Medicare Program; Update of the Reasonable Compensation Equivalent Limits for Services Furnished by Physicians

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[BPD-816-N]

RIN 0938-AH14

Medicare Program; Update of the Reasonable Compensation

Equivalent Limits for Services Furnished by Physicians

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice.

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SUMMARY: This notice sets forth updated payment limits on the amount of

allowable compensation for services furnished by physicians to

providers that are not covered by the prospective payment system or per

resident payments for graduate medical education. These services are

paid by Medicare on a reasonable cost basis. The revised reasonable

compensation equivalent limits are based on updated economic index data

and replace the limits that were published in the Federal Register on

February 20, 1985 (50 FR 7123).

EFFECTIVE DATE: These limits are effective for cost reporting periods

beginning on or after May 5, 1997.

FOR FURTHER INFORMATION CONTACT: Ward Pleines (410) 966-4528.

SUPPLEMENTARY INFORMATION:

I. Background

Under the Medicare program, payment for services furnished by a

physician is made under either the Hospital Insurance Program (Part A)

or the Supplementary Medical Insurance Program (Part B), depending on

the type of services furnished. Physicians' charges for medical or

surgical services to individual Medicare patients generally are covered

under Part B on a fee-for-service basis, under the Medicare physician

fee schedule, in accordance with section 1848 of the Social Security

Act (the Act). On the other hand, the compensation that physicians

receive from or through a provider for services that benefit patients

generally (for example, administrative services, committee work,

teaching, and supervision) can be covered under Part A or Part B,

depending on the provider's setting.

Most hospitals are paid for inpatient hospital services under the

prospective payment system. Before July 1, 1985, teaching hospitals

were paid for graduate medical education (GME) costs on a reasonable

cost basis. Section 9202 of the Consolidated Omnibus Budget

Reconciliation Act (Public Law 99-272), enacted on April 7, 1986, added

section (h) to section 1886 of the Act. That section changed the

payment methodology for the direct costs of GME programs from a

reasonable cost methodology to a methodology in which payment is fixed

in advance based on the hospital's per resident amount. The change was

effective for cost reporting periods beginning on or after July 1, 1985

(42 CFR 413.86).

The reasonable compensation equivalent (RCE) limits set forth in

this notice do not apply to costs of physician compensation that are

attributable to furnishing inpatient hospital services paid for under

the hospital inpatient prospective payment system or that are

attributable to GME costs. Further, compensation that a physician

receives for activities that may not be paid for under either Part A or

Part B are not considered in applying these limits. However, these

limits will apply to the costs providers incur in compensating

physicians for services to the provider in the following facilities:

Hospitals and units of hospitals not subject to the

prospective payment system, for both inpatient and outpatient services.

Hospitals subject to the prospective payment system, but

only for outpatient hospital services paid on a reasonable cost basis.

Comprehensive outpatient rehabilitation facilities

(CORFs).

Skilled nursing facilities (SNFs).

As required by section 1887(a)(2)(B) of the Act, allowable

compensation for services furnished by physicians to providers that are

paid by Medicare on a reasonable cost basis is subject to RCE limits.

Under these limits, payment is determined based on the lower of the

actual cost of the services to the provider (that is, the compensation

of the physician, whatever the form) or a reasonable compensation

equivalent. For purposes of applying the RCE limits, physician

compensation costs means monetary payments, fringe benefits, deferred

compensation and any other items of value (excluding office space or

billing and collection services), a provider or other organization

furnishes a physician in return for the physician's services (42 CFR

405.481(a)).

If a physician receives any compensation from a provider for his or

her physician services to the provider (that is, those services that

benefit patients generally), payment to those affected providers for

the costs of such compensation is subject to the RCE limits. The RCE

limits are not applied to payment for services that are identifiable

medical or surgical services to individual patients and paid for under

the physician fee schedule, even if the physician agrees to accept

compensation (for example, from a hospital) for those services.

(However, payment to teaching hospitals that have elected to be paid

for these services on a reasonable cost basis in accordance with

section 1861(b)(7) of the Act is subject to the limits.) The limits

apply equally to all physician services to providers that are payable

on a reasonable cost basis under Medicare.

On March 2, 1983, we published in the Federal Register (48 FR 8902)

the RCE limits (and the methodology used to calculate those limits)

that were applicable to cost reporting periods beginning during

calendar years 1982 and 1983. As part of that same publication, we

issued regulations at Sec. 405.482 that established a general authority

to develop, publish and apply limits.

More specifically, Sec. 405.482(f) requires that before the start

of a period to which a set of limits will be applied, we will publish a

notice in the Federal

[[Page 24484]]

Register that sets forth the limits and explains how they were

calculated. If the limits are merely updated by applying the most

recent economic index data without revising the methodology, then the

revised limits will be published in a notice in the Federal Register

without prior publication of a proposal or public comment period.

Thus, because we are calculating the 1997 limits using the same

methodology that was used to calculate the limits published on March 2,

1983 (48 FR 8919-8923), and February 20, 1985 (50 FR 7123), we are now

publishing these revised limits in final in this notice. The

methodology for establishing reasonable compensation equivalent limits

is based on an internal working paper (``A Methodology for

Determination of Reasonable FTE Compensation for Hospital-Based

Physicians'' by James R. Cantwell and William J. Sobaski (Working Paper

No. OR-32, revised December 1982)) developed by HCFA's Office of

Research and Demonstrations. Copies of this paper are available on

request from: ORD Publication, Office of Research and Demonstrations,

Health Care Financing Administration, Room C3-20-11, 7500 Security

Boulevard, Baltimore, MD 21244, (410) 786-6588.

