Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities for FY 2014, 26437-26480 [2013-10558]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 78, Number 87 (Monday, May 6, 2013)]
[Proposed Rules]
[Pages 26437-26480]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10558]



[[Page 26437]]

Vol. 78

Monday,

No. 87

May 6, 2013

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 413 and 424





Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities for FY 2014; Proposed Rule

Federal Register / Vol. 78 , No. 87 / Monday, May 6, 2013 / Proposed 
Rules

[[Page 26438]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 424

[CMS-1446-P]
RIN 0938-AR65


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities for FY 2014

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the payment rates used under 
the prospective payment system (PPS) for skilled nursing facilities 
(SNFs) for fiscal year (FY) 2014, would revise and rebase the SNF 
market basket, and would make certain technical and conforming 
revisions in the regulations text. This proposed rule also includes a 
proposed policy for reporting the SNF market basket forecast error 
correction in certain limited circumstances and a proposed new item for 
the Minimum Data Set (MDS), Version 3.0.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on July 1, 2013.

ADDRESSES: In commenting, please refer to file code CMS-1446-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 https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1446-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    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 to 
the following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1446-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. Centers for Medicare & Medicaid Services, Department of Health 
and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.
    (Because access to the interior of the Hubert H. Humphrey 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. Centers for Medicare & Medicaid Services, Department of Health 
and Human Services, 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: Penny Gershman, (410) 786-6643, for 
information related to clinical issues.
    John Kane, (410) 786-0557, for information related to the 
development of the payment rates and case-mix indexes.
    Kia Sidbury, (410) 786-7816, for information related to the wage 
index.
    Bill Ullman, (410) 786-5667, for information related to level of 
care determinations, consolidated billing, and general information.

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: https://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 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.

Availability of Certain Information Exclusively Through the Internet on 
the CMS Web Site

    The Wage Index for Urban Areas Based on CBSA Labor Market Areas 
(Table A) and the Wage Index Based on CBSA Labor Market Areas for Rural 
Areas (Table B) are published in the Federal Register as an Addendum to 
the annual SNF PPS rulemaking (that is, the SNF PPS proposed and final 
rules or, when applicable, the current update notice). However, as of 
FY 2012, a number of other Medicare payment systems adopted an approach 
in which such tables are no longer published in the Federal Register in 
this manner, and instead are made available exclusively through the 
Internet; see, for example, the FY 2012 Hospital Inpatient PPS (IPPS) 
final rule (76 FR 51476). To be consistent with these other Medicare 
payment systems and streamline the published content to focus on policy 
discussion, we now propose to adopt a similar approach for the SNF PPS 
as well. As discussed in greater detail in section VI. of this proposed 
rule, we would revise the applicable regulations text at Sec.  413.345 
to accommodate this approach, consistent with the wording of the 
corresponding statutory authority at section 1888(e)(4)(H)(iii) of the 
Social Security Act (the Act). Under this approach, effective October 
1, 2013, the individual wage index values displayed in Tables A and B 
of this rule would no longer be published in the Federal Register as 
part of the annual SNF PPS rulemaking, and instead would be made 
available exclusively through the Internet on CMS's SNF PPS Web site at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. Consistent with the provisions of section 
1888(e)(4)(H)(iii) of the Act, we would continue to publish in the 
Federal Register the specific ``factors to be applied in making the 
area wage adjustment'' (for example, the SNF prospective payment 
system's use of the hospital wage index exclusive of its occupational 
mix adjustment) as part of our annual SNF PPS rulemaking process, but 
that document would no longer include a listing of the individual wage 
index values themselves, which would instead be made available

[[Page 26439]]

exclusively through the Internet on the CMS Web Site.
    In addition, we note that in previous years, each rule or update 
notice issued under the annual SNF PPS rulemaking cycle has included a 
detailed reiteration of the various individual legislative provisions 
that have affected the SNF PPS over the years, a number of which 
represented temporary measures that have long since expired. That 
discussion, along with detailed background information on various other 
aspects of the SNF PPS, will now be made available exclusively on the 
CMS Web site as well, at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/. In connection with this change, this 
proposed rule is presented in a revised format that also serves to 
consolidate material on the individual rate components that had 
previously appeared redundantly in several different portions of the 
preamble. The revised format also reorders the preamble discussion to 
achieve a more logical presentation, by systematically discussing each 
of the various rate components in the actual order in which it is 
applied to the SNF payment rates. For ease of reference, we are 
including the following crosswalk between this proposed rule's 
reordered preamble discussion and the material that was presented in 
last year's SNF PPS update notice for FY 2013 (77 FR 46214, August 2, 
2012).

Crosswalk to FY 2013 Update Notice

------------------------------------------------------------------------
       FY 2014 Proposed Rule                FY 2013 Update Notice
------------------------------------------------------------------------
I. Executive Summary..............  I.
II.A Statutory Basis and Scope....  II.A
II.B Initial Transition...........  II.A
II.C Required Annual Rate Updates.  II.B, III.D
III.A Federal Base Rates..........  II.A, II.G.1, III.A.1
III.B.1 SNF Market Basket Index...  II.G.2, V
III.B.2 Use of the SNF Market       II.G.2, V.A
 Basket Percentage.
III.B.3 Forecast Error Adjustment.  II.G.2, V.B
III.B.4 Multifactor Productivity    II.G.2, V.C
 Adjustment (MFP).
III.B.4.1 Incorporating the MFP     V.C.1
 into the Market Basket Update.
III.B.5 Market Basket Update        V.D
 Factor for FY 2014.
III.C Case-Mix (C-M) Adjustment...  II.G.1, III.A.2, III.B
III.D Wage Index Adjustment.......  III.C
III.E Adjusted Rate Computation     III.F
 Example.
IV.A SNF Level of Care--            II.A, III.E
 Administrative Presumption.
IV.B Consolidated Billing.........  II.A, VI
IV.C Payment for SNF-Level Swing-   II.A, VII
 Bed Services.
V.A Revising and Rebasing the SNF   N/A
 Market Basket Index.
V.B Monitoring Impact of FY 2012    IV
 Policy Changes.
V.C Ensuring Accuracy in Grouping   N/A
 to Rehabilitation Categories.
V.D SNF Therapy Research Project..  N/A
VI. Provisions of the Proposed      N/A
 Rule and Technical Correction.
VII. Collection of Information      VIII.
 Requirements.
VIII. Response to Comments........  N/A
IX. Economic Analyses.............  X.
Table 1 Diff. Bet. Forecasted,      Table 1
 Actual Market Basket Increases.
Table 2 Unadjusted Federal Rate     Table 2
 Per Diem (Urban).
Table 3 Unadjusted Federal Rate     Table 3
 Per Diem (Rural).
Table 4 C-M Adjusted Federal        Table 4
 Rates, Indexes (Urban).
Table 5 C-M Adjusted Federal        Table 5
 Rates, Indexes (Rural).
Table 6 C-M Adj. Fed. Rates         Table 6
 (Urban), Lab./Non-Lab. Components.
Table 7 C-M Adj. Fed. Rates         Table 7
 (Rural), Lab./Non-Lab. Components.
Table 8 Rate Computation Example..  Table 8
Tables 9 through 16 Revising &      N/A
 Rebasing SNF Market Basket.
Table 17 Labor-Related Relative     Table 13
 Importance.
Table 18 C-M Distributions by       Table 9
 Major RUG-IV Category.
Table 19 C-M Distribution for       Table 10
 Therapy RUG-IV Groups.
Table 20 Mode of Therapy Provision  Table 11
Table 21 Distribution of MDS        Table 12
 Assessment Types.
Table 22 Projected Impact.........  Table 14
Table 23 Accounting Statement.....  Table 15
------------------------------------------------------------------------

    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of Major Provisions
    C. Summary of Cost and Benefits
II. Background
    A. Statutory Basis and Scope
    B. Initial Transition
    C. Required Annual Rate Updates
III. SNF PPS Rate Setting Methodology and FY 2014 Update
    A. Federal Base Rates
    B. SNF Market Basket Update
    1. SNF Market Basket Index
    2. Use of the SNF Market Basket Percentage
    3. Forecast Error Adjustment
    4. Multifactor Productivity Adjustment
    5. Market Basket Update Factor for FY 2014
    C. Case-Mix Adjustment
    D. Wage Index Adjustment
    E. Adjusted Rate Computation Example
IV. Additional Aspects of the SNF PPS
    A. SNF Level of Care--Administrative Presumption
    B. Consolidated Billing
    C. Payment for SNF-Level Swing-Bed Services
V. Other Issues
    A. Revising and Rebasing the SNF Market Basket Index
    1. Background
    2. Revising and Rebasing the SNF Market Basket
    3. Price Proxies Used to Measure Cost Category Growth

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    4. Proposed Market Basket Estimate for the FY 2014 SNF PPS 
Update
    5. Labor-Related Share
    B. Monitoring Impact of FY 2012 Policy Changes
    1. RUG Distributions
    2. Group Therapy Allocation
    3. MDS 3.0 Changes
    4. Conclusion
    C. Ensuring Accuracy in Grouping to Rehabilitation RUG-IV 
Categories
    D. SNF Therapy Research Project
VI. Provisions of the Proposed Rule and Technical Correction
VII. Collection of Information Requirements
VIII. Response to Comments
IX. Economic Analyses
Regulation Text

Acronyms

    In addition, because of the many terms to which we refer by acronym 
in this proposed rule, we are listing these abbreviations and their 
corresponding terms in alphabetical order below:

AIDS Acquired Immune Deficiency Syndrome
ARD Assessment reference date
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Pub. L. 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
CAH Critical access hospital
CBSA Core-based statistical area
CFR Code of Federal Regulations
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
COT Change of therapy
ECI Employment Cost Index
EOT End of therapy
EOT-R End of therapy--resumption
FQHC Federally qualified health center
FR Federal Register
FY Fiscal year
GAO Government Accountability Office
HCPCS Healthcare Common Procedure Coding System
HOMER Home office Medicare records
IGI IHS (Information Handling Services) Global Insight, Inc.
MDS Minimum data set
MFP Multifactor productivity
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
OMRA Other Medicare Required Assessment
PPS Prospective Payment System
RAI Resident assessment instrument
RAVEN Resident assessment validation entry
RFA Regulatory Flexibility Act, Pub. L. 96-354
RHC Rural health clinic
RIA Regulatory impact analysis
RUG-III Resource Utilization Groups, Version 3
RUG-V Resource Utilization Groups, Version 4
RUG-53 Refined 53-Group RUG-III Case-Mix Classification System
SCHIP State Children's Health Insurance Program
SNF Skilled nursing facility
STM Staff time measurement
STRIVE Staff time and resource intensity verification
UMRA Unfunded Mandates Reform Act, Pub. L. 104-4

I. Executive Summary

A. Purpose

    This proposed rule would update the SNF prospective payment rates 
for FY 2014 as required under section 1888(e)(4)(E) of the Act. It 
would also respond to section 1888(e)(4)(H) of the Act, which requires 
the Secretary to ``provide for publication in the Federal Register'' 
before the August 1 that precedes the start of each fiscal year, the 
unadjusted federal per diem rates, the case-mix classification system, 
and the factors to be applied in making the area wage adjustment used 
in computing the prospective payment rates for that fiscal year.

B. Summary of Major Provisions

    In accordance with sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5) of 
the Act, the federal rates in this proposed rule would reflect an 
update to the rates that we published in the SNF PPS update notice for 
FY 2013 (77 FR 46214) which reflects the SNF market basket index, 
adjusted by the forecast error correction, if applicable, and the 
multifactor productivity adjustment for FY 2014.

C. Summary of Cost and Benefits

------------------------------------------------------------------------
         Provision  description                  Total transfers
------------------------------------------------------------------------
Proposed FY 2014 SNF PPS payment rate    The overall economic impact of
 update.                                  this proposed rule would be an
                                          estimated increase of $500
                                          million in aggregate payments
                                          to SNFs during FY 2014.
------------------------------------------------------------------------

II. Background

A. Statutory Basis and Scope

    As amended by section 4432 of the Balanced Budget Act of 1997 (BBA, 
Pub. L. 105-33, enacted on August 5, 1997), section 1888(e) of the Act 
provides for the implementation of a PPS for SNFs. This methodology 
uses prospective, case-mix adjusted per diem payment rates applicable 
to all covered SNF services defined in section 1888(e)(2)(A) of the 
Act. The SNF PPS is effective for cost reporting periods beginning on 
or after July 1, 1998, and covers all costs of furnishing covered SNF 
services (routine, ancillary, and capital-related costs) other than 
costs associated with approved educational activities and bad debts. 
Under section 1888(e)(2)(A)(i) of the Act, covered SNF services include 
post-hospital extended care services for which benefits are provided 
under Part A, as well as those items and services (other than a small 
number of excluded services, such as physician services) for which 
payment may otherwise be made under Part B and which are furnished to 
Medicare beneficiaries who are residents in a SNF during a covered Part 
A stay. A comprehensive discussion of these provisions appears in the 
May 12, 1998 interim final rule (63 FR 26252).

B. Initial Transition

    Under sections 1888(e)(1)(A) and 1888(e)(11) of the Act, the SNF 
PPS included an initial, three-phase transition that blended a 
facility-specific rate (reflecting the individual facility's historical 
cost experience) with the federal case-mix adjusted rate. The 
transition extended through the facility's first three cost reporting 
periods under the PPS, up to and including the one that began in FY 
2001. Thus, the SNF PPS is no longer operating under the transition, as 
all facilities have been paid at the full federal rate effective with 
cost reporting periods beginning in FY 2002. As we now base payments 
for SNFs entirely on the adjusted federal per diem rates, we no longer 
include adjustment factors under the transition related to facility-
specific rates for the upcoming FY.

C. Required Annual Rate Updates

    Section 1888(e)(4)(E) of the Act requires the SNF PPS payment rates 
to be updated annually. The most recent annual update occurred in an 
update notice that set forth updates to the SNF PPS payment rates for 
FY 2013 (77 FR 46214).
    Under this requirement, section 1888(e)(4)(H) of the Act specifies 
that we provide for publication annually in the Federal Register of the 
following:
     The unadjusted federal per diem rates to be applied to 
days of covered SNF services furnished during the upcoming FY.
     The case-mix classification system to be applied with 
respect to these services during the upcoming FY.
     The factors to be applied in making the area wage 
adjustment with respect to these services.
    Along with other revisions discussed later in this preamble, this 
proposed rule would provide the required annual updates to the per diem 
payment rates for SNFs for FY 2014.

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III. SNF PPS Rate Setting Methodology and FY 2014 Update

A. Federal Base Rates

    Under section 1888(e)(4) of the Act, the SNF PPS uses per diem 
federal payment rates based on mean SNF costs in a base year (FY 1995) 
updated for inflation to the first effective period of the PPS. We 
developed the federal payment rates using allowable costs from 
hospital-based and freestanding SNF cost reports for reporting periods 
beginning in FY 1995. The data used in developing the federal rates 
also incorporated a ``Part B add-on,'' which is an estimate of the 
amounts that, prior to the SNF PPS, would have been payable under Part 
B for covered SNF services furnished to individuals during the course 
of a covered Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of the PPS (the 15-month period beginning July 
1, 1998) using a SNF market basket index, and then standardized for 
geographic variations in wages and for the costs of facility 
differences in case mix. In compiling the database used to compute the 
federal payment rates, we excluded those providers that received new 
provider exemptions from the routine cost limits, as well as costs 
related to payments for exceptions to the routine cost limits. Using 
the formula that the BBA prescribed, we set the federal rates at a 
level equal to the weighted mean of freestanding costs plus 50 percent 
of the difference between the freestanding mean and weighted mean of 
all SNF costs (hospital-based and freestanding) combined. We computed 
and applied separately the payment rates for facilities located in 
urban and rural areas, and adjusted the portion of the federal rate 
attributable to wage-related costs by a wage index to reflect 
geographic variations in wages.

B. SNF Market Basket Update

1. SNF Market Basket Index
    Section 1888(e)(5)(A) of the Act requires us to establish a SNF 
market basket index that reflects changes over time in the prices of an 
appropriate mix of goods and services included in covered SNF services. 
Accordingly, we have developed a SNF market basket index that 
encompasses the most commonly used cost categories for SNF routine 
services, ancillary services, and capital-related expenses. We use the 
SNF market basket index, adjusted in the manner described below, to 
update the federal rates on an annual basis. In the SNF PPS final rule 
for FY 2008 (72 FR 43425 through 43430), we revised and rebased the 
market basket, which included updating the base year from FY 1997 to FY 
2004. For FY 2014, we propose to revise and rebase the market basket to 
reflect FY 2010 total cost data, as detailed in section V.A. of this 
proposed rule.
    We are also proposing to determine the FY 2014 market basket 
increase based on the percent increase in the revised and rebased FY 
2010-based SNF market basket. For the FY 2014 proposed rule, the FY 
2010-based SNF market basket growth rate is estimated to be 2.3 
percent, which is based on the Information Handling Services (IHS) 
Global Insight, Inc. (IGI) first quarter 2013 forecast with historical 
data through fourth quarter 2012. In section III.B.5 of this proposed 
rule, we discuss the specific application of this adjustment to the 
forthcoming annual update of the SNF PPS payment rates.
2. Use of the SNF Market Basket Percentage
    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage as the percentage change in the SNF market basket index from 
the midpoint of the previous FY to the midpoint of the current FY. For 
the federal rates set forth in this proposed rule, we use the 
percentage change in the SNF market basket index to compute the update 
factor for FY 2014. This is based on the IGI first quarter 2013 
forecast (with historical data through the fourth quarter 2012) of the 
FY 2014 percentage increase in the FY 2010-based SNF market basket 
index for routine, ancillary, and capital-related expenses, which is 
used to compute the update factor in this proposed rule. As discussed 
in sections III.B.3. and III.B.4. of this proposed rule, this market 
basket percentage change would be reduced by the forecast error 
correction (Sec.  413.337(d)(2)), and by the MFP adjustment as required 
by section 1888(e)(5)(B)(ii) of the Act. Finally, as discussed in 
section II.B. of this proposed rule, we no longer compute update 
factors to adjust a facility-specific portion of the SNF PPS rates, 
because the initial 3-phase transition period from facility-specific to 
full federal rates that started with cost reporting periods beginning 
in July 1998 has expired.
3. Forecast Error Adjustment
    As discussed in the June 10, 2003 supplemental proposed rule (68 FR 
34768) and finalized in the August 4, 2003, final rule (68 FR 46057 
through 46059), the regulations at Sec.  413.337(d)(2) provide for an 
adjustment to account for market basket forecast error. The initial 
adjustment for market basket forecast error applied to the update of 
the FY 2003 rate for FY 2004, and took into account the cumulative 
forecast error for the period from FY 2000 through FY 2002, resulting 
in an increase of 3.26 percent to the FY 2004 update. Subsequent 
adjustments in succeeding FYs take into account the forecast error from 
the most recently available FY for which there is final data, and apply 
the difference between the forecasted and actual change in the market 
basket when the difference exceeds a specified threshold. We originally 
used a 0.25 percentage point threshold for this purpose; however, for 
the reasons specified in the FY 2008 SNF PPS final rule (72 FR 43425, 
August 3, 2007), we adopted a 0.5 percentage point threshold effective 
for FY 2008 and subsequent fiscal years. As we stated in the final rule 
for FY 2004 that first issued the market basket forecast error 
adjustment (68 FR 46058, August 4, 2003), the adjustment will ``. . . 
reflect both upward and downward adjustments, as appropriate.''
    For FY 2012 (the most recently available FY for which there is 
final data), the estimated increase in the market basket index was 2.7 
percentage points, while the actual increase was 2.2 percentage points, 
resulting in the actual increase being 0.5 percentage point lower than 
the estimated increase. As the forecast error calculation in this 
instance does not permit one to determine definitively if the forecast 
error adjustment threshold has been exceeded, we are proposing a policy 
that would be applied in instances, and only those instances, where the 
forecast error calculation is equal to 0.5 percentage point, when 
rounded to one significant digit (otherwise referred to as a tenth of a 
percentage point), as further discussed below. When the forecast error, 
rounded to one significant digit, is equal to 0.5 percentage point, we 
propose to report the forecast error to two significant digits 
(otherwise referred to as a hundredth of a percentage point) so that we 
may determine whether the forecast error correction threshold has been 
exceeded and whether the forecast error adjustment should be applied 
under Sec.  413.337(d)(2). This policy would apply only in those 
instances where the forecast error, when rounded to one significant 
digit, is 0.5 percentage point. For example, if the forecast error is 
calculated to be 0.4 percentage point when rounded to one significant 
digit, then no further determinations are necessary, the forecast error 
will be

[[Page 26442]]

reported as 0.4 percentage point, and a forecast error adjustment will 
not be applied. Likewise, if the forecast error is determined to be 0.6 
percentage point when rounded to one significant digit, then no further 
determination is necessary, the forecast error will be reported as 0.6 
percentage point, and a forecast error adjustment will be applied.
    We propose that when the forecast error is determined to be 0.5 
percentage point, when rounded to one significant digit, the 
determination of whether or not the threshold has been exceeded would 
be made by rounding the forecast error calculation to the second 
significant digit. We believe this approach is necessary and 
appropriate to ensure that the necessity for a forecast error 
adjustment is accurately determined in accordance with Sec.  
413.337(d)(2), which enables us to identify those instances where the 
difference between the actual and projected market basket becomes 
sufficiently significant to indicate that the historical price changes 
are not being adequately reflected. This proposed policy would enable 
us to distinguish between cases where the difference carried out to the 
second decimal place is less than the 0.5 threshold but rounds to 0.5 
(0.45 to 0.49) and cases where the difference carried out to the second 
decimal place is greater than the 0.5 threshold but rounds to 0.5 (0.51 
to 0.54). We would apply the proposed policy when the difference 
between the actual and projected market basket is either positive or 
negative 0.5 percentage point.
    As stated earlier, the forecast error calculation for FY 2012 is 
equal to 0.5 percentage point, rounded to one significant digit, or a 
tenth of a percentage point. Therefore, following the proposed policy 
outlined above, we would determine the forecast error for FY 2012 to 
the second significant digit, or the hundredth of a percentage point. 
The forecasted FY 2012 SNF market basket percentage change was 2.7 
percent. When rounded to the second significant digit, it was 2.69 
percent. This would be subtracted from the actual FY 2012 SNF market 
basket percentage change, rounded to the second significant digit, of 
2.18 percent to yield a negative forecast error correction of 0.51 
percentage point. As the forecast error correction, when rounded to two 
significant digits, exceeds 0.5 percentage point, a forecast error 
adjustment would be warranted under the policy outlined in the FY 2008 
SNF PPS final rule (72 FR 43425) (see Sec.  413.337(d)(2)).
    Consistent with prior applications of the forecast error adjustment 
since establishing the 0.5 percentage point threshold, and consistent 
with our applications of both the market basket adjustment and 
productivity adjustment described below, once we have determined that a 
forecast error adjustment is warranted, we will continue to apply the 
adjustment itself at one significant digit (otherwise referred to as a 
tenth of a percentage point). Therefore, because the forecasted FY 2012 
SNF market basket percentage change exceeded the actual SNF market 
basket percentage change for FY 2012 (the most recently available FY 
for which there is final data) by 0.51 percentage point, the FY 2014 
SNF market basket percentage change of 2.3 percent would be adjusted 
downward by the forecast error correction of 0.5 percentage point, 
resulting in a net SNF market basket increase factor of 1.8 percent. 
Table 1 shows the forecasted and actual market basket amounts for FY 
2012.

            Table 1--Difference Between the Forecasted and Actual Market Basket Increases for FY 2012
----------------------------------------------------------------------------------------------------------------
                                                                   Forecasted FY
                              Index                                    2012       Actual FY 2012      FY 2012
                                                                     increase*       increase**     difference
----------------------------------------------------------------------------------------------------------------
SNF (rounded to one significant digit)..........................             2.7             2.2            -0.5
SNF (rounded to two significant digits).........................            2.69            2.18           -0.51
----------------------------------------------------------------------------------------------------------------
* Published in Federal Register; based on second quarter 2011 IGI forecast (2004-based index).
** Based on the first quarter 2013 IHS Global Insight forecast, with historical data through the fourth quarter
  2012 (2004-based index).

4. Multifactor Productivity Adjustment
    Section 3401(b) of the Affordable Care Act requires that, in FY 
2012 (and in subsequent FYs), the market basket percentage under the 
SNF payment system as described in section 1888(e)(5)(B)(i) of the Act 
is to be reduced annually by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) 
of the Act, added by section 3401(a) of the Affordable Care Act, sets 
forth the definition of this productivity adjustment. The statute 
defines the productivity adjustment to be equal to ``the 10-year moving 
average of changes in annual economy-wide private nonfarm business 
multi-factor productivity (as projected by the Secretary for the 10-
year period ending with the applicable fiscal year, year, cost-
reporting period, or other annual period)'' (the MFP adjustment). The 
Bureau of Labor Statistics (BLS) is the agency that publishes the 
official measure of private nonfarm business multifactor productivity 
(MFP). Please see https://www.bls.gov/mfp to obtain the BLS historical 
published MFP data.
    The projection of MFP is currently produced by IGI, an economic 
forecasting firm. To generate a forecast of MFP, IGI replicated the MFP 
measure calculated by the BLS, using a series of proxy variables 
derived from IGI's U.S. macroeconomic models. This process is described 
in greater detail in section III.F.3 of the FY 2012 SNF PPS final rule 
(76 FR 48527 through 48529).
a. Incorporating the Multifactor Productivity Adjustment Into the 
Market Basket Update
    According to section 1888(e)(5)(A) of the Act, the Secretary 
``shall establish a skilled nursing facility market basket index that 
reflects changes over time in the prices of an appropriate mix of goods 
and services included in covered skilled nursing facility services.'' 
As described in section III.B.1. of this proposed rule, we propose to 
estimate the SNF PPS market basket percentage for FY 2014 under section 
1888(e)(5)(B)(i) of the Act based on the proposed FY 2010-based SNF 
market basket. Section 1888(e)(5)(B)(ii) of the Act, added by section 
3401(b) of the Affordable Care Act, requires that for FY 2012 and each 
subsequent FY, after determining the market basket percentage described 
in section 1888(e)(5)(B)(i) of the Act, ``the Secretary shall reduce 
such percentage by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II)'' (which we refer to as the MFP adjustment). 
Section 1888(e)(5)(B)(ii) of the Act further states that the reduction 
of the market basket percentage by the MFP adjustment may result in the 
market basket percentage

[[Page 26443]]

being less than zero for a FY, and may result in payment rates under 
section 1888(e) of the Act for a FY being less than such payment rates 
for the preceding FY. Thus, if the application of the MFP adjustment to 
the market basket percentage calculated under section 1888(e)(5)(B)(i) 
of the Act results in an MFP-adjusted market basket percentage that is 
less than zero, then the annual update to the unadjusted federal per 
diem rates under section 1888(e)(4)(E)(ii) of the Act would be 
negative, and such rates would decrease relative to the prior FY.
    For the FY 2014 update, the MFP adjustment is calculated as the 10-
year moving average of changes in MFP for the period ending September 
30, 2014. In accordance with section 1888(e)(5)(B)(i) of the Act and 
Sec.  413.337(d)(2) of the regulations, the market basket percentage 
for FY 2014 for the SNF PPS is based on IGI's first quarter 2013 
forecast of the proposed FY 2010-based SNF market basket update, as 
adjusted by the forecast error adjustment, and is estimated to be 1.8 
percent. In accordance with section 1888(e)(5)(B)(ii) of the Act (as 
added by section 3401(b) of the Affordable Care Act) and Sec.  
413.337(d)(3), this market basket percentage is then reduced by the MFP 
adjustment (the 10-year moving average of changes in MFP for the period 
ending September 30, 2014) of 0.4 percent, which is calculated as 
described above and based on IGI's first quarter 2013 forecast. The 
resulting MFP-adjusted SNF market basket update is equal to 1.4 
percent, or 1.8 percent less 0.4 percentage point.
5. Market Basket Update Factor for FY 2014
    Sections 1888(e)(4)(E)(ii)(IV) and 1888(e)(5)(i) of the Act require 
that the update factor used to establish the FY 2014 unadjusted federal 
rates be at a level equal to the market basket index percentage change. 
Accordingly, we determined the total growth from the average market 
basket level for the period of October 1, 2012 through September 30, 
2013 to the average market basket level for the period of October 1, 
2013 through September 30, 2014. This process yields an update factor 
of 2.3 percent. As further explained in section III.B.3 of this 
proposed rule, as applicable, we adjust the market basket update factor 
by the forecast error from the most recently available FY for which 
there is final data and apply this adjustment whenever the difference 
between the forecasted and actual percentage change in the market 
basket exceeds a 0.5 percentage point threshold. Since the forecasted 
FY 2012 SNF market basket percentage change exceeded the actual FY 2012 
SNF market basket percentage change (FY 2012 is the most recently 
available FY for which there is final data) by more than 0.5 percentage 
point, the FY 2014 market basket of 2.3 percent would be adjusted 
downward by the applicable difference, in this case of 0.5 percentage 
points, which reduces the FY 2014 market basket update factor to 1.8 
percent. In addition, for FY 2014, section 1888(e)(5)(B) of the Act 
requires us to reduce the market basket percentage by the MFP 
adjustment (the 10-year moving average of changes in MFP for the period 
ending September 30, 2014) of 0.4 percent, as described in section 
III.B.4. of this proposed rule. The resulting MFP-adjusted SNF market 
basket update would be equal to 1.4 percent, or 1.8 percent less 0.4 
percentage point. We are proposing that if more recent data become 
available (for example, a more recent estimate of the FY 2010-based SNF 
market basket, MFP adjustment, and/or FY 2004-based SNF market basket 
used for the forecast error calculation), we would use such data, if 
appropriate, to determine the FY 2014 SNF market basket update, FY 2014 
labor-related share relative importance, and MFP adjustment in the FY 
2014 SNF PPS final rule. We used the SNF market basket, adjusted as 
described above, to adjust each per diem component of the federal rates 
forward to reflect the change in the average prices for FY 2014 from 
average prices for FY 2013. We would further adjust the rates by a wage 
index budget neutrality factor, described later in this section. Tables 
2 and 3 reflect the updated components of the unadjusted federal rates 
for FY 2014, prior to adjustment for case-mix.

