[Federal Register: October 11, 2006 (Volume 71, Number 196)]
[Notices]
[Page 59885-60043]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11oc06-167]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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Medicare Program; Hospital Inpatient Prospective Payment Systems and
Fiscal Year 2007 Rates; Notice
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-1488-N]
RIN 0938-AO12
Medicare Program; Hospital Inpatient Prospective Payment Systems
and Fiscal Year 2007 Rates: Final Fiscal Year 2007 Wage Indices and
Payment Rates After Application of Revised Occupational Mix Adjustment
to Wage Index
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice.
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SUMMARY: This notice contains tables listing the final occupational mix
adjusted wage indices, hospital reclassifications, payment rates,
impacts, and other related tables as a result of the application of the
occupational mix adjustment to 100 percent of the wage index effective
for fiscal year (FY) 2007.
DATES: Effective Date: This notice is effective on October 1, 2006.
FOR FURTHER INFORMATION CONTACT: Valerie Miller, (410) 786-4535, Wage
Index Issues. Brian Slater, (410) 786-5229, Geographic Reclassification
Issues. Marc Hartstein, (410) 786-4548, All Other Issues.
SUPPLEMENTARY INFORMATION:
I. Background
In the August 18, 2006 Federal Register (71 FR 47870) (hereinafter
referred to as the FY 2007 IPPS final rule), we set forth our final
rule for the Medicare inpatient prospective payment system (IPPS). Due
to the decision in the case Bellevue Hosp. Center v. Leavitt, 443 F. 3d
163 (2nd Cir. 2006), we stated that we would publish the FY 2007
occupational mix adjusted wage index tables, rates, and impacts on our
Web site and in a Federal Register document subsequent to the FY 2007
IPPS final rule. (See the FY 2007 IPPS final rule for a full
explanation of the reasons for such subsequent publication.) This
notice includes such wage index tables, rates, and impacts.
II. Final FY 2007 Occupational Mix Adjusted Wage Indices, Rates, and
Impacts
A. Wage Index and Occupational Mix Adjustment
1. Implementation of the New Occupational Mix Adjustment for the FY
2007 Wage Index
The final wage index values for FY 2007 (except those for hospitals
receiving wage index adjustments under section 505 of Pub. L. 108-173)
are included in Tables 4A-1, 4A-2, 4B, 4C-1, 4C-2, and 4F of the
Addendum to this notice and are posted on our Web site at http://www.cms.hhs.gov/
[fxsp0]AcuteInpatientPPS/. For hospitals that are
receiving a wage index adjustment under section 505 of Pub. L. 108-173,
the hospital's final wage index will reflect the adjustment shown in
Table 4J of the Addendum to this notice. Tables 3A and 3B of the
Addendum to this notice and on our Web site reflect the 3-year average
of the average hourly wage for each labor market area before the
redesignation of hospitals, used for FYs 2005, 2006, and 2007. Table 3A
lists average hourly wages for urban areas and Table 3B lists these
data for rural areas. In addition, Table 2 in the Addendum to this
notice includes the occupational mix adjusted average hourly wage for
each hospital from the FYs 2001, 2002, and 2003 cost reporting periods.
The average hourly wages for FYs 2001 and 2002 reflect a 10 percent
occupational mix adjustment using the survey data used to develop the
FYs 2005 and 2006 wage indices, respectively. The FY 2003 average
hourly wages reflect a 100 percent occupational mix adjustment using
the recently collected survey data and were used to calculate the FY
2007 wage index.
2. Proxy Occupational Mix Adjustment for Hospitals With No Survey Data
As stated in the FY 2007 IPPS final rule (71 FR 48014), we have
applied the average occupational mix adjustment for a hospital's labor
market area to the wage data of hospitals that did not submit
occupational mix survey data or that submitted survey data that could
not be used because we determined it to be aberrant. For example, a
hospital's individual nurse category average hourly wages were out of
range (that is, unusually high or low), and the hospital did not
provide sufficient documentation to explain the aberrancy, or the
hospital did not submit any registered nurse staff salaries or hours
data.
In calculating the average occupational mix adjustment factor for
an area, we replicated Steps 1 through 6 of the calculation for the
occupational mix adjustment (see 71 FR 48009). However, instead of
performing these steps at the hospital level, we aggregated the data at
the labor market area level. In following these steps, for example, for
Core-Based Statistical Areas (CBSAs) that contain providers that did
not submit occupational mix survey data, the occupational mix
adjustment factor ranged from a low of 0.8944 (CBSA 39820, Redding,
CA), to a high of 1.0924 (CBSA 38220, Pine Bluff, AR). Also, in
computing a hospital's occupational mix adjusted salaries and wage-
related costs for nursing employees (Step 7 of the calculation (see 71
FR 48010)) in the absence of occupational mix survey data, we
multiplied the hospital's total salaries and wage-related costs by the
percentage of the area's total workers attributable to the area's total
nursing category. There were also two CBSAs in which none of the
providers submitted the occupational mix survey (CBSA 49740, Yuma, AZ,
and CBSA 25020, Guayama, P.R.). In the absence of any data in these
labor market areas, we applied an occupational mix adjustment factor of
1.0 to all providers.
3. Analysis of the Final FY 2007 Wage Index
Using the new occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the FY 2007 wage index
results in a national average hourly wage of $29.6529 and a Puerto-Rico
specific average hourly wage of $13.0943. We calculated the FY 2007
wage index using the Worksheet S-3 cost report data of 3,570 hospitals
and occupational mix survey data from 3,239 hospitals (90.7 percent
response rate). Although more than 3,239 hospitals submitted
occupational mix survey data for the January through March 2006
collection period, we excluded the data for 37 hospitals that did not
have FY 2003 Worksheet S-3 cost report data for use in calculating the
FY 2007 wage index. Also, we excluded the occupational mix survey data
of another 30 hospitals because their data was incomplete or aberrant.
Using the occupational mix data of 3,239 hospitals, the FY 2007
national average hourly wages for each occupational mix nursing
subcategory as calculated in Step 2 of the occupational mix calculation
are as follows:
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Average
Occupational mix nursing subcategory hourly wage
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National RN Management.................................. $38.5908
National RN Staff....................................... 33.3739
National LPN............................................ 19.2721
National Nurse Aides, Orderlies, and Attendants......... 13.6906
National Medical Assistants............................. 15.6304
National Nurse Category................................. 28.7431
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The national average hourly wage for the entire nurse category as
computed in Step 5 of the occupational mix calculation is $28.7431.
Hospitals with a nurse category average hourly wage (as calculated in
Step 4) of greater than national nurse category average hourly wage
receive an occupational mix adjustment factor (as calculated in Step 6)
of less than 1.0. Hospitals with a nurse category average hourly wage
(as calculated in Step 4) of less than national nurse category average
hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of greater than 1.0.
Based on the January through March 2006 occupational mix survey
data, we determined (in Step 7 of the occupational mix calculation)
that the national percentage of hospital employees in the Nurse
category is 42.9 percent, and the national percentage of hospital
employees in the All Other Occupations category is 57.1 percent. At the
CBSA level, the percentage of hospital employees in the Nurse category
ranged from a low of 23.0 percent in one CBSA, to a high of 85.5
percent in another CBSA.
After adjusting the FY 2007 wage indices by 100 percent for
occupational mix, the wage index values for a total of 250 hospitals in
73 labor market areas are assigned a statewide rural wage index value
(``the rural floor'') according to section 4410 of Pub. L. 105-33, or
an imputed floor, for hospitals located in all-urban States, according
to Sec. 412.64(h).
a. Effect of the 2006 Occupational Data on the FY 2007 Wage Index
(Unadjusted Relative to Adjusted Wage Index). We compared the FY 2007
unadjusted wage indices for each CBSA to the FY 2007 wage indices
adjusted for occupational mix. In implementing an occupational mix
adjusted wage index based on the above calculation, the final wage
index values for 14 rural areas (29.8 percent) and 201 urban areas
(52.1 percent) would decrease as a result of the adjustment. Six rural
areas (12.8 percent) and 108 urban areas (28.0 percent) would
experience a decrease of 1 percent or greater in their wage index
values. The largest negative impacts would be 2.7 percent and 6.0
percent. In addition, 33 rural areas (70.2 percent) and 181 urban areas
(46.9 percent) would experience an increase in their wage index values.
The largest increase for a rural area would be 3.16 percent and the
largest increase for an urban area would be 8.39 percent. Four urban
areas would be unaffected. These results indicate that a larger
percentage of rural areas benefit from an occupational mix adjustment
than do urban areas. However, as was the case with the previous
occupational mix data, close to a third of rural CBSAs (29.8 percent)
continue to experience a decrease in their wage indices as a result of
the occupational mix adjustment.
b. Effect of the 2006 Occupational Mix Survey Data Relative to the
2003 Survey Data. We also analyzed the effect on the FY 2007 wage index
of applying the January through March 2006 occupational mix survey
data, relative to applying the 2003 occupational mix survey data. In
this analysis, we compared the FY 2007 wage index adjusted 100 percent
using 2003 and 2006 survey data. By controlling for changes in
hospitals' wage data and geographic reclassification, we determined
that the wage index values for 27 rural areas (57.4 percent) and 183
urban areas (47.4 percent) would decrease as a result of applying the
2006 survey data instead of the 2003 survey data. Ten rural areas (21.3
percent) and 96 urban areas (24.9 percent) would experience a decrease
of 1 percent or greater in their wage index values. The largest
negative impact for a rural area would be 3.6 percent. Six urban areas
(1.2 percent) would be decreasing by greater than 5 percent; the
largest urban decrease would be 20.9 percent, and the second largest
decrease for an urban area would be 7.7 percent. One rural and one
urban area would be unaffected by the change in the occupational mix
data. In addition, 19 rural areas (40.4 percent) and 202 urban areas
(52.3 percent) would experience an increase in their wage index values.
The largest increase for a rural area would be 2.6 percent and the
largest increase for an urban area would be 7.15 percent.
B. Final FY 2007 Hospital Reclassifications/Redesignations
1. Withdrawals and Terminations
As we stated in the FY 2007 IPPS final rule (71 FR 48020), for FY
2007, rather than hospitals withdrawing or terminating their 3-year
reclassifications within 45 days of the publication of the IPPS
proposed rule, hospitals would be subject to special procedures unique
to FY 2007.
These procedures are as follows:
Hospitals had 15 days from the display date of the FY 2007
IPPS final rule to notify us of whether, in the absence of viewing the
final 100 percent occupational mix-adjusted wage index data, they wish
to choose a particular wage index for which they are eligible (such as
to definitively maintain, terminate, or withdraw from a
reclassification that they received ).
If we did not receive notice from the hospital within the
15-day timeframe, we made our best efforts to give the hospital the
highest wage index among its available options. We made
reclassification withdrawal and termination decisions based on what we
perceived would be most advantageous to the hospital. (See 71 FR 48020
for an explanation of the reclassifications and adjustment we chose
among.) Please note that in some cases we terminated a hospital's Lugar
reclassification under section 1886(d)(8)(B) of the Act in order to
receive the out-migration adjustment. Because this termination would
result in the hospital losing urban status, we published a separate
table (Table 9D) identifying these hospitals that move from Lugar/urban
status to rural status with the out-migration adjustment. Also, in some
cases, we may have made half-year terminations/withdrawals on behalf of
section 508 hospitals (or groups containing section 508 hospitals)
using the procedures identified in the FY 2007 IPPS final rule. (See 71
FR 48021 for an explanation of the half-year reclassifications that
could occur for section 508 hospitals and groups containing section 508
hospitals.
We have posted the final occupational mix-adjusted wage
indices, out-migration adjustments, and our decisions on hospital
reclassification on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp.
We have posted the same table on the
CMS Web site that appeared in the Federal Register final notice of the
occupational mix-adjusted wage indices.
