Medicare Program; Schedules of Limits and Prospectively Determined Payment Rates for Skilled Nursing Facility Inpatient Routine Service Costs

SUMMARY: This final notice with comment period sets forth an updated

schedule of limits on skilled nursing facility (SNF) routine service

costs for which payment may be made under the Medicare program and sets

forth an updated schedule of payment rates for low Medicare volume SNFs

that elect to receive prospectively determined payment rates for

routine service costs. Section 1888(a) of the Social Security Act (the

Act) requires that the Secretary update the per diem cost limits for

SNF routine service costs for cost reporting periods beginning on or

after October 1, 1995, and every 2 years thereafter. In addition,

section 1888(d)(4) of the Act requires the Secretary to establish and

publish prospectively determined payment rates at least 90 days prior

to the beginning of the Federal fiscal year (FY) to which such rates

are to be applied.

DATES: Effective date: The schedule of cost limits and the schedule of

prospectively determined payment rates are effective for cost reporting

periods beginning on or after October 1, 1997.

Comment date: Written comments will be considered if we receive

them at the appropriate address, as provided below, no later than 5:00

p.m. on December 1, 1997.

ADDRESSES: Mail written comments (an original and three copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: BPD-895-NC, P.O. Box 7517,

Baltimore, MD 21244-0517.

If you prefer, you may deliver your written comments (one original

and three copies) to one of the following addresses: Room 309-G, Hubert

H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC

20201, or Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-

1850.

Comments may also be submitted electronically to the following E-

mail address: [email protected] E-mail comments must include the

full name and address of the sender and must be submitted to the

referenced address in order to be considered. All comments must be

incorporated in the E-mail message because we may not be able to access

attachments. Electronically submitted comments will be available for

public inspection at the Independence Avenue address, below.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code BPD-895-NC. Comments received timely will be available for

public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 309-G of

the Department's offices at 200 Independence Avenue, SW, Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

Copies: To order copies of the Federal Register containing this

document, send your request to: New Orders, Superintendent of

Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date

of the issue requested and enclose a check or money order payable to

the Superintendent of Documents, or enclose your Visa or Master Card

number and expiration date. Credit card orders can also be placed by

calling the order desk at (202) 512-1800 or by faxing to (202) 512-

2250. The cost for each copy is $8.00. As an alternative, you can view

and photocopy the Federal Register document at most libraries

designated as Federal Depository Libraries and at many other public and

academic libraries throughout the country that receive the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Robert Kuhl, (410) 786-4597.

SUPPLEMENTARY INFORMATION:

I. Background

A. Authority for Establishing Cost Limits and Prospectively Determined

Payment Rates

1. Cost Limits

Sections 1861(v)(1)(A) and 1888 of the Act authorize the Secretary

to set limits on allowable costs incurred by a provider of services for

which payment may be made under Medicare. These limits are based on

estimates of the costs necessary for the efficient delivery of needed

health services. Section 1888(a) of the Act directs the Secretary to

set limits on per diem inpatient routine service costs for hospital-

based and freestanding SNFs by urban or rural area. Implementing

regulations appear at 42 CFR 413.30.

2. Prospectively Determined Payment Rates

Most SNFs are paid on a reasonable cost basis up to the routine

service per diem cost limits described in the previous paragraph.

However, under section 1888(d) of the Act, for cost reporting periods

beginning on or after October 1, 1986, a SNF with fewer than 1,500

Medicare covered days in a given cost reporting period may choose to

receive payment based on a prospectively determined payment rate in the

subsequent cost reporting period. Implementing regulations appear at 42

CFR Part 413, Subpart I.

The rates for the low Medicare volume SNFs are established on a per

diem basis and include payment for the cost of furnishing general

inpatient routine services and capital-related costs associated with

routine services. We are required to publish annual revisions to the

rates at least 90 days before the beginning of the Federal FY to which

the revised rates apply. In addition, under Sec. 413.312(a)(1)(i), we

are required to base the revised rates on the same cost data used to

develop the cost limits that are in effect for that Federal FY.

B. Previously Published Schedules of and Updates to Cost Limits and

Rates

1. Effective for FY 1993

We published a final notice with comment period on October 7, 1992

(57 FR 46177) announcing a schedule of limits for freestanding and

hospital-based SNFs effective for cost reporting periods beginning in

FY 1993. In December 1992, we published section 2828 of the Medicare

Provider Reimbursement Manual (HCFA Pub. 15-1), Transmittal Number 370,

establishing rates effective for cost reporting periods beginning in FY

1993. The same cost report, wage, and inflation data were used to

develop these cost limits and rates. The cost reports used to develop

the FY 1993 cost limits and rates covered cost reporting periods ending

on or after June 30, 1989, through May 31, 1990, for freestanding SNFs

and on or after October 31, 1988, through September 30, 1989, for

hospital-based SNFs. The 1988 hospital wage data and Metropolitan

Statistical Area (MSA) designations, based on pre-1990 census data as

described in the April 1, 1991, notice (56 FR 13319), were used to

develop the wage index that was applicable to the FY 1993 cost limits

and rates. It has been our longstanding

[[Page 51537]]

policy not to make changes in the cost report data or recognize changes

in the wage and MSA data until we publish a Federal Register notice

announcing an update to the SNF cost limits.

