.4
Decreased by 15% or more................           2,531             2.3
------------------------------------------------------------------------

    As Table 2 shows, over 96 percent of all IRF cases are in CMGs and 
tiers that would experience less than a 5 percent change (either 
increase or decrease) in the CMG relative weight value as a result of 
the proposed revisions. The most significant increase in the proposed 
CMG relative weight values, in terms of the largest number of cases 
affected, would be a 3.3 percent increase in the CMG relative weight 
value for CMG A0802--Replacement of lower extremity joint, motor score 
greater than 37.05 and motor score less than 49.55--in the ``no-
comorbidity'' tier. In the FY 2006 data, 25,822 IRF discharges were 
classified into this CMG and tier. We believe that the higher costs 
reported in this CMG and tier in FY 2006, compared with those reported 
for this CMG and tier in FY 2003, may reflect recent IRF case mix 
changes caused, at least in part, by the phase-in of the ``75 percent'' 
rule and increased medical review of IRF discharges. These changes to 
the system have likely increased the complexity of patients being 
admitted to IRFs, especially among the lower-extremity joint 
replacement cases with no comorbidities, which do not meet the 75 
percent rule criteria and have been the focus of a lot of the medical 
review activities.
    These same trends explain the most significant decrease in the 
proposed CMG relative weight values, in terms of the largest number of 
cases affected. The proposed revisions would reduce the CMG relative 
weight value for CMG 5001--Short-stay cases, length of stay is 3 days 
or fewer--by 31.7 percent. This decrease is associated with a 
substantial decrease in the number of cases classified into this 
extremely short-stay CMG, from 10,222 IRF discharges in FY 2003 to 
2,376 IRF discharges in FY 2006. We believe that increases in the 
complexity of IRF patients resulting from the ``75 percent'' rule and 
the IRF medical review activities may mean that fewer IRF patients can 
effectively be treated in IRFs for 3 days or fewer.
    The changes in the proposed average length of stay values in this 
proposed rule, compared with the current (FY 2008) average length of 
stay values, are small and primarily distributional. Some values 
increase and some decrease, compared with the FY 2008 values. The only 
notable changes are in 3 of the CMGs for traumatic spinal cord 
injuries, B0403, B0404, and B0405 (all in tier 1), for which the 
proposed average length of stay values increased by 8.55 days, 14.92 
days, and 9.72 days, respectively. This may, again, be due to increases 
in the complexity of IRF patients resulting from the ``75 percent'' 
rule and the IRF medical review activities. The overall average length 
of stay in IRFs also increased from 12.8 days in FY 2003 to 13.9 days 
in FY 2006, which may be attributable to increases in IRFs' case mix 
over this period.
    Given the recent changes in IRFs' case mix, we believe that it is 
especially important to update the CMG relative weights and average 
length of stay values at this time to reflect these changes.

III. Proposed FY 2009 IRF PPS Federal Prospective Payment Rates

A. Increase Factor for FY 2009 and Proposed FY 2009 Labor-Related Share

    Section 1886(j)(3)(C) of the Act requires the Secretary to 
establish an increase factor that reflects changes over time in the 
prices of an appropriate mix

[[Page 22681]]

of goods and services included in the covered IRF services, which is 
referred to as a market basket index. According to section 
1886(j)(3)(A)(i) of the Act, the increase factor shall be used to 
update the IRF Federal prospective payment rates for each FY. However, 
section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, 
Public Law 110-173, amended section 1886(j)(3)(C) of the Act to apply a 
zero percent increase factor for FYs 2008 and 2009, effective for IRF 
discharges occurring on or after April 1, 2008. In accordance with 
section 1886(j)(3)(C) of the Act, as amended by the legislation, we are 
applying an increase factor of zero percent to update the proposed IRF 
Federal prospective payment rates for FY 2009 in this proposed rule.
    We continue to use the methodology described in the FY 2006 IRF PPS 
final rule to update the labor-related share for FY 2009. In FY 2004, 
we updated the 1992 market basket data to 1997 based on the methodology 
described in the FY 2004 IRF PPS final rule (68 FR 45688 through 
45689). As discussed in the FY 2006 IRF PPS final rule (70 FR 47915 
through 47917), we rebased and revised the market basket for FY 2006 
using the 2002-based cost structures for IRFs, inpatient psychiatric 
facilities (IPFs), and long-term care hospitals (LTCHs) to determine 
the FY 2006 labor-related share. For FYs 2007 and 2008, we used the 
same methodology discussed in the FY 2006 IRF PPS final rule (70 FR at 
47908 through 47917) to determine the IRF labor-related share. For FY 
2009, we continue to use the same methodology discussed in the FY 2006 
IRF PPS final rule. The labor-related share for FY 2009 is the sum of 
the FY 2009 relative importance of each labor-related cost category, 
and reflects the different rates of price change for these cost 
categories between the base year (FY 2002) and FY 2009. For this 
proposed rule, the labor-related share reflects Global Insight's first 
quarter 2008 forecast. As shown in Table 3, the total FY 2009 
Rehabilitation, Psychiatric, and Long-Term Care Hospital Market Basket 
(RPL) labor-related share in this proposed rule is 75.691 percent. We 
propose to update the labor-related share with the most recent 
available data for the final rule.