                            Table 2--FY 2014 Unadjusted Federal Rate per Diem--Urban
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-   Therapy--non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $165.92          $124.98           $16.46           $84.67
----------------------------------------------------------------------------------------------------------------


                            Table 3--FY 2014 Unadjusted Federal Rate per Diem--Rural
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-   Therapy--non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $158.52          $144.11           $17.58           $86.25
----------------------------------------------------------------------------------------------------------------

C. Case-Mix Adjustment

    Under section 1888(e)(4)(G)(i) of the Act, the federal rate also 
incorporates an adjustment to account for facility case-mix, using a 
classification system that accounts for the relative resource 
utilization of different patient types. The statute specifies that the 
adjustment is to reflect both a resident classification system that the 
Secretary establishes to account for the relative resource use of 
different patient types, as well as resident assessment data and other 
data that the Secretary considers appropriate. In the interim final 
rule with comment period that initially implemented the SNF PPS (63 FR 
26252, May 12, 1998), we developed the RUG-III case-mix classification 
system, which tied the amount of payment to resident resource use in 
combination with resident characteristic information. Staff time 
measurement (STM) studies conducted in 1990, 1995, and 1997 provided 
information on resource use (time spent by staff members on residents) 
and resident characteristics that enabled us not only to establish RUG-
III, but also to create case-mix indexes (CMIs). The original RUG-III 
grouper logic was based on clinical data collected in 1990, 1995, and 
1997. As discussed in the SNF PPS proposed rule for FY 2010 (74 FR 
22208), we subsequently conducted a multi-year data collection and 
analysis under the Staff Time and Resource Intensity Verification 
(STRIVE) project to update the case-mix classification system for FY 
2011. The resulting Resource Utilization Groups, Version 4 (RUG-IV) 
case-mix classification system

[[Page 26444]]

reflected the data collected in 2006-2007 during the STRIVE project, 
and was finalized in the FY 2010 SNF PPS final rule (74 FR 40288) to 
take effect in FY 2011 concurrently with an updated new resident 
assessment instrument, version 3.0 of the Minimum Data Set (MDS 3.0), 
which collects the clinical data used for case-mix classification under 
RUG-IV.
    We note that case-mix classification is based, in part, on the 
beneficiary's need for skilled nursing care and therapy services. The 
case-mix classification system uses clinical data from the MDS to 
assign a case-mix group to each patient that is then used to calculate 
a per diem payment under the SNF PPS. As discussed in section IV.A of 
this proposed rule, the clinical orientation of the case-mix 
classification system supports the SNF PPS's use of an administrative 
presumption that considers a beneficiary's initial case-mix 
classification to assist in making certain SNF level of care 
determinations. Further, because the MDS is used as a basis for 
payment, as well as a clinical assessment, we have provided extensive 
training on proper coding and the time frames for MDS completion in our 
Resident Assessment Instrument (RAI) Manual. For an MDS to be 
considered valid for use in determining payment, the MDS assessment 
must be completed in compliance with the instructions in the RAI Manual 
in effect at the time the assessment is completed. For payment and 
quality monitoring purposes, the RAI Manual consists of both the Manual 
instructions and the interpretive guidance and policy clarifications 
posted on the appropriate MDS Web site at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/MDS30RAIManual.html.
    In addition, we note that section 511 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-
173, enacted December 8, 2003) amended section 1888(e)(12) of the Act 
to provide for a temporary increase of 128 percent in the PPS per diem 
payment for any SNF residents with Acquired Immune Deficiency Syndrome 
(AIDS), effective with services furnished on or after October 1, 2004. 
This special add-on for SNF residents with AIDS was to remain in effect 
until ``. . . the Secretary certifies that there is an appropriate 
adjustment in the case mix . . . to compensate for the increased costs 
associated with [such] residents. . . .'' The add-on for SNF residents 
with AIDS is also discussed in Program Transmittal 160 (Change 
Request 3291), issued on April 30, 2004, which is available 
online at www.cms.gov/transmittals/downloads/r160cp.pdf. In the SNF PPS 
final rule for FY 2010 (74 FR 40288), we did not address the 
certification of the add-on for SNF residents with AIDS in that final 
rule's implementation of the case-mix refinements for RUG-IV, thus 
allowing the add-on payment required by section 511 of the MMA to 
remain in effect. For the limited number of SNF residents that qualify 
for this add-on, there is a significant increase in payments. For 
example, using FY 2011 data, we identified fewer than 4,100 SNF 
residents with a diagnosis code of 042 (Human Immunodeficiency Virus 
(HIV) Infection). For FY 2014, an urban facility with a resident with 
AIDS in RUG-IV group ``HC2'' would have a case-mix adjusted payment of 
$414.72 (see Table 4) before the application of the MMA adjustment. 
After an increase of 128 percent, this urban facility would receive a 
case-mix adjusted payment of approximately $945.56.
    Currently, we use the ICD-9-CM code 042 to identify those residents 
for whom it is appropriate to apply the AIDS add-on established by 
section 511 of the MMA. In this context, we note that, in accordance 
with the requirements of the final rule published in the September 5, 
2012 Federal Register (77 FR 54664), we will be discontinuing our 
current use of the International Classification of Diseases, 9th 
revision, Clinical Modification (ICD-9-CM), effective with the 
compliance date for using the International Classification of Diseases, 
10th revision, Clinical Modification (ICD-10-CM) of October 1, 2014. 
Regarding the above-referenced ICD-9-CM diagnosis code of 042, we 
propose to transition to the equivalent ICD-10-CM diagnosis code of B20 
upon the October 1, 2014 implementation date for conversion to ICD-10-
CM, and we invite public comment on this proposal. We note that both 
ICD-9-CM diagnosis code 042 and ICD-10-CM diagnosis code B20 include 
AIDS, AIDS-related complex (ARC), and HIV infection, symptomatic, but 
ICD-9-CM diagnosis code 042 additionally includes AIDS-like syndrome 
whereas ICD-10-CM diagnosis code B20 does not. The term ``AIDS-like 
syndrome'' denotes a condition other than AIDS that has symptoms 
resembling those of AIDS, but a different etiology from the human 
immunodeficiency virus that causes AIDS. Accordingly, we believe that 
in omitting the category of AIDS-like syndrome, ICD-10-CM diagnosis 
code B20 actually reflects more accurately than its predecessor ICD-9-
CM code the intended scope of the statutory provision, which is 
directed specifically at those residents who are ``. . . afflicted with 
acquired immune deficiency syndrome (AIDS)'' (see section 
1888(e)(12)(A) of the Act, as amended by section 511 of the MMA).
    Under section 1888(e)(4)(H), each update of the payment rates must 
include the case-mix classification methodology applicable for the 
coming FY. The payment rates set forth in this proposed rule reflect 
the use of the RUG-IV case-mix classification system from October 1, 
2013, through September 30, 2014. We list the case-mix adjusted RUG-IV 
payment rates, provided separately for urban and rural SNFs, in Tables 
4 and 5 with corresponding case-mix values. These tables do not reflect 
the add-on for SNF residents with AIDS enacted by section 511 of the 
MMA, which we apply only after making all other adjustments (such as 
wage and case-mix).

                                      Table 4--RUG-IV Case-Mix Adjusted Federal Rates and Associated Indexes--Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case mix    Non-case mix
             RUG-IV Category               Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................            2.67            1.87          443.01         $233.71  ..............          $84.67         $761.39
RUL.....................................            2.57            1.87          426.41          233.71  ..............           84.67          744.79
RVX.....................................            2.61            1.28          433.05          159.97  ..............           84.67          677.69
RVL.....................................            2.19            1.28          363.36          159.97  ..............           84.67          608.00
RHX.....................................            2.55            0.85          423.10          106.23  ..............           84.67          614.00
RHL.....................................            2.15            0.85          356.73          106.23  ..............           84.67          547.63
RMX.....................................            2.47            0.55          409.82           68.74  ..............           84.67          563.23
RML.....................................            2.19            0.55          363.36           68.74  ..............           84.67          516.77
RLX.....................................            2.26            0.28          374.98           34.99  ..............           84.67          494.64
RUC.....................................            1.56            1.87          258.84          233.71  ..............           84.67          577.22

[[Page 26445]]

 
RUB.....................................            1.56            1.87          258.84          233.71  ..............           84.67          577.22
RUA.....................................            0.99            1.87          164.26          233.71  ..............           84.67          482.64
RVC.....................................            1.51            1.28          250.54          159.97  ..............           84.67          495.18
RVB.....................................            1.11            1.28          184.17          159.97  ..............           84.67          428.81
RVA.....................................            1.10            1.28          182.51          159.97  ..............           84.67          427.15
RHC.....................................            1.45            0.85          240.58          106.23  ..............           84.67          431.48
RHB.....................................            1.19            0.85          197.44          106.23  ..............           84.67          388.34
RHA.....................................            0.91            0.85          150.99          106.23  ..............           84.67          341.89
RMC.....................................            1.36            0.55          225.65           68.74  ..............           84.67          379.06
RMB.....................................            1.22            0.55          202.42           68.74  ..............           84.67          355.83
RMA.....................................            0.84            0.55          139.37           68.74  ..............           84.67          292.78
RLB.....................................            1.50            0.28          248.88           34.99  ..............           84.67          368.54
RLA.....................................            0.71            0.28          117.80           34.99  ..............           84.67          237.46
ES3.....................................            3.58  ..............          593.99  ..............          $16.46           84.67          695.12
ES2.....................................            2.67  ..............          443.01  ..............           16.46           84.67          544.14
ES1.....................................            2.32  ..............          384.93  ..............           16.46           84.67          486.06
HE2.....................................            2.22  ..............          368.34  ..............           16.46           84.67          469.47
HE1.....................................            1.74  ..............          288.70  ..............           16.46           84.67          389.83
HD2.....................................            2.04  ..............          338.48  ..............           16.46           84.67          439.61
HD1.....................................            1.60  ..............          265.47  ..............           16.46           84.67          366.60
HC2.....................................            1.89  ..............          313.59  ..............           16.46           84.67          414.72
HC1.....................................            1.48  ..............          245.56  ..............           16.46           84.67          346.69
HB2.....................................            1.86  ..............          308.61  ..............           16.46           84.67          409.74
HB1.....................................            1.46  ..............          242.24  ..............           16.46           84.67          343.37
LE2.....................................            1.96  ..............          325.20  ..............           16.46           84.67          426.33
LE1.....................................            1.54  ..............          255.52  ..............           16.46           84.67          356.65
LD2.....................................            1.86  ..............          308.61  ..............           16.46           84.67          409.74
LD1.....................................            1.46  ..............          242.24  ..............           16.46           84.67          343.37
LC2.....................................            1.56  ..............          258.84  ..............           16.46           84.67          359.97
LC1.....................................            1.22  ..............          202.42  ..............           16.46           84.67          303.55
LB2.....................................            1.45  ..............          240.58  ..............           16.46           84.67          341.71
LB1.....................................            1.14  ..............          189.15  ..............           16.46           84.67          290.28
CE2.....................................            1.68  ..............          278.75  ..............           16.46           84.67          379.88
CE1.....................................            1.50  ..............          248.88  ..............           16.46           84.67          350.01
CD2.....................................            1.56  ..............          258.84  ..............           16.46           84.67          359.97
CD1.....................................            1.38  ..............          228.97  ..............           16.46           84.67          330.10
CC2.....................................            1.29  ..............          214.04  ..............           16.46           84.67          315.17
CC1.....................................            1.15  ..............          190.81  ..............           16.46           84.67          291.94
CB2.....................................            1.15  ..............          190.81  ..............           16.46           84.67          291.94
CB1.....................................            1.02  ..............          169.24  ..............           16.46           84.67          270.37
CA2.....................................            0.88  ..............          146.01  ..............           16.46           84.67          247.14
CA1.....................................            0.78  ..............          129.42  ..............           16.46           84.67          230.55
BB2.....................................            0.97  ..............          160.94  ..............           16.46           84.67          262.07
BB1.....................................            0.90  ..............          149.33  ..............           16.46           84.67          250.46
BA2.....................................            0.70  ..............          116.14  ..............           16.46           84.67          217.27
BA1.....................................            0.64  ..............          106.19  ..............           16.46           84.67          207.32
PE2.....................................            1.50  ..............          248.88  ..............           16.46           84.67          350.01
PE1.....................................            1.40  ..............          232.29  ..............           16.46           84.67          333.42
PD2.....................................            1.38  ..............          228.97  ..............           16.46           84.67          330.10
PD1.....................................            1.28  ..............          212.38  ..............           16.46           84.67          313.51
PC2.....................................            1.10  ..............          182.51  ..............           16.46           84.67          283.64
PC1.....................................            1.02  ..............          169.24  ..............           16.46           84.67          270.37
PB2.....................................            0.84  ..............          139.37  ..............           16.46           84.67          240.50
PB1.....................................            0.78  ..............          129.42  ..............           16.46           84.67          230.55
PA2.....................................            0.59  ..............           97.89  ..............           16.46           84.67          199.02
PA1.....................................            0.54  ..............           89.60  ..............           16.46           84.67          190.73
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                     Table 5--RUG--IV Case-Mix Adjusted Federal Rates and Associated Indexes--Rural
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Nursing         Therapy      Non-case mix    Non-case mix
             RUG-IV Category               Nursing index   Therapy index     component       component     therapy comp      component      Total rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
RUX.....................................            2.67            1.87         $423.25         $269.49  ..............          $86.25         $778.99
RUL.....................................            2.57            1.87          407.40          269.49  ..............           86.25          763.14
RVX.....................................            2.61            1.28          413.74          184.46  ..............           86.25          684.45
RVL.....................................            2.19            1.28          347.16          184.46  ..............           86.25          617.87
RHX.....................................            2.55            0.85          404.23          122.49  ..............           86.25          612.97
RHL.....................................            2.15            0.85          340.82          122.49  ..............           86.25          549.56
RMX.....................................            2.47            0.55          391.54           79.26  ..............           86.25          557.05
RML.....................................            2.19            0.55          347.16           79.26  ..............           86.25          512.67

[[Page 26446]]

 
RLX.....................................            2.26            0.28          358.26           40.35  ..............           86.25          484.86
RUC.....................................            1.56            1.87          247.29          269.49  ..............           86.25          603.03
RUB.....................................            1.56            1.87          247.29          269.49  ..............           86.25          603.03
RUA.....................................            0.99            1.87          156.93          269.49  ..............           86.25          512.67
RVC.....................................            1.51            1.28          239.37          184.46  ..............           86.25          510.08
RVB.....................................            1.11            1.28          175.96          184.46  ..............           86.25          446.67
RVA.....................................            1.10            1.28          174.37          184.46  ..............           86.25          445.08
RHC.....................................            1.45            0.85          229.85          122.49  ..............           86.25          438.59
RHB.....................................            1.19            0.85          188.64          122.49  ..............           86.25          397.38
RHA.....................................            0.91            0.85          144.25          122.49  ..............           86.25          352.99
RMC.....................................            1.36            0.55          215.59           79.26  ..............           86.25          381.10
RMB.....................................            1.22            0.55          193.39           79.26  ..............           86.25          358.90
RMA.....................................            0.84            0.55          133.16           79.26  ..............           86.25          298.67
RLB.....................................            1.50            0.28          237.78           40.35  ..............           86.25          364.38
RLA.....................................            0.71            0.28          112.55           40.35  ..............           86.25          239.15
ES3.....................................            3.58  ..............          567.50  ..............           17.58           86.25          671.33
ES2.....................................            2.67  ..............          423.25  ..............           17.58           86.25          527.08
ES1.....................................            2.32  ..............          367.77  ..............           17.58           86.25          471.60
HE2.....................................            2.22  ..............          351.91  ..............           17.58           86.25          455.74
HE1.....................................            1.74  ..............          275.82  ..............           17.58           86.25          379.65
HD2.....................................            2.04  ..............          323.38  ..............           17.58           86.25          427.21
HD1.....................................            1.60  ..............          253.63  ..............           17.58           86.25          357.46
HC2.....................................            1.89  ..............          299.60  ..............           17.58           86.25          403.43
HC1.....................................            1.48  ..............          234.61  ..............           17.58           86.25          338.44
HB2.....................................            1.86  ..............          294.85  ..............           17.58           86.25          398.68
HB1.....................................            1.46  ..............          231.44  ..............           17.58           86.25          335.27
LE2.....................................            1.96  ..............          310.70  ..............           17.58           86.25          414.53
LE1.....................................            1.54  ..............          244.12  ..............           17.58           86.25          347.95
LD2.....................................            1.86  ..............          294.85  ..............           17.58           86.25          398.68
LD1.....................................            1.46  ..............          231.44  ..............           17.58           86.25          335.27
LC2.....................................            1.56  ..............          247.29  ..............           17.58           86.25          351.12
LC1.....................................            1.22  ..............          193.39  ..............           17.58           86.25          297.22
LB2.....................................            1.45  ..............          229.85  ..............           17.58           86.25          333.68
LB1.....................................            1.14  ..............          180.71  ..............           17.58           86.25          284.54
CE2.....................................            1.68  ..............          266.31  ..............           17.58           86.25          370.14
CE1.....................................            1.50  ..............          237.78  ..............           17.58           86.25          341.61
CD2.....................................            1.56  ..............          247.29  ..............           17.58           86.25          351.12
CD1.....................................            1.38  ..............          218.76  ..............           17.58           86.25          322.59
CC2.....................................            1.29  ..............          204.49  ..............           17.58           86.25          308.32
CC1.....................................            1.15  ..............          182.30  ..............           17.58           86.25          286.13
CB2.....................................            1.15  ..............          182.30  ..............           17.58           86.25          286.13
CB1.....................................            1.02  ..............          161.69  ..............           17.58           86.25          265.52
CA2.....................................            0.88  ..............          139.50  ..............           17.58           86.25          243.33
CA1.....................................            0.78  ..............          123.65  ..............           17.58           86.25          227.48
BB2.....................................            0.97  ..............          153.76  ..............           17.58           86.25          257.59
BB1.....................................            0.90  ..............          142.67  ..............           17.58           86.25          246.50
BA2.....................................            0.70  ..............          110.96  ..............           17.58           86.25          214.79
BA1.....................................            0.64  ..............          101.45  ..............           17.58           86.25          205.28
PE2.....................................            1.50  ..............          237.78  ..............           17.58           86.25          341.61
PE1.....................................            1.40  ..............          221.93  ..............           17.58           86.25          325.76
PD2.....................................            1.38  ..............          218.76  ..............           17.58           86.25          322.59
PD1.....................................            1.28  ..............          202.91  ..............           17.58           86.25          306.74
PC2.....................................            1.10  ..............          174.37  ..............           17.58           86.25          278.20
PC1.....................................            1.02  ..............          161.69  ..............           17.58           86.25          265.52
PB2.....................................            0.84  ..............          133.16  ..............           17.58           86.25          236.99
PB1.....................................            0.78  ..............          123.65  ..............           17.58           86.25          227.48
PA2.....................................            0.59  ..............           93.53  ..............           17.58           86.25          197.36
PA1.....................................            0.54  ..............           85.60  ..............           17.58           86.25          189.43
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Wage Index Adjustment

    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
federal rates to account for differences in area wage levels, using a 
wage index that the Secretary determines appropriate. Since the 
inception of the SNF PPS, we have used hospital inpatient wage data in 
developing a wage index to be applied to SNFs. We propose to continue 
this practice for FY 2014, as we continue to believe that in the 
absence of SNF-specific wage data, using the hospital inpatient wage 
index is appropriate and reasonable for the SNF PPS. As explained in 
the update notice for FY 2005 (69 FR 45786), the SNF PPS does not use 
the hospital area wage index's occupational mix adjustment, as this 
adjustment serves specifically to define the occupational categories 
more clearly in a hospital setting; moreover, the collection of the 
occupational wage data also excludes any wage data related to SNFs. 
Therefore, we believe that using the updated wage data exclusive of the

[[Page 26447]]

occupational mix adjustment continues to be appropriate for SNF 
payments. For FY 2014, the updated wage data are for hospital cost 
reporting periods beginning on or after October 1, 2009 and before 
October 1, 2010 (FY 2010 cost report data).
    Finally, we propose to continue to use the same methodology 
discussed in the SNF PPS final rule for FY 2008 (72 FR 43423) to 
address those geographic areas in which there are no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the FY 2014 SNF PPS wage index. For rural geographic areas that do not 
have hospitals, and therefore, lack hospital wage data on which to base 
an area wage adjustment, we would use the average wage index from all 
contiguous Core-Based Statistical Areas (CBSAs) as a reasonable proxy. 
For FY 2014, there are no rural geographic areas that do not have 
hospitals, and thus, this methodology would not be applied. For rural 
Puerto Rico, we would not apply this methodology due to the distinct 
economic circumstances that exist there (for example, due to the close 
proximity to one another of almost all of Puerto Rico's various urban 
and non-urban areas, this methodology would produce a wage index for 
rural Puerto Rico that is inappropriately higher than that in half of 
its urban areas); instead, we would continue to use the most recent 
wage index previously available for that area. For urban areas without 
specific hospital wage index data, we would use the average wage 
indexes of all of the urban areas within the state to serve as a 
reasonable proxy for the wage index of that urban CBSA. For FY 2014, 
the only urban area without wage index data available is CBSA 25980, 
Hinesville-Fort Stewart, GA.
    In addition, we note that section 315 of the Medicare, Medicaid, 
and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. 
L. 106-554, enacted on December 21, 2000) authorized us to establish a 
geographic reclassification procedure that is specific to SNFs, but 
only after collecting the data necessary to establish a SNF wage index 
that is based on wage data from nursing homes. However, to date, this 
has proven to be unfeasible due to the volatility of existing SNF wage 
data and the significant amount of resources that would be required to 
improve the quality of that data.
    Once calculated, we would apply the wage index adjustment to the 
labor-related portion of the federal rate. Each year, we calculate a 
revised labor-related share, based on the relative importance of labor-
related cost categories (that is, those cost categories that are 
sensitive to local area wage costs) in the input price index. For the 
FY 2014 SNF PPS update, we are proposing to revise the labor-related 
share to reflect the relative importance of the revised FY 2010-based 
SNF market basket cost weights for the following cost categories (as 
discussed further in section V.A. of this proposed rule): wages and 
salaries; employee benefits; contract labor; the labor-related portion 
of nonmedical professional fees; administrative and facilities support 
services; all other: labor-related services (previously referred to in 
the FY 2004-based SNF market basket as labor-intensive); and a 
proportion of capital-related expenses.
    We calculate the labor-related relative importance from the SNF 
market basket, and it approximates the labor-related portion of the 
total costs after taking into account historical and projected price 
changes between the base year and FY 2014. The price proxies that move 
the different cost categories in the market basket do not necessarily 
change at the same rate, and the relative importance captures these 
changes. Accordingly, the relative importance figure more closely 
reflects the cost share weights for FY 2014 than the base year weights 
from the SNF market basket.
    We calculate the labor-related relative importance for FY 2014 in 
four steps. First, we compute the FY 2014 price index level for the 
total market basket and each cost category of the market basket. 
Second, we calculate a ratio for each cost category by dividing the FY 
2014 price index level for that cost category by the total market 
basket price index level. Third, we determine the FY 2014 relative 
importance for each cost category by multiplying this ratio by the base 
year (FY 2010) weight. Finally, we add the FY 2014 relative importance 
for each of the labor-related cost categories (wages and salaries, 
employee benefits, the labor-related portion of non-medical 
professional fees, administrative and facilities support services, all 
other: labor-related services (previously referred to in the FY 2004-
based SNF market basket as labor-intensive services), and a portion of 
capital-related expenses) to produce the FY 2014 labor-related relative 
importance. Tables 6 and 7 show the RUG-IV case-mix adjusted federal 
rates by labor-related and non-labor-related components. In section V. 
of this proposed rule, Table 17 provides the FY 2014 labor-related 
share components based on the revised and rebased FY 2010-based SNF 
market basket.

 Table 6--RUG-IV Case-Mix Adjusted Federal Rates for Urban SNFs by Labor
                         and Non-Labor Component
------------------------------------------------------------------------
                                           Total      Labor    Non-labor
            RUG-IV Category                 rate     portion    portion
------------------------------------------------------------------------
RUX....................................     761.39    $531.18    $230.21
RUL....................................     744.79     519.60     225.19
RVX....................................     677.69     472.78     204.91
RVL....................................     608.00     424.17     183.83
RHX....................................     614.00     428.35     185.65
RHL....................................     547.63     382.05     165.58
RMX....................................     563.23     392.93     170.30
RML....................................     516.77     360.52     156.25
RLX....................................     494.64     345.08     149.56
RUC....................................     577.22     402.69     174.53
RUB....................................     577.22     402.69     174.53
RUA....................................     482.64     336.71     145.93
RVC....................................     495.18     345.46     149.72
RVB....................................     428.81     299.16     129.65
RVA....................................     427.15     298.00     129.15
RHC....................................     431.48     301.02     130.46
RHB....................................     388.34     270.92     117.42
RHA....................................     341.89     238.52     103.37
RMC....................................     379.06     264.45     114.61
RMB....................................     355.83     248.24     107.59
RMA....................................     292.78     204.26      88.52
RLB....................................     368.54     257.11     111.43
RLA....................................     237.46     165.66      71.80
ES3....................................     695.12     484.94     210.18
ES2....................................     544.14     379.61     164.53
ES1....................................     486.06     339.09     146.97
HE2....................................     469.47     327.52     141.95
HE1....................................     389.83     271.96     117.87
HD2....................................     439.61     306.69     132.92
HD1....................................     366.60     255.75     110.85
HC2....................................     414.72     289.33     125.39
HC1....................................     346.69     241.86     104.83
HB2....................................     409.74     285.85     123.89
HB1....................................     343.37     239.55     103.82
LE2....................................     426.33     297.42     128.91
LE1....................................     356.65     248.81     107.84
LD2....................................     409.74     285.85     123.89
LD1....................................     343.37     239.55     103.82
LC2....................................     359.97     251.13     108.84
LC1....................................     303.55     211.77      91.78
LB2....................................     341.71     238.39     103.32
LB1....................................     290.28     202.51      87.77
CE2....................................     379.88     265.02     114.86
CE1....................................     350.01     244.18     105.83
CD2....................................     359.97     251.13     108.84
CD1....................................     330.10     230.29      99.81
CC2....................................     315.17     219.88      95.29
CC1....................................     291.94     203.67      88.27
CB2....................................     291.94     203.67      88.27
CB1....................................     270.37     188.62      81.75
CA2....................................     247.14     172.41      74.73
CA1....................................     230.55     160.84      69.71
BB2....................................     262.07     182.83      79.24
BB1....................................     250.46     174.73      75.73
BA2....................................     217.27     151.58      65.69
BA1....................................     207.32     144.63      62.69
PE2....................................     350.01     244.18     105.83
PE1....................................     333.42     232.61     100.81
PD2....................................     330.10     230.29      99.81
PD1....................................     313.51     218.72      94.79
PC2....................................     283.64     197.88      85.76
PC1....................................     270.37     188.62      81.75
PB2....................................     240.50     167.78      72.72
PB1....................................     230.55     160.84      69.71
PA2....................................     199.02     138.84      60.18
PA1....................................     190.73     133.06      57.67
------------------------------------------------------------------------


[[Page 26448]]


 Table 7--RUG-IV Case-Mix Adjusted Federal Rates for Rural SNFs by Labor
                         and Non-Labor Component
------------------------------------------------------------------------
                                           Total      Labor    Non-labor
            RUG-IV Category                 rate     portion    portion
------------------------------------------------------------------------
RUX....................................     778.99    $543.45    $235.54
RUL....................................     763.14     532.40     230.74
RVX....................................     684.45     477.50     206.95
RVL....................................     617.87     431.05     186.82
RHX....................................     612.97     427.63     185.34
RHL....................................     549.56     383.40     166.16
RMX....................................     557.05     388.62     168.43
RML....................................     512.67     357.66     155.01
RLX....................................     484.86     338.26     146.60
RUC....................................     603.03     420.70     182.33
RUB....................................     603.03     420.70     182.33
RUA....................................     512.67     357.66     155.01
RVC....................................     510.08     355.85     154.23
RVB....................................     446.67     311.61     135.06
RVA....................................     445.08     310.51     134.57
RHC....................................     438.59     305.98     132.61
RHB....................................     397.38     277.23     120.15
RHA....................................     352.99     246.26     106.73
RMC....................................     381.10     265.87     115.23
RMB....................................     358.90     250.38     108.52
RMA....................................     298.67     208.36      90.31
RLB....................................     364.38     254.21     110.17
RLA....................................     239.15     166.84      72.31
ES3....................................     671.33     468.35     202.98
ES2....................................     527.08     367.71     159.37
ES1....................................     471.60     329.01     142.59
HE2....................................     455.74     317.94     137.80
HE1....................................     379.65     264.86     114.79
HD2....................................     427.21     298.04     129.17
HD1....................................     357.46     249.38     108.08
HC2....................................     403.43     281.45     121.98
HC1....................................     338.44     236.11     102.33
HB2....................................     398.68     278.14     120.54
HB1....................................     335.27     233.90     101.37
LE2....................................     414.53     289.19     125.34
LE1....................................     347.95     242.74     105.21
LD2....................................     398.68     278.14     120.54
LD1....................................     335.27     233.90     101.37
LC2....................................     351.12     244.96     106.16
LC1....................................     297.22     207.35      89.87
LB2....................................     333.68     232.79     100.89
LB1....................................     284.54     198.51      86.03
CE2....................................     370.14     258.22     111.92
CE1....................................     341.61     238.32     103.29
CD2....................................     351.12     244.96     106.16
CD1....................................     322.59     225.05      97.54
CC2....................................     308.32     215.10      93.22
CC1....................................     286.13     199.62      86.51
CB2....................................     286.13     199.62      86.51
CB1....................................     265.52     185.24      80.28
CA2....................................     243.33     169.76      73.57
CA1....................................     227.48     158.70      68.78
BB2....................................     257.59     179.71      77.88
BB1....................................     246.50     171.97      74.53
BA2....................................     214.79     149.85      64.94
BA1....................................     205.28     143.21      62.07
PE2....................................     341.61     238.32     103.29
PE1....................................     325.76     227.26      98.50
PD2....................................     322.59     225.05      97.54
PD1....................................     306.74     213.99      92.75
PC2....................................     278.20     194.08      84.12
PC1....................................     265.52     185.24      80.28
PB2....................................     236.99     165.33      71.66
PB1....................................     227.48     158.70      68.78
PA2....................................     197.36     137.69      59.67
PA1....................................     189.43     132.15      57.28
------------------------------------------------------------------------

    Section 1888(e)(4)(G)(ii) of the Act also requires that we apply 
this wage index in a manner that does not result in aggregate payments 
under the SNF PPS that are greater or less than would otherwise be made 
if the wage adjustment had not been made. For FY 2014 (federal rates 
effective October 1, 2013), we apply an adjustment to fulfill the 
budget neutrality requirement. We meet this requirement by multiplying 
each of the components of the unadjusted federal rates by a budget 
neutrality factor equal to the ratio of the weighted average wage 
adjustment factor for FY 2013 to the weighted average wage adjustment 
factor for FY 2014. For this calculation, we use the same 2012 claims 
utilization data for both the numerator and denominator of this ratio. 
We define the wage adjustment factor used in this calculation as the 
labor share of the rate component multiplied by the wage index plus the 
non-labor share of the rate component. The budget neutrality factor for 
FY 2014 is 1.0003. The wage index applicable to FY 2014 is set forth in 
Tables A and B, which appear in the Addendum of this proposed rule, and 
is also available on the CMS Web site at https://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html.
    In the SNF PPS final rule for FY 2006 (70 FR 45026, August 4, 
2005), we adopted the changes discussed in the OMB Bulletin No. 03-04 
(June 6, 2003), available online at https://www.whitehouse.gov/omb/bulletins/b03-04.html, which announced revised definitions for 
metropolitan statistical areas (MSAs), and the creation of micropolitan 
statistical areas and combined statistical areas. In addition, OMB 
published subsequent bulletins regarding CBSA changes, including 
changes in CBSA numbers and titles. We indicated in the FY 2008 SNF PPS 
final rule (72 FR 43423), that all subsequent SNF PPS rules and notices 
are considered to incorporate the CBSA changes published in the most 
recent OMB bulletin that applies to the hospital wage data used to 
determine the current SNF PPS wage index. The OMB bulletins are 
available online at https://www.whitehouse.gov/omb/bulletins/.
    In adopting the CBSA geographic designations, we provided for a 1-
year transition in FY 2006 with a blended wage index for all providers. 
For FY 2006, the wage index for each provider consisted of a blend of 
50 percent of the FY 2006 MSA-based wage index and 50 percent of the FY 
2006 CBSA-based wage index (both using FY 2002 hospital data). We 
referred to the blended wage index as the FY 2006 SNF PPS transition 
wage index. As discussed in the SNF PPS final rule for FY 2006 (70 FR 
45041), subsequent to the expiration of this 1-year transition on 
September 30, 2006, we used the full CBSA-based wage index values, as 
now presented in Tables A and B in the Addendum of this proposed rule.
    On February 28, 2013, OMB issued OMB Bulletin No. 13-01, announcing 
revisions to the delineation of Metropolitan Statistical Areas, 
Micropolitian Statistical Areas, and Combined Statistical Areas, and 
guidance on uses of the delineation of these areas. A copy of this 
bulletin may be obtained at https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. This bulletin states that it 
provides the delineations of all Metropolitan Statistical Areas, 
Metropolitan Divisions, Micropolitan Statistical Areas, Combined 
Statistical Areas, and New England City and Town Areas in the United 
States and Puerto Rico based on the standards published in the June 28, 
2010 Federal Register (75 FR 37246-37252) and Census Bureau data.
    While the revisions OMB published on February 28, 2013 are not as 
sweeping as the changes made when we adopted the CBSA geographic 
designations for FY 2006, the February 28, 2013 bulletin does contain a 
number of significant changes. For example, there are new CBSAs, urban 
counties that become rural, rural counties that become urban, and 
existing CBSAs that are being split apart.
    The changes made by the bulletin and their ramifications must be 
extensively reviewed and assessed by CMS before using them for the SNF 
PPS wage index. Because the bulletin was not issued until February 28, 
2013, we were unable to undertake such a lengthy process before 
publication of this FY 2014 proposed rule. By the time the bulletin was 
issued, the FY 2014 SNF PPS proposed rule was in the advanced stages of 
development. We had already developed the FY 2014 proposed wage index 
based on the previous OMB definitions. To allow for sufficient time to 
assess the new changes and their ramifications, we intend to propose 
changes to the wage index based on the newest CBSA changes in the FY 
2015 SNF PPS proposed rule. Thus, we would continue to use the previous 
OMB definitions (that is, those used for the FY 2013 SNF PPS update 
notice) for the FY 2014 SNF PPS wage index.