2. Effective for FY 1994 and FY 1995

Sections 13503(a)(1) and 13503(b) of the Omnibus Budget

Reconciliation Act of 1993 (OBRA `93) (Public Law 103-66) required that

there be no changes in the FY 1993 SNF routine cost limits and rates

(including adjustments for changes in the wage index or applicable

MSAs) established under section 1888 of the Act for cost reporting

periods beginning during Federal FY 1994 and FY 1995. This 2-year

freeze on the cost limits and rates resulted in a savings to the

Medicare program. These provisions of OBRA `93 were implemented, for

cost limits, in a final notice with comment period on January 6, 1994

(59 FR 762) and, for rates, in section 2828 L of the Provider

Reimbursement Manual (Transmittal 374, December 1993).

3. Effective for FY 1996

Section 13503(a)(2) of OBRA '93 amended section 1888(a) of the Act

and required that an update to the cost limits be provided for cost

reporting periods beginning on or after October 1, 1995 (FY 1996), and

every 2 years thereafter. However, during the FY 1996 legislative

period, reconciliation legislation contained a provision to preserve

the savings from the 2-year freeze by inflating the FY 1993 cost limits

and rates to cost reporting periods beginning in FY 1996, except that

inflation for FY 1994 and FY 1995 would not have been recognized. We

did not believe that it would be appropriate to issue the required

update to the cost limits and rates for cost reporting periods

beginning in FY 1996 until the prospect of this provision becoming law

was known. We determined in April 1996 (7 months into FY 1996) that the

FY 1996 legislative period would not produce a law that included this

provision.

On May 3, 1996, we expedited the issuance of the required update to

the FY 1996 cost limits and rates through a memorandum to all Associate

Regional Administrators (ARAs) for Medicare. We instructed the ARAs to

notify the intermediaries to implement this update. (This memorandum

also included corrections to erroneous projected rates of inflation

used to develop the FY 1990 and FY 1993 cost limits.) This memorandum

contained the monthly inflation factors that were needed to extend the

FY 1993 cost limits and rates to cost reporting periods beginning in FY

1996.

Our policy regarding the methodology used to provide the required

update to the limits and rates for FY 1996 conformed with the update

methodology described below Table IV of the October 7, 1992 notice,

which extends the cost reporting periods affected by the FY 1993 limits

by computing monthly inflation factors beyond those shown in Table IV.

Intermediaries were using this methodology to compute limits and rates

between October 1, 1995, and the issuance of the aforementioned

memorandum. We explained that this update methodology would be used

until a new schedule of limits or other provision is issued.

4. Effective for FY 1997

Section 1888(a) of the Act did not require us to provide an update

to the cost limits for FY 1997. Therefore, we trended the FY 1996 cost

limits and rates to cost reporting periods beginning in FY 1997 using

the latest available rates of inflation.

On August 22, 1996, we issued a memorandum to all ARAs for Medicare

to notify the intermediaries of the cost limits and monthly inflation

factors for cost reporting periods beginning in FY 1997.

On September 3, 1996, we published a final notice with comment

period (61 FR 46466) announcing the schedule of rates effective for

cost reporting periods beginning in FY 1997. That notice represented

the first schedule of rates published in the Federal Register after the

regulations implementing section 1888(d) were issued on July 21, 1995

(60 FR 37590).

C. Cost Limits and Rates Effective for FY 1998

This notice with comment period announces the schedule of cost

limits and rates effective for cost reporting periods beginning in FY

1998, as required under section 1888(a) of the Act. To meet the update

requirement under section 1888(a), we trended the FY 1997 cost limits

and rates to cost reporting periods beginning in FY 1998 using the

latest rates of inflation.

There is, however, increasing concern that post-1990 census data

have not been used in determining MSA designations and wage index

values since our last Federal Register notice was published on October

7, 1992. We believe that the numerous changes to the MSA designations

since we published the FY 1993 cost limits and rates should be

recognized in determining the appropriate wage index values used in

this notice. This notice presents the opportunity to implement these

changes to the wage data and to the MSA designations and conforms with

our longstanding policy to make such changes only in a Federal Register

notice.

This is the first time we have published a combined schedule of

cost limits and rates. Combining the cost limits and rates in one

notice is more economical in that they both utilize the same cost

report data, wage index values, and rates of inflation. In addition,

under section 1888(d) of the Act, an individual provider's

prospectively determined rate may not exceed its applicable cost limit

(see Section III.D. of this notice). This notice, containing cost

limits and rates for cost reporting periods beginning in FY 1998,

allows a provider to more conveniently determine its individual rate

than in previous years.

II. Update of the SNF Schedule of Limits and the Schedule of

Prospectively Determined Rates

Under the authority cited in section I. of this notice, this final

notice with comment period sets forth for cost reporting periods

beginning in FY 1998: (1) an updated schedule of limits on SNF routine

service costs for which payment may be made under the Medicare program;

and (2) an updated schedule of prospectively determined payment rates

for low Medicare volume SNFs that have elected to receive prospective

payments for routine service costs.

The cost limits set forth in Table I and the rates set forth in

Tables II and III of this notice are based on the FY 1997 cost limits

and rates, respectively, trended to cost reporting periods beginning in

FY 1998, using the most recent projections of the rates of inflation or

increase in the costs included in the SNF market basket.

We are continuing to use the HCFA hospital wage data to account for

area wage differences. This is necessary because industry-specific data

needed to calculate a wage index for SNFs are not available. Under

section 106 of the Social Security Act Amendments of 1994 (Public Law

103-432), the Secretary was required to begin collecting data no later

than October 31, 1995, on employee compensation and paid hours of

employment in SNFs for the purpose of constructing a SNF wage index

adjustment to the routine service cost limits. Until this data

collection effort is completed and the data are analyzed, we believe

that hospital wage data provide the best measure of comparable wages

that would also be paid by SNFs, since hospitals and SNFs generally

compete in the same labor

[[Page 51538]]

market for employees. We believe that the use of the hospital wage data

results in an appropriate adjustment to the labor-portion of the costs

based on an appropriate wage index as required under section 1888(a) of

the Act.