Our methodology for establishing reasonable levels of compensation

includes five steps, as follows:

We estimated the national average (mean) income for all

physicians (Y in formula below) using 1979 physician net incomes from

the American Medical Association (AMA) Periodic Survey of Physicians

(PSP), published by the AMA in its Profile of Medical Practices, 1981.

We then projected physicians' 1979 base net income levels

to the appropriate future year to account for changes in net income

levels occurring after the period for which we have data. To make this

calculation, we needed to determine an appropriate inflation factor to

project future year estimated net incomes on the basis of 1970 to 1980

data. We believe we can achieve the most accurate projection by using

the historical relationship (1970 through 1980) between physician

incomes and the Consumer Price Index (CPI), and projecting this using

forecasts of the CPI for future years.

Third, we determined the relationship between average net

income for all physicians (estimated in the first step, above) and net

income of certain categories of specialist physicians that are commonly

compensated by providers for services furnished to Medicare

beneficiaries. This resulted in separate specialty adjusters for nine

physician specialties.

Using the specialty-specific adjusters, we also adjusted

for differences in costs between types of geographic locations.

Finally, we calculated the average hours practiced per

year by specialty and location, which we then related to a standard

full-time equivalent (FTE) work year of 2080 hours. We used these

ratios to weight the specialty-location adjusters from the previous

step.

The updated RCE limits set forth in this notice were calculated

using the forecasting equation that appears on page five of Working

Paper No. OR-32, adjusted to reflect the rebasing of the CPI that

occurred between 1967 and 1982-1984:

yt=a1D+a2CPIt

a1D represents special circumstances that might impact

physician earnings other than the basic relationship with CPI

a2CPIt is the historic relationship of physician

earnings to the CPI.

D=a dummy variable taking a value of 1 for years 1971 through 1973 and

0 otherwise

CPI=Consumer Price Index for all urban consumers in year 1 (base year).

For 1997, the estimating equation takes on the following values:

D=0

CPIt=162.0*

*Calculated from the Congressional Budget forecasts of changes

in CPI-U for 1996 and 1997 as presented in Table 1 of ``The Economic

and Budget Outlook: An Update,'' August 1996, and adjusted by a

multiplicative factor of 2.994225 to convert the current index value

which uses 1982 through 1984 as 100, to one equivalent to the 1967-

based index value that was used in previous equations.

Therefore, when t=1995,

Yt=343.684 x 1.620 x 2.994225 x 100

Yt=$166,707.

For 1997, $166,707 is the estimated net income for all physicians.

After applying the specialty-locality adjusters, we are able to produce

an array of estimated 1997 average annual FTE compensation levels for

nine specialty categories by type of location. We are setting the

updated RCE limits, adjusted by the proportion of an FTE year actually

worked, at these annual incomes.

II. Application of RCE Limits

We will use the RCE limits to compute Medicare payment when the

physician is compensated by a provider that is subject to the RCE

limits in some or all of its areas. We will also use these limits when

the physician is compensated by any other related organization for

physician administrative, supervisory, and other provider services paid

under Medicare. In applying the RCE limits, the intermediary will

assign each compensated physician to the most appropriate specialty

category. If no specialty category is appropriate (for example, in

determining the reasonable cost for an emergency room physician), the

intermediary will use the reasonable compensation equivalent level for

the ``Total'' category, which is based on income data for all

physicians. The intermediary will determine the appropriate geographic

area classification given in Table II of section IV of this notice.

If the physician's contractual compensation covers all duties,

activities, and services furnished to the provider and to its patients,

and the physician is employed full-time, the appropriate specialty

compensation limit will be used and adjusted by the physician's

allocation agreement to arrive at the program's share of allowable

costs as physician compensation costs. In the absence of an allocation

agreement, we generally will assume that 100 percent of the

compensation was related to services paid for under the physician fee

schedule, and that there are no allowable costs for the physician's

services to the provider.

If a physician's compensation from the provider represents payment

only for services that benefit patients generally (that is, the

physician bills fees for all services furnished to individual

patients), then the appropriate specialty compensation limit will be

used. If a physician is employed by a provider to furnish services of

general benefit to patients on other than a full time basis, the

reasonable compensation limit will be adjusted upward or downward to

reflect the percentage of time his or her actual hours related to a

full work year of 2,080 hours.

III. Exceptions to the RCE Limits

Some providers, particularly but not exclusively small or rural

hospitals, may be unable to recruit or maintain an adequate number of

physicians at a compensation level within the prescribed limits. In

accordance with section 1887 (a)(2)(C) of the Act, if a provider is

able to demonstrate to the intermediary its inability to recruit or

maintain physicians at a compensation level allowable under the RCE

limits (as documented, for example, by unsuccessful advertising through

national medical or health care

[[Page 24485]]

publications), then the intermediary may grant an exception to the RCE

limits established under these rules.

IV. Geographic Area Classifications for RCE Limits

We adjust the RCE limits to account for differences in salary

levels by location as well as by specialty. In our methodology for

establishing limits, and in the limits as set forth in Table I, we have

classified geographic areas into three types: nonmetropolitan areas,

metropolitan areas less than one million, and metropolitan areas

greater than one million.

As we do for purposes of the hospital inpatient prospective payment

system and the physician fee schedule, we use the most current

Metropolitan Statistical Area (MSA) designations for purposes of

establishing the RCE limits. In New England, we use New England County

Metropolitan Areas (NECMAs) for this purpose.