In the FY 2007 IPPS final rule, we acknowledged that
hospitals may base termination/withdrawal decisions on factors other
than simply what results in the highest wage index for the upcoming
fiscal year. For this reason, we allowed a hospital to change a
decision that is made by CMS on its behalf. Hospitals now have a 30-day
period from the date these final data and our final decisions appear on
the CMS Web site to notify CMS in writing, with a copy to the MGCRB, of
whether they wish to reverse the reclassification decision made by CMS
or to choose another reclassification for which they are eligible.
Hospitals are able to
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determine the reclassification decision applied on their behalf by
reviewing Tables 9A through 9C for hospitals that are reclassified
under section 1886(d)(8)(B) of the Act, section 508 of Pub. L. 108-173,
or section 1886(d)(10) of the Act. The applicable wage index for these
hospitals will be found on Table 2. If a hospital is not listed in
Tables 9A through 9C, CMS has made a decision not to reclassify the
hospital and its home wage index will apply, including the effect of
any out-migration adjustment (if applicable). Again, the wage index
that will apply to the hospital is found in Table 2. Any applicable
out-migration adjustment for the hospital is found in Table 4J. As
indicated above in this section, we are publishing a separate table
identifying hospitals that we move from Lugar/urban status to rural
status with the out-migration adjustment in Table 9D.
Requests to reverse a decision made on behalf of a
hospital by CMS and to choose another reclassification or adjustment
for which the hospital is otherwise eligible must be received by CMS no
later than 5 p.m., e.s.t., with a copy sent to the MGCRB by October 30,
2006 (or within 30 days from the date the information appears on the
CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp
at the following addresses: Division of Acute Care, C4-08-06, 7500
Security Boulevard, Baltimore, MD 21244, Attn: Marianne Myers; and a
copy to Medicare Geographic Classification Review Board, 2520 Lord
Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
As required under Sec. 412.273(c), requests by groups of hospitals
must be made by all hospitals that are a party to the application or
reclassification. The reclassification or adjustment chosen by the
hospital must be one for which the hospital would otherwise be eligible
had CMS not made the withdrawal or termination decision on the
hospital's behalf.
If a hospital (or group of hospitals) fails to notify CMS
that it is revising a determination made on its behalf within 30 days
from the date the information appears on the CMS Web site, the decision
made by CMS on the hospital's behalf will be final for FY 2007.
Therefore, if CMS made a decision on a hospital's (or group of
hospitals) behalf to terminate or withdraw a reclassification and the
hospital does not reverse or modify CMS's decision within 30 days of
posting the decision on the CMS Web site, we will deem the hospital's
reclassification is withdrawn or terminated. If the hospital does not
reverse or modify CMS's decision within 30 days of posting of the
decision on the CMS Web site, once CMS's decision on the hospital's
behalf is in effect, it will be treated in the same manner as if the
hospital(s) had made the reclassification decision on its own. Thus,
for example, because a hospital cannot have overlapping
reclassifications, if we decide a hospital should accept a FY 2007
through 2009 reclassification and the hospital does not modify or
reverse CMS's decision within 30 days of posting the decision on the
CMS Web site, any reclassification the hospital previously had for FY
2006 through 2008 would be permanently terminated.
Hospitals should note that we will not recalculate the wage indices
or budget neutrality factors now that CMS has made their decisions
regarding what is most advantageous to each hospital using the 100
percent occupational mix-adjusted wage data. That is, we will not
further recalculate the wage indices (including any rural floors or
imputed rural floors) or standardized amounts based on hospital
decisions that further revise decisions made by CMS on the hospitals'
behalf.
In addition, we note that rural areas that include a section 508
hospital (specifically a hospital with wages relatively higher than the
wages of other hospitals) may experience a decrease in their wage index
for the second half of FY 2007. This is because section 508 hospitals
are not considered reclassified under section 1886(d)(10) of the Act,
and therefore, are not subject to the rule in section 1886(d)(8)(C)(ii)
of the Act requiring rural area wage indices to be calculated exclusive
of hospitals reclassified under section 1886(d)(10) of the Act, if
doing so would increase the rural wage index. Thus, for the first half
of the year, a section 508 hospital may be included in the home wage
index of a rural area, while the hospitals reclassified under section
1886(d)(10) of the Act are excluded, since such exclusion increases the
wage index of the rural area. However, for the second half of the year,
the hospital is no longer a section 508 hospital. If the former section
508 hospital is reclassified under section 1886(d)(10) of the Act, it
is grouped with other hospitals so reclassified. The high wages of the
section 508 hospital may operate such that, for the second half of the
year, it is more advantageous for all of the reclassified hospitals to
be included in the wage index of the rural area (rather than excluded
as they were in the first half of the year). However, because the other
reclassified hospitals are now included in the wage index, and not just
the sole section 508 hospital with high wages, the area may see a
decline in the wage index. We view this scenario as arising due to the
rural area's higher than expected wage index during the first half of
the year from including only the section 508 hospital and not any
reclassified hospitals. If we did not establish special rules that
allowed for one-half year reclassifications, the section 508 hospital
likely would have reclassified for the entire year under section
1886(d)(10) of the Act. In that case, the wage index for the second-
half of FY 2007 would have applied for the entire year.
2. MGCRB Applications for FY 2008
Section 1886(d)(10)(C)(ii) of the Act indicates that a hospital
requesting a change in geographic classification for a fiscal year must
submit its application to the MGCRB no later than the first day of the
13-month period ending on September 30 of the preceding fiscal year.
Thus, the statute requires that FY 2008 reclassification applications
be submitted to the MGCRB no later than September 1, 2006. For this
reason, hospitals must have filed a FY 2008 reclassification
application by the September 1, 2006 deadline even though the average
hourly wage data used to develop the final FY 2007 wage indices was not
available.
The MGCRB, in evaluating a hospital's request for reclassification
for FY 2008 for the wage index, must utilize the official data used to
develop the FY 2007 wage index. The wage data used to support the
hospital's wage comparisons must be from the CMS hospital wage survey.
Generally, the source for these data is the IPPS final rule. However,
the wage tables identifying the 3-year average hourly wages of
hospitals were not available in time to include them in the FY 2007
IPPS final rule and by the September 1, 2006 deadline for submitting FY
2008 geographic reclassification applications.
As outlined in Sec. 412.256(c)(2), hospitals with incomplete
applications have the opportunity to request that the MGCRB grant a
hospital that has submitted an application by September 1, 2006, an
extension beyond September 1, 2006, to complete its application. Thus,
while hospitals must file an application for reclassification to the
MGCRB by September 1, 2006, they are able to supplement the
reclassification application with official data used to develop the FY
2007 wage index after filing their initial application.
Therefore, as we stated in the FY 2007 IPPS final rule (71 FR 48022
through 48023), we are allowing hospitals 30 days after the final wage
data is posted on the CMS Web site or by October 30,
[[Page 59889]]
2006 to file a supplement to the reclassification application they
filed by September 1, 2006. The supplement would include the official
data (Attachment H in the MGCRB Application) used to develop the FY
2007 wage index. Supplements must be received within 30 days this final
data is posted on the CMS Web site or by October 30, 2006. The 3-year
average hourly wage information necessary for FY 2008 reclassification
applications appears in Tables 2, 3A, and 3B of the Addendum to this
notice. The information also is available on the CMS Web site at:
http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp and then by
accessing the page titled ``MGCRB Reclassification Data for FY 2008
Applications.'' Applications and other information about MGCRB
reclassifications may be obtained via the CMS Internet Web site at:
http://www.cms.hhs.gov/mgcrb/, or by calling the MGCRB at (410) 786-
1174. The mailing address of the MGCRB is: 2520 Lord Baltimore Drive,
Suite L, Baltimore, MD 21244-2670.
3. Cancellations of Previous Withdrawals or Terminations for FY 2008
and Subsequent Fiscal Years
We are also allowing a 30-day period from the date the final wage
data is posted on the CMS Web site to cancel a previous withdrawal or
termination in order for a hospital to reinstate its reclassification
for FY 2008 (for a FY 2006-2008 reclassification) or FY 2008 and FY
2009 (for a FY 2007-2009 reclassification). Because we have made
termination or withdrawal decisions on behalf of hospitals, hospitals
should look carefully at these decisions and determine whether they
want to cancel such withdrawals or terminations for FY 2008 or FY 2009
if the reclassification time period includes these years. Hospitals
must request to reinstate a reclassification that includes FY 2008
within 30 days of posting the Web site data for the reclassification to
continue in that year even if they agree with the decision we made on
their behalf for FY 2007.
Hospitals must request to reinstate a reclassification that
includes FY 2008 within 30 days of when the data are posted to the CMS
Web site or by October 30, 2006.
Requests to cancel a withdrawal or termination in order to
reinstate a hospital's reclassification for FY 2008 or FY 2009, or both
fiscal years, should be forwarded to the following addresses: Medicare
Geographic Classification Review Board, 2520 Lord Baltimore Drive,
Suite L, Baltimore, MD 21244-2670; and a copy to Division of Acute
Care, C4-08-06, 7500 Security Boulevard, Baltimore, MD 21244, Attn:
Marianne Myers.
All requests must be received within 30 days of this posting of CMS
final wage data and final reclassification decisions on the CMS Web
site or by October 30, 2006.
C. Final FY 2007 Prospective Payment Systems Payment Rates for Hospital
Operating and Capital Related Costs
As discussed in the FY 2007 IPPS final rule, due to the unusual
circumstances imposed by the order of the Court of Appeals for the
Second Circuit in the decision in Bellevue Hospital Center v. Leavitt,
we did not publish the final FY 2007 budget neutrality factors,
standardized amounts, fixed-loss cost threshold, outlier offset factor,
DRG weights, or wage indices in the FY 2007 IPPS final rule. Because
the occupational mix adjustment affects the calculation of the outlier
threshold as well as the outlier offset and budget neutrality factors
that are applied to the standardized amounts, we were only able to
provide tentative figures in that final rule. As discussed above in
this notice, we are publishing final occupation mix-adjusted wage
indices. Accordingly, in this section of this notice, we are discussing
the final FY 2007 prospective payment rates for Medicare hospital
inpatient operating costs and Medicare hospital inpatient capital-
related costs. We calculated these final rates using the methodology we
adopted in the FY 2007 IPPS final rule.
We note that, because hospitals excluded from the IPPS are paid on
a cost basis (and not by the IPPS), these hospitals were not affected
by the tentative figures for standardized amounts, offsets, and budget
neutrality factors. Therefore, the rate-of-increase percentages for
updating the target amounts for hospitals and hospital units excluded
from the IPPS that are effective October 1, 2006 were finalized in the
FY 2007 IPPS final rule (71 FR 48164) and are not included in this
notice.
1. Final FY 2007 Prospective Payment Rates for Hospital Inpatient
Operating Costs
a. Final FY 2007 Standardized Amount. We calculated the final FY
2007 standardized amounts using the methodology we adopted in the FY
2007 IPPS final rule. For a complete description of this methodology,
please see the FY 2007 IPPS final rule (71 FR 48145 through 48155).
Tables 1A and 1B in the Addendum to this notice contain the final
national standardized amount that we are applying to all hospitals,
except hospitals in Puerto Rico. The final Puerto Rico-specific amounts
are shown in Table 1C. The final amounts shown in Tables 1A and 1B
differ only in that the labor-related share applied to the final
standardized amounts in Table 1A is 69.7 percent, and the labor-related
share applied to the final standardized amounts in Table 1B is 62
percent. (The labor-related share is 62 percent for all hospitals
(other than those in Puerto Rico) whose wage indices are less than or
equal to 1.0000.)
In addition, Tables 1A and 1B include final standardized amounts
reflecting the full 3.4 percent update for FY 2007, and final
standardized amounts reflecting the 2.0 percentage point reduction to
the update (a 1.4 percent update) applicable for hospitals that fail to
submit quality data consistent with section 1886(b)(3)(B)(viii) of the
Act.
In the FY 2007 IPPS final rule, we did not supply a table that
illustrated the changes from the FY 2006 national average standardized
amount because we were only setting the standardized amounts
tentatively, but we stated that we would provide the table in the
subsequent Federal Register notice. Therefore, in this notice, we
include below a table that details the calculation of the final
standardized amounts.