E. Adjusted Rate Computation Example

    Using the hypothetical SNF XYZ described below, Table 8 shows the

[[Page 26449]]

adjustments made to the federal per diem rates to compute the 
provider's actual per diem PPS payment under the described scenario. We 
derive the Labor and Non-labor columns from Table 6. As illustrated in 
Table 8, SNF XYZ's total PPS payment would equal $41,917.80.

                 Table 8--Adjusted Rate Computation Example, SNF XYZ: Located in Cedar Rapids, IA (Urban CBSA 16300), Wage Index: 0.9001
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Adjusted                  Adjusted     Percent      Medicare
                  RUG-IV group                       Labor      Wage index     labor      Non-labor       rate      adjustment      days       Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVX.............................................      $472.78       0.9001      $425.55      $204.91      $630.46      $630.46           14    $8,826.44
ES2.............................................       379.61       0.9001       341.69       164.53       506.22       506.22           30    15,186.60
RHA.............................................       238.52       0.9001       214.69       103.37       318.06       318.06           16     5,088.96
CC2*............................................       219.88       0.9001       197.91        95.29       293.20       668.50           10     6,685.00
BA2.............................................       151.58       0.9001       136.44        65.69       202.13       202.13           30     6,063.90
                                                 -------------------------------------------------------------------------------------------------------
                                                  ...........  ...........  ...........  ...........  ...........  ...........          100   $41,850.90
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Reflects a 128 percent adjustment from section 511 of the MMA.

IV. Additional Aspects of the SNF PPS

A. SNF Level of Care--Administrative Presumption

    The establishment of the SNF PPS did not change Medicare's 
fundamental requirements for SNF coverage. However, because the case-
mix classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures with the existing resident 
assessment process and case-mix classification system discussed in 
section III.C of this proposed rule. This approach includes an 
administrative presumption that utilizes a beneficiary's initial 
classification in one of the upper 52 RUGs of the 66-group RUG-IV case-
mix classification system to assist in making certain SNF level of care 
determinations.
    In accordance with section 1888(e)(4)(H)(ii) of the Act and the 
regulations at Sec.  413.345, we include in each update of the federal 
payment rates in the Federal Register the designation of those specific 
RUGs under the classification system that represent the required SNF 
level of care, as provided in Sec.  409.30. As set forth in the FY 2011 
SNF PPS update notice (75 FR 42910), this designation reflects an 
administrative presumption under the 66-group RUG-IV system that 
beneficiaries who are correctly assigned to one of the upper 52 RUG-IV 
groups on the initial 5-day, Medicare-required assessment are 
automatically classified as meeting the SNF level of care definition up 
to and including the assessment reference date on the 5-day Medicare-
required assessment.
    A beneficiary assigned to any of the lower 14 RUG-IV groups is not 
automatically classified as either meeting or not meeting the 
definition, but instead receives an individual level of care 
determination using the existing administrative criteria. This 
presumption recognizes the strong likelihood that beneficiaries 
assigned to one of the upper 52 RUG-IV groups during the immediate 
post-hospital period require a covered level of care, which would be 
less likely for those beneficiaries assigned to one of the lower 14 
RUG-IV groups.
    In the July 30, 1999 final rule (64 FR 41670), we indicated that we 
would announce any changes to the guidelines for Medicare level of care 
determinations related to modifications in the case-mix classification 
structure. In this proposed rule, we would continue to designate the 
upper 52 RUG-IV groups for purposes of this administrative presumption, 
consisting of all groups encompassed by the following RUG-IV 
categories:
     Rehabilitation plus Extensive Services;
     Ultra High Rehabilitation;
     Very High Rehabilitation;
     High Rehabilitation;
     Medium Rehabilitation;
     Low Rehabilitation;
     Extensive Services;
     Special Care High;
     Special Care Low; and,
     Clinically Complex.
    However, we note that this administrative presumption policy does 
not supersede the SNF's responsibility to ensure that its decisions 
relating to level of care are appropriate and timely, including a 
review to confirm that the services prompting the beneficiary's 
assignment to one of the upper 52 RUG-IV groups (which, in turn, serves 
to trigger the administrative presumption) are themselves medically 
necessary. As we explained in the FY 2000 SNF PPS final rule (64 FR 
41667), the administrative presumption:

    ``. . . is itself rebuttable in those individual cases in which 
the services actually received by the resident do not meet the basic 
statutory criterion of being reasonable and necessary to diagnose or 
treat a beneficiary's condition (according to section 1862(a)(1) of 
the Act). Accordingly, the presumption would not apply, for example, 
in those situations in which a resident's assignment to one of the 
upper . . . groups is itself based on the receipt of services that 
are subsequently determined to be not reasonable and necessary.''

Moreover, we want to stress the importance of careful monitoring for 
changes in each patient's condition to determine the continuing need 
for Part A SNF benefits after the assessment reference date of the 5-
day assessment.

B. Consolidated Billing

    Sections 1842(b)(6)(E) and 1862(a)(18) of the Act (as added by 
section 4432(b) of the BBA) require a SNF to submit consolidated 
Medicare bills to its fiscal intermediary or Medicare Administrative 
Contractor for almost all of the services that its residents receive 
during the course of a covered Part A stay. In addition, section 
1862(a)(18) places the responsibility with the SNF for billing Medicare 
for physical therapy, occupational therapy, and speech-language 
pathology services that the resident receives during a noncovered stay. 
Section 1888(e)(2)(A) of the Act excludes a small list of services from 
the consolidated billing provision (primarily those services furnished 
by physicians and certain other types of practitioners), which remain 
separately billable under Part B when furnished to a SNF's Part A 
resident. These excluded service categories are discussed in greater 
detail in section V.B.2. of the May 12, 1998 interim final rule (63 FR 
26295 through 26297).
    We note that section 103 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113, enacted 
on November 29, 1999) amended this provision (section 1888(e)(2)(A) of 
the

[[Page 26450]]

Act) by further excluding a number of individual ``high-cost, low-
probability'' services, identified by Healthcare Common Procedure 
Coding System (HCPCS) codes, within several broader categories 
(chemotherapy items, chemotherapy administration services, radioisotope 
services, and customized prosthetic devices) that otherwise remained 
subject to the provision. We discuss this BBRA amendment in greater 
detail in the SNF PPS proposed and final rules for FY 2001 (65 FR 19231 
through 19232, April 10, 2000, and 65 FR 46790 through 46795, July 31, 
2000), as well as in Program Memorandum AB-00-18 (Change Request 
1070), issued March 2000, which is available online at 
www.cms.gov/transmittals/downloads/ab001860.pdf.
    As explained in the FY 2001 proposed rule (65 FR 19232), the 
amendments enacted in section 103 of the BBRA not only identified for 
exclusion from this provision a number of particular service codes 
within four specified categories (that is, chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices), but also gave the Secretary ``. . . the 
authority to designate additional, individual services for exclusion 
within each of the specified service categories.'' In the proposed rule 
for FY 2001, we also noted that the BBRA Conference report (H.R. Rep. 
No. 106-479 at 854 (1999) (Conf. Rep.)) characterizes the individual 
services that this legislation targets for exclusion as ``. . . high-
cost, low probability events that could have devastating financial 
impacts because their costs far exceed the payment [SNFs] receive under 
the prospective payment system. . . .'' According to the conferees, 
section 103(a) of the BBRA ``is an attempt to exclude from the PPS 
certain services and costly items that are provided infrequently in 
SNFs. . . .'' By contrast, we noted that the Congress declined to 
designate for exclusion any of the remaining services within those four 
categories (thus, leaving all of those services subject to SNF 
consolidated billing), because they are relatively inexpensive and are 
furnished routinely in SNFs.
    As we further explained in the final rule for FY 2001 (65 FR 
46790), and as our longstanding policy, any additional service codes 
that we might designate for exclusion under our discretionary authority 
must meet the same statutory criteria used in identifying the original 
codes excluded from consolidated billing under section 103(a) of the 
BBRA: they must fall within one of the four service categories 
specified in the BBRA, and they also must meet the same standards of 
high cost and low probability in the SNF setting, as discussed in the 
BBRA Conference report. Accordingly, we characterized this statutory 
authority to identify additional service codes for exclusion ``. . . as 
essentially affording the flexibility to revise the list of excluded 
codes in response to changes of major significance that may occur over 
time (for example, the development of new medical technologies or other 
advances in the state of medical practice)'' (65 FR 46791). In this 
proposed rule, we specifically invite public comments identifying HCPCS 
codes in any of these four service categories (chemotherapy items, 
chemotherapy administration services, radioisotope services, and 
customized prosthetic devices) representing recent medical advances 
that might meet our criteria for exclusion from SNF consolidated 
billing. We may consider excluding a particular service if it meets our 
criteria for exclusion as specified above. Commenters should identify 
in their comments the specific HCPCS code that is associated with the 
service in question, as well as their rationale for requesting that the 
identified HCPCS code(s) be excluded.
    We note that the original BBRA amendment (as well as the 
implementing regulations) identified a set of excluded services by 
means of specifying HCPCS codes that were in effect as of a particular 
date (in that case, as of July 1, 1999). Identifying the excluded 
services in this manner made it possible for us to utilize program 
issuances as the vehicle for accomplishing routine updates of the 
excluded codes, to reflect any minor revisions that might subsequently 
occur in the coding system itself (for example, the assignment of a 
different code number to the same service). Accordingly, in the event 
that we identify through the current rulemaking cycle any new services 
that would actually represent a substantive change in the scope of the 
exclusions from SNF consolidated billing, we would identify these 
additional excluded services by means of the HCPCS codes that are in 
effect as of a specific date (in this case, as of October 1, 2013). By 
making any new exclusions in this manner, we could similarly accomplish 
routine future updates of these additional codes through the issuance 
of program instructions.

C. Payment for SNF-Level Swing-Bed Services

    Section 1883 of the Act permits certain small, rural hospitals to 
enter into a Medicare swing-bed agreement, under which the hospital can 
use its beds to provide either acute- or SNF-level care, as needed. For 
critical access hospitals (CAHs), Part A pays on a reasonable cost 
basis for SNF-level services furnished under a swing-bed agreement. 
However, in accordance with section 1888(e)(7) of the Act, these 
services furnished by non-CAH rural hospitals are paid under the SNF 
PPS, effective with cost reporting periods beginning on or after July 
1, 2002. As explained in the FY 2002 final rule (66 FR 39562), this 
effective date is consistent with the statutory provision to integrate 
swing-bed rural hospitals into the SNF PPS by the end of the transition 
period, June 30, 2002.
    Accordingly, all non-CAH swing-bed rural hospitals have now come 
under the SNF PPS. Therefore, all rates and wage indexes outlined in 
earlier sections of this proposed rule for the SNF PPS also apply to 
all non-CAH swing-bed rural hospitals. A complete discussion of 
assessment schedules, the MDS, and the transmission software (RAVEN-SB 
for Swing Beds) appears in the FY 2002 final rule (66 FR 39562) and in 
the FY 2010 final rule (74 FR 40288). As finalized in the FY 2010 SNF 
PPS final rule (74 FR 40356-57), effective October 1, 2010, non-CAH 
swing-bed rural hospitals are required to complete an MDS 3.0 swing-bed 
assessment which is limited to the required demographic, payment, and 
quality items. The latest changes in the MDS for swing-bed rural 
hospitals appear on the SNF PPS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/.

V. Other Issues

A. Revising and Rebasing the SNF Market Basket Index

1. Background
    Section 1888(e)(5)(A) of the Act requires the Secretary to 
establish a market basket index that reflects the changes over time in 
the prices of an appropriate mix of goods and services included in the 
SNF PPS. Effective for cost reporting periods beginning on or after 
July 1, 1998, we revised and rebased our 1977 routine costs input price 
index and adopted a total expenses SNF input price index using FY 1992 
as the base year. In the FY 2002 SNF PPS final rule (66 FR 39582), we 
rebased and revised the market basket to a base year of FY 1997. We 
last rebased and revised the market basket to a base year of FY 2004 in 
the FY 2008 SNF PPS final rule (72 FR 43425). In this FY 2014 SNF PPS 
proposed rule, we are

[[Page 26451]]

proposing to revise and rebase the SNF market basket to a base year of 
FY 2010.
    The term ``market basket'' refers to the mix of goods and services 
needed to produce SNF care, and is also commonly used to denote the 
input price index that includes both weights (mix of goods and 
services) and price factors. The term ``market basket'' and ``market 
basket index'' used in this proposed rule refers to the SNF input price 
index.
    The proposed FY 2010-based SNF market basket represents routine 
costs, costs of ancillary services, and capital-related costs. The 
percentage change in the market basket reflects the average change in 
the price of a fixed set of goods and services purchased by SNFs to 
furnish all services. For further background information, see the May 
12, 1998 interim final rule with comment period (63 FR 26289), the FY 
2002 final rule (66 FR 39582), and the FY 2008 final rule (72 FR 
43425).
    For purposes of the SNF PPS, the SNF market basket is a fixed-
weight (Laspeyres-type) price index. A Laspeyres-type index compares 
the cost of purchasing a specified mix of goods and services in a 
selected base period to the cost of purchasing that same group of goods 
and services at current prices.
    We construct the market basket in three steps. The first step is to 
select a base period and estimate total base period expenditure shares 
for mutually exclusive and exhaustive spending categories. We use total 
costs for routine services, ancillary services, and capital. These 
shares are called ``cost'' or ``expenditure'' weights. The second step 
is to match each expenditure category to a price/wage variable, called 
a price proxy. We draw these price proxy variables from publicly 
available statistical series published on a consistent schedule, 
preferably at least quarterly. The final step involves multiplying the 
price level for each spending category by the cost weight for that 
category. The sum of these products (that is, weights multiplied by 
proxy index levels) for all cost categories yields the composite index 
level of the market basket for a given quarter or year. Repeating the 
third step for other quarters and years produces a time series of 
market basket index levels, from which we can calculate rates of 
growth.
    The market basket represents a fixed-weight index because it 
answers the question of how much more or less it would cost, at a later 
time, to purchase the same mix of goods and services that was purchased 
in the base period. The effects on total expenditures resulting from 
changes in the quantity or mix of goods and services purchased 
subsequent or prior to the base period are, by design, not considered.
    Consistent with our discussion in the May 12, 1998 interim final 
rule with comment period (63 FR 26252), the FY 2002 final rule (66 FR 
39582), and the FY 2008 proposed rule (72 FR 25541), and as further 
discussed below, to implement section 1888(e)(5)(A) of the Act we 
propose to revise and rebase the market basket so the cost weights and 
price proxies reflect the mix of goods and services that underlie 
Medicare allowable SNF costs (routine, ancillary, and capital-related) 
for FY 2010.
2. Revising and Rebasing the Skilled Nursing Facility Market Basket
    The terms ``rebasing'' and ``revising,'' while often used 
interchangeably, actually denote different activities. Rebasing means 
shifting the base year for the structure of costs of the input price 
index (for example, for this proposed rule, we propose to shift the 
base year cost structure from FY 2004 to FY 2010). Revising means 
changing data sources, cost categories, price proxies, and/or 
methodology used in developing the input price index.
    We are proposing both to rebase and revise the SNF market basket to 
reflect FY 2010 Medicare allowable total cost data (routine, ancillary, 
and capital-related). Medicare allowable costs are costs that are 
eligible for inclusion under the SNF PPS payments. For example, the SNF 
market basket excludes home health aide costs as these costs would be 
reimbursed under the Home Health PPS. We last rebased and revised the 
SNF market basket in the FY 2008 PPS final rule (72 FR 43425), 
reflecting data from FY 2004 Medicare allowable total costs.
    We selected FY 2010 as the new base year because 2010 is the most 
recent year for which relatively complete Medicare cost report (MCR) 
data are available. In developing the proposed market basket, we 
reviewed SNF expenditure data from SNF MCRs (CMS Form 2540-96) for FY 
2010 for each freestanding SNF that reported Medicare expenses and 
payments. The FY 2010 cost reports are those with cost reporting 
periods beginning after September 30, 2009, and before October 1, 2010. 
We propose to maintain our policy of using data from freestanding SNFs 
because freestanding SNF data reflect the actual cost structure faced 
by the SNF itself. In contrast, expense data for a hospital-based SNF 
reflect the allocation of overhead over the entire institution. Due to 
this method of allocation, total expenses will be correct, but the 
individual components' expenses may be skewed.
    We developed cost category weights for the proposed FY 2010-based 
SNF market basket in two stages. First, we derived base weights for 
seven major categories (wages and salaries, employee benefits, contract 
labor, pharmaceuticals, professional liability insurance, capital-
related, and a residual ``all other'') from the SNF MCRs. Second, we 
are proposing to divide the residual ``all other'' cost category 
(21.534 percent) into subcategories, using U.S. Department of Commerce 
Bureau of Economic Analysis' (BEA) 2002 Benchmark Input-Output (I-O) 
tables for the nursing home industry aged forward using price changes. 
The methodology we propose to use to age the data forward involves 
applying the annual price changes from the respective price proxies to 
the appropriate cost categories. We repeat this practice for each year. 
We then apply the resulting 2010 distributions to the aggregate 2010 
``all other'' cost weight of 21.534 percent to yield the detailed 2010 
all other cost weights. This is similar to the methodology we used to 
revise and rebase the SNF market basket to reflect FY 2004 data in the 
FY 2008 SNF final rule.
    The BEA Benchmark I-O data are generally scheduled for publication 
every 5 years, with the most recent data available being 2002. The 2007 
BEA Benchmark I-O data are expected to be released in the summer of 
2013. We are proposing that if more recent BEA Benchmark I-O data for 
2007 are released between the proposed and final rule with sufficient 
time to incorporate such data into the final rule that we would 
incorporate these data, as appropriate, into the FY 2010-based SNF PPS 
market basket for the final rule, so that the SNF market basket 
reflects the most recent BEA data available. We note that the FY 2004-
based SNF market basket used the 1997 BEA Benchmark I-O data to 
disaggregate the ``all other'' (residual) cost category--the data 
available at the time of the rebasing. The 2002 BEA Benchmark I-O data 
(and the forthcoming 2007 BEA Benchmark I-O data) are updates of the 
1997 BEA Benchmark I-O data.
    For this SNF market basket revision and rebasing, we are proposing 
to include a total of 29 detailed cost categories for the proposed FY 
2010-based SNF market basket, which is six more cost categories than 
the FY 2004-based SNF market basket. We are proposing to include five 
new cost categories in the proposed FY 2010-based SNF market basket: 
(1) Medical

[[Page 26452]]

Instruments and Supplies; (2) Apparel; (3) Machinery and Equipment; (4) 
Administrative and Facilities Support Services; and (5) Financial 
Services. Having separate categories for these costs enables them to be 
proxied more precisely. We are also proposing to divide the Nonmedical 
Professional Fees cost category into Nonmedical Professional Fees: 
Labor-Related and Nonmedical Professional Fees: Nonlabor-Related. In 
addition, we are proposing to revise our labels for the Labor-Intensive 
Services and Nonlabor-Intensive Services cost categories to All Other: 
Labor-Related Services and All Other: Nonlabor-Related Services, 
respectively. A more thorough discussion of our proposals is provided 
below.
    The capital-related portion of the FY 2010-based SNF market basket 
employs the same overall methodology used to develop the capital-
related portion of the FY 1997-based SNF market basket, described in 
the FY 2002 SNF PPS final rule (66 FR 39582) and the FY 2004-based SNF 
market basket, described in the FY 2008 SNF PPS final rule (72 FR 
43425). It is a similar methodology as is used for the inpatient 
hospital capital input price index described in the FY 1997 Hospital 
IPPS proposed rule (61 FR 27466), the FY 1997 Hospital IPPS final rule 
(61 FR 46196), the FY 2006 Hospital IPPS final rule (70 FR 47407), and 
the FY 2010 Hospital IPPS final rule (74 FR 43857). The strength of 
this methodology is that it reflects the vintage nature of capital, 
which represents the acquisition and use of capital over time. We 
explain this methodology in more detail below.
    Table 9 presents the FY 2010-based and FY 2004-based SNF market 
basket major cost weights. Following the table, we describe the sources 
of the major category weights and their subcategories in the FY 2010-
based SNF market basket.

       Table 9--FY 2010-Based SNF Market Basket Major Cost Weights
------------------------------------------------------------------------
                                    Proposed FY 2010-
           Cost Category             based SNF market  FY 2004-based SNF
                                          basket         market basket
------------------------------------------------------------------------
Wages and Salaries................             46.057             48.105
Employee Benefits.................             10.491             10.699
Contract Labor....................              5.545              3.951
Pharmaceuticals...................              7.872              7.894
Professional Liability Insurance..              1.141              1.717
Capital-related Expenses..........              7.360              7.207
All Other (residual)..............             21.534             20.427
------------------------------------------------------------------------

     Wages and Salaries: We derived the wages and salaries cost 
category using the FY 2010 SNF MCRs. We determined the share using 
Medicare allowable wages and salaries from Worksheet S-3, part II and 
total expenses from Worksheet B, part I. Medicare allowable wages and 
salaries are equal to total wages and salaries minus: (1) Excluded 
salaries from worksheet S-3, part II; and (2) nursing facility and non-
reimbursable salaries from worksheet A, lines 18, 34 through 36, and 58 
through 63. Medicare allowable total expenses are equal to total 
expenses from Worksheet B, lines 16, 21 through 30, 32, 33, 48, and 52 
through 54. This share represents the wage and salary share of costs 
for employees for the SNF, and does not include the wages and salaries 
from contract labor, which are allocated to wages and salaries in a 
later step. The same cost report methodology was used to derive the 
wages and salaries cost weight of the FY 2004-based SNF market basket.
     Employee Benefits: We determined the weight for employee 
benefits using FY 2010 SNF MCR data. We derived the share using 
Medicare allowable benefit costs from Worksheet S-3, part II and total 
expenses from Worksheet B. Medicare allowable benefits are equal to 
total benefits from Worksheet S-3, part II, minus excluded (non-
Medicare allowable) benefits. Non-Medicare allowable benefits are 
derived by multiplying non-Medicare allowable salaries times the ratio 
of total benefit costs for the SNF to the total wage costs for the SNF. 
The same cost report methodology was used to derive the benefits cost 
weight of the FY 2004-based SNF market basket.
     Contract Labor: We determined the weight for contract 
labor using 2010 SNF MCR data. We derived the share using Medicare 
allowable contract labor costs from Worksheet S-3, part II line 17 
minus nursing facility (NF) contract labor costs, and Medicare 
allowable total costs from Worksheet B. (Worksheet S-3, part II line 17 
only includes direct patient care contract labor attributable to SNF 
and NF services.) NF contract labor costs, which are not reimbursable 
under Medicare, are derived by multiplying total contract labor costs 
by the ratio of NF wages and salaries to the sum of NF and SNF wages 
and salaries.
    As we did for the FY 2004-based SNF market basket, we propose to 
allocate contract labor costs to the wages and salaries and employee 
benefits cost weights based on their relative proportion, under the 
assumption that contract costs are similarly distributed and likely to 
change at the same rate as direct labor costs even though unit labor 
cost levels may be different. The contract labor allocation proportion 
for wages and salaries is equal to the wages and salaries cost weight 
as a percent of the sum of the wages and salaries cost weight and the 
employee benefits cost weight. Using the FY 2010 MCR data, this 
percentage is approximately 81 percent; therefore, we propose to 
allocate approximately 81 percent of the contract labor cost weight to 
the wages and salaries cost weight. The remaining proportion of the 
contract labor cost weight is allocated to the employee benefits cost 
weight. Table 10 shows the wages and salaries and employee benefit cost 
weights after contract labor allocation for both the FY 2004-based SNF 
market basket and the proposed FY 2010-based SNF market basket.