Table II identifies by type of location the geographic areas

affected. It enables providers, physicians, Medicare fiscal

intermediaries, and other members of the public to determine which RCE

limit level will apply in specific areas. The table lists all MSAs and

their constituent counties, and identifies whether their population is

less than or greater than one million. (MSAs with populations greater

than one million are designated by asterisks.) All counties not listed

in Table II, and all other affected U.S. possessions and territories

not part of a State, are considered rural areas.

Table I.--Estimates of FTE Annual Average Net Compensation Levels for

1997*

------------------------------------------------------------------------

Metropolitan Metropolitan

Nonmetro- areas less areas

Specialty politan than one greater than

areas million one million

------------------------------------------------------------------------

Total.......................... $138,400 $148,400 $153,400

GP/FP.......................... 123,400 118,400 120,000

Int. Med....................... 130,000 133,400 143,400

Surgery........................ 158,400 176,700 180,000

Pediatrics..................... 113,400 131,700 121,700

OB/GYN......................... 173,400 168,400 170,000

Radiology...................... 188,400 200,100 195,000

Psychiatry..................... 120,000 123,400 133,400

Anesthesiology................. 145,000 173,400 173,400

Pathology...................... 180,000 190,000 186,700

------------------------------------------------------------------------

*All figures are rounded to the nearest $100. est. CPI 1997=162.0.

Table II.--Geographic Area Classification for RCE Limits

Abilene, TX

Taylor, TX

Aguadilla, PR

Aguada, PR

Aguadilla, PR

Moca, PR

Akron, OH

Portage, OH

Summit, OH

Albany, GA

Dougherty, GA

Lee, GA

Albany-Schenectady-Troy, NY

Albany, NY

Montgomery, NY

Rensselaer, NY

Saratoga, NY

Schenectady, NY

Schoharie, NY

Albuquerque, NM

Bernalillo, NM

Sandoval, NM

Valencia, NM

Alexandria, LA

Rapides, LA

Allentown-Bethlehem-Easton, PA

Carbon, PA

Lehigh, PA

Northampton, PA

Altoona, PA

Blair, PA

Amarillo, TX Potter, TX

Randall, TX

Anchorage, AK

Anchorage, AK

Ann Arbor, MI

Lenawee, MI

Livingston, MI

Washtenaw, MI

Anniston, AL

Calhoun, AL

Appleton-Oshkosh-Neenah, WI

Calumet, WI

Outagamie, WI

Winnebago, WI

Arecibo, PR

Arecibo, PR

Camuy, PR

Hatillo, PR

Asheville, NC

Buncombe, NC

Madison, NC

Athens, GA

Clarke, GA

Madison, GA

Oconee, GA

*Atlanta, GA

Barrow, GA

Bartow, GA

Carroll, GA

Cherokee, GA

Clayton, GA

Cobb, GA

Coweta, GA

De Kalb, GA

Douglas, GA

Fayette, GA

Forsyth, GA

Fulton, GA

Gwinnett, GA

Henry, GA

Newton, GA

Paulding, GA

Pickens, GA

Rockdale, GA

Spalding, GA

Walton, GA

Atlantic City-Cape May, NJ

Atlantic City, NJ

Cape May, NJ

Augusta-Aiken, GA-SC

Columbia, GA

McDuffie, GA

Richmond, GA

Aiken, SC

Edgefield, SC

Austin-San Marcos, TX

Bastrop, TX

Caldwell, TX

Hays, TX

Travis, TX

Williamson, TX

Bakersfield, CA

Kern, CA

*Baltimore, MD

Anne Arundel, MD

Baltimore, MD

Baltimore City, MD

Carroll, MD

Harford, MD

Howard, MD

Queen Annes, MD

Bangor, ME

Penobscot, ME

Barnstable-Yarmouth, MA

[[Page 24486]]