For the schedule of cost limits and rates effective with this

notice, we are using wage index values that are based on hospital wage

data from cost reporting periods beginning in FY 1993--the most recent

hospital wage data in effect before the effective date of this notice

and the most recent MSA designations. Accordingly, with the exception

of those wage index values that may be affected by recent corrections

to the 1993 wage data, the wage index values used in this notice are

based on the same wage data as are used to compute the wage index

values for the hospital prospective payment system for discharges

occurring on or after October 1, 1996. (A detailed description of the

methodology used to compute the hospital prospective payment wage index

is set forth in the final rule published in the Federal Register on

August 30, 1996 (61 FR 46166).) While these wage index values are based

on the MSA designations in effect prior to the effective date of this

notice, they do not, however, reflect changes in geographic

classification for certain rural hospitals required under section

1886(d)(8)(B) of the Act or geographic reclassifications based on

decisions of the Medicare Geographic Classification Review Board or the

Secretary under section 1886(d)(10) of the Act. Section 1886 of the Act

applies to hospitals only. Accordingly, as in the past, it would not be

appropriate to recognize changes in the geographic classification of

hospitals for purposes of computing the SNF cost limits even though an

SNF may be part of a medical complex that includes a reclassified

hospital.

III. Provisions of the SNF Schedule of Cost Limits and Prospectively

Determined Payment Rates

The schedule of cost limits set forth below applies to all SNFs,

including those low Medicare volume SNFs that are eligible to receive

the optional prospectively determined payment rate for routine

services. Under Sec. 413.314(d), the operational portion of an SNF's

prospectively determined payment rate, excluding capital-related costs,

cannot exceed its actual routine service cost limit (without regard to

exceptions, exemptions, or retroactive adjustments) in effect at the

time of the election to be paid a prospectively determined payment

rate. The eligibility requirements for receiving prospectively

determined payment rates are specified in subpart I of part 413.

These schedules of cost limits and rates provide for the following:

A. Separate Groupings for Labor-Related and Nonlabor-Related Components

of Per Diem Routine Service Costs

We are retaining the same groupings for the labor-related and

nonlabor-related components of per diem routine service costs as

follows:

1. As described in the October 7, 1992 notice for the FY 1993 cost

limits, separate group means were computed for the labor-related and

nonlabor-related components for hospital-based and freestanding SNFs in

accordance with the MSA or non-MSA designation in effect with that

notice. Each group mean was then multiplied by 112 percent.

2. As described in the September 3, 1996 notice for the FY 1997

rates, separate group means were computed for labor-related, nonlabor-

related, and capital-related components in accordance with the SNF's

census region and MSA or non-MSA designation in effect with that

notice. Each group mean was then multiplied by 105 percent.

B. Adjustment of SNF Labor-Related Data by the Wage Index

We are using a wage index based on 1993 hospital wage data and

post-1990 MSA designations, as discussed in section II of this notice,

to adjust the labor-related portion of the cost limits and rates

contained in this notice for area wage differences.

C. Use of SNF Market Basket

We are trending the FY 1997 cost limits and rates to FY 1998 using

projected cost increases by applying the SNF market basket index. This

market basket index is used to adjust the SNF cost data to reflect cost

increases occurring between the cost reporting periods represented in

the data collection and the midpoints of the cost reporting periods to

which the cost limits and rates apply.

The market basket index is comprised of the most commonly used

categories of SNF routine service expenses. The categories are based

primarily on those used by the National Center for Health Statistics in

its National Nursing Home Surveys.

The categories of expenses are weighted according to the estimated

proportion of SNF routine service costs attributable to each category.

A detailed description of the market basket index is described in the

October 7, 1992 notice for cost limits and the September 3, 1996 notice

for the rates.

In developing the market basket index, we obtained historical and

projected (estimated) rates of change in the price of goods and

services in each category. For cost limit purposes only, estimated

rates of change may be revised, retroactively, based on actual (final)

rates of change. As described in all previous schedules of cost limits,

if the final rate of change in the market basket index for a calendar

year differs from the estimated rate of change by at least 0.3

percentage points, we will adjust the limits. Elsewhere in this issue

of the Federal Register, we are proposing in a separate notice to

eliminate this provision to adjust the limits.

D. Application of the Adjusted Hospital Wage Index to the Labor-Related

Costs

In developing the FY 1997 cost limits and rates, we applied the

wage index to five categories of labor-related costs: wages, employee

benefits, health service costs, business service costs, and

miscellaneous costs. We continue to use this methodology in computing

the FY 1998 cost limits and rates.

For purposes of applying the wage index, employee benefits include

such items as FICA tax, health insurance, life insurance, facility

contributions to employee retirement funds, and all other compensation

that the SNF records in the ``employee health and welfare'' cost center

on its Medicare cost report. Health service costs include the costs of

physician services that are purchased under arrangement from outside

sources. Business service costs include costs of banking, contract

laundry, telephone, and other services that SNFs purchase at retail

from outside suppliers. Miscellaneous costs include various types of

routine operating costs not allocated to any other category of the

market basket.

E. Per Diem Add-On to the Cost Limits and Prospective Rates Effective

for Cost Reporting Periods Beginning in FY 1998

In the October 7, 1992 notice and the September 3, 1996 notice, we

described a per diem add-on to the limits and rates, respectively. This

per diem add-on was developed to take into account the costs associated

with the additional requirements placed on SNFs by the nursing home

reform provisions in section 1819 of the Act, including conducting

nurse aide training and competency evaluation programs, and to

recognize the additional costs due to the universal precaution

requirements of the Occupational Safety and Health Administration

(OSHA).