[[Page 26453]]



  Table 10--Wages and Salaries and Employee Benefits Cost Weights After
                        Contract Labor Allocation
------------------------------------------------------------------------
                                    Proposed FY 2010-
       Major cost categories         based SNF market  FY 2004-Based SNF
                                          basket         market basket
------------------------------------------------------------------------
Wages and salaries................             50.573             51.337
Employee benefits.................             11.520             11.418
------------------------------------------------------------------------

    Prior to contract labor allocation, the proposed FY 2010-based SNF 
market basket wages and salaries cost weight was about 2 percentage 
points lower than the FY 2004-based SNF market basket wages and 
salaries cost weight while the proposed FY 2010-based employee benefit 
cost weight was 0.2 percentage point lower than the FY 2004-based 
employee benefit cost weight. After the allocation of contract labor, 
the proposed FY 2010-based wages and salaries cost weight is about 0.7 
percentage point lower than the FY 2004-based wages and salaries cost 
weight while the proposed FY 2010-based employee benefits cost weight 
is about 0.1 percentage point higher than the FY 2004-based employee 
benefit cost weight. This is due to the increase in the FY 2010-based 
SNF market basket contract labor cost weight from the FY 2004-based SNF 
market basket contract labor cost weight, of which 81 percent of this 
increase is applied to the wages and salaries cost weight and 19 
percent is applied to the employee benefit cost weight, offsetting the 
actual decrease in the wages and salaries and employee benefit cost 
weights prior to the contract labor allocation.
     Pharmaceuticals: We derive the cost weight for 
pharmaceuticals in two steps using the FY 2010 SNF MCR and Medicare 
claims data.
    First, we calculated pharmaceutical costs using the non-salary 
costs from the Pharmacy cost center and the Drugs Charged to Patients' 
cost center, both found on Worksheet B of the SNF MCRs. Since these 
drug costs were attributable to the entire SNF and not limited to 
Medicare allowable services, we adjusted the drug costs by the ratio of 
Medicare allowable pharmacy total costs to total pharmacy costs from 
Worksheet B, part I, column 11. Worksheet B, part I allocates the 
general service cost centers, which are often referred to as ``overhead 
costs'' (in which pharmacy costs are included) to the Medicare 
allowable and non-Medicare allowable cost centers. This resulted in a 
proposed FY 2010-based SNF market basket drug cost weight of 3.1 
percent compared to the FY 2004-based SNF market basket drug cost 
weight, which was 3.2 percent using the same methodology. This drug 
cost share does not include the drug expenses associated with Medicaid 
patients. The methodology for including the Medicaid drug expenditures 
is explained in detail below. This Medicaid drug add-on increases the 
drug expenditure weight to over seven percent, and is consistent with 
the Medicaid drug add-on method that was used in the FY 2004-based SNF 
market basket.
    Second, for the FY 2010-based SNF market basket, we are proposing 
to continue to adjust the drug expenses reported on the MCR to include 
an estimate of total Medicaid drug costs, which are not represented in 
the Medicare-allowable drug cost weight. Similar to the last rebasing, 
we are estimating Medicaid drug costs based on data representing dual-
eligible Medicaid beneficiaries. Medicaid drug costs are estimated by 
multiplying Medicaid dual eligible drug costs per day times the number 
of Medicaid days as reported in the Medicare allowable skilled nursing 
cost center in the SNF MCR. Medicaid dual eligible drug costs per day 
(where the day represents an unduplicated drug supply day) were 
estimated using a sample of 2010 Part D claims for those dual-eligible 
beneficiaries who had a Medicare SNF stay during the year. Medicaid 
dual-eligible beneficiaries would receive their drugs through the 
Medicare Part D benefit, which would work directly with the pharmacy, 
and therefore, these costs would not be represented in the Medicare SNF 
MCRs. A random 20 percent sample of Medicare Part D claims data yielded 
a Medicaid drug cost per day of $17.39. We note that the FY 2004-based 
SNF market basket relied on data from the Medicaid Statistical 
Information System, which yielded a dual eligible Medicaid drug cost 
per day of $13.65 for 2004. For the revised and rebased FY 2010-based 
SNF market basket, we propose to use Part D claims to estimate total 
Medicaid drug costs as this provides drug expenditure data for dual-
eligible beneficiaries for 2010. The Medicaid Statistical Information 
System is no longer a comprehensive database for dual-eligible 
beneficiaries' drug costs.
    The proposed adjusted FY 2010-based SNF market basket drug cost 
weight, representing all drug expenditures including those we estimated 
for Medicaid, is 7.872 percent. The FY 2004-based SNF market basket 
pharmaceutical cost weight was 7.894 percent.
     Professional Liability Insurance: We calculated the 
professional liability insurance cost weight using costs from Worksheet 
S-2 of the MCRs as the sum of premiums, paid losses, and self-
insurance. To derive the professional liability insurance cost weight 
for the proposed FY 2010-based SNF market basket, we used the same cost 
report methodology that was used to derive the cost weight of the FY 
2004-based SNF market basket (see 72 FR 25543-25544). For the proposed 
FY 2010-based SNF market basket, the professional liability weight is 
1.141 percent, which is slightly lower than the 1.717 weight for the FY 
2004-based SNF market basket.
     Capital-Related: We derived the weight for overall 
capital-related expenses using the FY 2010 SNF MCRs. We calculated the 
Medicare allowable capital-related cost weight from Worksheet B, part 
II. In determining the subcategory weights for capital, we used 
information from the FY 2010 SNF MCR and the 2010 Bureau of Census' 
Service Annual Survey (SAS) data. For the FY 2004-based SNF market 
basket, we relied on the Bureau of Census Business Expenditure Survey 
(BES). The SAS data is a replacement/extension of the BES data, 
reflecting more recent data.
    We calculated the depreciation cost weight (that is, depreciation 
costs excluding leasing costs) using depreciation costs from Worksheet 
S-2. Since the depreciation costs reflect the entire SNF facility 
(Medicare and non-Medicare allowable units) we used total facility 
costs as the denominator. This methodology assumes that the 
depreciation of an asset is the same regardless of whether the asset 
was used for Medicare or non-Medicare patients. This methodology 
yielded a FY 2010-based SNF market basket depreciation cost weight of 
2.301 percent. This depreciation cost weight is further adjusted to 
account for a proportion of leasing expenses, which is described in 
more detail below. We determined the distribution between building and 
fixed equipment and movable equipment depreciation from the FY 2010 SNF

[[Page 26454]]

MCR, as well. The FY 2010 SNF MCR data showed a fixed/moveable 
depreciation split of 85/15, which is the same split used in the FY 
2004-based SNF market basket.
    We also derived the interest expense share of capital-related 
expenses from Worksheet A from the FY 2010 SNF MCRs. Similar to the 
depreciation cost weight, we calculated the interest cost weight using 
total facility costs. As done with the last rebasing, we determined the 
split of interest expense between for-profit and not-for-profit 
facilities based on the distribution of long-term debt outstanding by 
type of SNF (for-profit or not-for-profit) from the FY 2010 SNF MCRs. 
We estimated the split between for-profit and not-for-profit interest 
expense to be 41/59 percent.
    Because the data were not available in the MCRs, we used the most 
recent 2010 SAS data to derive the capital-related expenses 
attributable to leasing and other capital-related expenses. Based on 
the 2010 SAS data, we determined the leasing costs to be 30 percent of 
total capital-related expenses, while we determined the other capital-
related costs (insurance, taxes, licenses, other) to be 18 percent of 
total capital-related expenses. In the FY 2004-based SNF market basket, 
leasing costs represent 21 percent of total capital-related expenses 
while other capital-related costs represent 13 percent of total 
capital-related expenses.
    Lease expenses are not broken out as a separate cost category, but 
are distributed among the cost categories of depreciation, interest, 
and other capital, reflecting the assumption that the underlying cost 
structure and price movement of leasing expenses is similar to capital 
costs in general. As was done in previous rebasings, we assumed 10 
percent of lease expenses are overhead and assigned them to the other 
capital expenses cost category. We distributed the remaining lease 
expenses to the three cost categories based on the proportion of 
depreciation, interest, and other capital expenses to total capital 
costs, excluding lease expenses.
    Table 11 shows the capital-related expense distribution (including 
expenses from leases) in the proposed FY 2010-based SNF market basket 
and the FY 2004-based SNF market basket.

 Table 11--Comparison of the Capital-Related Expense Distribution of the
 FY 2010-Based SNF Market Basket and the FY 2004-Based SNF Market Basket
------------------------------------------------------------------------
                                    Proposed FY 2010-
           Cost category             based SNF market  FY 2004-based SNF
                                          basket         market basket
------------------------------------------------------------------------
Capital-related expenses..........              7.360              7.207
Total Depreciation................              3.180              2.858
Total Interest....................              2.096              3.037
Other Capital-related Expenses....              2.084              1.312
------------------------------------------------------------------------

    Our methodology for determining the price change of capital-related 
expenses accounts for the vintage nature of capital, which is the 
acquisition and use of capital over time. To capture this vintage 
nature, the price proxies must be vintage-weighted. The determination 
of these vintage weights occurs in two steps. First, we must determine 
the expected useful life of capital and debt instruments held by SNFs. 
Second, we must identify the proportion of expenditures within a cost 
category that is attributable to each individual year over the useful 
life of the relevant capital assets, or the vintage weights. We rely on 
Bureau of Economic Analysis (BEA) fixed asset data to derive the useful 
lives of both fixed and movable capital, which is the same data source 
used to derive the useful lives during the last rebasing. The specifics 
of the data sources used are explained below.
    Estimates of useful lives for movable and fixed assets for the 
proposed FY 2010-based SNF market basket are 6 and 25 years, 
respectively. These estimates are based on several data sources from 
the BEA, which publishes various useful life-related statistics, 
including asset service lives and current-cost average age, historical 
cost average age, and industry-specific current cost net stocks of 
assets. While SNF-specific data are not available, we can use the BEA 
data to develop estimates of useful life that are approximates of SNF 
capital purchases.
    There are two major issues we must address in using the BEA service 
life data to develop SNF-specific estimates. First, these data are 
published at a detailed asset level and not at an aggregate level, such 
as movable and fixed assets. There are 43 detailed movable assets in 
the BEA estimates. Some examples include computer software (34 months 
service life), electromedical equipment (9 years), medical instruments 
and related equipment (12 years), communication equipment (15 years), 
and office equipment (8 years). There are 23 detailed fixed assets in 
the BEA estimates. Some examples of detailed fixed assets are medical 
office buildings (36 years), hospitals and special care buildings (48 
years), and lodging (32 years). Again, there are no service life 
estimates at an aggregate level, such as movable and fixed assets. The 
second reason BEA service life data are not directly applicable to SNFs 
is that service lives are not industry-specific; they apply to many 
different industries and, in most cases, to all industries in the 
economy. We seek estimates applicable to nursing homes for our SNF-
specific estimates. BEA also publishes average asset age estimates. 
Average age estimates are updated more regularly than service lives 
data but reflect an average age rather than a service life. To get an 
estimate of the available service life of an asset, the average age is 
multiplied by 2 to reflect that some assets are retired prior to the 
useful life being exhausted. Average age data are available by detailed 
and aggregate asset levels for the overall economy and were last 
published in 2012.
    We developed a methodology to approximate movable and fixed asset 
ages for nursing and residential care services (NAICS 623) using the 
published BEA data. For the proposed FY 2010 SNF market basket, we use 
the average age for each asset type from the BEA fixed assets Table 2.9 
for all assets (not SNF-specific) and weight them using current cost 
net stock levels for each of these asset types in the nursing and 
residential care services industry. Current cost net stock levels are 
available for download from the BEA Web site at https://www.bea.gov/national/FA2004/Details/.
    These detailed current cost net stock estimates are not published 
in the Survey of Current Business, a U.S. Department of Commerce 
monthly publication that provides data on U.S. businesses. Historical 
cost average age

[[Page 26455]]

estimates for all industries are published in the BEA fixed assets 
Table 2.10; there are no industry-specific estimates for historical 
cost average age. Industry-specific historical cost average ages for 
NAICS 6230 is estimated by multiplying the industry specific current 
cost average age by the ratio of historical cost to current cost 
average age for all industries. This produces historical cost average 
age data for movable and fixed assets specific to NAICS 6230 of 3.2 and 
12.2 years, respectively. Since averages are measures of central 
tendency, we multiply each of these estimates by two to produce 
estimates of likely useful lives of 6.4 and 24.5 years for movable and 
fixed assets, which we round to 6 and 25 years, respectively. We are 
proposing an interest vintage weight time span of 22 years, obtained by 
weighting the fixed and movable vintage weights (25 years and 6 years, 
respectively) by the fixed and movable split (85 percent and 15 
percent, respectively).
    Given the expected useful life of capital and debt instruments, we 
must determine the proportion of capital expenditures attributable to 
each year of the expected useful life by cost category. These 
proportions represent the vintage weights. We were not able to find a 
historical time series of capital expenditures by SNFs. Therefore, we 
approximated the capital expenditure patterns of SNFs over time, using 
alternative SNF data sources. For building and fixed equipment, we used 
the stock of beds in nursing homes from the National Nursing Home 
Survey (NNHS) conducted by the National Center for Health Statistics 
(NCHS) for 1962 through 1999. For 2000 through 2010, we extrapolated 
the 1999 bed data forward using a 10-year moving average of growth in 
the number of beds from the SNF MCR data. We then used the change in 
the stock of beds each year to approximate building and fixed equipment 
purchases for that year. This procedure assumes that bed growth 
reflects the growth in capital-related costs in SNFs for building and 
fixed equipment. We believe that this assumption is reasonable because 
the number of beds reflects the size of a SNF, and as a SNF adds beds, 
it also likely adds fixed capital.
    For movable equipment, we used available SNF data to capture the 
changes in intensity of SNF services that would likely be accompanied 
by the purchase of movable equipment. We used the same methodology to 
estimate the change in intensity as published in the FY 2008 SNF final 
rule for the period from 1962 through 2004. For more details of the 
methodology, see the FY 2008 SNF PPS final rule (72 FR 43428). We 
propose to use the same methodology to estimate the ratio of ancillary 
to routine costs for 2005 through 2010 from the SNF MCR. The time 
series of the ratio of ancillary costs to routine costs for SNFs 
measures changes in intensity in SNF services, which are assumed to be 
associated with movable equipment purchase patterns. The assumption 
here is that as ancillary costs increase compared to routine costs, the 
SNF caseload becomes more complex and would require more movable 
equipment. Again, the lack of movable equipment purchase data for SNFs 
over time required us to use alternative SNF data sources. We believe 
the resulting two time series, determined from beds and the ratio of 
ancillary to routine costs, reflect real capital purchases of building 
and fixed equipment and movable equipment over time.
    To obtain nominal purchases, which are used to determine the 
vintage weights for interest, we converted the two real capital 
purchase series from 1963 through 2010 determined above to nominal 
capital purchase series using their respective price proxies (the BEA 
chained price index for nonresidential construction for hospitals & 
special care facilities and the PPI for Machinery and Equipment). We 
then combined the two nominal series into one nominal capital purchase 
series for 1963 through 2010. Nominal capital purchases are needed for 
interest vintage weights to capture the value of debt instruments.
    Once we created these capital purchase time series for 1963 through 
2010, we averaged different periods to obtain an average capital 
purchase pattern over time: (1) For building and fixed equipment, we 
averaged 24, 25-year periods; (2) for movable equipment, we averaged 
43, 6-year periods; and (3) for interest, we averaged 27, 22-year 
periods. We calculate the vintage weight for a given year by dividing 
the capital purchase amount in any given year by the total amount of 
purchases during the expected useful life of the equipment or debt 
instrument. Following publication of the FY 2010 IPPS/Rate Year 2010 
LTCH PPS proposed rule, and to provide greater transparency, we posted 
on the CMS market basket Web site at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html, an illustrative 
spreadsheet that contains an example of how the vintage-weighted price 
indexes are calculated.
    Table 12 shows the resulting vintage weights for each of these cost 
categories.

           Table 12--Vintage Weights for Proposed FY 2010-Based SNF PPS Capital-Related Price Proxies
----------------------------------------------------------------------------------------------------------------
                                                                   Building and
                            Year \1\                                   fixed          Movable        Interest
                                                                     equipment       equipment
----------------------------------------------------------------------------------------------------------------
1...............................................................            .061            .165            .030
2...............................................................            .059            .160            .030
3...............................................................            .053            .167            .032
4...............................................................            .050            .167            .033
5...............................................................            .046            .169            .035
6...............................................................            .043            .171            .037
7...............................................................            .041  ..............            .039
8...............................................................            .039  ..............            .040
9...............................................................            .036  ..............            .041
10..............................................................            .034  ..............            .043
11..............................................................            .034  ..............            .045
12..............................................................            .034  ..............            .047
13..............................................................            .033  ..............            .048
14..............................................................            .032  ..............            .048
15..............................................................            .031  ..............            .050
16..............................................................            .031  ..............            .052
17..............................................................            .032  ..............            .055

[[Page 26456]]

 
18..............................................................            .034  ..............            .058
19..............................................................            .035  ..............            .060
20..............................................................            .036  ..............            .060
21..............................................................            .038  ..............            .058
22..............................................................            .039  ..............            .058
23..............................................................            .042  ..............  ..............
24..............................................................            .043  ..............  ..............
25..............................................................            .044  ..............  ..............
                                                                 -----------------------------------------------
    Total.......................................................          1.000*          1.000*          1.000*
----------------------------------------------------------------------------------------------------------------
SOURCES: 2010 SNF MCRs; CMS,
NOTE: Totals may not sum to 1.000 due to rounding.
\1\ Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 25, for
  example, would apply to the most recent year.

     All Other (residual): We divided the residual ``all 
other'' cost category into subcategories, using the BEA's Benchmark 
Input-Output Tables for the nursing home industry aged to 2010 using 
relative price changes. (The methodology we used to age the data 
involves applying the annual price changes from the price proxies to 
the appropriate cost categories. We repeat this practice for each year. 
We then apply the resulting 2010 distributions to the aggregate 2010 
``all other'' cost weight of 21.534 percent to yield the detailed 2010 
all other cost weights.)
    For the FY 2010-based SNF market basket, we are proposing to 
include five new cost categories compared to the FY 2004-based SNF 
market basket, as discussed further below. We are also proposing to 
revise the labels for the labor-intensive and nonlabor-intensive cost 
categories; the new labels would be ``all other: labor-related'', and 
``all other: nonlabor-related''. As discussed in more detail below, we 
classify a cost category as labor-related and include it in the labor-
related share if the cost category is determined to be labor-intensive 
and its cost varies with the local labor market. In previous 
regulations, we grouped cost categories that met both of these criteria 
into labor-intensive services. We believe the new labels more 
accurately reflect the concepts that they are intended to convey. We 
are not proposing a change to our definition of the labor-related 
share, since we continue to classify a cost category as labor-related 
if the costs are labor-intensive and vary with the local labor market.
    For nonmedical professional fees, we are proposing to create two 
separate cost categories: (1) Nonmedical professional fees: labor-
related, and (2) nonmedical professional fees: Nonlabor-related. We 
discuss the distinction between these two categories in more detail 
below in the discussion of the labor-related share.
    Table 13 compares the proposed FY 2010-based SNF market basket cost 
weights with the FY 2004-based SNF market basket cost weights.

  Table 13--Comparison of the Proposed FY 2010-Based SNF Market Basket
    Cost Weights and the FY 2004-Based SNF Market Basket Cost Weights
------------------------------------------------------------------------
                                            Proposed FY
                                          2010-based SNF   FY 2004-based
              Cost category                market basket    SNF market
                                              weights     basket weights
------------------------------------------------------------------------
Total...................................         100.000         100.000
    Compensation........................          62.093          62.755
        Wages and Salaries..............          50.573          51.337
        Employee Benefits...............          11.520          11.418
    Nonmedical Professional Fees \1\....  ..............           1.322
        Nonmedical Professional Fees....  ..............           1.322
    Utilities...........................           2.223           1.551
        Electricity.....................           1.411           0.919
        Fuels, Non-highway..............           0.667           0.453
        Water and Sewerage..............           0.145           0.179
    Professional Liability Insurance....           1.141           1.717
        Professional Liability Insurance           1.141           1.717
    All Other...........................          27.183          25.448
        All Other Products..............          16.148           19.03
            Pharmaceuticals.............           7.872           7.894
            Food, Wholesale Purchase....           3.661           2.906
            Food, Retail Purchase.......           1.190           3.151
            Chemicals...................           0.166           0.589
            Medical Instruments and                0.764  ..............
             Supplies \2\...............
            Rubber and Plastics.........           0.981           1.513
            Paper and Printing Products.           0.838           1.394
            Apparel \2\.................           0.195  ..............
            Machinery and Equipment \2\.           0.190  ..............
            Miscellaneous Products......           0.291           1.582

[[Page 26457]]

 
        All Other Services..............          11.035           6.418
            Labor-Related Services......           6.227  ..............
                Nonmedical Professional            3.427  ..............
                 Fees: Labor-related \1\
                Administrative and                 0.497  ..............
                 Facilities Support \3\.
            All Other: Labor-Related               2.303           3.521
             Services \4\...............
                NonLabor-Related                   4.808  ..............
                 Services...............
Nonmedical Professional Fees: Nonlabor-            2.042  ..............
 related \1\
        Financial Services \5\..........           0.899  ..............
        Telephone Services..............           0.572           0.434
        Postage.........................           0.240           0.454
        All Other: Nonlabor-related                1.055           2.008
         Services \4\...................
    Capital-related Expenses............           7.360           7.207
        Total Depreciation..............           3.180           2.858
            Building and Fixed Equipment           2.701           2.437
            Movable Equipment...........           0.479           0.421
        Total Interest..................           2.096           3.037
            For-Profit SNFs.............           0.869           1.197
            Non-profit SNFs.............           1.227            1.84
        Other Capital-related Expenses..           2.084           1.312
            Other.......................           2.084           1.312
------------------------------------------------------------------------
\1\ For the FY 2010-based SNF Market basket, we are proposing to divide
  this category into nonmedical professional fees: labor-related and
  nonmedical professional fees: nonlabor-related.
\2\ For the FY 2010-based SNF Market basket, we are proposing to create
  a separate cost category for these expenses to proxy the price growth
  by a more specific index. These expenses were previously classified
  under miscellaneous products in the FY 2004-based SNF market basket.
\3\ For the FY 2010-based SNF Market basket, we are proposing to create
  a separate cost category for these expenses to proxy the price growth
  by a more specific index. These expenses were previously classified
  under labor intensive services cost weight in the FY 2004-based SNF
  market basket.
\4\ For the FY 2010-based SNF market basket, we are proposing to revise
  the labels for the labor-intensive and nonlabor-intensive cost
  categories to be all other: labor-related and all other: nonlabor-
  related.
\5\ For the FY 2010-based SNF market basket, we are proposing to create
  a separate cost category for these expenses to proxy the price growth
  by a more specific index. These expenses were previously classified
  under nonlabor intensive services cost weight in the FY 2004-based SNF
  market basket.

3. Price Proxies Used To Measure Cost Category Growth
    After developing the 29 cost weights for the proposed FY 2010-based 
SNF market basket, we selected the most appropriate wage and price 
proxies currently available to represent the rate of change for each 
expenditure category. With four exceptions (three for the capital-
related expenses cost categories and one for Professional Liability 
Insurance (PLI)), we base the wage and price proxies on Bureau of Labor 
Statistics (BLS) data, and group them into one of the following BLS 
categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the 2004 North American 
Industry Classification System (NAICS).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. PPIs 
are used when the purchases of goods or services are made at the 
wholesale level.
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by 
consumers. CPIs are only used when the purchases are similar to those 
of retail consumers rather than purchases at the wholesale level, or if 
no appropriate PPI were available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance. Reliability indicates that the 
index is based on valid statistical methods and has low sampling 
variability. Widely accepted statistical methods ensure that the data 
were collected and aggregated in a way that can be replicated. Low 
sampling variability is desirable because it indicates that the sample 
reflects the typical members of the population. (Sampling variability 
is variation that occurs by chance because only a sample was surveyed 
rather than the entire population.) Timeliness implies that the proxy 
is published regularly, preferably at least once a quarter. The market 
baskets are updated quarterly, and therefore, it is important for the 
underlying price proxies to be up-to-date, reflecting the most recent 
data available. We believe that using proxies that are published 
regularly (at least quarterly, whenever possible) helps to ensure that 
we are using the most recent data available to update the market 
basket. We strive to use publications that are disseminated frequently, 
because we believe that this is an optimal way to stay abreast of the 
most current data available. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis. 
Finally, relevance means that the proxy is applicable and 
representative of the cost category weight to which it is applied.

[[Page 26458]]

The CPIs, PPIs, and ECIs that we have selected to propose in this 
regulation meet these criteria. Therefore, we believe that they 
continue to be the best measure of price changes for the cost 
categories to which they would be applied.
    As discussed above, we propose that if the 2007 Benchmark I-O data 
become available between the proposed and final rule with sufficient 
time to incorporate such data into the final rule, we would incorporate 
these data, as appropriate, into the FY 2010-based SNF market basket 
for the final rule. In addition, we propose that to the extent the 
incorporation of the 2007 Benchmark I-O data results in a different 
composition of costs included in a particular cost category, we would 
revise that specific price proxy, as appropriate, to ensure that the 
costs included in each detailed cost category are aligned with the most 
appropriate price proxy. Table 15 lists all price proxies for the 
proposed revised and rebased SNF market basket. Below is a detailed 
explanation of the price proxies used for each cost category weight.
     Wages and Salaries: We are proposing to use the ECI for 
Wages and Salaries for Nursing Care Facilities (Private Industry) 
(NAICS 6231; BLS series code CIU2026231000000I) to measure price growth 
of this category. The FY 2004-based SNF market basket used a blended 
index based on 50 percent of the ECI for wages and salaries for nursing 
and residential care facilities (NAICS 623) and 50 percent of the ECI 
for wages and salaries for hospital workers (NAICS 622). For the FY 
2010-based SNF market basket, we are proposing to use the Nursing Care 
Facilities ECI, as we believe this ECI better reflects wage trends 
consistent with services provided by Medicare-certified SNFs.
    NAICS 623 includes facilities that provide a mix of health and 
social services, with many of the health services being largely some 
level of nursing services. Within NAICS 623 is NAICS 6231, which 
includes nursing care facilities primarily engaged in providing 
inpatient nursing and rehabilitative services. These facilities, which 
are most comparable to Medicare-certified SNFs, provide skilled nursing 
and continuous personal care services for an extended period of time, 
and therefore, have a permanent core staff of registered or licensed 
practical nurses. At the time of the last rebasing, BLS had just begun 
publishing ECI data for the more detailed nursing care facilities 
(NAICS 6231), and therefore, IGI, the economic forecasting firm, was 
unable to forecast this price proxy.
    BLS has now published over six years of historical data for the ECI 
for Nursing Care Facilities (NAICS 6231), which allows IGI to create a 
forecast for this detailed index. Additionally, in analyzing the 
historical trends, we believe this ECI is the most technically 
appropriate wage concept to use for the proposed revised and rebased 
2010-based SNF market basket as it is most comparable to Medicare-
certified SNFs, which are engaged in providing inpatient nursing and 
rehabilitative services.
     Employee Benefits: We are proposing to use the ECI for 
Benefits for Nursing Care Facilities (NAICS 6231) to measure price 
growth of this category. The ECI for Benefits for Nursing Care 
Facilities is calculated using BLS's total compensation (BLS series ID 
CIU2016231000000I) for nursing care facilities series and the relative 
importance of wages and salaries within total compensation. We believe 
this ECI and constructed series is technically appropriate for the 
reason stated above in the wages and salaries price proxy section. We 
used a blended benefits index in the FY 2004-based SNF market basket.
     Electricity: We are proposing to use the PPI for 
Commercial Electric Power (BLS series code WPU0542) to measure the 
price growth of this cost category. We used the same index in the FY 
2004-based SNF market basket.
     Fuels, nonhighway: We are proposing to use the PPI for 
Commercial Natural Gas (BLS series code WPU0552) to measure the price 
growth of this cost category. We used the same index in the FY 2004-
based SNF market basket.
     Water and Sewerage: We are proposing to use the CPI for 
Water and Sewerage Maintenance (All Urban Consumers) (BLS series code 
CUUR0000SEHG01) to measure the price growth of this cost category. We 
used the same index in the FY 2004-based SNF market basket.
     Professional Liability Insurance: We are proposing to use 
the CMS Hospital Professional Liability Insurance Index to measure 
price growth of this category. In the FY 2008 proposed rule (72 FR 
25552), we stated our difficulties associated with pricing malpractice 
costs experienced in all healthcare sectors, including hospitals and 
physicians. We also stated our intent to research alternative data 
sources, such as obtaining the data directly from the individual 
states' Departments of Insurance. We were unable to find a reliable 
data source that collects SNF-specific PLI data. Therefore, we are 
proposing to use the CMS Hospital Professional Liability Index, which 
tracks price changes for commercial insurance premiums for a fixed 
level of coverage, holding nonprice factors constant (such as a change 
in the level of coverage). We used the same index in the FY 2004-based 
SNF market basket. We believe this is an appropriate proxy to measure 
the price growth associated with SNF professional liability insurance, 
as it captures the price inflation associated with other medical 
institutions that serve Medicare patients.
     Pharmaceuticals: We are proposing to use the PPI for 
Pharmaceuticals for Human Use, Prescription (BLS series code 
WPUSI07003) to measure the price growth of this cost category. This is 
the same proxy that was used in the FY 2004-based SNF market basket, 
though BLS has since changed the naming convention of this series.
     Food: Wholesale Purchases: We are proposing to use the PPI 
for Processed Foods and Feeds (BLS series code WPU02) to measure the 
price growth of this cost category. We used the same index in the FY 
2004-based SNF market basket.
     Food: Retail Purchase: We are proposing to use the CPI for 
Food Away From Home (All Urban Consumers) (BLS series code 
CUUR0000SEFV) to measure the price growth of this cost category. We 
used the same index in the FY 2004-based SNF market basket.
     Chemicals: For measuring price change in the Chemicals 
cost category, we are proposing to use a blended PPI composed of the 
PPIs for Other Basic Organic Chemical Manufacturing (NAICS 325190) (BLS 
series code PCU32519-32519), Paint and Coating Manufacturing (NAICS 
325510) (BLS series code PCU32551-32551), Soap and Cleaning Compound 
Manufacturing (NAICS 325610) (BLS series code PCU32561-32561), and All 
Other Chemical Product and Preparation Manufacturing (NAICS 3259A0) 
(BLS series code PCU3259-3259).
    Using the 2002 Benchmark I-O data, we found that these four NAICS 
industries accounted for approximately 95 percent of SNF chemical 
expenses. The remaining 5 percent of SNF chemical expenses are for five 
other incidental NAICS chemicals industries, such as Alkalies and 
Chlorine Manufacturing. We are proposing to create a blended index 
based on those four NAICS chemical expenses listed above that account 
for 95 percent of SNF chemical expenses. We are proposing to create a 
blend based on each NAICS' expenses as a share of their sum. As stated 
above, we propose that if the 2007 Benchmark I-O data become available 
between the proposed and

[[Page 26459]]

final rule with sufficient time to incorporate such data into the final 
rule, we would incorporate these data, as appropriate, into the FY 
2010-based SNF market basket for the final rule. In addition, we 
propose that to the extent the incorporation of the 2007 Benchmark I-O 
data results in a different composition of chemical costs, we may 
revise, as appropriate, the blended chemical index set forth above to 
reflect these more recent data on SNF chemical purchases, to better 
align the costs with its price proxy. Table 14 below provides the 
weights for the blended chemical index.