Barnstable, MA

Baton Rouge, LA

Ascension, LA

East Baton Rouge, LA

Livingston, LA

West Baton Rouge, LA

Beaumont-Port Arthur, TX

Hardin, TX

Jefferson, TX

Orange, TX

Bellingham, WA

Whatcom, WA

Benton Harbor, MI

Berrien, MI

*Bergen-Passaic, NJ

Bergen, NJ

Passaic, NJ

Billings, MT

Yellowstone, MT

Biloxi-Gulfport-Pascagoula, MS

Hancock, MS

Harrison, MS

Jackson, MS

Binghamton, NY

Broome, NY

Tioga, NY

Birmingham, AL

Blount, AL

Jefferson, AL

St. Clair, AL

Shelby, AL

Bismarck, ND

Burleigh, ND

Morton, ND

Bloomington, IN

Monroe, IN

Bloomington-Normal, IL

McLean, IL

Boise City, ID

Ada, ID

Canyon, ID

*Boston-Brockton-Nashua, MA-NH

Bristol, MA

Essex, MA

Middlesex, MA

Norfolk, MA

Plymouth, MA

Suffolk, MA

Worcester, MA

Hillsborough, NH

Merrimack, NH

Rockingham, NH

Strafford, NH

Boulder-Longmont, CO

Boulder, CO

Brazoria, TX

Brazoria, TX

Bremerton, WA

Kitsap, WA

Brownsville-Harlingen-San Benito, TX

Cameron, TX

Bryan-College Station, TX

Brazos, TX

*Buffalo-Niagara Falls, NY

Erie, NY

Niagara, NY

Burlington, VT

Chittenden, VT

Franklin, VT

Grand Isle, VT

Caguas, PR

Caguas, PR

Cayey, PR

Cidra, PR

Gurabo, PR

San Lorenzo, PR

Canton-Massillon, OH

Carroll, OH

Stark, OH

Casper, WY

Natrona, WY

Cedar Rapids, IA

Linn, IA

Champaign-Urbana, IL

Champaign, IL

Charleston-North Charleston, SC

Berkeley, SC

Charleston, SC

Dorchester, SC

Charleston, WV

Kanawha, WV

Putnam, WV

*Charlotte-Gastonia-Rock Hill, NC-SC

Cabarrus, NC

Gaston, NC

Lincoln, NC

Mecklenburg, NC

Rowan, NC

Union, NC

York, SC

Charlottesville, VA

Albemarle, VA

Charlottesville City, VA

Fluvanna, VA

Greene, VA

Chattanooga, TN-GA

Catoosa, GA

Dade, GA

Walker, GA

Hamilton, TN

Marion, TN

Cheyenne, WY

Laramie, WY

*Chicago, IL

Cook, IL

De Kalb, IL

Du Page, IL

Grundy, IL

Kane, IL

Kendall, IL

Lake, IL

McHenry, IL

Will, IL

Chico-Paradise, CA

Butte, CA

*Cincinnati, OH-KY-IN

Dearborn, IN

Ohio, IN

Boone, KY

Campbell, KY

Gallatin, KY

Grant, KY

Kenton, KY

Pendleton, KY

Brown, OH

Clermont, OH

Hamilton, OH

Warren, OH

Clarksville-Hopkinsville, TN-KY

Christian, KY

Montgomery, TN

*Cleveland-Lorain-Elyria, OH

Ashtabula, OH

Cuyahoga, OH

Geauga, OH

Lake, OH

Lorain, OH

Medina, OH

Colorado Springs, CO

El Paso, CO

Columbia, MO

Boone, MO

Columbia, SC

Lexington, SC

Richland, SC

Columbus, GA-AL

Russell, AL

Chattanoochee, GA

Harris, GA

Muscogee, GA

*Columbus, OH

Delaware, OH

Fairfield, OH

Franklin, OH

Licking, OH

Madison, OH

Pickaway, OH

Corpus Christi, TX

Nueces, TX

San Patricio, TX

Cumberland, MD-WV

Allegany, MD

Mineral, WV

*Dallas, TX

Collin, TX

Dallas, TX

Denton, TX

Ellis, TX

Henderson, TX

Hunt, TX

Kaufman, TX

Rockwall, TX

Danville, VA

Danville City, VA

Pittsylvania, VA

Davenport-Rock Island-Moline, IA-IL

Scott, IA

Henry, IL

Rock Island, IL

Dayton-Springfield, OH

Clark, OH

Greene, OH

Miami, OH

Montgomery, OH

Daytona Beach, FL

Flagler, FL

Volusia, FL

Decatur, AL

Lawrence, AL

Morgan, AL

Decatur, IL

Macon, IL

*Denver, CO

Adams, CO

Arapahoe, CO

Denver, CO

Douglas, CO

[[Page 24487]]