[[Page 51539]]

The per diem add-on effective for FY 1997 will be trended to cost

reporting periods beginning in FY 1998, using the latest market basket

index. For cost limit purposes, the per diem add-on is $2.27 for cost

reporting periods beginning on or after October 1, 1997. For rate

purposes, the per diem add-on is $2.13 for cost reporting periods

beginning on or after October 1, 1997.

When HCFA updates the SNF cost limits and prospective rates using a

later data base that includes the costs of complying with these

additional requirements, a per diem add-on will no longer be needed

because those updated limits and rates would include these costs.

The following applies to the schedule of cost limits only:

F. Setting of Freestanding SNF Limits

The FY 1997 cost limits for freestanding SNFs were set at 112

percent of the average labor-related and average nonlabor-related costs

of each group, as described in the October 7, 1992 notice. This

methodology is prescribed by section 1888(a) of the Act. We continue to

use this methodology to set the freestanding SNF cost limits contained

in this notice.

G. Setting of Hospital-Based SNF Limits

The FY 1997 cost limits for hospital-based SNFs were set at the

freestanding SNF limit plus 50 percent of the difference between the

freestanding SNF limit and 112 percent of the mean per diem routine

service costs of hospital-based SNFs. This methodology for setting

hospital-based SNF cost limits was described in the October 7, 1992

notice and the January 6, 1994 notice. This methodology is prescribed

by sections 1888(a) and (b) of the Act. We continue to use this

methodology to set the hospital-based SNF cost limits contained in this

notice.

H. Cost-of-Living Adjustments to the Limits for Alaska, Hawaii, Puerto

Rico, and the Virgin Islands

To avoid disadvantaging SNFs located in Alaska, Hawaii, Puerto

Rico, and the Virgin Islands, we will continue to provide a cost-of-

living adjustment to the limits for these areas. This is an adjustment

of the nonlabor-related component of the limit that applies to these

areas, based on the amount of the most recently determined cost-of-

living differentials developed by the Office of Personnel Management.

Since we adjust the labor-related component by the applicable wage

index as discussed in section III.D. of this notice, this cost-of-

living adjustment will apply only to the nonlabor-related component.

I. Exception to Cost Limits

A SNF may request an exception to the cost limits under the

provisions of Sec. 413.30(f). The SNF must make the request to the

appropriate Medicare fiscal intermediary in accordance with section

2530 of the Provider Reimbursement Manual (HCFA Pub. 15-1). An

adjustment may be granted if the costs in excess of the limit are

reasonable, attributable to the circumstances specified in

Sec. 413.30(f)(1) through (f)(8), separately identified by the SNF, and

verified by the intermediary.

J. Use of Classification System for the Limits

The classification system we use is based on whether a SNF is

located within a MSA or in a New England County Metropolitan Area

(NECMA) based on standards published in the Federal Register on March

30, 1990 (55 FR 12154), using Bureau of the Census data or Bureau of

Census estimates made after 1990. The latest standards for developing

MSAs are the ones contained in the March 30, 1990 Federal Register.

The following applies to the schedule of rates only:

K. Use of Classification System for the Rates

We will retain the classification system based on grouping SNFs by

census regions and by urban or rural area designation within the

region. As required by sections 1883(d)(3) and 1886(d)(2)(D) of the

Act, the term ``region'' means one of the 9 census divisions,

comprising the 50 States and the District of Columbus, established by

the Bureau of Census for Statistical and reporting purposes. The term

``urban rate'' means an area within a MSA (as defined by the Office of

Management and Budget (OMB), with exceptions for certain NECMAs, as

described in a notice published in the Federal Register on April 1,

1991 (56 FR 13319)). The term ``rural area'' means an area outside such

an area (MSA).

IV. Methodology for Determining Per Diem Routine Service Cost Limits

and Low Volume Prospective Payment Rates

A. Development of Base Cost Limits and Rates

As discussed in section I of this notice, we trended the FY 1997

cost limits and rates using the latest market basket index, as

discussed in section III.C. of this notice. The annual percentage

increases in the market basket over the previous year that we used for

this projection in this notice are:

1993................................................................3.7

1994................................................................3.4

1995................................................................2.9

1996

...........................................................1

2.7

1997

...........................................................1

3.2

1998

...........................................................1

3.4

1999

...........................................................1

3.6

1 Forecasted increase.

B. Calculation of SNF Limit

1. Components of Limit

For each freestanding group, the freestanding limits for FY 1998

are shown in Table I of this notice. We used the computation below to

determine the hospital-based cost limits shown in Table I.

Cost Limit Data--Hospital-Based SNFs for Cost Reporting Periods

Beginning on or After October 1, 1997

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

Rural (non-

112 percent of hospital-based mean cost Urban (MSA) MSA)

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

Labor......................................... $166.13 $143.18

Nonlabor...................................... 34.97 23.58

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

Total..................................... 201.10 166.76

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

[[Page 51540]]

Calculation of 50 Percent of Difference Between 112 Percent of Hospital-

Based Mean Cost and Freestanding Limit

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

Labor Nonlabor

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

Urban (MSA)

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

112 Percent of Hospital-Based Mean Cost....... $166.13 $34.97

Freestanding Limit (Table I).................. -91.23 -19.59

Difference................................ 74.90 15.38

50 Percent of Difference.................. 37.45 7.69

Plus Freestanding Limit................... +91.23 +19.59

Hospital-Based Limit (MSA).................... 128.68 27.28

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

Rural (Non-MSA)

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

112 Percent of Hospital-Based Mean Cost....... $143.18 $23.58

Freestanding Limit (Table I).................. -92.64 -15.64

Difference................................ 50.54 7.94

50 Percent of Difference.................. 25.27 3.97

Plus Freestanding Limit................... +92.64 +15.64

Hospital-Based Limit (Non-MSA)................ 117.91 19.61

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

2. Adjustment of Labor-Related Component by Wage Index

To arrive at a labor-adjusted limit for each SNF, we multiply the

labor-related component of the limit for the SNF's group by the wage

index developed from wage levels for hospital workers in the area in

which the SNF is located (see Tables IV and V of this notice). The

adjusted limit that applies to a SNF is the sum of the nonlabor-related

component, plus the adjusted labor-related component, plus the OBRA/

OSHA per diem add-on discussed in section III.E. of this notice.