            Table 14--Proposed Chemical Blended Index Weights
------------------------------------------------------------------------
                                                              Weights
             NAICS                 Industry description      (percent)
------------------------------------------------------------------------
325190.........................  Other basic organic                   7
                                  chemical manufacturing.
325510.........................  Paint and coating                    12
                                  manufacturing.
325610.........................  Soap and cleaning                    49
                                  compound manufacturing.
3259A0.........................  All other chemical                   32
                                  product and
                                  preparation
                                  manufacturing.
                                 .......................             100
------------------------------------------------------------------------

The FY 2004-based SNF market basket also used a blended chemical proxy 
that was based on 1997 Benchmark I-O data. We believe our proposed 
chemical blended index for the FY 2010-based SNF market basket is 
technically appropriate, as it reflects more recent data on SNFs' 
purchasing patterns.
     Medical Instruments and Supplies: We are proposing to use 
the PPI for Medical, Surgical, and Personal Aid Devices (BLS series 
code WPU156) to measure the price growth of this cost category. The FY 
2004-based SNF market basket did not include a separate cost category 
for these expenses. Rather, these expenses were classified in the 
miscellaneous products cost category and proxied by the PPI for 
Finished Goods less Food and Energy (BLS series code WPUSOP3500). As 
stated above, we are proposing to break-out this cost category to proxy 
these expenses by a more specific price index that better reflects the 
price growth of medical instruments and supplies.
     Rubber and Plastics: We are proposing to use the PPI for 
Rubber and Plastic Products (BLS series code WPU07) to measure price 
growth of this cost category. We used the same index in the FY 2004-
based SNF market basket.
     Paper and Printing Products: We are proposing to use the 
PPI for Converted Paper and Paperboard Products (BLS series code 
WPU0915) to measure the price growth of this cost category. We used the 
same index in the FY 2004-based SNF market basket.
     Apparel: We are proposing to use the PPI for Apparel (BLS 
series code WPU0381) to measure the price growth of this cost category. 
The FY 2004-based SNF market basket did not have a separate cost 
category for these expenses. Rather, these expenses were classified in 
the miscellaneous products cost category and proxied by the PPI for 
Finished Goods less Food and Energy. As stated above, we are proposing 
to break-out this cost category to proxy these expenses by a more 
specific price index that better reflects the price growth of apparel 
products.
     Machinery and Equipment: We are proposing to use the PPI 
for Machinery and Equipment (BLS series code WPU11) to measure the 
price growth of this cost category. The 2004-based index did not have a 
separate cost category for these expenses. Rather, these expenses were 
classified in the miscellaneous products cost category and proxied by 
the PPI for Finished Goods less Food and Energy (BLS series code 
WPUSOP3500). As stated above, we are proposing to break-out this cost 
category to proxy these expenses by a more specific price index that 
reflects the price growth of machinery and equipment.
     Miscellaneous Products: For measuring price change in the 
Miscellaneous Products cost category, we are proposing to use the PPI 
for Finished Goods less Food and Energy (BLS series code WPUSOP3500). 
Both food and energy are already adequately represented in separate 
cost categories and should not also be reflected in this cost category. 
We used the same index in the FY 2004-based SNF market basket.
     Nonmedical Professional Fees: Labor-Related and Nonmedical 
Professional Fees: Nonlabor-Related: We are proposing to use the ECI 
for Total Compensation for Professional and Related Occupations 
(Private Industry) (BLS series code CIU2010000120000I) to measure the 
price growth of these categories. As described in more detail below, 
for this revising and rebasing of the SNF market basket we are 
proposing to divide the nonmedical professional fees cost category into 
two separate cost categories: (1) Nonmedical professional fees: labor-
related; and (2) nonmedical professional fees: Nonlabor-related. By 
separating these two categories we are able to identify more precisely 
which categories are to be included in the labor-related share, which 
is used in applying the SNF PPS geographic adjustment factor. We are 
proposing to proxy both of these cost categories by the ECI for Total 
Compensation for Professional and Related Occupations (Private 
Industry). This is the same proxy that was used in the FY 2004-based 
SNF market basket.
     Administrative and Facilities Support Services: We are 
proposing to use the ECI for Total Compensation for Office and 
Administrative Support Services (Private Industry) (BLS series code 
CIU2010000220000I) to measure the price growth of this category. The FY 
2004-based SNF market basket did not have a separate cost category for 
these expenses. Rather, these expenses were classified under labor 
intensive services and proxied by the ECI for Compensation for Service 
Occupations (Private Industry). As stated above, we are proposing to 
create a separate cost category for these expenses to reflect the 
specific price changes associated with these services.
     All Other: Labor-Related Services: We are proposing to use 
the ECI for Total Compensation for Service Occupations (Private 
Industry) (BLS series code CIU2010000300000I) to measure the price 
growth of this cost category (previously referred to as the labor-
intensive cost category in the FY 2004-based SNF market basket index). 
We used the same index in the FY 2004-based SNF market basket. As 
explained above, for this revising and rebasing of the SNF market 
basket, we are proposing to revise our label for the labor-intensive 
services to the all other: labor-related services.
     Financial Services: We are proposing to use the ECI for 
Total Compensation for Financial Activities

[[Page 26460]]

(Private Industry) (BLS series code CIU201520A000000I) to measure the 
price growth of this cost category. The FY 2004-based SNF market basket 
did not have a separate cost category for these expenses. Rather, these 
expenses were classified under nonlabor intensive services cost 
category and proxied by the CPI for All Items (Urban). As stated above, 
we are proposing to create a separate cost category for these expenses 
to reflect the specific price changes associated with these services.
     Telephone Services: We are proposing to use the CPI for 
Telephone Services (Urban) (BLS series code CUUR0000SEED) to measure 
the price growth of this cost category. We used the same index in the 
FY 2004-based SNF market basket.
     Postage: We are proposing to use the CPI for Postage and 
Delivery Services (Urban) (BLS series code CUUR0000SEEC) to measure the 
price growth of this cost category. We used the same index in the FY 
2004-based SNF market basket.
     All Other: NonLabor-Related Services: We are proposing to 
use the CPI for All Items Less Food and Energy (BLS series code 
CUUR0000SA0L1E) to measure the price growth of this cost category 
(previously referred to as the nonlabor-intensive cost category in the 
FY 2004-based SNF market basket index). Previously these costs were 
proxied by the CPI for All Items (Urban). We believe that using the CPI 
for All Items Less Food and Energy (BLS series code CUUR0000SA0L1E) 
will remove any double-counting of food and energy prices, which are 
already captured elsewhere in the market basket. Consequently, we 
believe that the incorporation of this proxy represents a technical 
improvement to the market basket.
     Capital-Related Expenses: For the capital price proxies 
(with the exception of the price proxy for the other capital-related 
cost category weight), we calculate vintage weighted price proxies. The 
methodology used to derive the vintage weights was described above. 
Below, we describe the price proxies for the SNF capital-related 
expenses:
     Depreciation--Building and Fixed Equipment: For measuring 
price change in this cost category, we are proposing to use BEA's 
chained price index for nonresidential construction for hospital and 
special care facilities. This is a publicly available price index used 
by BEA to deflate current-dollar private fixed investment for hospitals 
and special care facilities. The 2004-based index used the Boeckh 
Institutional Construction Index, which is not publicly available. We 
compared the BEA index with the Boeckh Institutional Construction Index 
and found that the average growth rates in the two series were similar 
over the historical time period. We are proposing to use the BEA price 
index in the FY 2010-based SNF market basket as this index is a 
publicly available index that reflects the price inflation associated 
with nonresidential construction, such as the construction of hospitals 
and special care facilities. As stated above, we prefer that our 
proxies are publicly available because this will help ensure that our 
market basket updates are as transparent to the public as possible.
     Depreciation--Movable Equipment: For measuring price 
change in this cost category, we are proposing to use the PPI for 
Machinery and Equipment (BLS series code WPU11). The same price proxy 
was used in the FY 2004-based SNF market basket index.
     Interest--Government and Nonprofit SNFs: For measuring 
price change in this cost category, we are proposing to use the Average 
Yield for Municipal Bonds from the Bond Buyer Index of 20 bonds. CMS 
input price indexes, including this proposed rebased and revised SNF 
market basket, appropriately reflect the rate of change in the price 
proxy and not the level of the price proxy. While SNFs may face 
different interest rate levels than those included in the Bond Buyer 
Index, the rate of change between the two is not significantly 
different. The same price proxy was used in the FY 2004-based SNF 
market basket index.
     Interest--For-profit SNFs: For measuring price change in 
this cost category, we are proposing to use the Average Yield for 
Moody's AAA Corporate Bonds. Again, the proposed revised and rebased 
SNF market basket index focuses on the rate of change in this interest 
rate, not on the level of the interest rate. The same price proxy was 
used in the FY 2004-based SNF market basket index.
     Other Capital-related Expenses: For measuring price change 
in this cost category, we are proposing the CPI-U for Rent of Primary 
Residence (BLS series ID CUUR0000SEHA). The same price proxy was used 
in the FY2004-based SNF market basket index, though the naming 
convention is slightly different as we have provided the full BLS 
naming convention.
    Table 15 shows the proposed price proxies for the FY 2010-based SNF 
Market Basket.

Table 15--Proposed Price Proxies for the FY 2010-Based SNF Market Basket
------------------------------------------------------------------------
         Cost category               Weight        Proposed price proxy
------------------------------------------------------------------------
Compensation...................          62.093  .......................
    Wages and Salaries.........          50.573  ECI for Wages and
                                                  Salaries for Nursing
                                                  Care Facilities.
    Employee Benefits..........          11.520  ECI for Benefits for
                                                  Nursing Care
                                                  Facilities.
Utilities......................           2.223  .......................
    Electricity................           1.411  PPI for Commercial
                                                  Electric Power.
    Fuels, Nonhighway..........           0.667  PPI for Commercial
                                                  Natural Gas.
    Water and Sewerage.........           0.145  CPI-U for Water and
                                                  Sewerage Maintenance.
Professional Liability                    1.141  CMS Hospital
 Insurance.                                       Professional Liability
                                                  Insurance Index.
All Other......................          27.183  .......................
    Other Products.............          16.148  .......................
        Pharmaceuticals........           7.872  PPI for Pharmaceuticals
                                                  for Human Use,
                                                  Prescription.
        Food, Wholesale                   3.661  PPI for Processed Foods
         Purchase.                                and Feeds.
        Food, Retail Purchases.           1.190  CPI-U for Food Away
                                                  From Home.
        Chemicals..............           0.166  Blend of Chemical PPIs.
        Medical Instruments and           0.764  PPI for Medical,
         Supplies.                                Surgical, and Personal
                                                  Aid Devices.
        Rubber and Plastics....           0.981  PPI for Rubber and
                                                  Plastic Products.
        Paper and Printing                0.838  PPI for Converted Paper
         Products.                                and Paperboard
                                                  Products.
        Apparel................           0.195  PPI for Apparel.
        Machinery and Equipment           0.190  PPI for Machinery and
                                                  Equipment.
        Miscellaneous Products.           0.291  PPI for Finished Goods
                                                  Less Food and Energy.
    All Other Services.........          11.035  .......................

[[Page 26461]]

 
        Labor-Related Services.           6.227  .......................
            Nonmedical                    3.427  ECI for Total
             Professional Fees:                   Compensation for
             Labor-related.                       Professional and
                                                  Related Occupations.
            Administrative and            0.497  ECI for Total
             Facilities Support.                  Compensation for
                                                  Office and
                                                  Administrative
                                                  Support.
            All Other: Labor-             2.303  ECI for Total
             Related Services.                    Compensation for
                                                  Service Occupations.
        Non Labor-Related                 4.808  .......................
         Services.
            Nonmedical                    2.042  ECI for Total
             Professional Fees:                   Compensation for
             Non Labor-Related.                   Professional and
                                                  Related Occupations.
            Financial Services.           0.899  ECI for Total
                                                  Compensation for
                                                  Financial Activities.
            Telephone Services.           0.572  CPI-U for Telephone
                                                  Services.
            Postage............           0.240  CPI-U for Postage and
                                                  Delivery Services.
            All Other: Nonlabor-          1.055  CPI-U for All Items
             Related Services.                    Less Food and Energy.
Capital-Related Expenses.......           7.360  .......................
    Total Depreciation.........           3.180  .......................
        Building and Fixed                2.701  BEA chained price index
         Equipment.                               for nonresidential
                                                  construction for
                                                  hospitals and special
                                                  care facilities--
                                                  vintage weighted (25
                                                  years).
        Movable Equipment......           0.479  PPI for Machinery and
                                                  Equipment--vintage
                                                  weighted (6 years).
    Total Interest.............           2.096  .......................
        For-Profit SNFs........           0.869  Average yield on
                                                  municipal bonds (Bond
                                                  Buyer Index 20 bonds)--
                                                  vintage weighted (22
                                                  years).
        Government and                    1.227  Average yield on
         Nonprofit SNFs.                          Moody's AAA corporate
                                                  bonds--vintage
                                                  weighted (22 years).
    Other Capital-Related                 2.084  CPI-U for Rent of
     Expenses.                                    Primary Residence.
                                ----------------
Total..........................         100.000  .......................
------------------------------------------------------------------------

4. Proposed Market Basket Estimate for the FY 2014 SNF PPS Update
    As discussed previously in this proposed rule, beginning with the 
FY 2014 SNF PPS update, we are proposing to adopt the FY 2010-based SNF 
market basket as the appropriate market basket of goods and services 
for the SNF PPS.
    Based on IGI's first quarter 2013 forecast with history through the 
fourth quarter of 2012, the most recent estimate of the proposed FY 
2010-based SNF market basket for FY 2014 is 2.3 percent. IGI is a 
nationally recognized economic and financial forecasting firm that 
contracts with CMS to forecast the components of CMS' market baskets. 
Based on IGI's first quarter 2013 forecast with history through the 
fourth quarter of 2012, the estimate of the current FY 2004-based SNF 
market basket for FY 2014 is 2.5 percent.
    Table 16 compares the proposed FY 2010-based SNF market basket and 
the FY 2004-based SNF market basket percent changes. For the historical 
period between FY 2008 and FY 2012, the average difference between the 
two market baskets is -0.3 percentage point. This is primarily the 
result of lower compensation price increases in the FY 2010-based 
market basket compared to the FY 2004-based SNF market basket. For the 
forecasted period between FY 2013 and FY 2015, the difference in the 
market basket forecasts is similar.

Table 16--Proposed FY 2010-Based SNF Market Basket and FY 2004-Based SNF
                Market Basket, Percent Changes: 2008-2015
------------------------------------------------------------------------
                                     Proposed rebased
         Fiscal year (FY)           FY 2010-based SNF  FY 2004-based SNF
                                      market basket          basket
------------------------------------------------------------------------
Historical data:
    FY 2008.......................                3.5                3.6
    FY 2009.......................                2.4                2.8
    FY 2010.......................                1.8                2.0
    FY 2011.......................                2.0                2.2
    FY 2012.......................                1.8                2.2
        Average FY 2008-2012......                2.3                2.6
Forecast:
    FY 2013.......................                1.9                2.3
    FY 2014.......................                2.3                2.5
    FY 2015.......................                2.4                2.6
        Average FY 2013-2015......                2.2                2.5
------------------------------------------------------------------------
Source: IHS Global Insight, Inc. 1st quarter 2013 forecast with
  historical data through 4th quarter 2012.


[[Page 26462]]

5. Labor-Related Share
    We define the labor-related share (LRS) as those expenses that are 
labor-intensive and vary with, or are influenced by, the local labor 
market. Each year, we calculate a revised labor-related share based on 
the relative importance of labor-related cost categories in the input 
price index. In this FY 2014 SNF PPS proposed rule, we are proposing to 
revise the labor-related share to reflect the relative importance of 
the following proposed FY 2010-based SNF market basket cost weights 
that we believe are labor-intensive and vary with, or are influenced 
by, the local labor market: (1) Wages and salaries; (2) employee 
benefits; (3) contract labor; (4) the labor-related portion of 
nonmedical professional fees; (5) administrative and facilities support 
services; (6) all other: labor-related services (previously referred to 
in the FY 2004-based SNF market basket as labor-intensive); and (7) a 
proportion of capital-related expenses. We are proposing to continue to 
include a proportion of capital-related expenses because a portion of 
these expenses are deemed to be labor-intensive and vary with, or are 
influenced by, the local labor market. For example, a proportion of 
construction costs for a medical building would be attributable to 
local construction workers' compensation expenses.
    Consistent with previous SNF market basket revisions and rebasings, 
the ``all other: labor-related services'' cost category is mostly 
comprised of building maintenance and security services (including, but 
not limited to, commercial and industrial machinery and equipment 
repair, nonresidential maintenance and repair, and investigation and 
security services). Because these services tend to be labor-intensive 
and are mostly performed at the SNF facility (and therefore, unlikely 
to be purchased in the national market), we believe that they meet our 
definition of labor-related services.
    For the proposed FY 2010-based SNF market basket, the proposed 
inclusion of the administrative and facilities support services cost 
category into the labor-related share remains consistent with the 
current labor-related share, since this cost category was previously 
included in the FY 2004-based SNF market basket labor-intensive cost 
category. As previously stated, we are proposing to establish a 
separate administrative and facilities support services cost category 
so that we can use the ECI for Total Compensation for Office and 
Administrative Support Services to reflect the specific price changes 
associated with these services.
    For the FY 2004-based SNF market basket, we assumed that all 
nonmedical professional services (including accounting and auditing 
services, engineering services, legal services, and management and 
consulting services) were purchased in the local labor market and, 
thus, all of their associated fees varied with the local labor market. 
As a result, we previously included 100 percent of these costs in the 
labor-related share. In an effort to determine more accurately the 
share of nonmedical professional fees that should be included in the 
labor-related share, we surveyed SNFs regarding the proportion of those 
fees that are attributable to local firms and the proportion that are 
purchased from national firms. We notified the public of our intent to 
conduct this survey on December 9, 2005 (70 FR 73250) and received no 
comments (71 FR 8588).
    With approval from OMB, we reached out to the industry and received 
responses to our survey from 141 SNFs. Using data on full-time 
equivalents to allocate responding SNFs across strata (region of the 
country and urban/rural status), post-stratification weights were 
calculated. Based on these weighted results, we determined that SNFs 
purchase, on average, the following portions of contracted professional 
services inside their local labor market:
     86 percent of accounting and auditing services.
     89 percent of architectural, engineering services.
     78 percent of legal services.
     87 percent of management consulting services.
    Together, these four categories represent 2.672 percentage points 
of the total costs for the proposed FY 2010-based SNF market basket. We 
applied the percentages from this special survey to their respective 
SNF market basket weights to separate them into labor-related and 
nonlabor-related costs. As a result, we are designating 2.285 of the 
2.672 total to the labor-related share, with the remaining 0.387 
categorized as nonlabor-related.
    In addition to the professional services listed above, we also 
classified expenses under NAICS 55, Management of Companies and 
Enterprises, into the nonmedical professional fees cost category. The 
NAICS 55 data are mostly comprised of corporate, subsidiary, and 
regional managing offices, or otherwise referred to as home offices. 
Formerly, all of the expenses within this category were considered to 
vary with, or be influenced by, the local labor market, and thus, were 
included in the labor-related share. Because many SNFs are not located 
in the same geographic area as their home office, we analyzed data from 
a variety of sources to determine what proportion of these costs should 
be appropriately included in the labor-related share.
    Our proposed methodology is based on data from the MCRs, as well as 
a CMS database of Home Office Medicare Records (HOMER) (a database that 
provides city and state information (addresses) for home offices). The 
MCR requires SNFs to report their home office compensation costs. Using 
the HOMER database to determine the home office location for each home 
office provider number, we compared the location of the SNF with the 
location of the SNF's home office. We propose to determine the 
proportion of NAICS 55 costs that should be allocated to the labor-
related share based on the percent of SNF home office compensation 
attributable to SNFs that had home offices located in their respective 
local labor markets--defined as being in the same MSA. We determined a 
SNF's MSA using its Zip Code information from the MCR, while a home 
office MSA was determined using the Medicare HOMER Database, which 
provided a home office Zip Code, as well.
    As stated above, we are proposing to determine the proportion of 
NAICS 55 costs that should be allocated to the labor-related share 
based on the percent of SNF home office compensation attributable to 
those SNFs that had home offices located in their respective labor 
markets. Using this proposed methodology, we determined that 32 percent 
of SNF home office compensation costs were for SNFs that had home 
offices located in their respective local labor markets; therefore, we 
propose to allocate 32 percent of NAICS 55 expenses to the labor-
related share. We believe that this methodology provides a reasonable 
estimate of the NAICS 55 expenses that are appropriately allocated to 
the labor-related share, because we primarily rely on data on home 
office compensation costs as provided by SNFs on Medicare cost reports. 
By combining these data with the specific MSAs for the SNF and their 
associated home office, we believe we have a reasonable estimate of the 
proportion of SNF's home office costs that would be incurred in the 
local labor market.
    In the proposed FY 2010-based SNF market basket, NAICS 55 expenses 
that were subject to allocation based on the home office allocation 
methodology represent 1.833 percent of the total costs. Based on the 
home office results, we are apportioning 0.587 percentage

[[Page 26463]]

point of the 1.833 percentage points figure into the labor-related 
share and designating the remaining 1.247 percentage points as 
nonlabor-related.
    The Benchmark I-O data contains other smaller cost categories that 
we allocate fully to either ``nonmedical professional fees: Labor-
related'' or ``nonmedical professional fees: nonlabor-related.'' 
Together, the sum of these smaller cost categories, the four nonmedical 
professional fees cost categories where survey results were available, 
and the NAICS 55 expenses represent all nonmedical professional fees, 
or 5.469 percent of total costs in the SNF market basket. Of the 5.469 
percentage points, 3.427 percentage points represent professional fees: 
Labor-related while 2.042 percentage points represent nonmedical 
professional fees: Nonlabor-related.
    Each year, we calculate a revised labor-related share based on the 
relative importance of labor-related cost categories in the SNF market 
basket. Table 17 summarizes the proposed updated labor-related share 
for FY 2014, which is based on the proposed rebased and revised FY 
2010-based SNF market basket, compared to the labor-related share that 
was used for the FY 2013 SNF PPS update.

    Table 17--Labor-Related Relative Importance, FY 2013 and FY 2014
------------------------------------------------------------------------
                                         Relative           Relative
                                    importance, labor- importance, labor-
                                     related, FY 2013   related, FY 2014
                                      (FY 2004-based     (FY 2010-based
                                       index) 12:2        index) 13:1
                                         forecast           forecast
------------------------------------------------------------------------
Wages and salaries\1\.............             49.847             49.204
Employee benefits.................             11.532             11.546
Nonmedical Professional fees:                   1.307              3.451
 labor-related....................
Administrative and facilities                     N/A              0.501
 support services.................
All Other: Labor-related                        3.364              2.292
 services\2\......................
Capital-related (.391)............              2.333              2.770
                                   -------------------------------------
    Total.........................             68.383             69.764
------------------------------------------------------------------------
\1\ As discussed above in section V.A.2 in this preamble, the wages and
  salaries and employee benefits cost weight reflect contract labor
  costs.
\2\ Previously referred to as labor-intensive services cost category in
  the FY 2004 -based SNF market basket.

B. Monitoring Impact of FY 2012 Policy Changes

    In the FY 2012 SNF PPS final rule, we stated we would monitor the 
impact of certain FY 2012 policy changes on various aspects of the SNF 
PPS (76 FR 48498). Specifically, we have been monitoring the impact of 
the following FY 2012 policy changes:
     Recalibration of the FY 2011 SNF parity adjustment to 
align overall payments under RUG-IV with those under RUG-III.
     Allocation of group therapy time to pay more appropriately 
for group therapy services based on resource utilization and cost.
     Implementation of changes to the MDS 3.0 patient 
assessment instrument, most notably the introduction of the Change-of-
Therapy (COT) Other Medicare Required Assessment (OMRA).
    We have posted quarterly memos to the SNF PPS Web site which 
highlight some of the trends we have observed over a given time period. 
These memos may be accessed through the SNF PPS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/SNF_Monitoring.zip. Below, we provide a summary of the results derived 
from this monitoring effort.
1. RUG Distributions
    As stated in the FY 2012 SNF PPS final rule (76 FR 48493), the 
recalibration of the FY 2011 parity adjustment used 8 months of FY 2011 
data as the basis for the recalibration. We observed that case-mix 
utilization patterns continued to be consistent over the final 4 months 
of FY 2011 and would not have resulted in a significant difference in 
the calculated amount of the recalibrated parity adjustment. We have 
posted data illustrating the RUG-IV distribution of days for the 
entirety of FY 2011, as compared to the days distribution used to 
calculate the parity adjustment in the FY 2012 final rule, and the 
distribution of days for FY 2012, all of which may be found at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/SNF_Monitoring.zip.
    Additionally, case-mix utilization observed during FY 2012 has not 
shown unanticipated changes in patient classification. Overall patient 
case mix is not significantly different from that observed in FY 2011. 
Table 18 illustrates a breakdown of the SNF case-mix distribution of 
service days by the major RUG classification categories for FY 2011 and 
FY 2012.

      Table 18--SNF Case-Mix Distributions by Major RUG-IV Category
------------------------------------------------------------------------
                                    FY 2011 (percent)  FY 2012 (percent)
------------------------------------------------------------------------
Rehabilitation Plus Extensive                     2.5                1.8
 Services.........................
Rehabilitation....................               87.9               88.8
Extensive Services................                0.6                0.7
Special Care......................                4.6                4.9
Clinically Complex................                2.5                2.2
Behavioral Symptoms and Cognitive                 0.4                0.3
 Performance......................
Reduced Physical Function.........                1.5                1.4
------------------------------------------------------------------------


[[Page 26464]]

    As illustrated in Table 18, there has been a decrease in the 
Rehabilitation Plus Extensive Services category and increases in some 
of the medically-based RUG categories, specifically Special Care and 
Extensive Services.
    It should be noted that the recalibration of the parity adjustment 
applied only to those RUG-IV groups with a therapy component 
(Rehabilitation Plus Extensive Services and Rehabilitation). This 
caused a shift in the hierarchy of nursing case-mix weights among the 
various RUG-IV groups. Since SNFs are permitted to ``index maximize'' 
when determining a resident's RUG classification (that is, of those 
RUGs for which the resident qualifies, SNFs are permitted to choose the 
one with the highest per diem payment), it is possible that the 
aforementioned case-mix distribution shifts reflect residents that had 
previously been classified into therapy groups but now index maximize 
into nursing groups instead.
    Looking specifically at the case-mix distribution for 
Rehabilitation RUGs only, the data show an increase in the percentage 
of service days at the highest therapy level (Ultra High 
Rehabilitation) in FY 2012. This is illustrated in Table 19.

 Table 19--SNF Case-Mix Distribution for Therapy RUG-IV Groups, by Minor
                        RUG-IV Therapy Categories
------------------------------------------------------------------------
                                    FY 2011 (percent)  FY 2012 (percent)
------------------------------------------------------------------------
Ultra-High Rehabilitation (>= 720                44.8               48.6
 minutes of therapy per week).....
Very-High Rehabilitation (500-719                26.9               25.6
 minutes of therapy per week).....
High Rehabilitation (325-499                     10.8               10.1
 minutes of therapy per week).....
Medium Rehabilitation (150-324                    7.6                6.2
 minutes of therapy per week).....
Low Rehabilitation (45-149 minutes                0.1                0.1
 of therapy per week).............
------------------------------------------------------------------------

    Although the decreases in the percentage of service days which 
classify into the Very-High, High, and Medium Rehabilitation RUG-IV 
therapy categories may be explained by the increased utilization of the 
Ultra-High Rehabilitation RUG-IV therapy category, some of the decrease 
may be due to index maximization into the Special Care RUG-IV category.
2. Group Therapy Allocation
    To account more accurately for resource utilization and cost and to 
equalize the payment incentives across therapy modes, we allocated 
group therapy time beginning in FY 2012. We anticipated that this 
policy would result in some change to the type of therapy mode (that 
is, individual, concurrent, or group) used for SNF residents. As noted 
in the section above, we have not observed any significant difference 
in patient case mix. However, as illustrated in Table 20, providers 
have significantly changed the mode of therapy since our STRIVE study 
(2006-2007).

                                       Table 20--Mode of Therapy Provision
----------------------------------------------------------------------------------------------------------------
                                                                                 FY 2011            FY 2012
                                                         STRIVE  (percent)      (percent)          (percent)
----------------------------------------------------------------------------------------------------------------
Individual.............................................                 74               91.8               99.5
Concurrent.............................................                 25                0.8                0.4
Group..................................................                 <1                7.4                0.1
----------------------------------------------------------------------------------------------------------------

    In the FY 2010 final rule (74 FR 40288, 40315-40319), we 
established a policy that, beginning in FY 2011, we would allocate 
concurrent therapy without the allocation of group therapy and, as a 
result, providers shifted from concurrent therapy to group therapy. In 
the FY 2012 SNF PPS final rule (76 FR 48486, 48511-48517), we 
established a policy that would allocate group therapy, and data from 
FY 2012 indicate that facilities are providing individual therapy 
almost exclusively.
3. MDS 3.0 Changes
    In the FY 2012 SNF PPS final rule, we introduced a new assessment 
called the COT OMRA to capture more accurately the therapy services 
provided to SNF residents. Effective for services provided on or after 
October 1, 2011, SNFs are required to complete a COT OMRA for patients 
classified into a RUG-IV therapy category (and for patients receiving 
therapy services who are classified into a nursing RUG because of index 
maximization), whenever the intensity of therapy changes to such a 
degree that it would no longer reflect the RUG-IV classification and 
payment assigned for the patient based on the most recent assessment 
used for Medicare payment (76 FR 48525). An evaluation of the necessity 
for a COT OMRA must be completed at the end of each COT observation 
period, which is a successive 7-day window beginning on the day 
following the ARD set for the most recent scheduled or unscheduled PPS 
assessment (or beginning the day therapy resumes in cases where an EOT-
R OMRA is completed), and ending every seven calendar days thereafter. 
In cases where the resident's therapy has changed to such a degree that 
it is no longer consistent with the resident's current RUG-IV 
classification, then the SNF must complete a COT OMRA to reclassify the 
resident into the appropriate RUG-IV category. The new RUG-IV group 
resulting from the COT OMRA is billed starting the first day of the 7-
day COT observation period for which the COT OMRA was completed and 
remains at this level until a new assessment is done that changes the 
patient's RUG-IV classification. Table 21 shows the distribution of all 
MDS assessment types as a percentage of all MDS assessments.

[[Page 26465]]



             Table 21--Distribution of MDS Assessment Types
------------------------------------------------------------------------
                                                    FY 2011     FY 2012
                                                   (percent)   (percent)
------------------------------------------------------------------------
Scheduled PPS assessment........................          95          84
Start-of-Therapy (SOT) OMRA.....................           2           2
End-of-Therapy (EOT) OMRA (w/o Resumption)......           3           3
Combined SOT/EOT OMRA...........................           0           0
End-of-Therapy OMRA (w/Resumption) (EOT-R OMRA).         N/A           0
Combined SOT/EOT-R OMRA.........................         N/A           0
Change-of-Therapy (COT) OMRA....................         N/A          11
------------------------------------------------------------------------

    Prior to the implementation of the COT OMRA, scheduled PPS 
assessments comprised the vast majority of completed assessments. With 
the implementation of the COT OMRA for FY 2012, scheduled PPS 
assessments still comprise the vast majority of completed MDS 
assessments, though the COT OMRA is the most frequently completed OMRA.
4. Conclusion
    Information related to our monitoring activities is posted on the 
SNF PPS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/Downloads/SNF_Monitoring.zip. Based on the data 
reviewed thus far, we have found no evidence of the possible negative 
impacts on SNF providers cited in comments in the FY 2012 final rule 
(see 76 FR 48497-98, 48537), particularly references to a potential 
``double hit'' from the combined impact of the recalibration of the FY 
2011 SNF parity adjustment and the FY 2012 policy changes (for example, 
allocation of group therapy time and introduction of the COT OMRA). As 
noted in the data provided in this section, overall case mix has not 
been affected significantly, which suggests that the aforementioned 
changes, while ensuring more accurate payment, have been absorbed into 
facility practices in such a manner that facilities continue to 
maintain historical trends in terms of patient case mix. Therefore, 
while we will continue our SNF monitoring efforts, we will post 
information to the aforementioned Web site only as appropriate.