Comparison of FY 2006 Standardized Amounts to Final FY 2007 Single Standardized Amount With Full Update and
Reduced Update
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Full update (3.4 percent) Reduced update (1.4 percent)
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FY 2006 Base Rate, after removing Labor: $3,505.76.................... Labor: $3,505.76.
reclassification budget neutrality, Nonlabor: $1,524.03................. Nonlabor: $1,524.03.
demonstration budget neutrality,
wage index transition budget
neutrality factors and outlier
offset (based on the proposed labor
and nonlabor market share
percentage for FY 2007).
Final FY 2007 Update Factor......... 1.034............................... 1.014.
[[Page 59890]]
Final FY 2007 DRG Recalibrations and 0.995662............................ 0.995662.
Wage Index Budget Neutrality Factor.
Final FY 2007 Reclassification 0.992355............................ 0.992355.
Budget Neutrality Factor.
Adjusted for Blend of FY 2006 DRG Labor: $3,581.64.................... Labor: $3,512.37.
Recalibration and Wage Index Budget Nonlabor: $1,557.01................. Nonlabor: $1,526.90.
Neutrality Factors.
Final FY 2007 Outlier Factor........ 0.948968............................ 0.948968.
Final FY 2007 Labor Market Wage 0.999700............................ 0.999700.
Index Transition Budget Neutrality
Factor.
Final Rural Demonstration Budget 0.999905............................ 0.999905.
Neutrality Factor.
Final Rate for FY 2007 (after Labor: $3,022.18.................... Labor: $2,963.73.
multiplying FY 2006 base rate by Nonlabor: $1,852.31................. Nonlabor: $1,816.48.
above factors) where the wage index
is less than or equal to 1.0000.
Final Rate for FY 2007 (after Labor: $3,397.52.................... Labor: $3,331.80.
multiplying FY 2006 base rate by Nonlabor: $1,476.97................. Nonlabor: $1,448.40.
above factors) where the wage index
is greater than 1.0000.
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The final labor-related and nonlabor-related portions of the
national average standardized amounts for Puerto Rico hospitals for FY
2007 are set forth in Table 1C in the Addendum to this notice. (The
labor-related share applied to the Puerto Rico-specific standardized
amount is 58.7 percent, or 62 percent, depending on which is more
advantageous to the hospital.
b. Final Adjustments for Area Wage Levels. The final occupational
mix adjusted wage indices by geographic area are listed in Tables 4A-1,
4A-2, 4B, 4C-1, 4C-2, and 4F in the Addendum to this notice. (These
tables are also available on the CMS Web site.)
c. FY 2007 Final Outlier Fixed-Loss Cost Threshold. Using the
methodology we adopted in the FY 2007 IPPS final rule, we are
establishing a final outlier fixed-loss cost threshold for FY 2007
equal to the prospective payment rate for the DRG, plus any IME and DSH
payments, and any add-on payments for new technology, plus $24,485.
d. DRG Weights. Because we rely on the wage index data as one of
the standardizing factors that we use in calculating both the charge-
based and the cost-based relative weights that we are blending to set
the FY 2007 transitional relative weights, we have recalculated the FY
2007 relative weights. We list the final DRG weights in Table 5 of the
Addendum to this notice.
2. Final FY 2007 Prospective Payment Rates for Acute Care Hospital
Inpatient Capital-Related Costs
We have calculated the final FY 2007 capital Federal rates,
offsets, and budget neutrality factors using the methodology we adopted
in the FY 2007 IPPS final rule. For a complete description of this
methodology, please see the FY 2007 IPPS final rule (71 FR 48155
through 48156).
a. Inpatient Hospital Capital-Related Prospective Payment Rate
Update. The factors used in the update framework are not affected by
the occupational mix information used to adjust the wage index.
Therefore, the update factor for FY 2007 was not revised from the
capital PPS standard Federal rate update factor published in the FY
2007 IPPS final rule and remains at 1.10 percent for FY 2007. A full
discussion of the update framework is provided in the FY 2007 IPPS
final rule (71 FR 48156 through 48158).
b. Outlier Payment Adjustment Factor. Based on the final thresholds
as set forth in section II.C. of this notice, we estimate that final
outlier payments for capital-related costs will equal 4.32 percent for
inpatient capital-related payments based on the final Federal rate in
FY 2007. Therefore, we are applying a final outlier adjustment factor
of 0.9568 to the final capital Federal rate. Thus, we estimate that the
percentage of capital outlier payments to total capital standard
payments for FY 2007 will be slightly lower than the percentages for FY
2006.
The outlier thresholds for FY 2007 are in section II.C.1. of this
notice. For FY 2007, a case qualifies as a cost outlier if the cost for
the case plus the IME and DSH payments are greater than the prospective
payment rate for the DRG plus $24,485.
c. Budget Neutrality Adjustment Factor for Changes in DRG
Classifications and Weights and the GAF. Using the methodology
discussed in the FY 2007 IPPS final rule (71 FR 48158 through 48161),
for FY 2007, we are establishing a final GAF/DRG budget neutrality
factor of 0.9986. The GAF/DRG budget neutrality factors are built
permanently into the capital rates; that is, they are applied
cumulatively in determining the capital Federal rate. This follows from
the requirement that estimated aggregate payments each year be no more
or less than they would have been in the absence of the annual DRG
reclassification and recalibration and changes in the GAF. The final
incremental change in the adjustment from FY 2006 to FY 2007 is 0.9986.
The final cumulative change in the capital Federal rate due to this
adjustment is 0.9906 (the product of the incremental factors for FYs
1993 though 2006 and the final incremental factor of 0.9986 for FY
2007). (We note that averages of the incremental factors that were in
effect during FYs 2005 and 2006, respectively, were used in the
calculation of the final cumulative adjustment of 0.9986 for FY 2007.)
This factor accounts for DRG reclassifications and recalibration
and for changes in the GAF as well as the revised wage index as
adjusted by occupational mix data. It also incorporates the effects on
the final GAF of FY 2007 geographic reclassification decisions made by
the MGCRB compared to FY 2006 decisions. However, it does not account
for changes in payments due to changes in the DSH and IME adjustment
factors or in the large urban add-on.
d. Exceptions Payment Adjustment Factor. The adjustments made to
the wage index as a result of the application of occupational mix data
had no effect on capital exceptions payments. Therefore, the special
exceptions adjustment factor remains at 0.9997 as discussed in section
III.A.4. of FY 2007 IPPS final rule (71 FR 48161). We also explained
that the adjustments for regular exception payments are no longer
necessary as they were only applicable during the capital transition
period (cost reporting periods beginning on or after October 1, 1991
and before October 1, 2001).
e. Capital Standard Federal Rate for FY 2007. We are providing a
chart that shows how each of the factors and adjustments for FY 2007
affected the computation of the final FY 2007 capital Federal rate in
comparison to the FY
[[Page 59891]]
2006 capital Federal rate. The FY 2007 update factor has the effect of
increasing the final capital Federal rate by 1.1 percent compared to
the average FY 2006 Federal rate. The final GAF/DRG budget neutrality
factor has the effect of decreasing the final capital Federal rate by
0.14 percent. The final FY 2007 outlier adjustment factor has the
effect of increasing the final capital Federal rate by 0.56 percent
compared to the average FY 2006 capital Federal rate. The FY 2007
exceptions payment adjustment factor remains unchanged from the FY 2006
exceptions payment adjustment factor, and therefore, has a 0.0 percent
net effect on the final FY 2007 capital Federal rate. The combined
effect of all the changes is to increase the capital Federal rate by
1.52 percent compared to the average FY 2006 capital Federal rate.
Comparison of Factors and Adjustments: FY 2006 Capital Federal Rate and FY 2007 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
FY 2006 FY 2007 Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\............................... 1.0080 1.0110 1.0110 1.10
GAF/DRG Adjustment Factor \1\................... 1.0008 \3\ 0.9986 0.9986 -0.14
Outlier Adjustment Factor \2\................... 0.9515 \3\ 0.9568 1.0056 0.56
Exceptions Adjustment Factor \2\................ 0.9997 0.9997 0.0000 0.00
Capital Federal Rate............................ $420.65 \3\ $427. 03 1.0152 1.52
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality factors are built permanently into the capital rates.
Thus, for example, the incremental change from FY 2006 to FY 2007 resulting from the application of the final
GAF/DRG budget neutrality factor for FY 2007 is 0.9986.
\2\ The outlier reduction factor and the exceptions adjustment factor are not built permanently into the capital
rates; that is, these factors are not applied cumulatively in determining the capital rates. Thus, for
example, the net change resulting from the application of the final FY 2007 outlier adjustment factor would be
0.9568/0.9515, or 1.0056.
\3\ Final factors for FY 2007, as discussed in section II.E. of this notice.
We provided a chart in the FY 2007 IPPS final rule (71 FR 48162)
that compared the tentative FY 2007 capital Federal rate to the
proposed FY 2007 capital Federal rate (71 FR 24158 through 24159). We
are now providing a chart that shows how the final FY 2007 capital
Federal rate differs from the tentative FY 2007 capital Federal rate as
presented in the FY 2007 IPPS final rule.
Comparison of Factors and Adjustments: FY 2007 Tentative Capital Federal Rate and FY 2007 Final Capital Federal
Rate
----------------------------------------------------------------------------------------------------------------
Tentative FY Final FY 2007
2007 \1\ \2\ Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\............................... 1.0110 1.0110 0 0
GAF/DRG Adjustment Factor \1\................... 0.9994 0.9986 0.0008 -0.08
Outlier Adjustment Factor \2\................... 0.9568 0.9568 0 0
Exceptions Adjustment Factor \2\................ 0.9997 0.9997 0.0000 0.00
Capital Federal Rate............................ $427.38 $427.03 0.0008 0.08
----------------------------------------------------------------------------------------------------------------
\1\ As published in the FY 2007 IPPS final rule without the application of occupational mix data to the wage
index.
\2\ Final capital inpatient factors and rates after occupational mix adjustment to wage index in accordance with
the order of the Second Circuit Court.
As a final comparison, we are providing a chart that shows how the
final FY 2007 capital Federal rate differs from the proposed FY 2007
capital Federal rate presented in the FY 2007 IPPS proposed rule (71 FR
24158 through 24159).
Comparison of Factors and Adjustments: Proposed FY 2007 Capital Federal Rate and Final FY 2007 Capital Federal
Rate
----------------------------------------------------------------------------------------------------------------
Proposed FY Final FY
2007 2007 Change Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor......................................... 1.0080 1.0110 1.0030 0.30
GAF/DRG Adjustment Factor............................. 1.0012 * 0.9986 0.9974 -0.26
Outlier Adjustment Factor............................. 0.9513 * 0.9568 1.0058 0.58
Exceptions Adjustment Factor.......................... 0.9997 0.9997 0.0000 0.00
Capital Federal Rate.................................. $424.42 * $427.03 1.0061 0.61
----------------------------------------------------------------------------------------------------------------
* Final factors for FY 2007, as discussed in section II.C.2 of this notice.
[[Page 59892]]
g. Special Capital Rate for Puerto Rico Hospitals. Using the
methodology discussed in the FY 2007 IPPS final rule (71 FR 48104), the
final FY 2007 special capital rate for Puerto Rico is $203.06. (See the
FY 2007 IPPS final rule (71 FR 48163) for additional information on the
calculation of FY 2007 capital PPS payments.)