Jefferson, CO

Des Moines, IA

Dallas, IA

Polk, IA

Warren, IA

*Detroit, MI

Lapeer, MI

Macomb, MI

Monroe, MI

Oakland, MI

St. Clair, MI

Wayne, MI

Dothan, AL

Dale, AL

Houston, AL

Dover, DE

Kent, DE

Dubuque, IA

Dubuque, IA

Duluth-Superior, MN-WI

St. Louis, MN

Douglas, WI

Dutchess County, NY

Dutchess, NY

Eau Claire, WI

Chippewa, WI

Eau Claire, WI

El Paso, TX

El Paso, TX

Elkhart-Goshen, IN

Elkhart, IN

Elmira, NY

Chemung, NY

Enid, OK

Garfield, OK

Erie, PA

Erie, PA

Eugene-Springfield, OR

Lane, OR

Evansville-Henderson, IN-KY

Posey, IN

Vanderburgh, IN

Warrick, IN

Henderson, KY

Fargo-Moorhead, ND-MN

Clay, MN

Cass, ND

Fayetteville, NC

Cumberland, NC

Fayetteville-Springdale-Rogers, AR

Benton, AR

Washington, AR

Flint, MI

Genesee, MI

Florence, AL

Colbert, AL

Lauderdale, AL

Florence, SC

Florence, SC

Fort Collins-Loveland, CO

Larimer, CO

*Ft. Lauderdale, FL

Broward, FL

Fort Myers-Cape Coral, FL

Lee, FL

Fort Pierce-Port St. Lucie, FL

Martin, FL

St. Lucie, FL

Fort Smith, AR-OK

Crawford, AR

Sebastian, AR

Sequoyah, OK

Fort Walton Beach, FL

Okaloosa, FL

Fort Wayne, IN

Adams, IN

Allen, IN

DeKalb, IN

Huntington, IN

Wells, IN

Whitley, IN

*Forth Worth-Arlington, TX

Hood, TX

Johnson, TX

Parker, TX

Tarrant, TX

Fresno, CA

Fresno, CA

Madera, CA

Gadsden, AL

Etowah, AL

Gainesville, FL

Alachua, FL

Galveston-Texas City, TX

Galveston, TX

Gary, IN

Lake, IN

Porter, IN

Glens Falls, NY

Warren, NY

Washington, NY

Goldsboro, NC

Wayne, NC

Grand Forks, ND-MN

Polk, MN

Grand Forks, ND

Grand Rapids-Muskegon-Holland, MI

Allegan, MI

Kent, MI

Muskegon, MI

Ottawa, MI

Great Falls, MT

Cascade, MT

Greeley, CO

Weld, CO

Green Bay, WI

Brown, WI

*Greensboro-Winston-Salem-High Point, NC

Alamance, NC

Davidson, NC

Davie, NC

Forsyth, NC

Guilford, NC

Randolph, NC

Stokes, NC

Yadkin, NC

Greenville, NC

Pitt, NC

Greenville-Spartanburg-Anderson, SC

Anderson, SC

Cherokee, SC

Greenville, SC

Pickens, SC

Spartanburg, SC

Hagerstown, MD

Washington, MD

Hamilton-Middletown, OH

Butler, OH

Harrisburg-Lebanon-Carlisle, PA

Cumberland, PA

Dauphin, PA

Lebanon, PA

Perry, PA

*Hartford, CT

Hartford, CT

Litchfield, CT

Middlesex, CT

Tolland, CT

Hickory-Morganton, NC

Alexander, NC

Burke, NC

Caldwell, NC

Catawba, NC

Honolulu, HI

Honolulu, HI

Houma, LA

Lafourche, LA

Terrebonne, LA

*Houston, TX

Chambers, TX

Fort Bend, TX

Harris, TX

Liberty, TX

Montgomery, TX

Waller, TX

Huntington-Ashland, WV-KY-OH

Boyd, KY

Carter, KY

Greenup, KY

Lawrence, OH

Cabell, WV

Wayne, WV

Huntsville, AL

Limestone, AL

Madison, AL

*Indianapolis, IN

Boone, IN

Hamilton, IN

Hancock, IN

Hendricks, IN

Johnson, IN

Madison, IN

Marion, IN

Morgan, IN

Shelby, IN

Iowa City, IA

Johnson, IA

Jackson, MI

Jackson, MI

Jackson, MS

Hinds, MS

Madison, MS

Rankin, MS

Jackson, TN

Madison, TN

Jacksonville, FL

Clay, FL

Duval, FL

Nassau, FL

St. Johns, FL

Jacksonville, NC

Onslow, NC

Jamestown, NY

Chautaqua, NY

Janesville-Beloit, WI

Rock, WI

[[Page 24488]]