Example--Calculation of Adjusted Limit for a Freestanding SNF

Located in Dallas, Texas:

Labor-Related Component..................................... $ 91.23 (Table I).

Wage Index.................................................. x 0.9729 (Table IV).

-----------

Adjusted Labor Component.................................... 88.76

Nonlabor-Related Component.................................. +19.59 (Table I).

OBRA/OSHA Per Diem Add-On................................... +2.27 (Sec. III.E.).

-----------

Adjusted Limit.............................................. 110.62

3. Adjustment for Cost Reporting Period

If a facility has a cost reporting period beginning in a month

after October 1, 1997, the intermediary increases the limit that

otherwise would apply to the SNF by the factor from Table VI of this

notice that corresponds to the month and year in which the cost

reporting period begins. Each factor represents the compounded monthly

increase derived from the projected annual increase in the market

basket index and is used to account for inflation in costs that occur

after the date on which the limits are effective.

Example: The following is a computation of a revised limit for the

previously cited SNF that has a cost reporting period that begins

January 1, 1998. The base adjusted limit for the SNF is $110.62. The

revised limit applicable to its cost reporting period $111.56, is

computed as follows:

Individual SNF Adjusted Base Limit........................... $110.62

Adjustment Factor from Table V............................... x 1.0084

6

----------

Revised Limit................................................ 111.56

If a facility uses a cost reporting period that is not 12 months in

duration, a special adjustment factor will be calculated. This is

necessary because projections are computed to the midpoint of a cost

reporting period and the adjustment factors in Table VI of this notice

are based on an assumed 12-month reporting period. For cost reporting

periods of other than 12 months, the calculation is done for the

midpoint of the specific cost reporting period. The SNF's intermediary

will obtain this adjustment factor from HCFA Central Office.

C. Calculation of the Routine Operating Portion of the Rates.

1. Adjustment of Labor-Related Component by Wage Index

a. Urban SNFs. To arrive at a labor adjusted component for the

rates, we multiply the labor-related component of the rate for the

SNF's region (Table II of this notice) by the wage index developed from

wage levels for hospital workers in the area in which the SNF is

located (Table IV of this notice).

b. Rural SNFs. To arrive at a labor adjusted component for the

rates, we multiply the labor-related rate for the SNF's region (Table

III of this notice) by the wage index developed from wage levels for

hospital workers in the state in which the SNF is located (Table V of

this notice).

2. Non-Labor-Related and OBRA/OSHA Per Diem Add-on

The adjusted routine operating portion of the rate that applies to

a SNF is the sum of the nonlabor-related component, plus the labor

adjusted component, plus the OBRA/OSHA per diem add-on discussed in

section III.E. of this notice.

[[Page 51541]]

3. Adjustment for Cost Reporting Period

If a facility has a cost reporting period beginning in a month

after October 1, 1997, the intermediary increases the adjusted routine

operating portion of the rate that otherwise apply to the SNF by the

factor from Table VI of this notice that corresponds to the month and

year in which the cost reporting period begins. Each factor represents

the compounded monthly increase derived from the annual increase in the

market basket index and is used to account for inflation in costs that

occur after the date on which the prospective payment rates are

effective.

If a facility uses a cost reporting period that is not 12 months in

duration, a special adjustment factor is calculated. This is necessary

because market basket increases are computed to the midpoint of a cost

reporting period and the adjustment factors in Table VI of this notice

are based on an assumed 12-month cost reporting period. For cost

reporting periods of other than 12 months, the calculation is done for

the midpoint of the specific cost reporting period. The SNF's

intermediary obtains this adjustment factor from the HCFA Central

Office.

D. Comparison of Provider's Prospective Payment Rate With Provider's

Cost Limit

Below is an example of the calculation of the prospectively

determined payment rate for a provider, including a comparison of the

adjusted routine operating portion of the rate with the applicable

routine operating cost limit applicable to the specific provider. The

capital-related component of the rate is added to the lower of the

SNF's specific cost limit or its adjusted routine operating portion of

the rate to arrive at the provider's actual prospectively determined

payment rate.

Example: In this case, the adjusted cost limit is less than the

adjusted rate for a freestanding SNF located in Providence, Rhode

Island (MSA Region 1), with a cost reporting period beginning January

1, 1998. Therefore, the prospectively determined payment rate for this

SNF is the adjusted limit plus the capital-related component of the

rate ($134.93).

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

Labor- Non-labor Capital-

related related related

component component component

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

Limit (Table I).................. $91.23 $19.59 ...........

Rate (Table II).................. 120.13 22.91 $10.00

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

Calculation of Prospective Payment rate

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

Limit Rate Rate source

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

Labor-Related Component...................... $91.23 $120.13 (Chart above).

Wage Index................................... x 1.1092 x 1.1092 (Table IV).

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

Adjusted Labor Component..................... 101.19 133.25 .....................................