D. Final FY 2007 Inpatient Operating and Capital-Related Impacts
1. Final FY 2007 Inpatient Operating Impacts (Quantitative Effects of
the Final Occupational Mix Adjusted Wage Indices)
The impact analysis for policy changes under the IPPS for operating
costs was included in the FY 2007 IPPS final rule. As stated in that
impact section (71 FR 48332), we were unable to provide final
occupational mix adjusted wage indices because of our obligation to
collect new occupational mix survey data consistent with the order of
the Court of Appeals in the Second Circuit. We were also unable to
provide final relative weights, budget neutrality calculations, the
outlier threshold and outlier offsets to the standardized amounts
because these figures are all dependent on final wage indices. However,
we also indicated that when 100 percent occupational mix adjusted wage
data were available, we would recalculate the impacts and provide them
in a subsequent Federal Register notice prior to October 1, 2006. Now
that the new occupational mix survey data are available and the final
100 percent occupational mix adjusted wage data have been prepared, we
are providing the final impacts for FY 2007 including the effect of the
occupational mix adjusted wage data. Since there are statutory budget
neutrality requirements applied to changes in DRGs and recalibration,
wage index and geographic reclassifications, our payment estimates for
hospitals overall are consistent with our estimate from the FY 2007
IPPS final rule (71 FR 48331). That is, the revisions to these figures
do not increase or decrease aggregate total IPPS payments relative to
those we earlier calculated. We continue to estimate that the changes
in the FY 2007 IPPS final rule, in conjunction with the final IPPS
rates included in this notice, will result in an approximate $3.4
billion increase in operating and capital payments. (See the FY 2007
IPPS final rule (71 FR 48331) for a more detailed explanation of how we
estimated this $3.4 billion increase).
a. Analysis of Impact Table I. Table I displays the results of our
analysis of the payment changes for FY 2007 that are affected by use of
the 100 percent occupational-mix adjusted wage data using occupational-
mix survey data from January through March. These impacts update the
tentative ones that were shown in the FY 2007 IPPS final rule. As
explained in the FY 2007 IPPS final rule and this notice, the FY 2006
occupational-mix survey data were unavailable in time for the
completion of the IPPS final rule that was made available to the public
on August 1. In this notice, we are only displaying the columns that
were affected by the change to the 100 percent occupational-mix
adjusted wage data and therefore we are not reprinting the impacts to
the quality data rate difference or the MDH changes from section 5003
of the Deficit Reduction Act that were published in the FY 2007 IPPS
final rule. (See the FY 2007 IPPS final rule (71 FR 48333 through
48341) for a full discussion of the FY 2007 regulatory impact
analysis.)
Table I categorizes hospitals by various geographic and special
payment consideration groups to illustrate the varying impacts on
different types of hospitals. The top row of the table shows the
overall impact on the 3,595 hospitals included in the analysis. The
next four rows of Table I contain hospitals categorized according to
their geographic location: all urban, which is further divided into
large urban and other urban; and rural. There are 2,590 hospitals
located in urban areas included in our analysis. Among these, there are
1,441 hospitals located in large urban areas (populations over 1
million), and 1,149 hospitals in other urban areas (populations of 1
million or fewer). In addition, there are 1,005 hospitals in rural
areas. The next two groupings are by bed-size categories, shown
separately for urban and rural hospitals. The final groupings by
geographic location are by census divisions, also shown separately for
urban and rural hospitals.
The second part of Table I shows hospital groups based on
hospitals' FY 2007 payment classifications, including any
reclassifications under section 1886(d)(10) of the Act. For example,
the rows labeled urban, large urban, other urban, and rural show that
the number of hospitals paid based on these categorizations after
consideration of geographic reclassifications (including
reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of the
Act, which have implications for capital payments) are 2,607, 1,448,
1,159, and 988, respectively.
The next three groupings examine the impacts of the changes on
hospitals grouped by whether or not they have GME residency programs
(teaching hospitals that receive an IME adjustment) or receive DSH
payments, or some combination of these two adjustments. There are 2,511
non-teaching hospitals in our analysis, 843 teaching hospitals with
fewer than 100 residents, and 241 teaching hospitals with 100 or more
residents.
In the DSH categories, hospitals are grouped according to their DSH
payment status, and whether they are considered urban or rural for DSH
purposes. The next category groups hospitals considered urban after
geographic reclassification, in terms of whether they receive the IME
adjustment, the DSH adjustment, both, or neither.
The next five rows examine the impacts of the changes on rural
hospitals by special payment groups (sole community hospitals (SCHs),
rural referral centers (RRCs), and Medicare dependent hospitals
(MDHs)), as well as rural hospitals not receiving a special payment
designation. There were 187 RRCs, 376 SCHs, 146 MDHs, 98 hospitals that
are both SCHs and RRCs, and 8 hospitals that are both MDHs and RRCs.
The next two groupings are based on type of ownership and the
hospital's Medicare utilization expressed as a percent of total patient
days. These data are taken primarily from the FY 2004 Medicare cost
reports, if available, (otherwise FY 2003 data are used).
The next series of groupings concern the geographic
reclassification status of hospitals. The first grouping displays all
urban hospitals that were reclassified by the MGCRB for FY 2007. The
next grouping shows the MGCRB rural reclassifications. The final three
rows in Table I contain hospitals located in urban counties, but deemed
to be rural under section 1886(d)(8)(E) of the Act, hospitals located
in rural counties but deemed to be urban under section 1886(d)(8)(B) of
the Act, and hospitals currently reclassified under section 508 of Pub.
L. 108-173, which expires on March 31, 2007.
[[Page 59893]]
Table I.--Impact Analysis of Changes for FY 2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2007
FY 2007 wage index
Transitional FY 2007 transition FY 2007 out-
Number of \1/3\ Cost FY 2007 DRG, Rel. for FY 2007 MGCRB migration All FY 2007
hospitals \2/3\ charge wage data Wts. and hospitals reclassifications adjustment changes \8\
\1\ (1) weights & \3\ (3) Wage index moving from \6\ (6) \7\ (7) (8)
DRG changes changes \4\ urban to
\2\ (2) (4) rural \5\
(5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals............................ 3,595 0.3 0.2 0.0 0.0 0.0 0.1 3.5
By Geographic Location:
Urban hospitals...................... 2,590 0.2 0.1 0.0 0.0 -0.3 0.1 3.4
Large urban areas (populations over 1 1,441 0.4 0.0 -0.1 0.0 -0.4 0.0 3.5
million)............................
Other urban areas (populations of 1 1,149 0.1 0.3 0.0 0.0 -0.1 0.2 3.4
million or fewer)...................
Rural hospitals...................... 1,005 0.3 0.3 0.4 0.3 2.1 0.1 3.9
Bed Size (Urban):
0-99 beds............................ 651 0.4 0.1 0.0 0.0 -0.5 0.1 3.5
100-199 beds......................... 867 0.6 0.2 0.3 0.0 -0.1 0.1 3.8
200-299 beds......................... 492 0.3 0.1 0.0 0.0 -0.3 0.1 3.6
300-499 beds......................... 413 0.1 0.2 -0.2 0.0 -0.3 0.1 3.3
500 or more beds..................... 167 0.0 0.1 -0.3 0.0 -0.3 0.0 3.2
Bed Size (Rural):
0-49 beds............................ 348 0.5 0.2 0.6 0.1 0.8 0.2 4.7
50-99 beds........................... 370 0.5 0.2 0.4 0.2 1.1 0.2 4.9
100-149 beds......................... 174 0.4 0.4 0.5 0.5 2.5 0.1 3.6
150-199 beds......................... 68 0.3 0.4 0.3 0.4 3.4 0.1 3.3
200 or more beds..................... 45 0.0 0.3 -0.1 0.0 3.1 0.0 3.0
Urban by Region:
New England.......................... 128 0.4 1.1 1.0 0.0 0.3 0.1 3.5
Middle Atlantic...................... 357 0.5 0.6 0.7 0.0 -0.1 0.2 3.9
South Atlantic....................... 388 0.1 -0.2 -0.5 0.0 -0.4 0.0 3.2
East North Central................... 395 0.2 0.3 0.1 0.0 -0.3 0.0 3.4
East South Central................... 165 -0.1 -0.6 -1.0 0.0 -0.4 0.1 2.7
West North Central................... 157 0.0 -0.4 -0.8 0.0 -0.6 0.0 2.8
West South Central................... 374 0.2 -0.1 -0.3 0.0 -0.5 0.0 3.4
Mountain............................. 149 0.2 0.2 0.0 0.0 -0.2 0.0 3.7
Pacific.............................. 424 0.4 0.1 0.1 0.0 -0.3 0.1 3.7
Puerto Rico.......................... 53 0.3 -1.4 -1.5 0.0 -0.6 0.0 2.0
Rural by Region:
New England.......................... 19 0.5 -0.2 0.1 0.0 2.0 0.1 6.0
Middle Atlantic...................... 72 0.5 0.2 0.5 0.1 2.3 0.0 5.2
South Atlantic....................... 176 0.4 0.4 0.5 0.2 2.2 0.2 3.8
East North Central................... 125 0.2 -0.2 -0.1 0.1 1.6 0.0 3.8
East South Central................... 180 0.3 0.6 0.5 0.2 2.5 0.1 3.5
West North Central................... 116 0.2 0.2 0.2 0.0 2.0 0.1 4.3
West South Central................... 193 0.4 0.9 0.9 0.5 2.8 0.2 4.1
Mountain............................. 81 0.3 -0.2 -0.1 2.1 0.8 0.1 2.7
Pacific.............................. 43 0.3 -0.3 -0.2 0.0 1.8 0.1 3.2
By Payment Classification:
Urban hospitals...................... 2,607 0.2 0.1 0.0 0.0 -0.3 0.1 3.4
Large urban areas (populations over 1 1,448 0.4 0.0 -0.1 0.0 -0.4 0.0 3.5
million)............................
Other urban areas (populations of 1 1,159 0.1 0.3 0.0 0.0 -0.1 0.2 3.4
million or fewer)...................
Rural areas.......................... 988 0.3 0.3 0.4 0.3 2.0 0.1 4.0
Teaching Status:
Nonteaching.......................... 2,511 0.4 0.1 0.1 0.0 0.2 0.1 3.8
Fewer than 100 residents............. 843 0.2 0.1 -0.1 0.0 -0.2 0.1 3.4
100 or more residents................ 241 0.1 0.3 -0.1 0.0 -0.3 0.0 3.1
Urban DSH:
Non-DSH.............................. 906 0.2 0.1 -0.1 0.0 -0.1 0.1 3.6
100 or more beds..................... 1,520 0.2 0.1 0.0 0.0 -0.3 0.1 3.4
Less than 100 beds................... 346 0.6 0.0 0.2 0.0 -0.3 0.1 3.6
Rural DSH:
SCH.................................. 386 0.3 0.2 0.4 0.2 0.6 0.1 4.6
[[Page 59894]]
RRC.................................. 199 0.2 0.4 0.3 0.2 3.4 0.0 3.5
Other Rural:
100 or more beds..................... 55 0.6 0.7 0.9 0.9 0.7 0.2 3.5
Less than 100 beds................... 183 0.6 0.5 0.7 0.4 0.9 0.4 3.8
Urban teaching and DSH:
Both teaching and DSH................ 815 0.2 0.1 -0.1 0.0 -0.3 0.0 3.3
Teaching and no DSH.................. 201 0.1 0.3 0.0 0.0 -0.1 0.2 3.3
No teaching and DSH.................. 1,051 0.5 0.1 0.1 0.0 -0.1 0.1 3.7
No teaching and no DSH............... 540 0.3 0.0 -0.2 0.0 -0.3 0.0 3.5
Special Hospital Types:
RRC.................................. 187 0.2 0.5 0.3 0.2 3.1 0.1 3.5
SCH.................................. 376 0.3 0.1 0.3 0.2 0.4 0.1 3.6
MDH.................................. 146 0.5 0.2 0.5 0.0 0.7 0.1 9.0
SCH and RRC.......................... 98 0.1 -0.1 -0.1 0.0 1.9 0.0 3.1
MDH and RRC.......................... 8 0.3 -0.1 0.3 0.0 1.0 0.0 14.0
Type of Ownership:
Voluntary............................ 2,102 0.2 0.2 0.1 0.0 0.0 0.1 3.5
Proprietary.......................... 880 0.4 -0.1 -0.2 0.1 -0.1 0.0 3.5
Government........................... 603 0.3 0.0 -0.2 0.0 0.1 0.1 3.4
Unknown.............................. 10 2.2 0.1 1.7 0.0 -0.3 0.2 7.6
Medicare Utilization as a Percent of
Inpatient Days:
0-25................................. 243 0.6 -0.1 0.1 0.0 -0.3 0.0 3.6
25-50................................ 1,328 0.2 0.0 -0.2 0.0 -0.4 0.0 3.3
50-65................................ 1,478 0.3 0.3 0.2 0.0 0.4 0.1 3.7
Over 65.............................. 462 0.2 0.3 0.1 0.0 0.5 0.1 3.8
Unknown.............................. 84 1.0 -0.4 0.1 0.0 -0.5 0.1 4.4
Urban Hospitals Reclassified by the 281 0.3 0.3 0.1 0.0 2.4 0.0 3.7
Medicare Geographic Classification
Review Board: First Half FY 2007
Reclassifications.......................