Jersey City, NJ

Hudson, NJ

Johnson City-Kingsport-Bristol, TN-VA

Carter, TN

Hawkins, TN

Sullivan, TN

Unicoi, TN

Washington, TN

Bristol City, VA

Scott, VA

Washington, VA

Johnstown, PA

Cambria, PA

Somerset, PA

Joplin, MO

Jasper, MO

Newton, MO

Kalamazoo-Battlecreek, MI

Calhoun, MI

Kalamazoo, MI

Van Buren, MI

Kankakee, IL

Kankakee, IL

*Kansas City, KS-MO

Johnson, KS

Leavenworth, KS

Miami, KS

Wyandotte, KS

Cass, MO

Clay, MO

Clinton, MO

Jackson, MO

Lafayette, MO

Platte, MO

Ray, MO

Kenosha, WI

Kenosha, WI

Killeen-Temple, TX

Bell, TX

Coryell, TX

Knoxville, TN

Anderson, TN

Blount, TN

Knox, TN

Loudon, TN

Sevier, TN

Union, TN

Kokomo, IN

Howard, IN

Tipton, IN

La Crosse, WI-MN

Houston, MN

La Crosse, WI

Lafayette, LA

Acadia, LA

Lafayette, LA

St. Landry, LA

St. Martin, LA

Lafayette, IN

Clinton, IN

Tippecanoe, IN

Lake Charles, LA

Calcasieu, LA

Lakeland-Winter Haven, FL

Polk, FL

Lancaster, PA

Lancaster, PA

Lansing-East Lansing, MI

Clinton, MI

Eaton, MI

Ingham, MI

Laredo, TX

Webb, TX

Las Cruces, NM

Dona Ana, NM

Las Vegas, NV-AZ

Mohave, AZ

Clark, NV

Nye, NV

Lawrence, KS

Douglas, KS

Lawton, OK

Comanche, OK

Lewiston-Auburn, ME

Androscoggin, ME

Lexington, KY

Bourbon, KY

Clark, KY

Fayette, KY

Jessamine, KY

Madison, KY

Scott, KY

Woodford, KY

Lima, OH

Allen, OH

Auglaize, OH

Lincoln, NE

Lancaster, NE

Little Rock-North Little Rock, AR

Faulkner, AR

Lonoke, AR

Pulaski, AR

Saline, AR

Longview-Marshall, TX

Gregg, TX

Harrison, TX

Upshur, TX *Los Angeles-Long Beach, CA

Los Angeles, CA

Louisville, KY-IN

Clark, IN

Floyd, IN

Harrison, IN

Scott, IN

Bullitt, KY

Jefferson, KY

Oldham, KY

Lubbock, TX

Lubbock, TX

Lynchburg, VA

Amherst, VA

Bedford City, VA

Bedford, VA

Campbell, VA

Lynchburg City, VA

Macon, GA

Bibb, GA

Houston, GA

Jones, GA

Peach, GA

Twiggs, GA

Madison, WI

Dane, WI

Mansfield, OH

Crawford, OH

Richland, OH

Mayaguez, PR

Anasco, PR

Cabo Rojo, PR

Hormigueros, PR

Mayaguez, PR

Sabana Grande, PR

San German, PR

McAllen-Edinburg-Mission, TX

Hidalgo, TX

Medford-Ashland, OR Jackson, OR

Melbourne-Titusville-Palm Bay Fl

Brevard, Fl

*Memphis, TN-AR-MS

Crittenden, AR

De Soto, MS

Fayette, TN

Shelby, TN

Tipton, TN

Merced, CA

Merced, CA

*Miami, FL

Dade, FL

*Middlesex-Somerset-Hunterdon, NJ

Hunterdon, NJ

Middlesex, NJ

Somerset, NJ

*Milwaukee, WI

Milwaukee, WI

Ozaukee, WI

Washington, WI

Waukesha, WI

*Minneapolis-St Paul, MN-WI

Anoka, MN

Carver, MN

Chisago, MN

Dakota, MN

Hennepin, MN

Isanti, MN

Ramsey, MN

Scott, MN

Sherburne, MN

Washington, MN

Wright, MN

Pierce, WI

St. Croix, WI

Mobile, AL

Baldwin, AL

Mobile, AL

Modesto, CA

Stanislaus, CA

Monmouth-Ocean, NJ

Monmouth, NJ

Ocean, NJ

Monroe, LA

Ouachita, LA

Montgomery, AL

Autauga, AL

Elmore, AL

Montgomery, AL

Muncie, IN

Delaware, IN

Myrtle Beach, SC

Horry, SC

Naples, FL

Collier, FL

*Nashville, TN

Cheatham, TN

Davidson, TN

Dickson, TN

Robertson, TN

Rutherford TN

[[Page 24489]]