Non-Labor Component.......................... 19.59 22.91 (Chart above).

OBRA/OSHA Add-on............................. +2.27 +2.13 (Sec III.E.).

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

Adjusted Limit/Rate.......................... 123.05 $158.29 .....................................

Cost Reporting Year Adjustment Factor........ x 1.00846 x 1.00846 (Table VI).

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

Revised Limit/Rate........................... 124.09 159.63 .....................................

Capital-Related Component.................... +10.00 (Chart above).

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

Prospectively Determined Payment Rate........ 134.09 .....................................

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

V. Schedule of Limits

Under the authority of sections 1861(v)(1)(A) and 1888 of the Act,

the following group per diem limits will apply to the adjusted SNF

inpatient routine service costs paid for under Medicare for cost

reporting periods beginning on or after October 1, 1997. Medicare

fiscal intermediaries will compute the adjusted limits for SNFs using

the methodology set forth in this notice and will notify each SNF of

its applicable limit. These limits, as adjusted by the applicable wage

indexes, cost reporting year adjustments, and adjusted by the OBRA/OSHA

per diem add-on, will remain in effect for cost reporting periods

beginning on or after October 1, 1997, until a new schedule of cost

limits or other provision is issued.

Table I.--SNF Group Limits

[Cost Reporting Periods Beginning On or After 10/1/97]

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

Labor- Non-labor *

Location related related

component component

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

Freestanding:

MSA Limit................................. $91.23 $19.59

Non-MSA Limit............................. 92.64 15.64

Hospital-Based:

MSA Limit................................. 128.68 27.28

Non-MSA Limit............................. 117.91 19.61

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

* The nonlabor portion of the limits for SNFs located in the States of

Alaska and Hawaii, the Commonwealth of Puerto Rico, and the Virgin

Islands will be increased by the following cost-of-living adjustments:

[[Page 51542]]

Adjustment

Area factor

Alaska..................................................... 1.250

Hawaii:

Oahu................................................... 1.225

Kauai.................................................. 1.175

Maui, Lanai and Molokai................................ 1.200

Hawaii (island)........................................ 1.150

Puerto Rico................................................ 1.100

Virgin Islands............................................. 1.125

Table II.--Prospective Rates--MSA Locations Effective October 1, 1997

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

Labor- Nonlabor- Capital-

Region \1\ related related related

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

1. New England (CT, ME, MA, NH,

RI, VT)......................... $120.13 $22.91 $10.00

2. Middle Atlantic (PA, NJ, NY).. 115.86 20.94 9.79

3. South Atlantic (DE, DC, FL,

GA, MD, NC, SC, VA, WV)......... 103.86 16.70 9.81

4. East North Central (IL, IN,

MI, OH, WI)..................... 98.70 16.40 9.18

5. East South Central (AL, KY,

MS, TN)......................... 99.28 14.61 7.32

6. West North Central (IA, KS,

MN, MO, NE, ND, SD)............. 105.87 17.59 10.23

7. West South Central (AR, LA,

OK, TX)......................... 92.64 14.47 10.06

8. Mountain (AZ, CO, ID, MT, NV,

NM, UT, WY)..................... 110.22 18.83 13.04

9. Pacific (AK, CA, HI, OR, WA).. 100.30 20.56 8.40

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

\1\ There are 17 MSAs that have counties in two or more regions. For

each of these MSAs, the region in which a majority of the SNFs are

located determines the regional rate that is paid as shown below. This

is the same methodology as that used to implement the requirements of

section 1886(d)(2)(D) of the Act as they apply to the hospital

prospective payment system.

The MSAs are as follows:

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

MSA Region

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

Chattanooga, TN-GA......................................... 5

Cincinnati, OH-KY-IN....................................... 4

Columbus, GA-AL............................................ 3

Davenport-Rock Island-Moline, IA-IL........................ 4

Duluth-Superior, MN-WI..................................... 6

Evansville-Henderson, IN-KY................................ 4

Huntington-Ashland, WV-KY-OH............................... 3

Johnson City-Kingsport-Bristol, TN-VA...................... 5

La Crosse, WI-MN........................................... 4

Louisville, KY-IN.......................................... 5

Memphis, TN-AR-MS.......................................... 5

Minneapolis-St. Paul, MN-WI................................ 6

Parkersburg-Marietta, WV-OH................................ 3

St. Louis, MO-IL........................................... 6

Steubenville-Weirton, OH-WV................................ 4

Wheeling, WV-OH............................................ 3

Wilmington-Newark, DE-NJ-MD................................ 3

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

Table III.--Prospective Rates--Non-MSA Locations Effective October 1,

1997

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

Labor- Nonlabor- Capital-

Region related related related

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

1. New England (CT, ME, MA, NH,

RI, VT)......................... $129.68 $21.62 $10.58

2. Middle Atlantic (PA, NJ, NY).. 121.14 17.40 7.94

3. South Atlantic (DE, DC, FL,

GA, MD, NC, SC, VA, WV)......... 114.52 15.56 9.19

4. East North Central (IL, IN,

MI, OH, WI)..................... 108.02 15.08 8.28

5. East South Central (AL, KY,

MS, TN)......................... 108.81 13.70 6.77

6. West North Central (IA, KS,

MN, MO, NE, ND, SD)............. 111.41 14.83 6.66

7. West South Central (AR, LA,

OK, TX)......................... 105.74 13.44 9.22

8. Mountain (AZ, CO, ID, MT, NV,

NM, UT, WY)..................... 110.40 16.18 8.36

9. Pacific (AK, CA, HI, OR, WA).. 123.54 20.74 10.16

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

[[Page 51543]]