C. Ensuring Accuracy in Grouping to Rehabilitation RUG-IV Categories

    As noted in section III.C of this proposed rule, under section 
1888(e)(4)(G)(i) of the Act, the federal rate incorporates an 
adjustment to account for facility case mix, using a classification 
system that accounts for the relative resource utilization of different 
patient types. As part of the Nursing Home Case-Mix and Quality 
demonstration project, Version III of the Resource Utilization Groups 
(RUG-III) case-mix classification system was developed to capture 
resource use of nursing home patients and to provide an improved method 
of tracking the quality of their care. In 1998, the first version of 
RUG-III was a 44-group model for classifying SNF patients into 
homogeneous groups according to their clinical characteristics and the 
amount and type of resources they use as measured by the Resident 
Assessment Instrument, the Minimum Data Set (MDS). A detailed 
description of the RUG-III groups appears in the interim final rule 
with comment period from May 12, 1998 (63 FR 26262-26263). The RUG-III 
groups were the basis for the case mix indexes used to establish 
equitable prospective payment levels for patients with different 
service use.
    In FY 2006, the RUG-III classification system was refined to 
include 53 groups for case-mix classification that continued to be 
based on patient data collected on the MDS 2.0. This reflected the 
addition of 9 new RUG groups comprising a new Extensive Services plus 
Rehabilitation payment category, to account for the higher cost of 
beneficiaries requiring both rehabilitation and certain high-intensity 
medical services. A detailed explanation of the RUG-III refinement 
appears in the FY 2006 proposed rule (70 FR 29076-29079, May 19, 2005).
    In FY 2011, the RUG-IV classification system was implemented and 
included 66 groups for case-mix classification based on patient data 
collected on the newest version of the Resident Assessment Instrument, 
MDS 3.0. A detailed explanation of the RUG-IV model appears in the FY 
2010 proposed rule (74 FR 22220-22238, May 12, 2009).
    In the May 12, 1998 interim final rule with comment period (63 FR 
26252, 26256), we explained how the RUG-III system was used to place 
SNF patients into one of 44 patient groups or subcategories used for 
payment. The RUG category of Medium Rehabilitation (Medium Rehab) was 
explained in conjunction with the RUG categories of High and Very High 
Rehabilitation. Among other requirements specific to each category, 
``all three require at least 5 days per week of skilled rehabilitative 
therapy, but they are split according to weekly treatment time'' (63 FR 
26258). To qualify for Medium Rehab, a patient also needs to receive at 
least 150 minutes of therapy of any combination of the three 
rehabilitation disciplines: physical therapy, occupational therapy, and 
speech therapy.
    Subsequently, across all iterations of the SNF PPS (including the 
RUG refinement in FY 2006 and the transition from RUG-III to RUG-IV in 
FY 2011), the criteria for classification into the Medium Rehab 
category remained the same. As set forth in the FY 2010 final rule (74 
FR 40389), to be classified into the Medium Rehab category under RUG 
III or RUG IV, the resident must receive ``5 days any combination of 3 
rehabilitation disciplines.'' In order for the SNF resident to qualify 
for the Medium Rehab or Medium Rehab plus Extensive Services category, 
he or she must receive five distinct calendar days of therapy within a 
7-day time period (and at least 150 minutes of therapy across that time 
as well). This reflects the SNF level of care requirement under Sec.  
409.31(b)(1) that skilled services must be needed and received on a 
daily basis, and the provision at Sec.  409.34(a)(2) which specifies 
that the ``daily basis'' criterion can be met by skilled rehabilitation 
services that are needed and provided at least 5 days per week. 
Further, the payment rates for these RUG groups were based on staff 
time over the requisite number of distinct therapy days. For example, 
the policy would be implemented correctly if a patient received a total 
of 150 minutes of therapy in the form of physical therapy on Monday and 
Wednesday, occupational therapy on Sunday and Tuesday, and speech 
therapy on Friday. In this example, therapy services are being provided 
over a separate and distinct 5-day period (Sunday, Monday, Tuesday, 
Wednesday, and Friday). Similarly, 5 distinct calendar days of

[[Page 26466]]

therapy are required to classify into the High, Very High, and Ultra 
High Rehabilitation categories. The amount of therapy provided over the 
7-day look-back period is currently recorded on the MDS 3.0 in section 
O, item O0400A, O0400B, and O0400C.
    Medium Rehab and Medium Rehab Plus Extensive Services qualifiers 
remained the same under the SNF PPS from 1998 until the present; 
however, the MDS did not contain the appropriate items to permit 
providers to report the number of distinct calendar days of therapy 
that a particular resident receives during a given week, inadvertently 
allowing residents who do not meet the Medium Rehab and Medium Rehab 
Plus Extensive Services qualifiers (under the intended policy as 
discussed above) to classify inappropriately into those RUG categories. 
For example, a resident receives 150 minutes of therapy in the form of 
physical therapy and occupational therapy on Monday (one session of 
physical therapy and one session of occupational therapy) and Wednesday 
(one session of physical therapy and one session of occupational 
therapy) and speech therapy on Friday. The intent of the Medium Rehab 
classification criteria is for such a resident not to classify into the 
Medium Rehab RUG category, since he or she only received therapy on 3 
days (Monday, Wednesday, and Friday) during the 7-day look-back period 
for this PPS assessment. However, the MDS item set only requires the 
SNF to record the number of days therapy was received by each therapy 
discipline during that 7-day look-back period, without distinguishing 
between distinct calendar days. Thus, in the example above, the SNF 
would record on the MDS: 2 days of physical therapy, 2 days of 
occupational therapy, and 1 day of speech therapy. Currently, the RUG 
grouper adds these days together, allowing the resident described above 
to be classified into the Medium Rehab category even though the 
resident did not actually receive 5 distinct calendar days of therapy 
as required by the criteria. This resident would not meet the 
classification criteria for the Medium Rehab category as they were 
intended to be applied.
    In rare instances, the same issue can occur with the Low 
Rehabilitation (Low Rehab) and Low Rehab Plus Extensive Services 
categories, which require rehabilitation services for at least 45 
minutes a week with three days of any combination of the three 
rehabilitation disciplines (and restorative nursing 6 days per week). 
Similar to the Medium Rehab classification criteria, the intent here, 
as well, is to require distinct calendar days of therapy during the 7-
day look-back period (in this case, 3 distinct calendar days of 
therapy). For example, this policy would be implemented correctly if a 
resident received a total of 90 minutes of therapy in the form of 
physical therapy on Monday and Wednesday, occupational therapy on 
Wednesday and Friday, and speech therapy on Friday. In this example, 
therapy services are being provided over 3 distinct calendar days 
(Monday, Wednesday, and Friday). However, as with the Medium Rehab 
category, it is possible for certain residents who do not meet the Low 
Rehab qualifiers under the intended policy to classify inappropriately 
into the Low Rehab category. For example, if a resident were to receive 
90 minutes of therapy in the form of physical therapy and occupational 
therapy on Monday, and physical therapy and speech therapy on Tuesday, 
this patient would only have received therapy for 2 distinct days in 
that 7-day look-back period; however, based on the information 
currently recorded on the MDS, the patient would still be classified in 
a Low Rehab RUG.
    As explained above, we are clarifying that our classification 
criteria for the Rehabilitation RUG categories require that the 
resident receive the requisite number of distinct calendar days of 
therapy to be classified into the Rehabilitation RUG category. However, 
the MDS item set currently does not contain an item that permits SNFs 
to report the total number of distinct calendar days of therapy 
provided by all rehabilitation disciplines, allowing some residents to 
be classified into Rehabilitation RUG categories when they do not 
actually meet our classification criteria. To permit facilities to 
report the number of distinct calendar days that a resident receives 
therapy, and to permit implementation of our Rehabilitation RUG 
classification criteria as intended, we propose to add item O0420 to 
the MDS Item Set, Distinct Calendar Days of Therapy. Effective October 
1, 2013, facilities would be required to record under this item the 
number of distinct calendar days of therapy provided by all the 
rehabilitation disciplines over the 7-day look-back period for the 
current assessment, which would be used to classify the resident into 
the correct Rehabilitation RUG category. We invite comments on our 
proposal to add this item to the MDS Item Set so that we may properly 
implement our Rehabilitation RUG classification criteria based on the 
number of distinct calendar days of therapy a patient received, as 
described above.

D. SNF Therapy Research Project

    Currently, the therapy payment rate component of the SNF PPS is 
based solely on the amount of therapy provided to a patient during the 
7-day look-back period, regardless of the specific patient 
characteristics. The amount of therapy a patient receives is used to 
classify the resident into a RUG category, which then determines the 
per diem payment for that resident. CMS has contracted with Acumen, LLC 
and the Brookings Institution to identify potential alternatives to the 
existing methodology used to pay for therapy services received under 
the SNF PPS.
    As an initial step, the project will review past research studies 
and policy issues related to SNF PPS therapy payment and options for 
improving or replacing the current system of paying for SNF therapy 
services received. We welcome comments and ideas on the existing 
methodology used to pay for therapy services under the SNF PPS. 
Comments may be included as part of comments on this proposed rule. We 
are also soliciting comments outside the comment period and these 
comments should be sent via email to SNFTherapyPayments@cms.hhs.gov. We 
will also regularly update the public on the progress of this project 
on the project Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html.

VI. Provisions of the Proposed Rule and Technical Correction

    As discussed in section III. of this proposed rule, this proposed 
rule would update the payment rates under the SNF PPS for FY 2014 as 
required by section 1888(e)(4)(E)(ii). Also, as discussed in section 
III.B.3. of this proposed rule, we propose that when the forecast 
error, rounded to one significant digit, is 0.5 percentage point, we 
would calculate the forecast error to 2 significant digits in order to 
determine whether the forecast error threshold has been exceeded. 
Further, as discussed in section III.C. of this proposed rule, we 
propose that upon the conversion to ICD-10-CM effective October 1, 
2014, we would use the ICD-10-CM code B20 (in place of the ICD-9-CM 
code 042) to identify those residents for whom it is appropriate to 
apply the AIDS add-on established under section 511 of the MMA. In 
addition, as discussed in section III.D. of this proposed rule, to 
allow for sufficient time to assess the February 28, 2013 OMB changes 
to the statistical area delineations and their

[[Page 26467]]

ramifications, we intend to propose changes to the wage index based on 
the newest CBSA changes in the FY 2015 SNF PPS proposed rule. Thus, we 
would continue to use the previous OMB definitions (that is, those used 
for the FY 2013 SNF PPS update notice) for the FY 2014 SNF PPS wage 
index.
    As discussed previously in section V.A of this proposed rule, we 
propose to revise and rebase the SNF market basket index to reflect a 
base year of FY 2010, and to use this revised and rebased market basket 
to determine the SNF market basket percentage increase for 2014. In 
addition, we propose to revise the labor-related share to reflect the 
relative importance of the labor-related cost weights in the proposed 
FY 2010-based SNF market basket. Also, as discussed in section V.C. of 
this proposed rule, to help ensure accuracy in grouping to the 
rehabilitation RUG categories, we propose to add item O0420 to the MDS 
Item Set, which would require facilities to record the number of 
distinct calendar days of therapy provided by all the rehabilitation 
disciplines over the 7-day look-back period for the current assessment.
    In addition, as discussed earlier in this proposed rule, we are 
proposing to adopt an approach already being followed by other Medicare 
payment systems, under which the lengthy wage index tables that are 
currently published in the Federal Register as part of the annual SNF 
PPS rulemaking, would instead be made available exclusively through the 
Internet on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/WageIndex.html. To adopt this approach, 
we propose to revise Sec.  413.345. Currently, Sec.  413.345 states 
that CMS publishes the wage index in the Federal Register. We propose 
to revise this language, consistent with the language of the 
corresponding statutory authority at section 1888(e)(4)(H)(iii), to 
state that CMS publishes in the Federal Register ``the factors to be 
applied in making the area wage adjustment.'' Accordingly, while the 
annual Federal Register publication would continue to include a 
discussion of the various applicable ``factors'' applied in making the 
area wage adjustment (for example, the SNF PPS's use of the hospital 
wage index exclusive of its occupational mix adjustment), effective 
October 1, 2013, it would no longer include a listing of the individual 
wage index values themselves, which would instead be made available 
exclusively through the Internet on the CMS Web site.
    Further, we propose to make a minor technical correction in the 
regulations text at Sec.  424.11(e)(4), regarding the types of 
practitioners (in addition to physicians) that can sign the required 
SNF level of care certification and recertifications. In the calendar 
year (CY) 2011 Medicare Physician Fee Schedule (MPFS) final rule with 
comment period (75 FR 73387, 73602, 73626-27), we revised the 
regulations at Sec.  424.20(e)(2) to implement section 3108 of the 
Affordable Care Act, which amended section 1814(a)(2) of the Act, by 
adding physician assistants to the provision authorizing nurse 
practitioners and clinical nurse specialists to perform this function. 
However, we inadvertently neglected to make a conforming revision in 
the regulations text at Sec.  424.11(e)(4), an omission that we now 
propose to rectify.

VII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide a 60-day notice in the Federal Register and solicit public 
comments before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to evaluate fairly whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comments on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of the section 
3506(c)(2)(A)-required issues for the following information collection 
requirements (ICRs):

ICRs Regarding Nursing Home and Swing Bed PPS Item Sets

    Under sections 4204(b) and 4214(d) of the Omnibus Budget 
Reconciliation Act of 1987 (OBRA 1987, Pub. L. 100-203 enacted on 
December 22, 1987), the submission and retention of resident assessment 
data for purposes of carrying out OBRA 1987 are not subject to the PRA. 
While certain data items that are collected under the SNF resident 
assessment instrument (or MDS 3.0) fall under the OBRA 1987 exemption, 
MDS 3.0's PPS-related item sets are outside the scope of OBRA 1987 and 
require PRA consideration.
    As discussed in section V.C. of the preamble, this rule proposes to 
add PPS-related Item O0420 to the MDS 3.0 form to capture the number of 
distinct calendar days a SNF resident has received therapy in a seven-
day look-back period. The Item would be added to allow the RUG-IV 
grouper software to calculate more accurately the number of therapy 
days a SNF resident has received in order to place him or her into the 
correct RUG-IV payment group. The Item would not be added as the result 
of any change in statute or policy; rather, it would be added to ensure 
that our existing Rehabilitation RUG classification policies are 
properly implemented as intended.
    While we are proposing to add Item O0420 to the MDS 3.0 form, we do 
not believe this action will cause any measurable adjustments to our 
burden estimates. Consequently, we are not revising the burden 
estimates that have been approved under OCN 0938-1140 (CMS-R-250) for 
the Nursing Home and Swing Bed PPS Item Sets.

Submission of PRA-Related Comments

    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection and recordkeeping 
requirements. These requirements are not effective until they have been 
approved by the OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collection referenced above, access CMS' Web 
site at https://www.cms.hhs.gov/PaperworkReductionActof1995, or email 
your request, including your address, phone number, OMB number, and CMS 
document identifier, to Paperwork@cms.hhs.gov, or call the Reports 
Clearance Office on (410) 786-1326.
    We invite public comments on this proposed information collection 
and recordkeeping requirement. If you comment on this proposed 
information collection and recordkeeping requirement, please do either 
of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
(CMS-1446-P) Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

[[Page 26468]]

VIII. Response to 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.

IX. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA, March 
22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 
4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated an economically significant 
rule, under section 3(f)(1) of Executive Order 12866. Accordingly, we 
have prepared a regulatory impact analysis (RIA) as further discussed 
below. Also, the rule has been reviewed by OMB.
2. Statement of Need
    This proposed rule would update the SNF prospective payment rates 
for FY 2014 as required under section 1888(e)(4)(E) of the Act. It also 
responds to section 1888(e)(4)(H) of the Act, which requires the 
Secretary to ``provide for publication in the Federal Register'' before 
the August 1 that precedes the start of each fiscal year, of the 
unadjusted federal per diem rates, the case-mix classification system, 
and the factors to be applied in making the area wage adjustment. As 
these statutory provisions prescribe a detailed methodology for 
calculating and disseminating payment rates under the SNF PPS, we do 
not have the discretion to adopt an alternative approach.
3. Overall Impacts
    This proposed rule sets forth proposed updates of the SNF PPS rates 
contained in the update notice for FY 2013 (77 FR 46214). Based on the 
above, we estimate that the aggregate impact would be an increase of 
$500 million in payments to SNFs, resulting from the SNF market basket 
update to the payment rates, as adjusted by the MFP adjustment and 
forecast error correction. The impact analysis of this proposed rule 
represents the projected effects of the changes in the SNF PPS from FY 
2013 to FY 2014. Although the best data available are utilized, there 
is no attempt to predict behavioral responses to these changes, or to 
make adjustments for future changes in such variables as days or case-
mix.
    Certain events may occur to limit the scope or accuracy of our 
impact analysis, as this analysis is future-oriented and, thus, very 
susceptible to forecasting errors due to certain events that may occur 
within the assessed impact time period. Some examples of possible 
events may include newly-legislated general Medicare program funding 
changes by the Congress, or changes specifically related to SNFs. In 
addition, changes to the Medicare program may continue to be made as a 
result of previously-enacted legislation, or new statutory provisions. 
Although these changes may not be specific to the SNF PPS, the nature 
of the Medicare program is such that the changes may interact and, 
thus, the complexity of the interaction of these changes could make it 
difficult to predict accurately the full scope of the impact upon SNFs.
    In accordance with sections 1888(e)(4)(E) and 1888(e)(5) of the 
Act, we update the FY 2013 payment rates by a factor equal to the 
market basket index percentage change adjusted by the FY 2012 forecast 
error adjustment (if applicable) and the MFP adjustment to determine 
the payment rates for FY 2014. As discussed previously, for FY 2012 and 
each subsequent FY, as required by section 1888(e)(5)(B) of the Act as 
amended by section 3401(b) of the Affordable Care Act, the market 
basket percentage is reduced by the MFP adjustment. The special AIDS 
add-on established by section 511 of the MMA remains in effect until 
``. . . such date as the Secretary certifies that there is an 
appropriate adjustment in the case mix. . . .'' We have not provided a 
separate impact analysis for the MMA provision. Our latest estimates 
indicate that there are fewer than 4,100 beneficiaries who qualify for 
the add-on payment for residents with AIDS. The impact to Medicare is 
included in the ``total'' column of Table 22. In updating the SNF rates 
for FY 2014, we made a number of standard annual revisions and 
clarifications mentioned elsewhere in this proposed rule (for example, 
the update to the wage and market basket indexes used for adjusting the 
federal rates).
    The annual update set forth in this proposed rule applies to SNF 
payments in FY 2014. Accordingly, the analysis that follows only 
describes the impact of this single year. In accordance with the 
requirements of the Act, we will publish a notice or rule for each 
subsequent FY that will provide for an update to the SNF payment rates 
and include an associated impact analysis.
4. Detailed Economic Analysis
    The FY 2014 impacts appear in Table 22. Using the most recently 
available data, in this case FY 2012, we apply the current FY 2013 wage 
index and labor-related share value to the number of payment days to 
simulate FY 2013 payments. Then, using the same FY 2012 data, we apply 
the FY 2014 wage index and labor-related share value to simulate FY 
2014 payments. We tabulate the resulting payments according to the 
classifications in Table 22, e.g. facility type, geographic region, 
facility ownership, and compare the difference between current and 
proposed payments to determine the overall impact. The breakdown of the 
various categories of data in the table follows.
    The first column shows the breakdown of all SNFs by urban or rural 
status, hospital-based or freestanding status, census region, and 
ownership.
    The first row of figures describes the estimated effects of the 
various changes on all facilities. The next six rows show the effects 
on facilities split by hospital-based, freestanding, urban, and rural 
categories. The urban and rural designations are based on the location 
of the facility under the CBSA designation. The next nineteen rows show 
the effects on facilities by urban versus rural status by census 
region. The last three rows show the effects on facilities by ownership 
(that is, government, profit, and non-profit status).
    The second column in the table shows the number of facilities in 
the impact database.
    The third column of the table shows the effect of the annual update 
to the wage index. This represents the effect of using the most recent 
wage data

[[Page 26469]]

available. The total impact of this change is zero percent; however, 
there are distributional effects of the change.
    The fourth column shows the effect of all of the changes on the FY 
2014 payments. The update of 1.4 percent (consisting of the market 
basket increase of 2.3 percentage points, reduced by the 0.5 percentage 
point forecast error correction and further reduced by the 0.4 
percentage point MFP adjustment) is constant for all providers and, 
though not shown individually, is included in the total column. It is 
projected that aggregate payments will increase by 1.4 percent, 
assuming facilities do not change their care delivery and billing 
practices in response.
    As illustrated in Table 22, the combined effects of all of the 
changes vary by specific types of providers and by location. Though all 
facilities would experience payment increases, the projected impact on 
providers for FY 2014 varies due to the impact of the wage index 
update. For example, due to changes from updating the wage index, 
providers in the rural Pacific region would experience a 2.5 percent 
increase in FY 2014 total payments and providers in the urban East 
South Central region would experience a 0.7 percent increase in FY 2014 
total payments.

                          Table 22--RUG-IV Projected Impact to the SNF PPS for FY 2014
----------------------------------------------------------------------------------------------------------------
                                                                     Number of      Update wage    Total FY 2014
                                                                  facilities  FY       data           change
                                                                       2014          (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Group:
Total...........................................................          15,376             0.0             1.4
    Urban.......................................................          10,578             0.1             1.5
    Rural.......................................................           4,798            -0.3             1.1
    Hospital based urban........................................             757             0.2             1.6
    Freestanding urban..........................................           9,821             0.1             1.5
    Hospital based rural........................................             402            -0.3             1.1
    Freestanding rural..........................................           4,396            -0.3             1.1
Urban by region:
    New England.................................................             804             0.6             2.0
    Middle Atlantic.............................................           1,452             0.9             2.3
    South Atlantic..............................................           1,740            -0.5             0.8
    East North Central..........................................           2,048            -0.3             1.1
    East South Central..........................................             525            -0.7             0.7
    West North Central..........................................             868            -0.6             0.8
    West South Central..........................................           1,240            -0.2             1.2
    Mountain....................................................             490             0.2             1.6
    Pacific.....................................................           1,405             0.8             2.2
    Outlying....................................................               6             0.1             1.5
Rural by region:
    New England.................................................             153             0.4             1.8
    Middle Atlantic.............................................             262            -0.2             1.2
    South Atlantic..............................................             608            -0.5             0.9
    East North Central..........................................             928            -0.8             0.6
    East South Central..........................................             551            -0.7             0.7
    West North Central..........................................           1,114             0.6             2.0
    West South Central..........................................             813            -0.8             0.6
    Mountain....................................................             246             0.3             1.7
    Pacific.....................................................             123             1.0             2.5
Ownership:
    Government..................................................             830             0.2             1.6
    Profit......................................................          10,722             0.0             1.4
    Non-profit..................................................           3,824             0.0             1.4
----------------------------------------------------------------------------------------------------------------
Note: The Total column includes the 2.3 percent market basket increase, reduced by the 0.5 percentage point
  forecast error correction and further reduced by the 0.4 percentage point MFP adjustment. Additionally, we
  found no SNFs in rural outlying areas.

5. Alternatives Considered
    As described above, we estimate that the aggregate impact for FY 
2014 would be an increase of $500 million in payments to SNFs, 
resulting from the SNF market basket update to the payment rates, as 
adjusted by the forecast error correction and the MFP adjustment.
    Section 1888(e) of the Act establishes the SNF PPS for the payment 
of Medicare SNF services for cost reporting periods beginning on or 
after July 1, 1998. This section of the statute prescribes a detailed 
formula for calculating payment rates under the SNF PPS, and does not 
provide for the use of any alternative methodology. It specifies that 
the base year cost data to be used for computing the SNF PPS payment 
rates must be from FY 1995 (October 1, 1994, through September 30, 
1995). In accordance with the statute, we also incorporated a number of 
elements into the SNF PPS (for example, case-mix classification 
methodology, a market basket index, a wage index, and the urban and 
rural distinction used in the development or adjustment of the federal 
rates). Further, section 1888(e)(4)(H) of the Act specifically requires 
us to disseminate the payment rates for each new FY through the Federal 
Register, and to do so before the August 1 that precedes the start of 
the new FY. Accordingly, we are not pursuing alternatives with respect 
to the payment methodology as discussed above.
6. Accounting Statement
    As required by OMB Circular A-4 (available online at 
www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), in Table 23, we have prepared an accounting statement 
showing the classification of the expenditures

[[Page 26470]]

associated with the provisions of this proposed rule. Table 23 provides 
our best estimate of the possible changes in Medicare payments under 
the SNF PPS as a result of the policies in this proposed rule, based on 
the data for 15,376 SNFs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, SNFs).

       Table 23--Accounting Statement: Classification of Estimated
   Expenditures, From the 2013 SNF PPS Fiscal Year to the 2014 SNF PPS
                               Fiscal Year
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $500 million.*
From Whom To Whom?                          Federal Government to SNF
                                             Medicare Providers.
------------------------------------------------------------------------
* The net increase of $500 million in transfer payments is a result of
  the MFP-adjusted market basket increase of $500 million.

7. Conclusion
    This proposed rule sets forth updates of the SNF PPS rates 
contained in the update notice for FY 2013 (77 FR 46214). Based on the 
above, we estimate the overall estimated payments for SNFs in FY 2014 
are projected to increase by $500 million, or 1.4 percent, compared 
with those in FY 2013. We estimate that in FY 2014 under RUG-IV, SNFs 
in urban and rural areas would experience, on average, a 1.5 and 1.1 
percent increase, respectively, in estimated payments compared with FY 
2013. Providers in the rural Pacific region would experience the 
largest estimated increase in payments of approximately 2.5 percent. 
Providers in the rural West South Central region would experience the 
smallest increase in payments of 0.6 percent.

B. Regulatory Flexibility Act Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, non-profit organizations, and small 
governmental jurisdictions. Most SNFs and most other providers and 
suppliers are small entities, either by their non-profit status or by 
having revenues of $25.5 million or less in any 1 year. For purposes of 
the RFA, approximately 91 percent of SNFs are considered small 
businesses according to the Small Business Administration's latest size 
standards (NAICS 623110), with total revenues of $25.5 million or less 
in any 1 year. (For details, see the Small Business Administration's 
Web site at https://www.sba.gov/category/navigation-structure/contracting/contracting-officials/eligibility-size-standards). 
Individuals and States are not included in the definition of a small 
entity. In addition, approximately 25 percent of SNFs classified as 
small entities are non-profit organizations. Finally, the estimated 
number of small business entities does not distinguish provider 
establishments that are within a single firm and, therefore, the number 
of SNFs classified as small entities may be higher than the estimate 
above.
    This proposed rule sets forth updates of the SNF PPS rates 
contained in the update notice for FY 2013 (77 FR 46214). Based on the 
above, we estimate that the aggregate impact would be an increase of 
$500 million in payments to SNFs, resulting from the SNF market basket 
update to the payment rates, as adjusted by the forecast error 
correction and the MFP adjustment. While it is projected in Table 22 
that all providers would experience a net increase in payments, we note 
that some individual providers within the same region or group may 
experience different impacts on payments than others due to the 
distributional impact of the FY 2014 wage indexes and the degree of 
Medicare utilization.
    Guidance issued by the Department of Health and Human Services on 
the proper assessment of the impact on small entities in rulemakings, 
utilizes a cost or revenue impact of 3 to 5 percent as a significance 
threshold under the RFA. According to MedPAC, Medicare covers 
approximately 12 percent of total patient days in freestanding 
facilities and 23 percent of facility revenue (Report to the Congress: 
Medicare Payment Policy, March 2013, available at https://www.medpac.gov/documents/Mar13_EntireReport.pdf). However, it is worth 
noting that the distribution of days and payments is highly variable. 
That is, the majority of SNFs have significantly lower Medicare 
utilization (Report to the Congress: Medicare Payment Policy, March 
2013, available at https://www.medpac.gov/documents/Mar13_EntireReport.pdf). As a result, for most facilities, when all payers 
are included in the revenue stream, the overall impact on total 
revenues should be substantially less than those impacts presented in 
Table 22. As indicated in Table 22, the effect on facilities is 
projected to be an aggregate positive impact of 1.4 percent. As the 
overall impact on the industry as a whole, and thus on small entities 
specifically, is less than the 3 to 5 percent threshold discussed 
above, the Secretary has determined that this proposed rule would not 
have a significant 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 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. This proposed rule would 
affect small rural hospitals that (a) furnish SNF services under a 
swing-bed agreement or (b) have a hospital-based SNF. We anticipate 
that the impact on small rural hospitals would be similar to the impact 
on SNF providers overall. Moreover, as noted in the FY 2012 final rule 
(76 FR 48539), the category of small rural hospitals would be included 
within the analysis of the impact of this proposed rule on small 
entities in general. As indicated in Table 22, the effect on facilities 
is projected to be an aggregate positive impact of 1.4 percent. As the 
overall impact on the industry as a whole is less than the 3 to 5 
percent threshold discussed above, the Secretary has determined that 
this proposed rule would not have a significant impact on a substantial 
number of small rural hospitals.

C. Unfunded Mandates Reform Act Analysis

    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 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2013, that 
threshold is approximately $141 million. This proposed rule would not 
impose spending costs on State, local, or tribal governments in the 
aggregate, or by the private sector, of $141 million.

D. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that impose substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has federalism 
implications. This proposed rule would have no substantial direct 
effect on State and local governments, preempt State law, or otherwise 
have federalism implications.

[[Page 26471]]

List of Subjects

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, 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 set forth 
below:

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
1. The authority citation for part 413 continues to read as follows:

    Authority:  Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), 
and (n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security 
Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and 
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); sec. 124 of Pub. 
L. 106-133 (113 Stat. 1501A-332) and sec. 3201 of Pub. L. 112-96 
(126 Stat. 156).

0
2. Section 413.345 is revised to read as follows:


Sec.  413.345  Publication of Federal prospective payment rates.

    CMS publishes information pertaining to each update of the Federal 
payment rates in the Federal Register. This information includes the 
standardized Federal rates, the resident classification system that 
provides the basis for case-mix adjustment (including the designation 
of those specific Resource Utilization Groups under the resident 
classification system that represent the required SNF level of care, as 
provided in Sec.  409.30 of this chapter), and the factors to be 
applied in making the area wage adjustment. This information is 
published before May 1 for the fiscal year 1998 and before August 1 for 
the fiscal years 1999 and after.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
3. The authority citation for part 424 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
4. Section 424.11 is amended by revising paragraph (e)(4) to read as 
follows:


Sec.  424.11  General procedures.

* * * * *
    (e) * * *
    (4) A nurse practitioner or clinical nurse specialist as defined in 
paragraph (e)(5) or (e)(6) of this section, or a physician assistant as 
defined in section 1861(aa)(5) of the Act, in the circumstances 
specified in Sec.  424.20(e).
* * * * *

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

    Dated: April 4, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 25, 2013.
Kathleen Sebelius,
Secretary.