     Table 3.--Proposed FY 2009 IRF RPL Labor-Related Share Relative
                               Importance
------------------------------------------------------------------------
                                                   Proposed FY 2009 IRF
                 Cost category                     labor-related share
                                                   relative importance
------------------------------------------------------------------------
Wages and salaries.............................                   52.683
Employee benefits..............................                   14.039
Professional fees..............................                    2.896
All other labor intensive services.............                    2.137
                                                ------------------------
    Subtotal:..................................                   71.755
                                                ========================
Labor-related share of capital costs (.46).....                    3.936
                                                ------------------------
    Total:.....................................                  75.691
------------------------------------------------------------------------
Source: GLOBAL INSIGHT, INC, 1st QTR, 2008; @USMACRO/CONTROL0308 @CISSIM/
  TL0208.SIM Historical Data through 4th QTR, 2007.

B. Proposed Area Wage Adjustment

    Section 1886(j)(6) of the Act requires the Secretary to adjust the 
proportion (as estimated by the Secretary from time to time) of 
rehabilitation facilities' costs attributable to wages and wage-related 
costs by a factor (established by the Secretary) reflecting the 
relative hospital wage level in the geographic area of the 
rehabilitation facility compared to the national average wage level for 
those facilities. The Secretary is required to update the IRF PPS wage 
index on the basis of information available to the Secretary on the 
wages and wage-related costs to furnish rehabilitation services. Any 
adjustments or updates made under section 1886(j)(6) of the Act for a 
FY are made in a budget neutral manner.
    In the FY 2008 IRF PPS final rule (72 FR 44299), we maintained the 
methodology described in the FY 2006 IRF PPS final rule to determine 
the wage index, labor market area definitions, and hold harmless policy 
consistent with the rationale outlined in the FY 2006 IRF PPS final 
rule (70 FR 47917 through 47933).
    For FY 2009, we propose to maintain the policies and methodologies 
described in the FY 2008 IRF PPS final rule relating to the labor 
market area definitions and the wage index methodology for areas with 
wage data. Therefore, this proposed rule continues to use the Core-
Based Statistical Area (CBSA) labor market area definitions and the 
pre-reclassification and pre-floor hospital wage index data based on 
2004 cost report data.
    When adopting new labor market designations made by the Office of 
Management and Budget (OMB), we identified some geographic areas where 
there were no hospitals and, thus, no hospital wage index data on which 
to base the calculation of the IRF PPS wage index. We continue to use 
the same methodology discussed in the FY 2008 IRF PPS final rule (72 FR 
44299) to address those geographic areas where there are no hospitals 
and, thus, no hospital wage index data on which to base the calculation 
of the FY 2009 IRF PPS wage index.
    Additionally, this proposed rule incorporates the CBSA changes 
published in the most recent OMB bulletin that applies to the hospital 
wage data used to determine the current IRF PPS wage index. The changes 
were nomenclature and did not represent substantive changes to the 
CBSA-based designations. Specifically, OMB added or deleted certain 
CBSA numbers and revised certain titles. The OMB bulletins are 
available online at http://www.whitehouse.gov/omb/bulletins/index.html.
    Finally, as discussed in the FY 2008 IRF PPS final rule (72 FR 
44298), FY 2008 was the third and final year of the 3-year phase-out of 
the budget neutral hold harmless policy. For FY 2008 and beyond, we no 
longer apply an adjustment for IRFs that meet the criteria described in 
the FY 2006 final rule (70 FR 47923 through 47926).
1. Clarification of New England Deemed Counties
    We are taking this opportunity to address the change in the 
treatment of ``New England deemed counties'' (that is, those counties 
in New England listed in Sec.  412.64(b)(1)(ii)(B) that were deemed

[[Page 22682]]