Table IV.--Wage Index for Urban Areas

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

Wage

Urban area (constituent counties or county equivalents) index

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

0040 Abilene, TX............................................ 0.8048

Taylor, TX

0060 Aguadilla, PR.......................................... 0.4237

Aguada, PR

Aguadilla, PR

Moca, PR

0080 Akron, OH.............................................. 0.9853

Portage, OH

Summit, OH

0120 Albany, GA............................................. 0.8597

Dougherty, GA

Lee, GA

0160 Albany-Schenectady-Troy, NY............................ 0.8624

Albany, NY

Montgomery, NY

Rensselaer, NY

Saratoga, NY

Schenectady, NY

Schoharie, NY

0200 Albuquerque, NM........................................ 0.9344

Bernalillo, NM

Sandoval, NM

Valencia, NM

0220 Alexandria, LA......................................... 0.8119

Rapides, LA

0240 Allentown-Bethlehem-Easton, PA......................... 0.9992

Carbon, PA

Lehigh, PA

Northampton, PA

0280 Altoona, PA............................................ 0.9510

Blair, PA

0320 Amarillo, TX........................................... 0.8730

Potter, TX

Randall, TX

0380 AK Anchorage, AK....................................... 1.3224

Anchorage,

0440 Ann Arbor, MI........................................... 1.1662

Lenawee, MI

Livingston, MI

Washtenaw, MI

0450 Anniston, AL........................................... 0.8023

Calhoun, AL

0460 Appleton-Oshkosh-Neenah, WI............................ 0.8890

Calumet, WI

Outagamie, WI

Winnebago, WI

0470 Arecibo, PR............................................ 0.4397

Arecibo, PR

Camuy, PR

Hatillo, PR

0480 Asheville, NC.......................................... 0.9334

Buncombe, NC

Madison, NC

0500 Athens, GA............................................. 0.9408

Clarke, GA

Madison, GA

Oconee, GA

0520 Atlanta, GA............................................ 1.0033

Barrow, GA

Bartow, GA

Carroll, GA

Cherokee, GA

Clayton, GA

Cobb, GA

Coweta, GA

DeKalb, GA

Douglas, GA

Fayette, GA

Forsyth, GA

Fulton, GA

Gwinnett, GA

Henry, GA

Newton, GA

Paulding, GA

Pickens, GA

Rockdale, GA

Spalding, GA

Walton, GA

0560 Atlantic City-Cape May, NJ............................. 1.1077

Atlantic City, NJ

Cape May, NJ

0600 Augusta-Aiken, GA-SC................................... 0.8836

Columbia, GA

McDuffie, GA

Richmond, GA

Aiken, SC

Edgefield, SC

0640 Austin-San Marcos, TX.................................. 0.9254

Bastrop, TX

Caldwell, TX

Hays, TX

Travis, TX Williamson, TX

0680 Bakersfield, CA........................................ 1.0189

Kern, CA

0720 Baltimore, MD.......................................... 0.9798

Anne Arundel, MD

Baltimore, MD

Baltimore City, MD

Carroll, MD

Harford, MD

Howard, MD

Queen Annes, MD

0733 Bangor, ME............................................. 0.9391

Penobscot, ME

0743 Barnstable-Yarmouth, MA................................ 1.3651

Barnstable, MA

0760 Baton Rouge, LA........................................ 0.8433

Ascension, LA

East Baton Rouge, LA

Livingston, LA

West Baton Rouge, LA

0840 Beaumont-Port Arthur, TX............................... 0.8576

Hardin, TX

Jefferson, TX

Orange, TX

0860 Bellingham, WA......................................... 1.1317

Whatcom, WA

0870 Benton Harbor, MI...................................... 0.8506

Berrien, MI

0875 Bergen-Passaic, NJ..................................... 1.1785

Bergen, NJ

Passaic, NJ

0880 Billings, MT........................................... 0.9086

Yellowstone, MT

0920 Biloxi-Gulfport-Pascagoula, MS......................... 0.8554

Hancock, MS

Harrison, MS

Jackson, MS

0960 Binghamton, NY......................................... 0.8822

Broome, NY

Tioga, NY

1000 Birmingham, AL......................................... 0.9036

Blount, AL

Jefferson, AL

St. Clair, AL

Shelby, AL

1010 Bismarck, ND........................................... 0.7923

Burleigh, ND

Morton, ND

1020 Bloomington, IN........................................ 0.8652

Monroe, IN

1040 Bloomington-Normal, IL................................. 0.8990

McLean, IL

1080 Boise City, ID......................................... 0.9383

Ada, ID

Canyon, ID

1123 Boston-Worcester Lawrence-Lowell-...................... 1.1613

Brockton,MA-NH

Bristol, MA

Essex, MA

Middlesex, MA

Norfolk, MA

Plymouth, MA

Suffolk, MA

Worcester, MA

Hillsborough, NH

Merrimack, NH

Rockingham, NH

Strafford, NH

1125 Boulder-Longmont, CO................................... 0.9522

Boulder, CO

1145 Brazoria, TX........................................... 0.9201

Brazoria, TX

1150 Bremerton, WA.......................................... 1.0901

Kitsap, WA

1240 Brownsville-Harlingen-San Benito, TX................... 0.8542

Cameron, TX

1260 Bryan-College Station, TX.............................. 0.8851

Brazos, TX

1280 Buffalo-Niagara Falls, NY.............................. 0.9107

Erie, NY

Niagara, NY

1303 Burlington, VT......................................... 1.0068

Chittenden, VT

Franklin, VT

Grand Isle, VT