Urban Nonreclassified, First Half FY 2,284 0.2 0.1 -0.1 0.0 -0.6 0.1 3.4
2007:...................................
All Urban Hospitals Reclassified Second 341 0.3 0.4 0.2 0.0 1.8 0.0 3.5
Half FY 2007:...........................
Urban Nonreclassified Hospitals Second 2,224 0.2 0.1 -0.1 0.0 -0.6 0.1 3.4
Half FY 2007:...........................
All Rural Hospitals Reclassified Full 369 0.2 0.3 0.2 0.1 3.6 0.0 3.6
Year FY 2007:...........................
Rural Nonreclassified Hospitals Full Year 578 0.5 0.3 0.5 0.6 -0.3 0.3 4.4
FY 2007:................................
All Section 401 Reclassified Hospitals:.. 30 0.2 0.8 0.8 0.0 -0.1 0.0 5.4
Other Reclassified Hospitals (Section 57 0.6 0.3 0.6 0.0 3.6 0.0 4.4
1886(d)(8)(B))..........................
Section 508 Hospitals.................... 108 0.2 0.6 0.4 0.0 -0.2 0.0 1.9
Specialty Hospitals...................... ........... ............ ........... ........... ........... ................. ........... ...........
Cardiac Specialty Hospitals.............. 21 -2.0 0.0 -2.4 0.0 -0.6 0.0 1.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the
national total. Discharge data are from FY 2005, and hospital cost report data are from reporting periods beginning in FY 2004 and FY 2003.
\2\ This column displays the final payment impact of the changes to the V24 GROUPER and the recalibration of the DRG cost weights based on FY 2005
MedPAR data in accordance with section 1886(d)(4)(C)(iii) of the Act.
\3\ This column displays the final payment impact of updating the wage index data with the 100 percent occupational mix adjustment applied to the FY
2003 cost report data.
[[Page 59895]]
\4\ This column displays the final payment impact of the 0.995662 budget neutrality factor for DRG and wage index changes (with a 100 percent
occupational mix adjustment applied to the wage index) data in accordance with section 1886(d)(4)(C)(iii) of the Act and section 1886(d)(3)(E) of the
Act.
\5\ Shown here are the final effects of providing rural hospitals formerly located in urban areas with urban wage index values in FY 2007. The effects
reflected here are budget neutral: this column therefore includes the effect of the 0.999700 adjustment that we have applied to the rates to ensure
budget neutrality.
\6\ Shown here are the final effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB) and CMS decisions
made on behalf of the hospital for FY 2007. The effects demonstrate the FY 2007 payment impact of going from no reclassifications to the
reclassifications scheduled to be in effect for FY 2007. Reclassification for prior years has no bearing on the payment impacts shown here. This
column reflects the geographic budget neutrality factor of 0.992355.
\7\ This column displays the final impact of the FY 2007 implementation of section 505 of Pub. L. 108-173, which provides for an increase in a
hospital's wage index if the hospital qualifies by meeting a threshold percentage of residents of the county where the hospital is located who commute
to work at hospitals in counties with higher wage indices.
\8\ This column shows final changes in payments from FY 2006 to FY 2007. It incorporates all of the changes displayed in Columns 2, 3, 4,5, and 6 (the
changes displayed in Columns 2 and 3 are included in Column 4), as well as those displayed in columns 2 and 3 (related to the quality data
differential in the IPPS update and implementation of the MDH DRA provisions) of the FY 2007 IPPS final rule. It also reflects the impact of the FY
2007 update, changes in hospitals' reclassification status in FY 2007 compared to FY 2006, and the changes in payments as a result of continuing the
reclassifications under section 508 of Pub. L. 108-173. The product of these impacts may be different from the percentage changes shown here due to
rounding and interactive effects.
(1) Effects of the Changes to the DRG Reclassifications and
Relative Cost-Based Weights (Column 2). In Column 2 of Table I, we
present the combined effects of the DRG reclassifications and
recalibration, as discussed in section II. of the preamble to the FY
2007 IPPS final rule (71 FR 47879 through 47979). Section
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate
classification changes in order to reflect changes in treatment
patterns, technology, and any other factors that may change the
relative use of hospital resources.
As discussed in the preamble of the FY 2007 IPPS final rule (71 FR
47882 through 47898), we are changing the relative weight calculation
methodology from a charge-based to a cost-based method. Further, we are
implementing the new methodology under a 3-year transition such that
weights in FY 2007 are \1/3\ cost-based and \2/3\ charge-based. As part
of the methodology for determining cost weights, we standardize
hospital charges by the wage index to remove the effect of area wage
differences. Since the wage index data has been updated to reflect a
100 percent occupational mix adjustment based on the latest survey data
available, we recalculated the relative weights for the FY 2007 by
standardizing charges using the 100 percent occupational mix adjusted
wage indices. The use of occupational mix adjusted wage indices to
standardize hospital charges resulted in very small changes to the DRG
relative weights. No DRG weight changed by greater or less than 1
percent from those shown in Table 5 of the FY 2007 IPPS final rule. The
revised and final FY 2007 DRG relative weights are shown in Table 5 of
the Addendum to this notice.
In column 2, we compare aggregate payments using the FY 2007
blended relative weights (GROUPER Version 24) to the FY 2006 DRG
relative charge weights (GROUPER Version 23.0) so the percentages shown
here illustrate the effect of changes to the DRGs and relative weights.
The method of calculating the relative weights and the reclassification
changes to the GROUPER are described in more detail in section II. of
the preamble to the FY 2007 IPPS final rule. The impacts shown in this
column are generally very consistent by hospital category with those
shown in column 4 of Table I of the FY 2007 IPPS final rule (71 FR
48335). With the exception of using occupational mix adjusted wage
indices to standardize hospital charges, the data and methodology that
we modeled in this column are identical to the FY 2007 IPPS final rule.
Therefore, any differences in the impacts shown in this column from
column 6 of Table I of the FY 2007 IPPS final rule and column 4 of the
table above are due to the use of occupational mix adjusted wage data.
We note that this column reflects the impact of changes to the DRG
classifications and relative weights only and is not budget neutral.
Consistent with section 1886(d)(4)(C)(iii) of the Act, we apply a
single budget neutrality factor to ensure that the combined overall
payment impact of changes to the DRG classification, relative weights,
and wage index is budget neutral. The budget neutrality factor for the
combined changes to the DRGs, relative weights, and wage index are
shown in the table above entitled, ``Comparison of FY 2006 Standardized
Amounts to Final FY 2007 Single Standardized Amount with Full Update
and Reduced Update.''
(2) Effects of Wage Index Changes (Column 3). Section 1886(d)(3)(E)
of the Act requires that, beginning October 1, 1993, we annually update
the wage data used to calculate the wage index. In accordance with this
requirement, the wage index for FY 2007 is based on data submitted for
hospital cost reporting periods beginning on or after October 1, 2002
and before October 1, 2003. In the IPPS FY 2007 IPPS final rule, due to
the decision in Bellevue Hosp. Center v. Leavitt, in which the Court of
Appeals for the Second Circuit ordered CMS to apply the occupational
mix adjustment to 100 percent of the wage index effective for FY 2007
(see section III.C. of the FY 2007 IPPS final rule for more details of
this Court decision (71 FR 48006)), we were unable to show the impact
of the 100 percent occupational mix adjustment as the necessary data
were unavailable in time for making the final IPPS rule available to
the public on August 1. This column now shows the final estimated
effect of updating the wage index with wage data from FY 2003 hospital
cost reports and moving to a 100 percent occupational mix adjusted wage
index using occupational mix survey data for January through March of
this year.
The estimated impact on hospital payments of the new wage data with
the 100 percent occupational mix adjustment applied using the new
survey data is isolated in Column 3 by holding the other payment
parameters constant. That is, Column 3 shows the percentage changes in
payments when going from a model using the FY 2006 wage index, based on
FY 2002 wage data and having a 10-percent occupational mix adjustment
applied, to a model using the FY 2007 pre-reclassification wage index,
based on FY 2003 wage data with a 100 percent occupational mix
adjustment based on the latest occupational mix survey data. The wage
data collected on the FY 2003 cost report are the same as the FY 2002
wage data that were used to calculate the FY 2006 wage index.
Hospitals located in urban New England are estimated to receive the
greatest benefit from the new wage and occupational mix data. Payments
to hospitals in urban New England are estimated to increase 1.1 percent
while rural hospitals located in the West South Central region
experience an increase of 0.9 percent from these data.
[[Page 59896]]
Puerto Rico hospitals see the least benefit from the change to the wage
and occupational mix data with a 1.4 percent estimated decrease in
payments.
The national average hourly wage increased 5.9 percent compared to
FY 2006 from the new wage data. Therefore, the only manner in which to
maintain or exceed the previous year's wage index was to match the
national 5.9 increase in average hourly wage. Of the 3,491 hospitals
with wage data for both FYs 2006 and 2007, 1,706, or 48.9 percent, also
experienced an average hourly wage increase of 5.9 percent or more.
The following chart compares the shifts in wage index values for
hospitals for FY 2007 relative to FY 2006. Among urban hospitals, 40
will experience an increase of between 5 percent and 10 percent and 15
will experience an increase of more than 10 percent. No rural hospitals
will experience an increase greater than 5 percent, but 790 will
experience increases between 0 and 5 percent. On the negative side, 79
urban hospitals will experience decreases in their wage index values of
at least 5 percent, but less than 10 percent. Eight urban hospitals
will experience decreases in their wage index values greater than 10
percent.
The following chart shows the projected impact for urban and rural
hospitals:
------------------------------------------------------------------------
Number of
hospitals
Percentage change in area wage index values -----------------
Urban Rural
------------------------------------------------------------------------
Increase more than 10 percent......................... 15 0
Increase more than 5 percent and less than 10 percent. 40 0
Increase or decrease less than 5 percent.............. 2,354 986
Decrease more than 5 percent and less than 10 percent. 79 5
Decrease more than 10 percent......................... 8 4
------------------------------------------------------------------------
(3) Combined Effects of DRG and Wage Index Changes, Including
Budget Neutrality Adjustment (Column 4). Section 1886(d)(4)(C)(iii) of
the Act requires that changes to DRG reclassifications and the relative
weights cannot increase or decrease aggregate payments. In addition,
section 1886(d)(3)(E) of the Act specifies that any updates or
adjustments to the wage index are to be budget neutral. As noted in the
Addendum to this final rule, in determining the budget neutrality
factor, we equated simulated aggregate payments for FY 2006 and FY 2007
using the FY 2005 Medicare utilization data after applying the changes
to the DRG relative weights and the wage index.
We computed a wage and DRG recalibration budget neutrality factor
of 0.995662. The 0.0 percent impact for all hospitals demonstrates that
these changes, in combination with the budget neutrality factor, are
budget neutral. In Table I, the combined overall impacts of the effects
of both the DRG reclassifications and the updated wage index are shown
in Column 4. The changes in this column are the sum of the changes in
Columns 2 and 3, combined with the budget neutrality factor for the
wage index, including the wage index floor for urban areas required by
section 4410 of Pub. L. 105-33. There also may be some variation of
plus or minus 0.1 percentage point due to rounding. As indicated above,
the changes in the relative weights are generally consistent with those
we showed in Table I of the FY 2007 IPPS final rule while the impacts
due to the wage data may be somewhat different than those shown there
because of the new occupational mix survey and a 100 percent adjustment
to the wage index. Any changes between column 6 of Table I of the FY
2007 IPPS final rule and column 4 of Table I of this notice are due to
use of a 100 percent adjustment for occupational mix and the new survey
data.