    Note:  The following addendum will not appear in the Code of 
Federal Regulations.

Addendum--FY 2014 CBSA Wage Index Tables

    In this addendum, we provide the wage index tables referred to 
in the preamble to this proposed rule. Tables A and B display the 
CBSA-based wage index values for urban and rural providers. As noted 
previously in this proposed rule, we are currently proposing to take 
an approach already being followed by other Medicare payment 
systems, whereby for SNF PPS rules and notices published on or after 
October 1, 2013, these wage index tables would henceforth be made 
available exclusively through the Internet on the CMS Web site 
rather than being published in the Federal Register as part of the 
annual SNF PPS rulemaking.

 Table A--FY 2014 Wage Index for Urban Areas Based on CBSA Labor Market
                                  Areas
------------------------------------------------------------------------
                                   Urban area (constituent        Wage
          CBSA Code                       counties)               index
------------------------------------------------------------------------
10180.......................  Abilene, TX.....................    0.8260
                              Callahan County, TX
                              Jones County, TX
                              Taylor County, TX
10380.......................  Aguadilla-Isabela-San               0.3662
                               Sebasti[aacute]n, PR.
                              Aguada Municipio, PR
                              Aguadilla Municipio, PR
                              A[ntilde]asco Municipio, PR
                              Isabela Municipio, PR
                              Lares Municipio, PR
                              Moca Municipio, PR
                              Rinc[oacute]n Municipio, PR
                              San Sebasti[aacute]n Municipio,
                               PR
10420.......................  Akron, OH.......................    0.8485
                              Portage County, OH
                              Summit County, OH
10500.......................  Albany, GA......................    0.8750
                              Baker County, GA
                              Dougherty County, GA
                              Lee County, GA
                              Terrell County, GA
                              Worth County, GA
10580.......................  Albany-Schenectady-Troy, NY.....    0.8636
                              Albany County, NY
                              Rensselaer County, NY
                              Saratoga County, NY
                              Schenectady County, NY
                              Schoharie County, NY
10740.......................  Albuquerque, NM.................    0.9704
                              Bernalillo County, NM
                              Sandoval County, NM
                              Torrance County, NM
                              Valencia County, NM
10780.......................  Alexandria, LA..................    0.7821
                              Grant Parish, LA
                              Rapides Parish, LA
10900.......................  Allentown-Bethlehem-Easton, PA-     0.9208
                               NJ.
                              Warren County, NJ
                              Carbon County, PA
                              Lehigh County, PA
                              Northampton County, PA
11020.......................  Altoona, PA.....................    0.9140
                              Blair County, PA
11100.......................  Amarillo, TX....................    0.8993
                              Armstrong County, TX
                              Carson County, TX
                              Potter County, TX
                              Randall County, TX
11180.......................  Ames, IA........................    0.9465
                              Story County, IA
11260.......................  Anchorage, AK...................    1.2259
                              Anchorage Municipality, AK
                              Matanuska-Susitna Borough, AK
11300.......................  Anderson, IN....................    0.9694
                              Madison County, IN
11340.......................  Anderson, SC....................    0.8803
                              Anderson County, SC
11460.......................  Arbor, MI.......................    1.0125
                              Washtenaw County, MI
11500.......................  Anniston-Oxford, AL.............    0.7369
                              Calhoun County, AL
11540.......................  Appleton, WI....................    0.9485
                              Calumet County, WI
                              Outagamie County, WI
11700.......................  Asheville, NC...................    0.8508
                              Buncombe County, NC
                              Haywood County, NC
                              Henderson County, NC
                              Madison County, NC
12020.......................  Athens-Clarke County, GA........    0.9284
                              Clarke County, GA
                              Madison County, GA
                              Oconee County, GA
                              Oglethorpe County, GA
12060.......................  Atlanta-Sandy Springs-Marietta,     0.9465
                               GA.
                              Barrow County, GA

[[Page 26472]]

 
                              Bartow County, GA
                              Butts County, GA
                              Carroll County, GA
                              Cherokee County, GA
                              Clayton County, GA
                              Cobb County, GA
                              Coweta County, GA
                              Dawson County, GA
                              DeKalb County, GA
                              Douglas County, GA
                              Fayette County, GA
                              Forsyth County, GA
                              Fulton County, GA
                              Gwinnett County, GA
                              Haralson County, GA
                              Heard County, GA
                              Henry County, GA
                              Jasper County, GA
                              Lamar County, GA
                              Meriwether County, GA
                              Newton County, GA
                              Paulding County, GA
                              Pickens County, GA
                              Pike County, GA
                              Rockdale County, GA
                              Spalding County, GA
                              Walton County, GA
12100.......................  Atlantic City-Hammonton, NJ.....    1.2310
                              Atlantic County, NJ
12220.......................  Auburn-Opelika, AL..............    0.7802
                              Lee County, AL
12260.......................  Augusta-Richmond County, GA-SC..    0.9189
                              Burke County, GA
                              Columbia County, GA
                              McDuffie County, GA
                              Richmond County, GA
                              Aiken County, SC
                              Edgefield County, SC
12420.......................  Austin-Round Rock, TX...........    0.9616
                              Bastrop County, TX
                              Caldwell County, TX
                              Hays County, TX
                              Travis County, TX
                              Williamson County, TX
12540.......................  Bakersfield, CA.................    1.1730
                              Kern County, CA
12580.......................  Baltimore-Towson, MD............    0.9916
                              Anne Arundel County, MD
                              Baltimore County, MD
                              Carroll County, MD
                              Harford County, MD
                              Howard County, MD
                              Queen Anne's County, MD
                              Baltimore City, MD
12620.......................  Bangor, ME......................    0.9751
                              Penobscot County, ME
12700.......................  Barnstable Town, MA.............    1.3062
                              Barnstable County, MA
12940.......................  Baton Rouge, LA.................    0.8050
                              Ascension Parish, LA
                              East Baton Rouge Parish, LA
                              East Feliciana Parish, LA
                              Iberville Parish, LA
                              Livingston Parish, LA
                              Pointe Coupee Parish, LA
                              St. Helena Parish, LA
                              West Baton Rouge Parish, LA
                              West Feliciana Parish, LA
12980.......................  Battle Creek, MI................    0.9763
                              Calhoun County, MI
13020.......................  Bay City, MI....................    0.9526
                              Bay County, MI
13140.......................  Beaumont-Port Arthur, TX........    0.8634
                              Hardin County, TX
                              Jefferson County, TX
                              Orange County, TX
13380.......................  Bellingham, WA..................    1.1940
                              Whatcom County, WA
13460.......................  Bend, OR........................    1.1857
                              Deschutes County, OR
13644.......................  Bethesda-Frederick-Gaithersburg,    1.0348
                               MD.
                              Frederick County, MD
                              Montgomery County, MD
13740.......................  Billings, MT....................    0.8727
                              Carbon County, MT
                              Yellowstone County, MT
13780.......................  Binghamton, NY..................    0.7863
                              Broome County, NY
                              Tioga County, NY
13820.......................  Birmingham-Hoover, AL...........    0.8395
                              Bibb County, AL
                              Blount County, AL
                              Chilton County, AL
                              Jefferson County, AL
                              St. Clair County, AL
                              Shelby County, AL
                              Walker County, AL
13900.......................  Bismarck, ND....................    0.7312
                              Burleigh County, ND
                              Morton County, ND
13980.......................  Blacksburg-Christiansburg-          0.8354
                               Radford, VA.
                              Giles County, VA
                              Montgomery County, VA
                              Pulaski County, VA
                              Radford City, VA
14020.......................  Bloomington, IN.................    0.9343
                              Greene County, IN
                              Monroe County, IN
                              Owen County, IN
14060.......................  Bloomington-Normal, IL..........    0.9349
                              McLean County, IL
14260.......................  Boise City-Nampa, ID............    0.9298
                              Ada County, ID
                              Boise County, ID
                              Canyon County, ID
                              Gem County, ID
                              Owyhee County, ID
14484.......................  Boston-Quincy, MA...............    1.2505
                              Norfolk County, MA
                              Plymouth County, MA
                              Suffolk County, MA
14500.......................  Boulder, CO.....................    0.9891
                              Boulder County, CO
14540.......................  Bowling Green, KY...............    0.8314
                              Edmonson County, KY
                              Warren County, KY
14740.......................  Bremerton-Silverdale, WA........    1.0311
                              Kitsap County, WA
14860.......................  Bridgeport-Stamford-Norwalk, CT.    1.3287
                              Fairfield County, CT
15180.......................  Brownsville-Harlingen, TX.......    0.8213
                              Cameron County, TX
15260.......................  Brunswick, GA...................    0.7716
                              Brantley County, GA
                              Glynn County, GA
                              McIntosh County, GA
15380.......................  Buffalo-Niagara Falls, NY.......    1.0048
                              Erie County, NY
                              Niagara County, NY
15500.......................  Burlington, NC..................    0.8552
                              Alamance County, NC
15540.......................  Burlington-South Burlington, VT.    1.0173
                              Chittenden County, VT
                              Franklin County, VT
                              Grand Isle County, VT
15764.......................  Cambridge-Newton-Framingham, MA.    1.1201
                              Middlesex County, MA
15804.......................  Camden, NJ......................    1.0297
                              Burlington County, NJ
                              Camden County, NJ
                              Gloucester County, NJ
15940.......................  Canton-Massillon, OH............    0.8729
                              Carroll County, OH
                              Stark County, OH
15980.......................  Cape Coral-Fort Myers, FL.......    0.8720
                              Lee County, FL
16020.......................  Cape Girardeau-Jackson, MO-IL...    0.9213
                              Alexander County, IL
                              Bollinger County, MO
                              Cape Girardeau County, MO
16180.......................  Carson City, NV.................    1.0767
                              Carson City, NV
16220.......................  Casper, WY......................    1.0154
                              Natrona County, WY
16300.......................  Cedar Rapids, IA................    0.9001
                              Benton County, IA
                              Jones County, IA
                              Linn County, IA
16580.......................  Champaign-Urbana, IL............    0.9450
                              Champaign County, IL
                              Ford County, IL
                              Piatt County, IL
16620.......................  Charleston, WV..................    0.8147
                              Boone County, WV
                              Clay County, WV
                              Kanawha County, WV
                              Lincoln County, WV
                              Putnam County, WV
16700.......................  Charleston-North Charleston-        0.9013
                               Summerville, SC.
                              Berkeley County, SC
                              Charleston County, SC
                              Dorchester County, SC

[[Page 26473]]

 
16740.......................  Charlotte-Gastonia-Concord, NC-     0.9479
                               SC.
                              Anson County, NC
                              Cabarrus County, NC
                              Gaston County, NC
                              Mecklenburg County, NC
                              Union County, NC
                              York County, SC
16820.......................  Charlottesville, VA.............    0.8443
                              Albemarle County, VA
                              Fluvanna County, VA
                              Greene County, VA
                              Nelson County, VA
                              Charlottesville City, VA
16860.......................  Chattanooga, TN-GA..............    0.8499
                              Catoosa County, GA
                              Dade County, GA
                              Walker County, GA
                              Hamilton County, TN
                              Marion County, TN
                              Sequatchie County, TN
16940.......................  Cheyenne, WY....................    0.9534
                              Laramie County, WY
16974.......................  Chicago-Naperville-Joliet, IL...    1.0446
                              Cook County, IL
                              DeKalb County, IL
                              DuPage County, IL
                              Grundy County, IL
                              Kane County, IL
                              Kendall County, IL
                              McHenry County, IL
                              Will County, IL
17020.......................  Chico, CA.......................    1.1637
                              Butte County, CA
17140.......................  Cincinnati-Middletown, OH-KY-IN.    0.9382
                              Dearborn County, IN
                              Franklin County, IN
                              Ohio County, IN
                              Boone County, KY
                              Bracken County, KY
                              Campbell County, KY
                              Gallatin County, KY
                              Grant County, KY
                              Kenton County, KY
                              Pendleton County, KY
                              Brown County, OH
                              Butler County, OH
                              Clermont County, OH
                              Hamilton County, OH
                              Warren County, OH
17300.......................  Clarksville, TN-KY..............    0.7376
                              Christian County, KY
                              Trigg County, KY
                              Montgomery County, TN
                              Stewart County, TN
17420.......................  Cleveland, TN...................    0.7528
                              Bradley County, TN
                              Polk County, TN
17460.......................  Cleveland-Elyria-Mentor, OH.....    0.9306
                              Cuyahoga County, OH
                              Geauga County, OH
                              Lake County, OH
                              Lorain County, OH
                              Medina County, OH
17660.......................  Coeur d'Alene, ID...............    0.9102
                              Kootenai County, ID
17780.......................  College Station-Bryan, TX.......    0.9537
                              Brazos County, TX
                              Burleson County, TX
                              Robertson County, TX
17820.......................  Colorado Springs, CO............    0.9321
                              El Paso County, CO
                              Teller County, CO
17860.......................  Columbia, MO....................    0.8231
                              Boone County, MO
                              Howard County, MO
17900.......................  Columbia, SC....................    0.8680
                              Calhoun County, SC
                              Fairfield County, SC
                              Kershaw County, SC
                              Lexington County, SC
                              Richland County, SC
                              Saluda County, SC
17980.......................  Columbus, GA-AL.................    0.7896
                              Russell County, AL
                              Chattahoochee County, GA
                              Harris County, GA
                              Marion County, GA
                              Muscogee County, GA
18020.......................  Columbus, IN....................    0.9860
                              Bartholomew County, IN
18140.......................  Columbus, OH....................    0.9700
                              Delaware County, OH
                              Fairfield County, OH
                              Franklin County, OH
                              Licking County, OH
                              Madison County, OH
                              Morrow County, OH
                              Pickaway County, OH
                              Union County, OH
18580.......................  Corpus Christi, TX..............    0.8469
                              Aransas County, TX
                              Nueces County, TX
                              San Patricio County, TX
18700.......................  Corvallis, OR...................    1.0641
                              Benton County, OR
18880.......................  Crestview-Fort Walton Beach-        0.8948
                               Destin, FL.
                              Okaloosa County, FL
19060.......................  Cumberland, MD-WV...............    0.8088
                              Allegany County, MD
                              Mineral County, WV
19124.......................  Dallas-Plano-Irving, TX.........    0.9872
                              Collin County, TX
                              Dallas County, TX
                              Delta County, TX
                              Denton County, TX
                              Ellis County, TX
                              Hunt County, TX
                              Kaufman County, TX
                              Rockwall County, TX
19140.......................  Dalton, GA......................    0.8662
                              Murray County, GA
                              Whitfield County, GA
19180.......................  Danville, IL....................    0.9500
                              Vermilion County, IL
19260.......................  Danville, VA....................    0.7921
                              Pittsylvania County, VA
                              Danville City, VA
19340.......................  Davenport-Moline-Rock Island, IA-   0.9345
                               IL.
                              Henry County, IL
                              Mercer County, IL
                              Rock Island County, IL
                              Scott County, IA
19380.......................  Dayton, OH......................    0.8941
                              Greene County, OH
                              Miami County, OH
                              Montgomery County, OH
                              Preble County, OH
19460.......................  Decatur, AL.....................    0.7195
                              Lawrence County, AL
                              Morgan County, AL
19500.......................  Decatur, IL.....................    0.7946
                              Macon County, IL
19660.......................  Deltona-Daytona Beach-Ormond        0.8596
                               Beach, FL.
                              Volusia County, FL
19740.......................  Denver-Aurora-Broomfield, CO....    1.0461
                              Adams County, CO
                              Arapahoe County, CO
                              Broomfield County, CO
                              Clear Creek County, CO
                              Denver County, CO
                              Douglas County, CO
                              Elbert County, CO
                              Gilpin County, CO
                              Jefferson County, CO
                              Park County, CO
19780.......................  Des Moines-West Des Moines, IA..    0.9433
                              Dallas County, IA
                              Guthrie County, IA
                              Madison County, IA
                              Polk County, IA
                              Warren County, IA
19804.......................  Detroit-Livonia-Dearborn, MI....    0.9256
                              Wayne County, MI
20020.......................  Dothan, AL......................    0.7136
                              Geneva County, AL
                              Henry County, AL
                              Houston County, AL
20100.......................  Dover, DE.......................    0.9981
                              Kent County, DE
20220.......................  Dubuque, IA.....................    0.8828
                              Dubuque County, IA
20260.......................  Duluth, MN-WI...................    0.9351
                              Carlton County, MN
                              St. Louis County, MN
                              Douglas County, WI
20500.......................  Durham-Chapel Hill, NC..........    0.9707
                              Chatham County, NC
                              Durham County, NC
                              Orange County, NC
                              Person County, NC
20740.......................  Eau Claire, WI..................    1.0174
                              Chippewa County, WI
                              Eau Claire County, WI
20764.......................  Edison-New Brunswick, NJ........    1.0956
                              Middlesex County, NJ
                              Monmouth County, NJ
                              Ocean County, NJ
                              Somerset County, NJ
20940.......................  El Centro, CA...................    0.8885
                              Imperial County, CA
21060.......................  Elizabethtown, KY...............    0.7928
                              Hardin County, KY

[[Page 26474]]

 
                              Larue County, KY
21140.......................  Elkhart-Goshen, IN..............    0.9369
                              Elkhart County, IN
21300.......................  Elmira, NY......................    0.8396
                              Chemung County, NY
21340.......................  El Paso, TX.....................    0.8441
                              El Paso County, TX
21500.......................  Erie, PA........................    0.7973
                              Erie County, PA
21660.......................  Eugene-Springfield, OR..........    1.1773
                              Lane County, OR
21780.......................  Evansville, IN-KY...............    0.8367
                              Gibson County, IN
                              Posey County, IN
                              Vanderburgh County, IN
                              Warrick County, IN
                              Henderson County, KY
                              Webster County, KY
21820.......................  Fairbanks, AK...................    1.1043
                              Fairbanks North Star Borough, AK
21940.......................  Fajardo, PR.....................    0.3744
                              Ceiba Municipio, PR
                              Fajardo Municipio, PR
                              Luquillo Municipio, PR
22020.......................  Fargo, ND-MN....................    0.7835
                              Cass County, ND
                              Clay County, MN
22140.......................  Farmington, NM..................    0.9776
                              San Juan County, NM
22180.......................  Fayetteville, NC................    0.8460
                              Cumberland County, NC
                              Hoke County, NC
22220.......................  Fayetteville-Springdale-Rogers,     0.8993
                               AR-MO.
                              Benton County, AR
                              Madison County, AR
                              Washington County, AR
                              McDonald County, MO
22380.......................  Flagstaff, AZ...................    1.2840
                              Coconino County, AZ
22420.......................  Flint, MI.......................    1.1303
                              Genesee County, MI
22500.......................  Florence, SC....................    0.7968
                              Darlington County, SC
                              Florence County, SC
22520.......................  Florence-Muscle Shoals, AL......    0.7553
                              Colbert County, AL
                              Lauderdale County, AL
22540.......................  Fond du Lac, WI.................    0.9517
                              Fond du Lac County, WI
22660.......................  Fort Collins-Loveland, CO.......    0.9743
                              Larimer County, CO
22744.......................  Fort Lauderdale-Pompano Beach-      1.0422
                               Deerfield Beach, FL.
                              Broward County, FL
22900.......................  Fort Smith, AR-OK...............    0.7588
                              Crawford County, AR
                              Franklin County, AR
                              Sebastian County, AR
                              Le Flore County, OK
                              Sequoyah County, OK
23060.......................  Fort Wayne, IN..................    0.9048
                              Allen County, IN
                              Wells County, IN
                              Whitley County, IN
23104.......................  Fort Worth-Arlington, TX........    0.9552
                              Johnson County, TX
                              Parker County, TX
                              Tarrant County, TX
                              Wise County, TX
23420.......................  Fresno, CA......................    1.1817
                              Fresno County, CA
23460.......................  Gadsden, AL.....................    0.8017
                              Etowah County, AL
23540.......................  Gainesville, FL.................    0.9751
                              Alachua County, FL
                              Gilchrist County, FL
23580.......................  Gainesville, GA.................    0.9292
                              Hall County, GA
23844.......................  Gary, IN........................    0.9440
                              Jasper County, IN
                              Lake County, IN
                              Newton County, IN
                              Porter County, IN
24020.......................  Glens Falls, NY.................    0.8402
                              Warren County, NY
                              Washington County, NY
24140.......................  Goldsboro, NC...................    0.8316
                              Wayne County, NC
24220.......................  Grand Forks, ND-MN..............    0.7321
                              Polk County, MN
                              Grand Forks County, ND
24300.......................  Grand Junction, CO..............    0.9347
                              Mesa County, CO
24340.......................  Grand Rapids-Wyoming, MI........    0.9129
                              Barry County, MI
                              Ionia County, MI
                              Kent County, MI
                              Newaygo County, MI
24500.......................  Great Falls, MT.................    0.9274
                              Cascade County, MT
24540.......................  Greeley, CO.....................    0.9694
                              Weld County, CO
24580.......................  Green Bay, WI...................    0.9627
                              Brown County, WI
                              Kewaunee County, WI
                              Oconto County, WI
24660.......................  Greensboro-High Point, NC.......    0.8288
                              Guilford County, NC
                              Randolph County, NC
                              Rockingham County, NC
24780.......................  Greenville, NC..................    0.9382
                              Greene County, NC
                              Pitt County, NC
24860.......................  Greenville-Mauldin-Easley, SC...    0.9611
                              Greenville County, SC
                              Laurens County, SC
                              Pickens County, SC
25020.......................  Guayama, PR.....................    0.3723
                              Arroyo Municipio, PR
                              Guayama Municipio, PR
                              Patillas Municipio, PR
25060.......................  Gulfport-Biloxi, MS.............    0.8610
                              Hancock County, MS
                              Harrison County, MS
                              Stone County, MS
25180.......................  Hagerstown-Martinsburg, MD-WV...    0.9273
                              Washington County, MD
                              Berkeley County, WV
                              Morgan County, WV
25260.......................  Hanford-Corcoran, CA............    1.1171
                              Kings County, CA
25420.......................  Harrisburg-Carlisle, PA.........    0.9515
                              Cumberland County, PA
                              Dauphin County, PA
                              Perry County, PA
25500.......................  Harrisonburg, VA................    0.9128
                              Rockingham County, VA
                              Harrisonburg City, VA
25540.......................  Hartford-West Hartford-East         1.1056
                               Hartford, CT.
                              Hartford County, CT
                              Middlesex County, CT
                              Tolland County, CT
25620.......................  Hattiesburg, MS.................    0.7972
                              Forrest County, MS
                              Lamar County, MS
                              Perry County, MS
25860.......................  Hickory-Lenoir-Morganton, NC....    0.8383
                              Alexander County, NC
                              Burke County, NC
                              Caldwell County, NC
                              Catawba County, NC
25980.......................  Hinesville-Fort Stewart, GA \1\.    0.8602
                              Liberty County, GA
                              Long County, GA
26100.......................  Holland-Grand Haven, MI.........    0.8050
                              Ottawa County, MI
26180.......................  Honolulu, HI....................    1.2109
                              Honolulu County, HI
26300.......................  Hot Springs, AR.................    0.8510
                              Garland County, AR
26380.......................  Houma-Bayou Cane-Thibodaux, LA..    0.7556
                              Lafourche Parish, LA
                              Terrebonne Parish, LA
26420.......................  Houston-Sugar Land-Baytown, TX..    0.9945
                              Austin County, TX
                              Brazoria County, TX
                              Chambers County, TX
                              Fort Bend County, TX
                              Galveston County, TX
                              Harris County, TX
                              Liberty County, TX
                              Montgomery County, TX
                              San Jacinto County, TX
                              Waller County, TX
26580.......................  Huntington-Ashland, WV-KY-OH....    0.8858
                              Boyd County, KY
                              Greenup County, KY
                              Lawrence County, OH
                              Cabell County, WV
                              Wayne County, WV
26620.......................  Huntsville, AL..................    0.8199
                              Limestone County, AL
                              Madison County, AL
26820.......................  Idaho Falls, ID.................    0.9351
                              Bonneville County, ID
                              Jefferson County, ID
26900.......................  Indianapolis-Carmel, IN.........    1.0151
                              Boone County, IN
                              Brown County, IN

[[Page 26475]]

 
                              Hamilton County, IN
                              Hancock County, IN
                              Hendricks County, IN
                              Johnson County, IN
                              Marion County, IN
                              Morgan County, IN
                              Putnam County, IN
                              Shelby County, IN
26980.......................  Iowa City, IA...................    0.9896
                              Johnson County, IA
                              Washington County, IA
27060.......................  Ithaca, NY......................    0.9366
                              Tompkins County, NY
27100.......................  Jackson, MI.....................    0.8981
                              Jackson County, MI
27140.......................  Jackson, MS.....................    0.8196
                              Copiah County, MS
                              Hinds County, MS
                              Madison County, MS
                              Rankin County, MS
                              Simpson County, MS
27180.......................  Jackson, TN.....................    0.7720
                              Chester County, TN
                              Madison County, TN
27260.......................  Jacksonville, FL................    0.8987
                              Baker County, FL
                              Clay County, FL
                              Duval County, FL
                              Nassau County, FL
                              St. Johns County, FL
27340.......................  Jacksonville, NC................    0.7894
                              Onslow County, NC
27500.......................  Janesville, WI..................    0.9110
                              Rock County, WI
27620.......................  Jefferson City, MO..............    0.8501
                              Callaway County, MO
                              Cole County, MO
                              Moniteau County, MO
                              Osage County, MO
27740.......................  Johnson City, TN................    0.7257
                              Carter County, TN
                              Unicoi County, TN
                              Washington County, TN
27780.......................  Johnstown, PA...................    0.8486
                              Cambria County, PA
27860.......................  Jonesboro, AR...................    0.8017
                              Craighead County, AR
                              Poinsett County, AR
27900.......................  Joplin, MO......................    0.8016
                              Jasper County, MO
                              Newton County, MO
28020.......................  Kalamazoo-Portage, MI...........    1.0001
                              Kalamazoo County, MI
                              Van Buren County, MI
28100.......................  Kankakee-Bradley, IL............    0.9698
                              Kankakee County, IL
28140.......................  Kansas City, MO-KS..............    0.9487
                              Franklin County, KS
                              Johnson County, KS
                              Leavenworth County, KS
                              Linn County, KS
                              Miami County, KS
                              Wyandotte County, KS
                              Bates County, MO
                              Caldwell County, MO
                              Cass County, MO
                              Clay County, MO
                              Clinton County, MO
                              Jackson County, MO
                              Lafayette County, MO
                              Platte County, MO
                              Ray County, MO
28420.......................  Kennewick-Pasco-Richland, WA....    0.9499
                              Benton County, WA
                              Franklin County, WA
28660.......................  Killeen-Temple-Fort Hood, TX....    0.8963
                              Bell County, TX
                              Coryell County, TX
                              Lampasas County, TX
28700.......................  Kingsport-Bristol-Bristol, TN-VA    0.7223
                              Hawkins County, TN
                              Sullivan County, TN
                              Bristol City, VA
                              Scott County, VA
                              Washington County, VA
28740.......................  Kingston, NY....................    0.9104
                              Ulster County, NY
28940.......................  Knoxville, TN...................    0.7484
                              Anderson County, TN
                              Blount County, TN
                              Knox County, TN
                              Loudon County, TN
                              Union County, TN
29020.......................  Kokomo, IN......................    0.9099
                              Howard County, IN
                              Tipton County, IN
29100.......................  La Crosse, WI-MN................    1.0248
                              Houston County, MN
                              La Crosse County, WI
29140.......................  Lafayette, IN...................    0.9996
                              Benton County, IN
                              Carroll County, IN
                              Tippecanoe County, IN
29180.......................  Lafayette, LA...................    0.8266
                              Lafayette Parish, LA
                              St. Martin Parish, LA
29340.......................  Lake Charles, LA................    0.7798
                              Calcasieu Parish, LA
                              Cameron Parish, LA
29404.......................  Lake County-Kenosha County, IL-     1.0249
                               WI.
                              Lake County, IL
                              Kenosha County, WI
29420.......................  Lake Havasu City-Kingman, AZ....    0.9953
                              Mohave County, AZ
29460.......................  Lakeland-Winter Haven, FL.......    0.8316
                              Polk County, FL
29540.......................  Lancaster, PA...................    0.9704
                              Lancaster County, PA
29620.......................  Lansing-East Lansing, MI........    1.0663
                              Clinton County, MI
                              Eaton County, MI
                              Ingham County, MI
29700.......................  Laredo, TX......................    0.7618
                              Webb County, TX
29740.......................  Las Cruces, NM..................    0.9210
                              Dona Ana County, NM
29820.......................  Las Vegas-Paradise, NV..........    1.1682
                              Clark County, NV
29940.......................  Lawrence, KS....................    0.8700
                              Douglas County, KS
30020.......................  Lawton, OK......................    0.7926
                              Comanche County, OK
30140.......................  Lebanon, PA.....................    0.8192
                              Lebanon County, PA
30300.......................  Lewiston, ID-WA.................    0.9254
                              Nez Perce County, ID
                              Asotin County, WA
30340.......................  Lewiston-Auburn, ME.............    0.9086
                              Androscoggin County, ME
30460.......................  Lexington-Fayette, KY...........    0.8850
                              Bourbon County, KY
                              Clark County, KY
                              Fayette County, KY
                              Jessamine County, KY
                              Scott County, KY
                              Woodford County, KY
30620.......................  Lima, OH........................    0.9170
                              Allen County, OH
30700.......................  Lincoln, NE.....................    0.9505
                              Lancaster County, NE
                              Seward County, NE
30780.......................  Little Rock-North Little Rock-      0.8661
                               Conway, AR.
                              Faulkner County, AR
                              Grant County, AR
                              Lonoke County, AR
                              Perry County, AR
                              Pulaski County, AR
                              Saline County, AR
30860.......................  Logan, UT-ID....................    0.8791
                              Franklin County, ID
                              Cache County, UT
30980.......................  Longview, TX....................    0.8971
                              Gregg County, TX
                              Rusk County, TX
                              Upshur County, TX
31020.......................  Longview, WA....................    1.0504
                              Cowlitz County, WA
31084.......................  Los Angeles-Long Beach-Glendale,    1.2315
                               CA.
                              Los Angeles County, CA
31140.......................  Louisville-Jefferson County, KY-    0.8892
                               IN.
                              Clark County, IN
                              Floyd County, IN
                              Harrison County, IN
                              Washington County, IN
                              Bullitt County, KY
                              Henry County, KY
                              Meade County, KY
                              Nelson County, KY
                              Oldham County, KY
                              Shelby County, KY
                              Spencer County, KY
                              Trimble County, KY
31180.......................  Lubbock, TX.....................    0.8994
                              Crosby County, TX
                              Lubbock County, TX
31340.......................  Lynchburg, VA...................    0.8808
                              Amherst County, VA
                              Appomattox County, VA
                              Bedford County, VA
                              Campbell County, VA
                              Bedford City, VA
                              Lynchburg City, VA
31420.......................  Macon, GA.......................    0.8860
                              Bibb County, GA
                              Crawford County, GA