to be parts of urban areas under section 601(g) of the Social Security 
Amendments of 1983) that was made in the FY 2008 Inpatient Prospective 
Payment System (IPPS) final rule with comment period (72 FR 47337). 
These counties include the following: Litchfield County, CT; York 
County, ME; Sagadahoc County, ME; Merrimack County, NH; and Newport 
County, RI. Of these five ``New England deemed counties,'' three (York 
County, ME, Sagadahoc County, ME, and Newport County, RI) are also 
included in metropolitan statistical areas (MSAs) defined by OMB and 
are considered urban under both the current IPPS and IRF PPS labor 
market area definitions in Sec.  412.64(b)(1)(ii)(A). The remaining 
two, Litchfield County, CT and Merrimack County, NH, are geographically 
located in areas that are considered rural under the current IPPS (and 
IRF PPS) labor market area definitions, but have been previously deemed 
urban under the IPPS in certain circumstances, as discussed below.
    In the FY 2008 IPPS final rule with comment period, (72 FR 47337 
through 47338), Sec.  412.64(b)(1)(ii)(B) was revised that the two 
``New England deemed counties'' that are still considered rural under 
the OMB definitions (Litchfield County, CT and Merrimack County, NH), 
are no longer considered urban, effective for discharges occurring on 
or after October 1, 2007, and, therefore, are considered rural in 
accordance with Sec.  412.64(b)(1)(ii)(C). However, for purposes of 
payment under the IPPS, acute care hospitals located within those areas 
are treated as being reclassified to their deemed urban area effective 
for discharges occurring on or after October 1, 2007 (see 72 FR 47337 
through 47338). We note that the IRF PPS does not provide for 
geographic reclassification. Also, in the FY 2008 IPPS final rule with 
comment period (72 FR 47338), we explained that we limited this policy 
change for the ``New England deemed counties'' only to IPPS hospitals, 
and any change to non-IPPS provider wage indexes would be addressed in 
the respective payment system rules.
    Accordingly, as stated above, we are taking this opportunity to 
clarify the treatment of ``New England deemed counties'' under the IRF 
PPS in this proposed rule.
    As discussed above, the IRF PPS has consistently used the IPPS 
definition of ``urban'' and ``rural'' with regard to the wage index 
used in the IRF PPS. Under existing Sec.  412.602, an IRF's wage index 
is determined based on the location of the IRF in an urban or rural 
area as defined in Sec. Sec.  412.64(b)(1)(ii)(A) through (C).
    Historical changes to the labor market area/geographic 
classifications and annual updates to the wage index values under the 
IRF PPS are made effective October 1 each year. When we established the 
most recent IRF PPS payment rate update, effective for discharges 
occurring on or after October 1, 2007 through September 30, 2008, we 
considered the ``New England deemed counties'' (including Litchfield 
County, CT and Merrimack County, NH) as urban for FY 2008, as evidenced 
by the inclusion of Litchfield County, CT as one of the constituent 
counties of urban CBSA 25540 (Hartford-West Hartford-East Hartford, 
CT), and the inclusion of Merrimack County, NH as one of the 
constituent counties of urban CBSA 31700 (Manchester-Nashua, NH).
    As noted above, Sec.  412.602 indicates that the terms ``rural'' 
and ``urban'' are defined according to the definitions of those terms 
in Sec. Sec.  412.64(b)(1)(ii)(A) through (C). Applying the IPPS 
definitions, Litchfield County, CT and Merrimack County, NH are not 
considered ``urban'' under Sec. Sec.  412.64(b)(1)(ii)(A) and (B) as 
revised under the FY 2008 IPPS final rule and, therefore, are 
considered ``rural'' under Sec.  412.64(b)(1)(ii)(C). Accordingly, 
reflecting our policy to use the IPPS definitions of ``urban'' and 
``rural'', these two counties would be considered ``rural'' under the 
IRF PPS effective with the next update of the IRF PPS payment rates, 
October 1, 2008, and would no longer be included in urban CBSA 25540 
(Hartford-West Hartford-East Hartford, CT) and urban CBSA 31700 
(Manchester-Nashua, NH), respectively. We note that this policy is 
consistent with our policy of not taking into account IPPS geographic 
reclassifications in determining payments under the IRF PPS. We do not 
need to make any changes to our regulations to effectuate this change.
    There is one IRF (in Merrimack County, NH) that greatly benefits 
from treating these counties as rural. This IRF would begin to receive 
a higher wage index value and the 21.3 percent adjustment that is 
applied to IRF PPS payments for rural facilities. Currently, there are 
no IRFs in the following areas: Litchfield County, CT; rural 
Connecticut; or rural New Hampshire.
2. Multi-Campus Hospital Wage Index Data
    In the FY 2008 IRF PPS final rule (72 FR 44284, August 7, 2007), we 
established IRF PPS wage index values for FY 2008 calculated from the 
same data (collected from cost reports submitted by hospitals for cost 
reporting periods beginning during FY 2003) used to compute the FY 2007 
acute care hospital inpatient wage index, without taking into account 
geographic reclassification under sections 1886(d)(8) and (d)(10) of 
the Act. The IRF PPS wage index values applicable for discharges 
occurring on or after October 1, 2007 through September 30, 2008 are 
shown in Table 1 (for urban areas) and Table 2 (for rural areas) in the 
addendum to the FY 2008 IRF PPS final rule (72 FR 44312 through 44335).
    We are continuing to use IPPS wage data for the FY 2009 IRF PPS 
Wage Index, because we believe that using the hospital inpatient wage 
data is appropriate and reasonable for the IRF PPS. We note that the 
IPPS wage data used to determine the FY 2009 IRF wage index values 
reflect our policy that was adopted under the IPPS beginning in FY 
2008, which apportions the wage data for multi-campus hospitals located 
in different labor market areas (CBSAs) to each CBSA where the campuses 
are located (see the FY 2008 IPPS final rule with comment period (72 FR 
47317 through 47320)). We computed the FY 2009 IRF PPS wage index 
values presented in this notice consistent with our pre-reclassified 
IPPS