(4) Effects of the 3-Year Provision Allowing Urban Hospitals that
Were Converted to Rural as a Result of the FY 2005 Labor Market Area
Changes to Maintain the Wage Index of the Urban Labor Market Area in
Which They Were Formerly Located (Column 5). To help alleviate the
decreased payments for urban hospitals that became rural under the new
labor market area definitions, for purposes of the wage index, we
adopted a policy in FY 2005 to allow them to maintain the wage index
assignment of the MSA where they were located for the 3-year period FY
2005, FY 2006, and FY 2007. Column 5 shows the impact of the remaining
labor market area transition, for those hospitals that were urban under
the old labor market area designations and are now considered rural
hospitals. Section 1886(d)(3)(E) of the Act specifies that any updates
or adjustments to the wage index are to be budget neutral. Therefore,
we applied a adjustment of 0.999700 to ensure that the effects of
reclassification are budget neutral as indicated by the zero effect on
payments to hospitals overall. The rural hospital row shows a 0.3
percent benefit from this provision as these hold-harmless hospitals
are now classified as geographically rural.
(5) Effects of MGCRB Reclassifications (Column 6). Our impact
analysis up to this point has assumed hospitals are paid on the basis
of their actual geographic location (with the exception of ongoing
policies that provide that certain hospitals receive payments on other
bases than where they are geographically located, such as hospitals in
rural counties that are deemed urban under section 1886(d)(8)(B) of the
Act). The changes in Column 6 reflect the per case payment impact of
moving from this baseline to a simulation incorporating the MGCRB
decisions for FY 2007 which affect hospitals' wage index area
assignments.
By February 28 of each year, the MGCRB makes reclassification
determinations that will be effective for the next fiscal year, which
begins on October 1. The MGCRB may approve a hospital's
reclassification request for the purpose of using another area's wage
index value. The FY 2007 wage index values incorporate all of the
MGCRB's reclassification decisions for FY 2007 as well as any decisions
made by the CMS Administrator through the appeals and review process.
For FY 2007, as stated in the FY 2006 IPPS final rule (70 FR 47382,
August 12, 2005), we established procedural rules under section
1886(d)(10)(D)(v) of the Act to address specific circumstances where
individual and group reclassifications involve a section 508 hospital.
The rules were designed to recognize the special circumstances of
section 508 hospital reclassifications ending midyear during FY 2007
and were intended to allow previously approved reclassifications to
continue through March 31, 2007, and new section 1886(d)(10)
reclassifications to begin April 1, 2007, upon the conclusion of the
section 508 reclassifications. Under these procedural rules, some
section 1886(d)(10) hospital reclassifications are only in effect for
the second half of the fiscal year.
The first and second half fiscal year section 1886(d)(10)
reclassifications permitted under these procedural rules have
implications for the calculation of the reclassified wage indices and
the reclassification budget neutrality factor. Section 1886(d)(8)(c) of
the Act provides requirements for determining the wage index values for
hospitals that were reclassified as a result of the MGCRB decisions
under 1886(d)(10) of the Act. As provided in the statute, we are
required to calculate a separate wage index for hospitals reclassified
to an area if including the wage data for the reclassified hospitals
would reduce the area wage index by more than 1 percent.
[[Page 59897]]
Because of the half-year reclassifications permitted under the
procedural rules, in this final rule, we are issuing two separate wage
indices for affected areas (one effective from October 1, 2006, through
March 31, 2007 and a second reclassified wage index effective April 1,
2007, through September 30, 2007). The FY 2007 wage index values are
calculated based on the wage data for hospitals reclassified to the
area in the respective half of the fiscal year. The impact of this
policy is modeled in Column 6 of Table I of this notice.
The overall effect of geographic reclassification is required by
section 1886(d)(8)(D) of the Act to be budget neutral. In this final
rule, we are calculating one budget neutrality adjustment that reflects
the average of the adjustments required for first and second half
fiscal year reclassifications, respectively. Therefore, we applied an
adjustment of 0.992355 to ensure that the effects of the section
1886(d)(10) reclassifications are budget neutral. (See section II.A. of
the Addendum to FY 2007 IPPS final rule (71 48146).) As noted in
section II.B. of this notice, CMS applied reclassification decisions
for FY 2007 on behalf of hospitals to give them the highest wage index.
Hospitals have 30 days from the date of the posting of these data on
the CMS Web site to revise the decision that CMS made on their behalf.
The impacts shown in Column 6 of Table 1 above reflect the CMS
reclassification decisions on behalf of hospitals, which reflect the
area that would give the hospital the highest wage index using a 100
percent occupational-mix adjustment and the most recent survey data. As
a group, rural hospitals benefit most from reclassification. We
estimate that their payments will rise 2.1 percent in FY 2007. Payments
to urban hospitals will decline by 0.3 percent. Hospitals in other
urban areas will experience an overall decrease in payments of 0.1
percent, while hospitals in large urban areas will lose 0.4 percent.
Among urban hospital groups (that is, bed size, census division and
IME/DSH status), payments generally would decline.
A positive impact is evident among all of the rural hospital
groups. The smallest increase among rural census divisions is 0.8
percent for the Mountain region. The largest increases are in the rural
West South Central and rural East South Central regions with 2.8 and
2.5 percent, respectively. Urban hospitals reclassified for FY 2007 are
expected to receive an increase of 2.4 percent, while rural
reclassified hospitals are expected to benefit from the MGCRB changes
with a 3.6 percent increase in payments. Payments to urban and rural
hospitals that did not reclassify are expected to decrease slightly due
to the MGCRB changes, decreasing by 0.6 percent for urban hospitals and
0.3 percent for rural hospitals.
(6) Effects of the Wage Index Adjustment for Out-Migration (Column
7). Section 1886(d)(13) of the Act, as added by section 505 of Pub. L.
108-173, provides for an increase in the wage index for hospitals
located in certain counties that have a relatively high percentage of
hospital employees who reside in the county, but work in a different
area with a higher wage index. Hospitals located in counties that
qualify for the payment adjustment are to receive an increase in the
wage index that is equal to a weighted average of the difference
between the wage index of the resident county and the higher wage index
work area(s), weighted by the overall percentage of workers who are
employed in an area with a higher wage index.
Using our established criteria, 583 providers in 282 counties are
eligible for this adjustment. Due to the statutory formula to calculate
the adjustment and the small number of counties that qualify, the
impact on hospitals is minimal, with an overall impact on all hospitals
of 0.1 percent.
(7) Effects of All Changes (Column 8). Column 8 compares our
estimate of payments per case between FY 2006 and FY 2007,
incorporating all changes reflected in the FY 2007 IPPS final rule and
in this notice (including statutory changes). This column reflects the
impact of all FY 2007 changes relative to FY 2006, including the impact
of the quality data changes and the MDH changes from section 5003 of
the DRA (see 70 FR 48335) and the impacts shown in Columns 2 through 8
as well as other factors that are not applied until the final rates are
calculated. The average increase for all hospitals is approximately 3.5
percent. This increase includes the effects of the 3.4 percent market
basket update. It also reflects the 0.5 percentage point difference
between the projected outlier payments in FY 2006 (5.1 percent of total
DRG payments) and the current estimate of the percentage of actual
outlier payments in FY 2006 (4.6 percent), as described in the
introduction to this Appendix and the Addendum to this final rule. As a
result, payments are projected to be 0.5 percentage points lower in FY
2006 than originally estimated, resulting in a 0.5 percentage point
greater increase for FY 2007 than would otherwise occur. In addition,
the impact of section 505 adjustments accounted for a 0.1 percent
increase. Indirect medical education formula changes for teaching
hospitals under section 502 of Pub. L. 108-173, changes in payments due
to the difference between the FY 2006 and FY 2007 wage index values
assigned to providers reclassified under section 508 of Pub. L. 108-
173, and changes in the incremental increase in payments from section
505 of Pub. L. 108-173 out-migration adjustments account for the
remaining -0.6 percent.
There might also be interactive effects among the various factors
comprising the payment system that we are not able to isolate. For
these reasons, the values in Column 8 may not equal the product of the
percentage changes described above. We estimate that payments will
increase across all hospitals in each category shown in column 8.
We estimate that the average payment per case will increase in FY
2007 by 3.5 percent across all hospitals, 3.4 percent for hospitals in
urban areas, 3.5 percent for hospitals in large urban areas, 3.4
percent for hospitals in other urban areas and 3.9 percent for
hospitals in rural areas.
Among urban census divisions, we estimate the largest payment
increases would be 3.9 percent in the Mid Atlantic region and 3.7
percent in the Pacific and Mountain regions. We estimate that the
smallest urban increase will be 2.0 percent in Puerto Rico.
Among rural areas, the New England and Middle Atlantic regions
would benefit the most from changes in the FY 2007 IPPS final rule,
with 6.0 and 5.2 percent increases, respectively. The smallest increase
would occur in the Mountain region, with a 2.7 percent increase in
payments.
Among special categories of rural hospitals in Column 8, MDH/RRC
providers receive an increase in payments of 14.0 percent and MDH
providers receive an increase of 9.0 percent, primarily due to the
changes to MDH payments set forth in section 5003 of Pub. L. 109-171
(see 70 FR 48062).
Urban hospitals reclassified for the first half of FY 2007 are
anticipated to receive an increase of 3.7 percent, while urban
hospitals that reclassified for the second half of FY 2007 are expected
to receive an increase of 3.5 percent. The same set of rural hospitals
is reclassified for the first and second half of FY 2007. Rural
hospitals reclassifying for the entire year of FY 2007 are anticipated
to receive a 3.6 percent payment increase. Those hospitals located in
rural counties, but deemed to be urban under section 1886(d)(8)(B) of
the Act are expected to receive an increase in
[[Page 59898]]
payments of 4.4 percent. Hospitals that were reclassified under section
508 of Pub. L. 108-173, which is only effective through March 31, 2007,
are expected to receive an increase of 1.9 percent. This lower
estimated increase in payment than the average for all hospitals is due
to the expiration of the higher section 508 wage indices in effect for
6 months of FY 2007.
b. Analysis of Impact Table II. Table II presents the projected
impact of the changes for FY 2007 for urban and rural hospitals and for
the different categories of hospitals shown in Table I. It compares the
estimated payments per case for FY 2006 with the average estimated per
case payments for FY 2007, as calculated under our models. Thus, this
table presents, in terms of the average dollar amounts paid per
discharge, the combined effects of the changes presented in Table I.
The percentage changes shown in the last column of Table II equal the
percentage changes in average payments from Column 8 of Table I.