[[Page 26476]]

 
                              Jones County, GA
                              Monroe County, GA
                              Twiggs County, GA
31460.......................  Madera-Chowchilla, CA...........    0.8352
                              Madera County, CA
31540.......................  Madison, WI.....................    1.1463
                              Columbia County, WI
                              Dane County, WI
                              Iowa County, WI
31700.......................  Manchester-Nashua, NH...........    1.0099
                              Hillsborough County, NH
31740.......................  Manhattan, KS...................    0.7876
                              Geary County, KS
                              Pottawatomie County, KS
                              Riley County, KS
31860.......................  Mankato-North Mankato, MN.......    0.9316
                              Blue Earth County, MN
                              Nicollet County, MN
31900.......................  Mansfield, OH...................    0.8448
                              Richland County, OH
32420.......................  Mayag[uuml]ez, PR...............    0.3769
                              Hormigueros Municipio, PR
                              Mayag[uuml]ez Municipio, PR
32580.......................  McAllen-Edinburg-Mission, TX....    0.8429
                              Hidalgo County, TX
32780.......................  Medford, OR.....................    1.0735
                              Jackson County, OR
32820.......................  Memphis, TN-MS-AR...............    0.9075
                              Crittenden County, AR
                              DeSoto County, MS
                              Marshall County, MS
                              Tate County, MS
                              Tunica County, MS
                              Fayette County, TN
                              Shelby County, TN
                              Tipton County, TN
32900.......................  Merced, CA......................    1.2788
                              Merced County, CA
33124.......................  Miami-Miami Beach-Kendall, FL...    0.9912
                              Miami-Dade County, FL
33140.......................  Michigan City-La Porte, IN......    0.9255
                              LaPorte County, IN
33260.......................  Midland, TX.....................    1.0092
                              Midland County, TX
33340.......................  Milwaukee-Waukesha-West Allis,      0.9868
                               WI.
                              Milwaukee County, WI
                              Ozaukee County, WI
                              Washington County, WI
                              Waukesha County, WI
33460.......................  Minneapolis-St. Paul-               1.1260
                               Bloomington, MN-WI.
                              Anoka County, MN
                              Carver County, MN
                              Chisago County, MN
                              Dakota County, MN
                              Hennepin County, MN
                              Isanti County, MN
                              Ramsey County, MN
                              Scott County, MN
                              Sherburne County, MN
                              Washington County, MN
                              Wright County, MN
                              Pierce County, WI
                              St. Croix County, WI
33540.......................  Missoula, MT....................    0.9100
                              Missoula County, MT
33660.......................  Mobile, AL......................    0.7475
                              Mobile County, AL
33700.......................  Modesto, CA.....................    1.3641
                              Stanislaus County, CA
33740.......................  Monroe, LA......................    0.7550
                              Ouachita Parish, LA
                              Union Parish, LA
33780.......................  Monroe, MI......................    0.8755
                              Monroe County, MI
33860.......................  Montgomery, AL..................    0.7507
                              Autauga County, AL
                              Elmore County, AL
                              Lowndes County, AL
                              Montgomery County, AL
34060.......................  Morgantown, WV..................    0.8267
                              Monongalia County, WV
                              Preston County, WV
34100.......................  Morristown, TN..................    0.6884
                              Grainger County, TN
                              Hamblen County, TN
                              Jefferson County, TN
34580.......................  Mount Vernon-Anacortes, WA......    1.0697
                              Skagit County, WA
34620.......................  Muncie, IN......................    0.8780
                              Delaware County, IN
34740.......................  Muskegon-Norton Shores, MI......    0.9625
                              Muskegon County, MI
34820.......................  Myrtle Beach-North Myrtle Beach-    0.8663
                               Conway, SC.
                              Horry County, SC
34900.......................  Napa, CA........................    1.5354
                              Napa County, CA
34940.......................  Naples-Marco Island, FL.........    0.9147
                              Collier County, FL
34980.......................  Nashville-Davidson--Murfreesboro-   0.9174
                               Franklin, TN.
                              Cannon County, TN
                              Cheatham County, TN
                              Davidson County, TN
                              Dickson County, TN
                              Hickman County, TN
                              Macon County, TN
                              Robertson County, TN
                              Rutherford County, TN
                              Smith County, TN
                              Sumner County, TN
                              Trousdale County, TN
                              Williamson County, TN
                              Wilson County, TN
35004.......................  Nassau-Suffolk, NY..............    1.2764
                              Nassau County, NY
                              Suffolk County, NY
35084.......................  Newark-Union, NJ-PA.............    1.1273
                              Essex County, NJ
                              Hunterdon County, NJ
                              Morris County, NJ
                              Sussex County, NJ
                              Union County, NJ
                              Pike County, PA
35300.......................  New Haven-Milford, CT...........    1.1933
                              New Haven County, CT
35380.......................  New Orleans-Metairie-Kenner, LA.    0.8789
                              Jefferson Parish, LA
                              Orleans Parish, LA
                              Plaquemines Parish, LA
                              St. Bernard Parish, LA
                              St. Charles Parish, LA
                              St. John the Baptist Parish, LA
                              St. Tammany Parish, LA
35644.......................  New York-White Plains-Wayne, NY-    1.3117
                               NJ.
                              Bergen County, NJ
                              Hudson County, NJ
                              Passaic County, NJ
                              Bronx County, NY
                              Kings County, NY
                              New York County, NY
                              Putnam County, NY
                              Queens County, NY
                              Richmond County, NY
                              Rockland County, NY
                              Westchester County, NY
35660.......................  Niles-Benton Harbor, MI.........    0.8479
                              Berrien County, MI
35840.......................  North Port-Bradenton-Sarasota-      0.9468
                               Venice, FL.
                              Manatee County, FL
                              Sarasota County, FL
35980.......................  Norwich-New London, CT..........    1.1871
                              New London County, CT
36084.......................  Oakland-Fremont-Hayward, CA.....    1.7061
                              Alameda County, CA
                              Contra Costa County, CA
36100.......................  Ocala, FL.......................    0.8461
                              Marion County, FL
36140.......................  Ocean City, NJ..................    1.0628
                              Cape May County, NJ
36220.......................  Odessa, TX......................    0.9702
                              Ector County, TX
36260.......................  Ogden-Clearfield, UT............    0.9209
                              Davis County, UT
                              Morgan County, UT
                              Weber County, UT
36420.......................  Oklahoma City, OK...............    0.8896
                              Canadian County, OK
                              Cleveland County, OK
                              Grady County, OK
                              Lincoln County, OK
                              Logan County, OK
                              McClain County, OK
                              Oklahoma County, OK
36500.......................  Olympia, WA.....................    1.1650
                              Thurston County, WA
36540.......................  Omaha-Council Bluffs, NE-IA.....    0.9797
                              Harrison County, IA
                              Mills County, IA
                              Pottawattamie County, IA
                              Cass County, NE
                              Douglas County, NE
                              Sarpy County, NE

[[Page 26477]]

 
                              Saunders County, NE
                              Washington County, NE
36740.......................  Orlando-Kissimmee, FL...........    0.9101
                              Lake County, FL
                              Orange County, FL
                              Osceola County, FL
                              Seminole County, FL
36780.......................  Oshkosh-Neenah, WI..............    0.9438
                              Winnebago County, WI
36980.......................  Owensboro, KY...................    0.7823
                              Daviess County, KY
                              Hancock County, KY
                              McLean County, KY
37100.......................  Oxnard-Thousand Oaks-Ventura, CA    1.3132
                              Ventura County, CA
37340.......................  Palm Bay-Melbourne-Titusville,      0.8707
                               FL.
                              Brevard County, FL
37380.......................  Palm Coast, FL..................    0.8209
                              Flagler County, FL
37460.......................  Panama City-Lynn Haven-Panama       0.7909
                               City Beach, FL.
                              Bay County, FL
37620.......................  Parkersburg-Marietta-Vienna, WV-    0.7576
                               OH.
                              Washington County, OH
                              Pleasants County, WV
                              Wirt County, WV
                              Wood County, WV
37700.......................  Pascagoula, MS..................    0.7574
                              George County, MS
                              Jackson County, MS
37764.......................  Peabody, MA.....................    1.0571
                              Essex County, MA
37860.......................  Pensacola-Ferry Pass-Brent, FL..    0.7800
                              Escambia County, FL
                              Santa Rosa County, FL
37900.......................  Peoria, IL......................    0.8290
                              Marshall County, IL
                              Peoria County, IL
                              Stark County, IL
                              Tazewell County, IL
                              Woodford County, IL
37964.......................  Philadelphia, PA................    1.0926
                              Bucks County, PA
                              Chester County, PA
                              Delaware County, PA
                              Montgomery County, PA
                              Philadelphia County, PA
38060.......................  Phoenix-Mesa-Scottsdale, AZ.....    1.0505
                              Maricopa County, AZ
                              Pinal County, AZ
38220.......................  Pine Bluff, AR..................    0.8103
                              Cleveland County, AR
                              Jefferson County, AR
                              Lincoln County, AR
38300.......................  Pittsburgh, PA..................    0.8713
                              Allegheny County, PA
                              Armstrong County, PA
                              Beaver County, PA
                              Butler County, PA
                              Fayette County, PA
                              Washington County, PA
                              Westmoreland County, PA
38340.......................  Pittsfield, MA..................    1.0966
                              Berkshire County, MA
38540.......................  Pocatello, ID...................    0.9795
                              Bannock County, ID
                              Power County, ID
38660.......................  Ponce, PR.......................    0.4614
                              Juana D[iacute]az Municipio, PR
                              Ponce Municipio, PR
                              Villalba Municipio, PR
38860.......................  Portland-South Portland-            1.0023
                               Biddeford, ME.
                              Cumberland County, ME
                              Sagadahoc County, ME
                              York County, ME
38900.......................  Portland-Vancouver-Beaverton, OR-   1.1848
                               WA.
                              Clackamas County, OR
                              Columbia County, OR
                              Multnomah County, OR
                              Washington County, OR
                              Yamhill County, OR
                              Clark County, WA
                              Skamania County, WA
38940.......................  Port St. Lucie, FL..............    0.9391
                              Martin County, FL
                              St. Lucie County, FL
39100.......................  Poughkeepsie-Newburgh-              1.1593
                               Middletown, NY.
                              Dutchess County, NY
                              Orange County, NY
39140.......................  Prescott, AZ....................    1.0199
                              Yavapai County, AZ
39300.......................  Providence-New Bedford-Fall         1.0579
                               River, RI-MA.
                              Bristol County, MA
                              Bristol County, RI
                              Kent County, RI
                              Newport County, RI
                              Providence County, RI
                              Washington County, RI
39340.......................  Provo-Orem, UT..................    0.9501
                              Juab County, UT
                              Utah County, UT
39380.......................  Pueblo, CO......................    0.8250
                              Pueblo County, CO
39460.......................  Punta Gorda, FL.................    0.8771
                              Charlotte County, FL
39540.......................  Racine, WI......................    0.9352
                              Racine County, WI
39580.......................  Raleigh-Cary, NC................    0.9286
                              Franklin County, NC
                              Johnston County, NC
                              Wake County, NC
39660.......................  Rapid City, SD..................    0.9608
                              Meade County, SD
                              Pennington County, SD
39740.......................  Reading, PA.....................    0.9105
                              Berks County, PA
39820.......................  Redding, CA.....................    1.5053
                              Shasta County, CA
39900.......................  Reno-Sparks, NV.................    1.0369
                              Storey County, NV
                              Washoe County, NV
40060.......................  Richmond, VA....................    0.9723
                              Amelia County, VA
                              Caroline County, VA
                              Charles City County, VA
                              Chesterfield County, VA
                              Cumberland County, VA
                              Dinwiddie County, VA
                              Goochland County, VA
                              Hanover County, VA
                              Henrico County, VA
                              King and Queen County, VA
                              King William County, VA
                              Louisa County, VA
                              New Kent County, VA
                              Powhatan County, VA
                              Prince George County, VA
                              Sussex County, VA
                              Colonial Heights City, VA
                              Hopewell City, VA
                              Petersburg City, VA
                              Richmond City, VA
40140.......................  Riverside-San Bernardino-           1.1492
                               Ontario, CA.
                              Riverside County, CA
                              San Bernardino County, CA
40220.......................  Roanoke, VA.....................    0.9233
                              Botetourt County, VA
                              Craig County, VA
                              Franklin County, VA
                              Roanoke County, VA
                              Roanoke City, VA
                              Salem City, VA
40340.......................  Rochester, MN...................    1.1712
                              Dodge County, MN
                              Olmsted County, MN
                              Wabasha County, MN
40380.......................  Rochester, NY...................    0.8770
                              Livingston County, NY
                              Monroe County, NY
                              Ontario County, NY
                              Orleans County, NY
                              Wayne County, NY
40420.......................  Rockford, IL....................    0.9792
                              Boone County, IL
                              Winnebago County, IL
40484.......................  Rockingham County-Strafford         1.0215
                               County, NH.
                              Rockingham County, NH
                              Strafford County, NH
40580.......................  Rocky Mount, NC.................    0.8786
                              Edgecombe County, NC
                              Nash County, NC
40660.......................  Rome, GA........................    0.8962
                              Floyd County, GA
40900.......................  Sacramento-Arden-Arcade-            1.5211
                               Roseville, CA.
                              El Dorado County, CA
                              Placer County, CA
                              Sacramento County, CA
                              Yolo County, CA
40980.......................  Saginaw-Saginaw Township North,     0.8886
                               MI.
                              Saginaw County, MI
41060.......................  St. Cloud, MN...................    1.0703
                              Benton County, MN
                              Stearns County, MN
41100.......................  St. George, UT..................    0.9385
                              Washington County, UT

[[Page 26478]]

 
41140.......................  St. Joseph, MO-KS...............    0.9876
                              Doniphan County, KS
                              Andrew County, MO
                              Buchanan County, MO
                              DeKalb County, MO
41180.......................  St. Louis, MO-IL................    0.9373
                              Bond County, IL
                              Calhoun County, IL
                              Clinton County, IL
                              Jersey County, IL
                              Macoupin County, IL
                              Madison County, IL
                              Monroe County, IL
                              St. Clair County, IL
                              Crawford County, MO
                              Franklin County, MO
                              Jefferson County, MO
                              Lincoln County, MO
                              St. Charles County, MO
                              St. Louis County, MO
                              Warren County, MO
                              Washington County, MO
                              St. Louis City, MO
41420.......................  Salem, OR.......................    1.1195
                              Marion County, OR
                              Polk County, OR
41500.......................  Salinas, CA.....................    1.5626
                              Monterey County, CA
41540.......................  Salisbury, MD...................    0.8986
                              Somerset County, MD
                              Wicomico County, MD
41620.......................  Salt Lake City, UT..............    0.9396
                              Salt Lake County, UT
                              Summit County, UT
                              Tooele County, UT
41660.......................  San Angelo, TX..................    0.8053
                              Irion County, TX
                              Tom Green County, TX
41700.......................  San Antonio, TX.................    0.8939
                              Atascosa County, TX
                              Bandera County, TX
                              Bexar County, TX
                              Comal County, TX
                              Guadalupe County, TX
                              Kendall County, TX
                              Medina County, TX
                              Wilson County, TX
41740.......................  San Diego-Carlsbad-San Marcos,      1.2104
                               CA.
                              San Diego County, CA
41780.......................  Sandusky, OH....................    0.7821
                              Erie County, OH
41884.......................  San Francisco-San Mateo-Redwood     1.6200
                               City, CA.
                              Marin County, CA
                              San Francisco County, CA
                              San Mateo County, CA
41900.......................  San Germ[aacute]n-Cabo Rojo, PR.    0.4569
                              Cabo Rojo Municipio, PR
                              Lajas Municipio, PR
                              Sabana Grande Municipio, PR
                              San Germ[aacute]n Municipio, PR
41940.......................  San Jose-Sunnyvale-Santa Clara,     1.6761
                               CA.
                              San Benito County, CA
                              Santa Clara County, CA
41980.......................  San Juan-Caguas-Guaynabo, PR....    0.4374
                              Aguas Buenas Municipio, PR
                              Aibonito Municipio, PR
                              Arecibo Municipio, PR
                              Barceloneta Municipio, PR
                              Barranquitas Municipio, PR
                              Bayam[oacute]n Municipio, PR
                              Caguas Municipio, PR
                              Camuy Municipio, PR
                              Can[oacute]vanas Municipio, PR
                              Carolina Municipio, PR
                              Cata[ntilde]o Municipio, PR
                              Cayey Municipio, PR
                              Ciales Municipio, PR
                              Cidra Municipio, PR
                              Comer[iacute]o Municipio, PR
                              Corozal Municipio, PR
                              Dorado Municipio, PR
                              Florida Municipio, PR
                              Guaynabo Municipio, PR
                              Gurabo Municipio, PR
                              Hatillo Municipio, PR
                              Humacao Municipio, PR
                              Juncos Municipio, PR
                              Las Piedras Municipio, PR
                              Lo[iacute]za Municipio, PR
                              Manat[iacute] Municipio, PR
                              Maunabo Municipio, PR
                              Morovis Municipio, PR
                              Naguabo Municipio, PR
                              Naranjito Municipio, PR
                              Orocovis Municipio, PR
                              Quebradillas Municipio, PR
                              R[iacute]o Grande Municipio, PR
                              San Juan Municipio, PR
                              San Lorenzo Municipio, PR
                              Toa Alta Municipio, PR
                              Toa Baja Municipio, PR
                              Trujillo Alto Municipio, PR
                              Vega Alta Municipio, PR
                              Vega Baja Municipio, PR
                              Yabucoa Municipio, PR
42020.......................  San Luis Obispo-Paso Robles, CA.    1.3089
                              San Luis Obispo County, CA
42044.......................  Santa Ana-Anaheim-Irvine, CA....    1.2036
                              Orange County, CA
42060.......................  Santa Barbara-Santa Maria-          1.3165
                               Goleta, CA.
                              Santa Barbara County, CA
42100.......................  Santa Cruz-Watsonville, CA......    1.7835
                              Santa Cruz County, CA
42140.......................  Santa Fe, NM....................    1.0179
                              Santa Fe County, NM
42220.......................  Santa Rosa-Petaluma, CA.........    1.6743
                              Sonoma County, CA
42340.......................  Savannah, GA....................    0.8572
                              Bryan County, GA
                              Chatham County, GA
                              Effingham County, GA
42540.......................  Scranton--Wilkes-Barre, PA......    0.8283
                              Lackawanna County, PA
                              Luzerne County, PA
                              Wyoming County, PA
42644.......................  Seattle-Bellevue-Everett, WA....    1.1784
                              King County, WA
                              Snohomish County, WA
42680.......................  Sebastian-Vero Beach, FL........    0.8797
                              Indian River County, FL
43100.......................  Sheboygan, WI...................    0.9242
                              Sheboygan County, WI
43300.......................  Sherman-Denison, TX.............    0.8760
                              Grayson County, TX
43340.......................  Shreveport-Bossier City, LA.....    0.8297
                              Bossier Parish, LA
                              Caddo Parish, LA
                              De Soto Parish, LA
43580.......................  Sioux City, IA-NE-SD............    0.9202
                              Woodbury County, IA
                              Dakota County, NE
                              Dixon County, NE
                              Union County, SD
43620.......................  Sioux Falls, SD.................    0.8310
                              Lincoln County, SD
                              McCook County, SD
                              Minnehaha County, SD
                              Turner County, SD
43780.......................  South Bend-Mishawaka, IN-MI.....    0.9465
                              St. Joseph County, IN
                              Cass County, MI
43900.......................  Spartanburg, SC.................    0.8797
                              Spartanburg County, SC
44060.......................  Spokane, WA.....................    1.1221
                              Spokane County, WA
44100.......................  Springfield, IL.................    0.9204
                              Menard County, IL
                              Sangamon County, IL
44140.......................  Springfield, MA.................    1.0422
                              Franklin County, MA
                              Hampden County, MA
                              Hampshire County, MA
44180.......................  Springfield, MO.................    0.8476
                              Christian County, MO
                              Dallas County, MO
                              Greene County, MO
                              Polk County, MO
                              Webster County, MO
44220.......................  Springfield, OH.................    0.8483
                              Clark County, OH
44300.......................  State College, PA...............    0.9615
                              Centre County, PA

[[Page 26479]]

 
44600.......................  Steubenville-Weirton, OH-WV.....    0.7415
                              Jefferson County, OH
                              Brooke County, WV
                              Hancock County, WV
44700.......................  Stockton, CA....................    1.3792
                              San Joaquin County, CA
44940.......................  Sumter, SC......................    0.7626
                              Sumter County, SC
45060.......................  Syracuse, NY....................    0.9937
                              Madison County, NY
                              Onondaga County, NY
                              Oswego County, NY
45104.......................  Tacoma, WA......................    1.1623
                              Pierce County, WA
45220.......................  Tallahassee, FL.................    0.8602
                              Gadsden County, FL
                              Jefferson County, FL
                              Leon County, FL
                              Wakulla County, FL
45300.......................  Tampa-St. Petersburg-Clearwater,    0.9114
                               FL.
                              Hernando County, FL
                              Hillsborough County, FL
                              Pasco County, FL
                              Pinellas County, FL
45460.......................  Terre Haute, IN.................    0.9747
                              Clay County, IN
                              Sullivan County, IN
                              Vermillion County, IN
                              Vigo County, IN
45500.......................  Texarkana, TX-Texarkana, AR.....    0.7459
                              Miller County, AR
                              Bowie County, TX
45780.......................  Toledo, OH......................    0.8854
                              Fulton County, OH
                              Lucas County, OH
                              Ottawa County, OH
                              Wood County, OH
45820.......................  Topeka, KS......................    0.9012
                              Jackson County, KS
                              Jefferson County, KS
                              Osage County, KS
                              Shawnee County, KS
                              Wabaunsee County, KS
45940.......................  Trenton-Ewing, NJ...............    1.0622
                              Mercer County, NJ
46060.......................  Tucson, AZ......................    0.8991
                              Pima County, AZ
46140.......................  Tulsa, OK.......................    0.8179
                              Creek County, OK
                              Okmulgee County, OK
                              Osage County, OK
                              Pawnee County, OK
                              Rogers County, OK
                              Tulsa County, OK
                              Wagoner County, OK
46220.......................  Tuscaloosa, AL..................    0.8498
                              Greene County, AL
                              Hale County, AL
                              Tuscaloosa County, AL
46340.......................  Tyler, TX.......................    0.8562
                              Smith County, TX
46540.......................  Utica-Rome, NY..................    0.8806
                              Herkimer County, NY
                              Oneida County, NY
46660.......................  Valdosta, GA....................    0.7558
                              Brooks County, GA
                              Echols County, GA
                              Lanier County, GA
                              Lowndes County, GA
46700.......................  Vallejo-Fairfield, CA...........    1.6355
                              Solano County, CA
47020.......................  Victoria, TX....................    0.8986
                              Calhoun County, TX
                              Goliad County, TX
                              Victoria County, TX
47220.......................  Vineland-Millville-Bridgeton, NJ    1.0674
                              Cumberland County, NJ
47260.......................  Virginia Beach-Norfolk-Newport      0.8928
                               News, VA-NC.
                              Currituck County, NC
                              Gloucester County, VA
                              Isle of Wight County, VA
                              James City County, VA
                              Mathews County, VA
                              Surry County, VA
                              York County, VA
                              Chesapeake City, VA
                              Hampton City, VA
                              Newport News City, VA
                              Norfolk City, VA
                              Poquoson City, VA
                              Portsmouth City, VA
                              Suffolk City, VA
                              Virginia Beach City, VA
                              Williamsburg City, VA
47300.......................  Visalia-Porterville, CA.........    0.9989
                              Tulare County, CA
47380.......................  Waco, TX........................    0.8248
                              McLennan County, TX
47580.......................  Warner Robins, GA...............    0.7718
                              Houston County, GA
47644.......................  Warren-Troy-Farmington Hills, MI    0.9464
                              Lapeer County, MI
                              Livingston County, MI
                              Macomb County, MI
                              Oakland County, MI
                              St. Clair County, MI
47894.......................  Washington-Arlington-Alexandria,    1.0570
                               DC-VA-MD-WV.
                              District of Columbia, DC
                              Calvert County, MD
                              Charles County, MD
                              Prince George's County, MD
                              Arlington County, VA
                              Clarke County, VA
                              Fairfax County, VA
                              Fauquier County, VA
                              Loudoun County, VA
                              Prince William County, VA
                              Spotsylvania County, VA
                              Stafford County, VA
                              Warren County, VA
                              Alexandria City, VA
                              Fairfax City, VA
                              Falls Church City, VA
                              Fredericksburg City, VA
                              Manassas City, VA
                              Manassas Park City, VA
                              Jefferson County, WV
47940.......................  Waterloo-Cedar Falls, IA........    0.8366
                              Black Hawk County, IA
                              Bremer County, IA
                              Grundy County, IA
48140.......................  Wausau, WI......................    0.8652
                              Marathon County, WI
48300.......................  Wenatchee-East Wenatchee, WA....    1.0151
                              Chelan County, WA
                              Douglas County, WA
48424.......................  West Palm Beach-Boca Raton-         0.9637
                               Boynton Beach, FL.
                              Palm Beach County, FL
48540.......................  Wheeling, WV-OH.................    0.6702
                              Belmont County, OH
                              Marshall County, WV
                              Ohio County, WV
48620.......................  Wichita, KS.....................    0.8710
                              Butler County, KS
                              Harvey County, KS
                              Sedgwick County, KS
                              Sumner County, KS
48660.......................  Wichita Falls, TX...............    0.9578
                              Archer County, TX
                              Clay County, TX
                              Wichita County, TX
48700.......................  Williamsport, PA................    0.8303
                              Lycoming County, PA
48864.......................  Wilmington, DE-MD-NJ............    1.0632
                              New Castle County, DE
                              Cecil County, MD
                              Salem County, NJ
48900.......................  Wilmington, NC..................    0.8900
                              Brunswick County, NC
                              New Hanover County, NC
                              Pender County, NC
49020.......................  Winchester, VA-WV...............    0.9072
                              Frederick County, VA
                              Winchester City, VA
                              Hampshire County, WV
49180.......................  Winston-Salem, NC...............    0.8373
                              Davie County, NC
                              Forsyth County, NC
                              Stokes County, NC
                              Yadkin County, NC
49340.......................  Worcester, MA...................    1.1632
                              Worcester County, MA
49420.......................  Yakima, WA......................    1.0399
                              Yakima County, WA
49500.......................  Yauco, PR.......................    0.3798
                              Gu[aacute]nica Municipio, PR
                              Guayanilla Municipio, PR
                              Pe[ntilde]uelas Municipio, PR
                              Yauco Municipio, PR
49620.......................  York-Hanover, PA................    0.9580
                              York County, PA
49660.......................  Youngstown-Warren-Boardman, OH-     0.8406
                               PA.
                              Mahoning County, OH
                              Trumbull County, OH
                              Mercer County, PA
49700.......................  Yuba City, CA \1\...............    1.1809
                              Sutter County, CA
                              Yuba County, CA

[[Page 26480]]

 
49740.......................  Yuma, AZ........................    0.9715
                              Yuma County, AZ
------------------------------------------------------------------------
\1\ At this time, there are no hospitals located in this urban area on
  which to base a wage index.


 Table B--FY 2014 Wage Index Based on CBSA Labor Market Areas for Rural
                                  Areas
------------------------------------------------------------------------
                                                                  Wage
         State code                    Nonurban area             index
------------------------------------------------------------------------
1..........................  Alabama.........................     0.7175
2..........................  Alaska..........................     1.3720
3..........................  Arizona.........................     0.9205
4..........................  Arkansas........................     0.7374
5..........................  California......................     1.2697
6..........................  Colorado........................     0.9844
7..........................  Connecticut.....................     1.1356
8..........................  Delaware........................     1.0116
10.........................  Florida.........................     0.8009
11.........................  Georgia.........................     0.7482
12.........................  Hawaii..........................     0.9919
13.........................  Idaho...........................     0.7637
14.........................  Illinois........................     0.8392
15.........................  Indiana.........................     0.8547
16.........................  Iowa............................     0.8470
17.........................  Kansas..........................     0.7963
18.........................  Kentucky........................     0.7726
19.........................  Louisiana.......................     0.7610
20.........................  Maine...........................     0.8273
21.........................  Maryland........................     0.8733
22.........................  Massachusetts...................     1.3671
23.........................  Michigan........................     0.8308
24.........................  Minnesota.......................     0.9140
25.........................  Mississippi.....................     0.7610
26.........................  Missouri........................     0.7780
27.........................  Montana.........................     0.9136
28.........................  Nebraska........................     0.8893
29.........................  Nevada..........................     0.9822
30.........................  New Hampshire...................     1.0381
31.........................  New Jersey \1\..................  .........
32.........................  New Mexico......................     0.8843
33.........................  New York........................     0.8235
34.........................  North Carolina..................     0.8118
35.........................  North Dakota....................     0.6814
36.........................  Ohio............................     0.8281
37.........................  Oklahoma........................     0.7712
38.........................  Oregon..........................     0.9437
39.........................  Pennsylvania....................     0.8350
40.........................  Puerto Rico \1\.................     0.4047
41.........................  Rhode Island \1\................  .........
42.........................  South Carolina..................     0.8337
43.........................  South Dakota....................     0.8199
44.........................  Tennessee.......................     0.7458
45.........................  Texas...........................     0.7889
46.........................  Utah............................     0.8769
47.........................  Vermont.........................     0.9782
48.........................  Virgin Islands..................     0.7089
49.........................  Virginia........................     0.7802
50.........................  Washington......................     1.0574
51.........................  West Virginia...................     0.7398
52.........................  Wisconsin.......................     0.8934
53.........................  Wyoming.........................     0.9280
65.........................  Guam............................     0.9611
------------------------------------------------------------------------
\1\ All counties within the State are classified as urban, with the
  exception of Puerto Rico. Puerto Rico has areas designated as rural;
  however, no short-term, acute care hospitals are located in the
  area(s) for FY 2014. The Puerto Rico wage index is the same as FY
  2013.

[FR Doc. 2013-10558 Filed 5-1-13; 4:15 pm]
BILLING CODE 4120-01-P