Sumner, TN

Williamson, TN

Wilson, TN

*Nassau-Suffolk, NY

Nassau, NY

Suffolk, NY

*New Haven-Bridgeport-Stamford-Danbury-Waterbury, CT

Fairfield, CT

New Haven, CT

New London-Norwich, CT

New London, CT

*New Orleans, LA

Jefferson, LA

Orleans, LA

Plaquemines, LA

St. Bernard, LA

St. Charles, LA

St. James, LA

St. John The Baptist, LA

St. Tammany, LA

*New York, NY

Bronx, NY

Kings, NY

New York, NY

Putnam, NY

Queens, NY

Richmond, NY

Rockland, NY

Westchester, NY

*Newark, NJ

Essex, NJ

Morris, NJ

Sussex, NJ

Union, NJ

Warren, NJ

Newburgh, NY-PA

Orange, NY

Pike, PA

*Norfolk-Virginia Beach-Newport News, VA-NC

Currituck, NC

Chesapeake City, VA

Gloucester, VA

Hampton City, VA

Isle of Wight, VA

James City, VA

Mathews, VA

Newport News City, VA

Norfolk City, VA

Poquoson City, VA

Portsmouth City, VA

Suffolk City, VA

Virginia Beach City VA

Williamsburg City, VA

York, VA

*Oakland, CA

Alameda, CA

Contra Costa, CA

Ocala, FL

Marion, FL

Odessa-Midland, TX

Ector, TX

Midland, TX

Oklahoma City, OK

Canadian, OK

Cleveland, OK

Logan, OK

McClain, OK

Oklahoma, OK

Pottawatomie, OK

Olympia, WA

Thurston, WA

Omaha, NE-IA

Pottawattamie, IA

Cass, NE

Douglas, NE

Sarpy, NE

Washington, NE

*Orange County, CA Orange, CA

*Orlando, FL

Lake, FL

Orange, FL

Osceola, FL

Seminole, FL

Owensboro, KY

Daviess, KY

Panama City, FL Bay, FL

Parkersburg-Marietta, WV-OH

Washington, OH

Wood, WV

Pensacola, FL

Escambia, FL

Santa Rosa, FL

Peoria-Pekin, IL

Peoria, IL

Tazewell, IL

Woodford, IL

*Philadelphia, PA-NJ

Burlington, NJ

Camden, NJ

Gloucester, NJ

Salem, NJ

Bucks, PA

Chester, PA

Delaware, PA

Montgomery, PA

Philadelphia, PA

*Phoenix-Mesa, AZ

Maricopa, AZ

Pinal, AZ

Pine Bluff, AR

Jefferson, AR

*Pittsburgh, PA

Allegheny, PA

Beaver, PA

Butler, PA

Fayette, PA

Washington, PA

Westmoreland, PA

Pittsfield, MA

Berkshire, MA

Ponce, PR

Guayanilla, PR

Juana Diaz, PR

Penuelas, PR

Ponce, PR

Villalba, PR

Yauco, PR

Portland, ME

Cumberland, ME

Sagadahoc, ME

York, ME

*Portland-Vancouver, OR-WA

Clackamas, OR

Columbia, OR

Multnomah, OR

Washington, OR

Yamhill, OR

Clark, WA

*Providence-Warwick, RI

Bristol, RI

Kent, RI

Newport, RI

Providence, RI

Washington, RI

Provo-Orem, UT

Utah, UT

Pueblo, CO

Pueblo, CO

Punta Gorda, FL

Charlotte, FL

Racine, WI

Racine, WI

Raleigh-Durham-Chapel Hill, NC

Chatham, NC

Durham, NC

Franklin, NC

Johnston, NC

Orange, NC

Wake, NC

Rapid City, SD

Pennington, SD

Reading, PA

Berks, PA

Redding, CA

Shasta, CA

Reno, NV

Washoe, NV

Richland-Kennewick-Pasco, WA

Benton, WA

Franklin, WA

Richmond-Petersburg, VA

Charles City County, VA

Chesterfield, VA

Colonial Heights City, VA

Dinwiddie, VA

Goochland, VA

Hanover, VA

Henrico, VA

Hopewell City, VA

New Kent, VA

Petersburg City, VA

Powhatan, VA

Prince George, VA

Richmond City, VA

*Riverside-San Bernardino, CA

Riverside, CA

San Bernardino, CA

Roanoke, VA

Botetourt, VA

Roanoke, VA

Roanoke City, VA

Salem City, VA

Rochester, MN

Olmsted, MN

*Rochester, NY

Genesee, NY

Livingston, NY

Monroe, NY

Ontario, NY

Orleans, NY

Wayne, NY

Rockford, IL

Boone, IL

Ogle, IL

Winnebago, IL

[[Page 24490]]

Rocky Mount, NC

Edgecombe, NC

Nash, NC

*Sacramento, CA

El Dorado, CA

Placer, CA

Sacramento, CA

Saginaw-Bay City-Midland, MI

Bay, MI

Midland, MI

Saginaw, MI

St. Cloud, MN

Benton, MN

Stearns, MN

St. Joseph, MO

Andrews, MO

Buchanan, MO

*St. Louis, MO-IL

Clinton, IL

Jersey, IL

Madison, IL

Monroe, IL

St. Clair, IL

Franklin, MO

Jefferson, MO

Lincoln, MO

St. Charles, MO

St. Louis, MO

St. Louis City, MO

Warren, MO

Salem, OR

Marion, OR

Polk, OR

Salinas, CA

Monterey, CA

*Salt Lake City-Ogden, UT

Davis, UT

Salt Lake, UT

Weber, UT

San Angelo, TX

Tom Green, TX

*San Antonio, TX

Bexar, TX

Comal, TX

Guadalupe, TX

Wilson, TX

*San Diego, CA

San Diego, CA

*San Francisco, CA

Marin, CA

San Francisco, CA

San Mateo, CA

*San Jose, CA

Santa Clara, CA

*San Juan-Bayamon, PR

Aguas Buenas, PR

Barceloneta, PR

Bayamon, PR

Canovanas, PR

Carolina, PR

Catano, PR

Ceiba, PR

Comerio, PR

Corozal, PR

Dorado, PR

Fajardo, PR

Florida, PR

Guaynabo, PR

Humacao, PR

Juncos, PR

Los Piedras, PR

Loiza, PR

Luguillo, PR

Manati, PR

Naranjito, PR

Rio Grande, PR

San Juan, PR

Toa Alta, PR

Toa Baja, PR

Trujillo Alto, PR

Vega Alta, PR

Vega Baja, PR

Yabucoa, PR

San Luis Obispo-Atascadero-Paso Robles, CA

San Luis Obispo, CA

Santa Barbara-Santa Maria-Lompoc, CA

Santa Barbara, CA

Santa Cruz-Watsonville, CA

Santa Cruz, CA

Santa Fe, NM

Los Alamos, NM

Santa Fe, NM

Santa Rosa, CA

Sonoma, CA

Sarasota-Bradenton, FL

Manatee, FL

Sarasota, FL

Savannah, GA

Bryan, GA

Chatham, GA

Effingham, GA

Scranton--Wilkes-Barre--Hazleton, PA

Columbia, PA

Lackawanna, PA

Luzerne, PA

Wyoming, PA

*Seattle-Bellevue-Everett, WA

Island, WA

King, WA

Snohomish, WA

Sharon, PA

Mercer, PA

Sheboygan, WI

Sheboygan, WI

Sherman-Denison, TX

Grayson, TX

Shreveport-Bossier City, LA

Bossier, LA

Caddo, LA

Webster, LA

Sioux City, IA-NE

Woodbury, IA

Dakota, NE

Sioux Falls, SD

Lincoln, SD

Minnehaha, SD

South Bend, IN

St. Joseph, IN

Spokane, WA

Spokane, WA

Springfield, IL

Menard, IL

Sangamon, IL

Springfield, MO

Christian, MO

Greene, MO

Webster, MO

Springfield, MA

Hampden, MA

Hampshire, MA

State College, PA

Centre, PA

Steubenville-Weirton, OH-WV

Jefferson, OH

Brooke, WV

Hancock, WV

Stockton-Lodi, CA

San Joaquin, CA

Sumter, SC

Sumter, SC

Syracuse, NY

Cayuga, NY

Madison, NY

Onondaga, NY

Oswego, NY

Tacoma, WA

Pierce, WA

Tallahassee, FL

Gadsden, FL

Leon, FL

*Tampa-St. Petersburg-Clearwater, FL

Hernando, FL

Hillsborough, FL

Pasco, FL

Pinellas, FL

Terre Haute, IN

Clay, IN

Vermillion, IN

Vigo, IN

Texarkana, AR-Texarkana, TX

Miller, AR

Bowie, TX

Toledo, OH

Fulton, OH

Lucas, OH

Wood, OH

Topeka, KS

Shawnee, KS

Trenton, NJ

Mercer, NJ

Tucson, AZ

Pima, AZ

Tulsa, OK

Creek, OK

Osage, OK

Rogers, OK

Tulsa, OK

Wagoner, OK

Tuscaloosa, AL

Tuscaloosa, AL

Tyler, TX

Smith, TX

Utica-Rome, NY

Herkimer, NY

Oneida, NY

Vallejo-Fairfield-Napa, CA

Napa, CA

Solano, CA

Ventura, CA

Ventura, CA

Victoria, TX

Victoria, TX

Vineland-Millville-Bridgeton, NJ

Cumberland, NJ

Visalia-Tulare-Porterville, CA

Tulare, CA

[[Page 24491]]