TABLE II.--Impact Analysis of Changes for FY 2007 Operating Prospective Payment System
[Payments per case]
----------------------------------------------------------------------------------------------------------------
Average FY Average FY
Number of 2006 2007 All FY 2007
hospitals payment per payment per changes
(1) case \1\ case \1\ (4)
(2) (3)
----------------------------------------------------------------------------------------------------------------
All hospitals............................................... 3,595 8,540 8,838 3.5
By Geographic Location:
Urban hospitals......................................... 2,590 8,951 9,258 3.4
Large urban areas (populations over 1 million).......... 1,441 9,368 9,692 3.5
Other urban areas (populations of 1 million or fewer)... 1,149 8,446 8,731 3.4
Rural hospitals......................................... 1,005 6,228 6,474 3.9
Bed Size (Urban):
0-99 beds............................................... 651 6,730 6,964 3.5
100-199 beds............................................ 867 7,490 7,772 3.8
200-299 beds............................................ 492 8,403 8,702 3.6
300-499 beds............................................ 413 9,405 9,719 3.3
500 or more beds........................................ 167 11,388 11,748 3.2
Bed Size (Rural):
0-49 beds............................................... 348 5,222 5,466 4.7
50-99 beds.............................................. 370 5,622 5,897 4.9
100-149 beds............................................ 174 6,199 6,425 3.6
150-199 beds............................................ 68 6,933 7,163 3.3
200 or more beds........................................ 45 7,898 8,134 3.0
Urban by Region:
New England............................................. 128 9,391 9,717 3.5
Middle Atlantic......................................... 357 9,833 10,217 3.9
South Atlantic.......................................... 388 8,476 8,747 3.2
East North Central...................................... 395 8,561 8,854 3.4
East South Central...................................... 165 8,209 8,433 2.7
West North Central...................................... 157 8,689 8,929 2.8
West South Central...................................... 374 8,447 8,737 3.4
Mountain................................................ 149 8,812 9,140 3.7
Pacific................................................. 424 10,742 11,144 3.7
Puerto Rico............................................. 53 4,190 4,272 2.0
Rural by Region:
New England............................................. 19 8,137 8,627 6.0
Middle Atlantic......................................... 72 6,291 6,616 5.2
South Atlantic.......................................... 176 6,033 6,264 3.8
East North Central...................................... 125 6,457 6,700 3.8
East South Central...................................... 180 5,973 6,181 3.5
West North Central...................................... 116 6,422 6,696 4.3
West South Central...................................... 193 5,669 5,902 4.1
Mountain................................................ 81 6,589 6,768 2.7
Pacific................................................. 43 7,608 7,850 3.2
By Payment Classification:
Urban hospitals......................................... 2,607 8,939 9,245 3.4
Large urban areas (populations over 1 million).......... 1,448 9,357 9,682 3.5
Other urban areas (populations of 1 million or fewer)... 1,159 8,431 8,714 3.4
Rural areas............................................. 988 6,278 6,530 4.0
Teaching Status:
Non-teaching............................................ 2,511 7,124 7,393 3.8
Fewer than 100 Residents................................ 843 8,640 8,932 3.4
100 or more Residents................................... 241 12,605 13,001 3.1
Urban DSH:
Non-DSH................................................. 906 7,725 8,001 3.6
100 or more beds........................................ 1,520 9,424 9,746 3.4
Less than 100 beds...................................... 346 6,159 6,383 3.6
Rural DSH:
SCH..................................................... 386 5,816 6,080 4.6
RRC..................................................... 199 6,946 7,186 3.5
[[Page 59899]]
Other Rural:
100 or more beds........................................ 55 5,737 5,936 3.5
Less than 100 beds...................................... 183 5,104 5,301 3.8
Urban teaching and DSH:
Both teaching and DSH................................... 815 10,367 10,707 3.3
Teaching and no DSH..................................... 201 8,601 8,889 3.3
No teaching and DSH..................................... 1,051 7,617 7,899 3.7
No teaching and no DSH.................................. 540 7,283 7,539 3.5
Rural Hospital Types:
RRC..................................................... 187 7,277 7,529 3.5
SCH..................................................... 376 6,216 6,439 3.6
MDH..................................................... 146 5,190 5,657 9.0
SCH and RRC............................................. 98 7,408 7,637 3.1
MDH and RRC............................................. 8 6,439 7,341 14.0
Unknown................................................. ........... ........... ........... ...........
Type of Ownership:
Voluntary............................................... 2,102 8,680 8,984 3.5
Proprietary............................................. 880 7,714 7,984 3.5
Government.............................................. 603 8,779 9,078 3.4
Unknown................................................. 10 13,196 14,194 7.6
Medicare Utilization as a Percent of Inpatient Days:
0-25.................................................... 243 12,182 12,620 3.6
25-50................................................... 1,328 9,739 10,057 3.3
50-65................................................... 1,478 7,438 7,714 3.7
Over 65................................................. 462 6,662 6,915 3.8
Unknown................................................. 84 9,920 10,354 4.4
Hospitals Reclassified by the Medicare Geographic
Classification Review Board: FY 2005 Reclassifications:
Urban Hospitals Reclassified by the Medicare Geographic 281 8,778 9,099 3.7
Classification Review Board: First Half FY 2007
Reclassifications:.........................................
Urban Nonreclassified, First Half FY 2007:.................. 2,284 8,983 9,288 3.4
All Urban Hospitals Reclassified Second Half FY 2007:....... 341 9,038 9,351 3.5
Urban Nonreclassified Hospitals Second Half FY 2007:........ 2,224 8,947 9,253 3.4
All Rural Hospitals Reclassified Second Half FY 2007:....... 369 6,759 7,004 3.6
Rural Nonreclassified Hospitals Second Half FY 2007:........ 578 5,559 5,806 4.4
All Section 401 Reclassified Hospitals:..................... 30 7,030 7,408 5.4
Other Reclassified Hospitals (Section 1886(d)(8)(B))........ 57 5,839 6,097 4.4
Section 508 Hospitals....................................... 108 9,268 9,446 1.9
Specialty Hospitals......................................... ........... ........... ........... ...........
Cardiac Specialty Hospitals................................. 21 11,363 11,497 1.2
----------------------------------------------------------------------------------------------------------------
\1\ These payment amounts per case do not reflect any estimates of annual case-mix increase.
2. Final FY 2007 Capital-Related Impacts (Quantitative Effects of the
Final Occupational Mix Adjusted Wage Indices)
(a) General Considerations. In accordance with Sec. 412.312, the
basic methodology for determining a capital PPS payment is:
(Standard Federal Rate) x (DRG weight) x (Geographic Adjustment Factor
(GAF)) x (Large Urban Add-on, if applicable) x (COLA for hospitals
located in Alaska and Hawaii) x (1 + Disproportionate Share (DSH)
Adjustment Factor + Indirect Medical Education (IME) Adjustment Factor,
if applicable).
In addition, hospitals may also receive outlier payments for those
cases that qualify under the threshold established for each fiscal
year.
The data used in developing the impact analysis presented below are
taken from the March 2006 update of the FY 2005 MedPAR file and the
March 2006 update of the Provider-Specific File that is used for
payment purposes. Although the analyses of the changes to the capital
prospective payment system do not incorporate cost data, we used the
March 2006 update of the most recently available hospital cost report
data (FYs 2003 and 2004) to categorize hospitals. Our analysis has
several qualifications. First, we do not make adjustments for
behavioral changes that hospitals may adopt in response to policy
changes. Second, due to the interdependent nature of the IPPS, it is
very difficult to precisely quantify the impact associated with each
change. Third, we draw upon various sources for the data used to
categorize hospitals in the tables. In some cases (for instance, the
number of beds), there is a fair degree of variation in the data from
different sources. We have attempted to construct these variables with
the best available sources overall. However, for individual hospitals,
some miscategorizations are possible.
Using cases from the March 2006 update of the FY 2005 MedPAR file,
we simulated payments under the capital PPS for FY 2006 and FY 2007 for
a comparison of total payments per case. Any short-term, acute care
hospitals not paid under the general IPPS (Indian Health Service
hospitals and hospitals in Maryland) are excluded from the simulations.
[[Page 59900]]
We modeled payments for each hospital by multiplying the capital
Federal rate by the GAF and the hospital's case-mix. We then added
estimated payments for indirect medical education, disproportionate
share, large urban add-on, and outliers, if applicable. For purposes of
this impact analysis, the model includes the following assumptions:
We estimate that the Medicare case-mix index will increase
by 1.0 percent in both FYs 2006 and 2007.
We estimate that the Medicare discharges will be 13.5
million in FY 2006 and 13.1 million in FY 2007 for a 3.0 percent
decrease from FY 2006 to FY 2007.
The capital Federal rate was updated beginning in FY 1996
by an analytical framework that considers changes in the prices
associated with capital-related costs and adjustments to account for
forecast error, changes in the case-mix index, allowable changes in
intensity, and other factors. The FY 2007 update is 1.1 percent (see
section II.E.2. of this notice).
In addition to the FY 2007 update factor, the FY 2007
capital Federal rate was calculated based on a GAF/DRG budget
neutrality factor of 0.9986, an outlier adjustment factor of 0.9568,
and an exceptions adjustment factor of 0.9997.
(b) Results. We used the actuarial model described above to
estimate the potential impact of our changes for FY 2007 on total
capital payments per case, using a universe of 3,595 hospitals. As
described above, the individual hospital payment parameters are taken
from the best available data, including the March 2006 update of the FY
2005 MedPAR file, the March 2006 update to the Provider-Specific File,
and the most recent cost report data from the March 2006 update of
HCRIS. In Table III, we present a comparison of total payments per case
for FY 2006 compared to FY 2007 based on the FY 2007 payment policies.
Column 2 shows estimates of payments per case under our model for FY
2006. Column 3 shows estimates of payments per case under our model for
FY 2007. Column 4 shows the total percentage change in payments from FY
2006 to FY 2007. The change represented in Column 4 includes the 1.1
percent update to the capital Federal rate, a 0.0 percent increase in
case-mix, changes in the adjustments to the capital Federal rate (for
example, the effect of the hospital wage index on the GAF), and
reclassifications by the MGCRB. The comparisons are provided by: (1)
Geographic location; (2) region; and (3) payment classification.
The simulation results show that, on average, capital payments per
case can be expected to increase 2.4 percent in FY 2007. In addition to
the 1.1 percent increase due to the capital market basket update, this
projected increase in capital payments per case is largely attributable
to the change in the DRG recalibration process methodology for FY 2007
as discussed in section II.C. of the preamble of the FY 2007 IPPS final
rule (71 FR 48006). To a lesser extent, the final outlier factor also
contributes to the increase in capital payments per case, while the
final GAF has the opposite effect on capital payments (0.2 percent and
-0.1 percent, respectively).
The results of our comparisons by geographic location and by region
are consistent with the results we expected after applying the changes
to the DRG recalibration methodology. The geographic comparison shows
that urban hospitals are expected to experience a 2.3 percent increase
in IPPS capital payments per case, while rural hospitals are expected
to experience a 2.4 percent increase in capital payments per case. This
difference is mostly due to the changes to the methodology used to
recalibrate DRGs discussed in the FY 2007 IPPS final rule (71 FR
47882). The capital impact is largely consistent with the impacts in
the FY 2007 IPPS final rule (71 FR 48348). However the capital GAF is
somewhat affected by the wage index changes resulting from using the
revised occupational mix survey data and applying a 100 percent
occupational mix adjustment. Any changes from the impact presented in
the FY 2007 IPPS final rule would be due to the revised wage indices
and the new occupational mix adjustment. Due to circumstances described
in the FY 2007 IPPS final rule (71 FR 48005), the wage index used in
these calculations is final.
All regions are estimated to receive an increase in total capital
payments per case from FY 2006 to FY 2007. Changes vary by region from
a minimum increase of 0.14 percent in Puerto Rico for (urban) to a
maximum increase of 3.1 percent in the West South Central rural region
and the Middle Atlantic rural region. The change in payments per case
for all hospitals is 2.4 percent and is the same as indicated in the FY
2007 IPPS final rule.
Section 1886(d)(10) of the Act established the MGCRB. Before FY
2005, hospitals could apply to the MGCRB for reclassification for
purposes of the standardized amount, wage index, or both. Section
401(c) of Pub. L. 108-173 equalized the standardized amounts under the
operating IPPS. Therefore, beginning in FY 2005, there is no longer
reclassification for the purposes of the standardized amounts; however,
hospitals still may apply for reclassification for purposes of the wage
index for FY 2007. Reclassification for wage index purposes also
affects the GAF because that factor is constructed from the hospital
wage index.
As discussed in the FY 2007 IPPS final rule (71 FR 48067),
procedural rules were established in the FY 2006 IPPS final rule (70 FR
47382) to recognize the special circumstances of section 508 hospital
reclassifications ending midyear during FY 2007. Under these procedural
rules, some section 1886(d)(10) hospital reclassifications are only in
effect for the second half of the fiscal year. These half fiscal year
reclassifications have implications for the calculation of reclassified
wage indices and therefore, affect capital payments because GAF values
are calculated from the hospital wage index.
To present the effects of the hospitals being reclassified for FY
2007, we show the average payments per case for reclassified hospitals
for each half of FY 2007 compared to the average payments per case for
the same time period in FY 2006. The reclassified groups are compared
to all other nonreclassified hospitals for the same time period. These
categories are further identified by urban and rural designation. In
general, the average payments per case in the first half of FY 2007 is
the same or 0.1 percent less as the average payments per case in the
second half of FY 2007 for each category of reclassified hospitals
shown in Table III . The exception to that generalization is rural
nonreclassified hospitals, which are expected to have the largest
increases in payments, as well as the largest increase from the first
half to the second half of FY 2007, that is, 2.7 percent in the first
half of FY 2007, and 3.0 percent in the second half of FY 2007. Urban
reclassified hospitals are expected to increase 2.6 percent and 2.5
percent in the first and second halves of FY 2007, respectively.
Reclassified rural hospitals and nonreclassified urban hospitals are
projected to have the same increase of 2.3 percent in the first half,
while in the second half, the increase in payments per discharge to
urban nonreclassified hospitals will remain at 2.3 percent but payments
per discharge to rural reclassified hospitals are expected to decrease
by 0.1 percent to 2.2 percent from the first half of FY 2007 to the
second half of FY 2007.
[[Page 59901]]
Table III.--Comparison of Total Payments Per Case
[FY 2006 payments compared to FY 2007 payments]
----------------------------------------------------------------------------------------------------------------
Average FY Average FY
Number of 2006 2007
hospitals payments/ payments/ Change
case case
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
All hospitals........................................... 3,595 753 771 2.4
Large urban areas (populations over 1 million).......... 1,441 849 869 2.4
Other urban areas (populations of 1 million or fewer)... 1,149 731 747 2.3
Rural areas............................................. 1,005 513 526 2.4
Urban hospitals......................................... 2,590 796 814 2.3
0-99 beds........................................... 651 617 631 2.3
100-199 beds........................................ 867 673 690 2.6
200-299 beds........................................ 492 751 769 2.4
300-499 beds........................................ 413 827 845 2.2
500 or more beds.................................... 167 1,005 1,027 2.2
Rural hospitals......................................... 1,005 513 526 2.4
0-49 beds........................................... 348 422 435 3.1
50-99 beds.......................................... 370 469 482 2.8
100-149 beds........................................ 174 516 528 2.3
150-199 beds........................................ 68 564 576 2.2
200 or more beds.................................... 45 642 654 1.9
By Region:
Urban by Region......................................... 2,590 796 814 2.3
New England......................................... 128 853 874 2.5
Middle Atlantic..................................... 357 873 898 2.9
South Atlantic...................................... 388 755 771 2.0
East North Central.................................. 395 782 801 2.5
East South Central.................................. 165 720 731 1.6
West North Central.................................. 157 783 795 1.6
West South Central.................................. 374 740 758 2.4
Mountain............................................ 149 787 808 2.6
Pacific............................................. 424 920 942 2.4
Puerto Rico......................................... 53 347 348 0.1
Rural by Region......................................... 1,005 513 526 2.4
New England......................................... 19 686 696 1.5
Middle Atlantic..................................... 72 518 534 3.1
South Atlantic...................................... 176 497 511 2.7
East North Central.................................. 125 547 560 2.2
East South Central.................................. 180 476 487 2.3
West North Central.................................. 116 540 551 2.2
West South Central.................................. 193 464 479 3.1
Mountain............................................ 81 535 542 1.3
Pacific............................................. 43 616 627 1.7
By Payment Classification:
All hospitals........................................... 3,595 753 771 2.4
Large urban areas (populations over 1 million).......... 1,448 848 869 2.4
Other urban areas (populations of 1 million or fewer)... 1,159 730 746 2.3
Rural areas............................................. 988 515 527 2.4
Teaching Status:
Non-teaching............................................ 2,511 630 645 2.5
Fewer than 100 Residents................................ 843 765 782 2.2
100 or more Residents................................... 241 1,100 1,125 2.3
Urban DSH:
100 or more beds........................................ 1,520 821 840 2.4
Less than 100 beds...................................... 346 543 557 2.5
Rural DSH:
Sole Community (SCH/EACH)............................... 386 464 477 2.7
Referral Center (RRC/EACH).............................. 199 570 582 2.1
Other Rural:
100 or more beds........................................ 55 475 486 2.3
Less than 100 beds...................................... 183 423 435 3.0
Urban teaching and DSH:
Both teaching and DSH................................... 815 902 922 2.3
Teaching and no DSH..................................... 201 816 835 2.3
No teaching and DSH..................................... 1,051 667 683 2.5
No teaching and no DSH.................................. 540 700 716 2.3
Rural Hospital Types:
Non special status hospitals............................ 2,490 799 818 2.3
RRC/EACH................................................ 44 707 722 2.2
SCH/EACH................................................ 39 627 640 2.1
Medicare-dependent hospitals (MDH)...................... 18 421 433 2.8
SCH, RRC and EACH....................................... 16 736 756 2.7
[[Page 59902]]
Hospitals Reclassified by the Medicare Geographic
Classification Review Board: FY2007 Reclassifications:
All Urban Reclassified 1st Half......................... 281 777 797 2.6
All Urban Non-Reclassified 1st Half..................... 2,284 799 818 2.3
All Rural Reclassified 1st Half......................... 358 555 568 2.3
All Rural Non-Reclassified 1st Half..................... 589 460 473 2.7
All Urban Reclassified 2nd Half......................... 341 807 826 2.5
All Urban Non-Reclassified 2nd Half..................... 2,224 795 814 2.3
ALL Rural Reclassified 2nd Half......................... 369 559 571 2.2
All Rural Non-Reclassified 2nd Half..................... 578 451 464 3.0
All Section 401 Reclassified Hospitals.................. 30 553 565 2.3
Other Reclassified Hospitals (Section 1886(d)(8)(B)).... 53 516 528 2.2
Type of Ownership:
Voluntary............................................... 2,102 771 790 2.4
Proprietary............................................. 880 679 695 2.3
Government.............................................. 603 740 757 2.3
Medicare Utilization as a Percent of Inpatient Days:
0-25.................................................... 243 999 1,026 2.7
25-50................................................... 1,328 855 874 2.2
50-65................................................... 1,478 663 680 2.5
Over 65................................................. 462 597 611 2.4
----------------------------------------------------------------------------------------------------------------
III. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995.
Authority: Program; No. 93.773 Medicare--Hospital Insurance
Program; and No. 93.774, Medicare--Supplementary Medical Insurance
Program)
Dated: September 21, 2006.
Mark B. McClellan,
Administrator, , Centers for Medicare & Medicaid Services.
Approved: September 27, 2006.
Michael O. Leavitt,
Secretary.
Addendum
This addendum includes tables referred to throughout the notice
which contain data relating to the FY 2007 wage indices and the
hospital reclassifications and payment amounts for operating and
capital-related costs that are affected by the new occupational mix
survey data discussed in section II. of this notice.
Table 1A--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor (69.7 Percent Labor Share/30.3 Percent Nonlabor Share If
Wage Index Is Greater Than 1)
Table 1B--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If Wage
Index Is Less Than or Equal To 1)
Table 1C--Adjusted Operating Standardized Amounts for Puerto Rico,
Labor/Nonlabor
Table 1D--Capital Standard Federal Payment Rate
Table 2--Hospital Case-Mix Indexes for Discharges Occurring in
Federal Fiscal Year 2005; Hospital Wage Indexes for Federal Fiscal
Year 2007; Hospital Average Hourly Wage for Federal Fiscal Years
2005 (2001 Wage Data), 2006 (2002 Wage Data), and 2007 (2003 Wage
Data); Wage Indexes and 3-Year Average of Hospital Average Hourly
Wages
Table 3A--FY 2007 and 3-Year Average Hourly Wage for Urban Areas by
CBSA
Table 3B--FY 2007 and 3-Year Average Hourly Wage for Rural Areas by
CBSA
Table 4A--1--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Urban Areas by CBSA--FY 2007
Table 4A--2--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Certain Urban Areas by CBSA for the Period April 1 through
September 30, 2007
Table 4B--1--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Rural Areas by CBSA--FY 2007
Table 4B--2--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Certain Rural Areas by CBSA for the Period April 1 through
September 30, 2007*
Table 4C--1--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Hospitals That Are Reclassified by CBSA--FY 2007
Table 4C--2--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Certain Hospitals That Are Reclassified by CBSA for the
Period April 1 through September 30, 2007
Table 4F--Puerto Rico Wage Index and Capital Geographic Adjustment
Factor (GAF) by CBSA--FY 2007
Table 4J--Out-Migration Adjustment--FY 2007
Table 5--List of Diagnosis-Related Groups (DRGs), Relative Weighting
Factors, and Geometric and Arithmetic Mean Length of Stay (LOS)
Table 9A--Hospital Reclassifications and Redesignations by
Individual Hospitals and CBSA for FY 2007
Table 9B--Hospital Reclassifications and Redesignations by
Individual Hospital Under Section 508 of Pub. L. 108-173 for FY 2007
Table 9C--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act for FY 2007
Table 9D--Hospitals who waived Lugar status to receive Out-migration
Adjustment
Table 10--Geometric Mean Plus the Lesser of 0.75 of the National
Adjusted Operating Standardized Payment Amount (Increased to Reflect
the Difference Between Costs and Charges) or 0.75 of One Standard
Deviation of Mean Charges by Diagnosis-Related Group (DRG)--
September 2006
[[Page 59903]]
Table 1A.--National Adjusted Operating Standardized; Labor/Nonlabor
[69.7 Percent Labor Share/30.3 Percent Nonlabor Share If Wage Index
Greater Than 1]
------------------------------------------------------------------------
Full Update (3.4 Percent) Reduced Update (1.4 Percent)
------------------------------------------------------------------------
Labor-related Nonlabor-related Labor-related Nonlabor-related
------------------------------------------------------------------------
$3,397.52 $1,476.97 $3,331.80 $1,448.40
------------------------------------------------------------------------
Table 1B.--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor
[62 Percent Labor Share/38 Percent Nonlabor Share If Wage Index Less
Than or Equal to 1]
------------------------------------------------------------------------
Full Update (3.4 Percent) Reduced Update (1.4 Percent)
------------------------------------------------------------------------
Labor-related Nonlabor-related Labor-related Nonlabor-related
------------------------------------------------------------------------
$3,022.18 $1,852.31 $2,963.73 $1,816.48
------------------------------------------------------------------------
Table 1C.--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor
----------------------------------------------------------------------------------------------------------------
Rates If Wage Index Rates If Wage Index
Greater Than 1 Less Than or Equal to 1
---------------------------------------------------
Labor Nonlabor Labor Nonlabor
----------------------------------------------------------------------------------------------------------------
National.................................................... $3,397.52 $1,476.97 $3,022.18 $1,852.31
Puerto Rico................................................. 1,436.12 880.20 1,359.68 956.64
----------------------------------------------------------------------------------------------------------------
Table 1D.--Capital Standard Federal Payment Rate
------------------------------------------------------------------------
Rate
------------------------------------------------------------------------
National................................................... $427.03
Puerto Rico................................................ 203.03
------------------------------------------------------------------------
Table 2.--Hospital Case-Mix Indexes for Discharges Occurring in Federal Fiscal Year 2005; Hospital Wage Indexes
for Federal Fiscal Year 2007; Hospital Average Hourly Wages for Federal Fiscal Years 2005 (2001 Wage Data), 2006
(2002 Wage Data), and 2007 (2003 Wage Data); Wage Indexes and 3-Year Average of Hospital Average Hourly Wages
----------------------------------------------------------------------------------------------------------------
Average
Case-mix FY 2007 Average Average Average hourly
Provider No. index \2\ wage index hourly wage hourly wage hourly wage wage** (3