Waco, TX

McLennan, TX

*Washington, DC-MD-VA-WV

District of Columbia, DC

Calvert, MD

Charles, MD

Frederick, MD

Montgomery, MD

Prince Georges, MD

Alexandria City, VA

Arlington, VA

Clarke, VA

Culpepper, VA

Fairfax, VA

Fairfax City, VA

Falls Church City, VA

Fauquier, VA

Fredericksburg City, VA

King George, VA

Loudoun, VA

Manassas City, VA

Manassas Park City, VA

Prince William, VA

Spotsylvania, VA

Stafford, VA

Warren, VA

Berkeley, WV

Jefferson, WV

Waterloo-Cedar Falls, IA

Black Hawk, IA

Wausau, WI

Marathon, WI

West Palm Beach-Boca Raton, FL

Palm Beach, FL

Wheeling, OH-WV

Belmont, OH

Marshall, WV

Ohio, WV

Wichita, KS

Butler, KS

Harvey, KS

Sedgwick, KS

Wichita Falls, TX

Archer, TX

Wichita, TX

Williamsport, PA

Lycoming, PA

Wilmington-Newark, DE-MD

New Castle, DE

Cecil, MD

Wilmington, NC

New Hanover, NC

Brunswick, NC

Yakima, WA

Yakima, WA

Yolo, CA

Yolo, CA

York, PA

York, PA

Youngstown-Warren, OH

Columbiana, OH

Mahoning, OH

Trumbull, OH

Yuba City, CA

Sutter, CA

Yuba, CA

Yuma, AZ

Yuma, AZ

*Population greater than one million.

V. Impact Statement

Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601

through 612), we prepare a regulatory flexibility analysis unless we

certify that a notice will not have a significant economic impact on a

substantial number of small entities. For purposes of the RFA, all

physicians are considered to be small entities. Individuals and States

are not included in the definition of a small entity.

In addition, section 1102(b) of the Act requires us to prepare a

regulatory impact analysis for any notice that may have a significant

impact on the operations of a substantial number of small rural

hospitals. Such an analysis must conform to the provisions of section

604 of the RFA. For purposes of section 1102(b) of the Act, we define a

small rural hospital as a hospital that is located outside of a

Metropolitan Statistical Area and has fewer than 50 beds.

As noted above, we are updating the RCE limits by applying the most

recent economic index data without revising the methodology. This

notice announces an update of the limits, as required by regulations at

42 CFR 405.482(f)(3), and does not alter any regulations or policy. As

discussed above, the RCE limits apply only to providers paid on a

reasonable cost basis, and to compensation a physician receives from a

provider for services that benefit patients generally or otherwise but

that are not eligible for payment under the physician fee schedule.

Also, the limits do not apply to costs of physician compensation that

are attributable to furnishing inpatient hospital services paid for

under the hospital prospective payment system or that are attributable

to GME costs. As a result of the application of the RCE limits, we

estimate the costs associated with the updated limits for the next 5

fiscal years as follows:

Update of RCE Limits*

------------------------------------------------------------------------

Fiscal year Costs

------------------------------------------------------------------------

1997.......................................................... $ 30

1998.......................................................... 40

1999.......................................................... 50

2000.......................................................... 50

2001.......................................................... 50

------------------------------------------------------------------------

*All figures are rounded to the nearest $5 million.

For these reasons, we are not preparing analyses for either the RFA

or section 1102(b) of the Act because we have determined, and we

certify, that this notice will not have a significant economic impact

on a substantial number of small entities or a significant impact on

the operations of a substantial number of small rural hospitals.

In accordance with the provisions of Executive Order 12866, this

notice was reviewed by the Office of Management and Budget.

VI. Waiver of Prior Notice and 30-Day Delay in the Effective Date

We are publishing this notice as a final notice without prior

publication of a proposed notice for public comment. For the reasons

discussed below, we believe that publishing a proposed notice is

unnecessary.

Section 405.482(f) permits us to publish revised RCE limits in

final without prior publication of a proposal for public comment if the

limits are merely updated by applying the most recent economic index

data without revising the methodology. This notice does not implement

any change in the methodology for determining the RCE limits.

Therefore, we believe that publication of a proposal is

unnecessary, and we find good cause to waive the procedure.

We also normally provide a delay of 30 days in the effective date.

However, if adherence to this procedure would be impractical,

unnecessary, or contrary to public interest, we may waive the delay in

the effective date. The RCE limits set forth in this notice are

effective for cost reporting periods beginning on or after the date of

publication of the notice in the Federal Register. As a practical

matter, if we allowed a 30-day delay in the effective date of this

notice, those providers with cost reporting periods beginning during

those thirty days, and the physicians who are based in these providers,

would be unable to take timely advantage of the increase in limits

contained in this notice. This eventually would be contrary to the

public interest. Therefore, we find good cause to waive the usual 30-

day delay in the effective date.

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance; and Program No. 93.774, Medicare--

Supplementary Medical Insurance Program)

Dated: December 20, 1996.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: January 16, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-11521 Filed 5-2-97; 8:45 am]

BILLING CODE 4120-01-P