1310 Caguas, PR............................................. 0.4573

Caguas, PR

Cayey, PR

Cidra, PR

Gurabo, PR

San Lorenzo, PR

1320 Canton-Massillon, OH................................... 0.8648

Carroll, OH

Stark, OH

1350 Casper, WY............................................. 0.8821

Natrona, WY

1360 Cedar Rapids, IA....................................... 0.8458

Linn, IA

1400 Champaign-Urbana, IL................................... 0.9391

Champaign, IL

1440 Charleston-North Charleston, SC........................ 0.8963

Berkeley, SC

Charleston, SC

Dorchester, SC

1480 Charleston, WV......................................... 0.9526

Kanawha, WV

Putnam, WV

1520 Charlotte-Gastonia-Rock Hill, NC-SC.................... 0.9620

Cabarrus, NC

Gaston, NC

Lincoln, NC

[[Page 51544]]

Mecklenburg, NC

Rowan, NC

Union, NC

York, SC

1540 Charlottesville, VA.................................... 0.9155

Albemarle, VA

Charlottesville City, VA

Fluvanna, VA

Greene, VA

1560 Chattanooga, TN-GA..................................... 0.8847

Catoosa, GA

Dade, GA

Walker, GA

Hamilton, TN

Marion, TN

1580 Cheyenne, WY........................................... 0.7678

Laramie, WY

1600 Chicago, IL............................................ 1.0760

Cook, IL

DeKalb, IL

DuPage, IL

Grundy, IL

Kane, IL

Kendall, IL

Lake, IL

McHenry, IL

Will, IL

1620 Chico-Paradise, CA..................................... 1.0417

Butte, CA

1640 Cincinnati, OH-KY-IN................................... 0.9570

Dearborn, IN

Ohio, IN

Boone, KY

Campbell, KY

Gallatin, KY

Grant, KY

Kenton, KY

Pendleton, KY

Brown, OH

Clermont, OH

Hamilton, OH

Warren, OH

1660 Clarksville-Hopkinsville, TN-KY........................ 0.7716

Christian, KY

Montgomery, TN

1680 Cleveland-Lorain-Elyria, OH............................ 0.9886

Ashtabula, OH

Cuyahoga, OH

Geauga, OH

Lake, OH

Lorain, OH

Medina, OH

1720 Colorado Springs, CO................................... 0.9341

El Paso, CO

1740 Columbia, MO........................................... 0.8899

Boone, MO

1760 Columbia, SC........................................... 0.9160

Lexington, SC

Richland, SC

1800 Columbus, GA-AL Russell, AL............................ 0.7779

Chattanoochee, GA

Harris, GA

Muscogee, GA

1840 Columbus, OH........................................... 0.9681

Delaware, OH

Fairfield, OH

Franklin, OH

Licking, OH

Madison, OH

Pickaway, OH

1880 Corpus Christi, TX..................................... 0.8881

Nueces, TX

San Patricio, TX

1900 Cumberland, MD-WV...................................... 0.8671

Allegany, MD

Mineral, WV

1920 Dallas, TX............................................. 0.9729

Collin, TX

Dallas, TX

Denton, TX

Ellis, TX

Henderson, TX

Hunt, TX

Kaufman, TX

Rockwall, TX

1950 Danville, VA........................................... 0.8497

Danville City, VA

Pittsylvania, VA

1960 Davenport-Rock Island-Moline, IA-IL.................... 0.8388

Scott, IA

Henry, IL

Rock Island, IL

2000 Dayton-Springfield, OH................................. 0.9559

Clark, OH

Greene, OH

Miami, OH

Montgomery, OH

2020 Daytona Beach, FL...................................... 0.8871

Flagler, FL

Volusia, FL

2030 Decatur, AL............................................ 0.8384

Lawrence, AL

Morgan, AL

2040 Decatur, IL............................................ 0.7848

Macon, IL

2080 Denver, CO............................................. 1.0166

Adams, CO

Arapahoe, CO

Denver, CO

Douglas, CO

Jefferson, CO

2120 Des Moines, IA......................................... 0.8815

Dallas, IA

Polk, IA

Warren, IA

2160 Detroit, MI............................................ 1.0724

Lapeer, MI

Macomb, MI

Monroe, MI

Oakland, MI

St. Clair, MI

Wayne, MI

2180 Dothan, AL............................................. 0.7740

Dale, AL

Houston, AL

2190 Dover, DE.............................................. 0.8997

Kent, DE

2200 Dubuque, IA............................................ 0.8112

Dubuque, IA

2240 Duluth-Superior, MN-WI................................. 0.9416

St. Louis, MN

Douglas, WI

2281 Dutchess County, NY.................................... 1.0589

Dutchess, NY

2290 Eau Claire, WI......................................... 0.8678

Chippewa, WI

Eau Claire, WI

2320 El Paso, TX............................................ 0.9464

El Paso, TX

2330 Elkhart-Goshen, IN..................................... 0.8801

Elkhart, IN

2335 Elmira, NY............................................. 0.8417

Chemung, NY

2340 Enid, OK............................................... 0.7862

Garfield, OK

2360 Erie, PA............................................... 0.9159

Erie, PA

2400 Eugene-Springfield, OR................................. 1.1271

Lane, OR

2440 Evansville-Henderson, IN-KY............................ 0.8983

Posey, IN

Vanderburgh, IN

Warrick, IN

Henderson, KY

2520 Fargo-Moorhead, ND-MN.................................. 0.9045

Clay, MN

Cass, ND

2560 Fayetteville, NC....................................... 0.9007

Cumberland, NC

2580 Fayetteville-Springdale-Rogers, AR..................... 0.7220

Benton, AR

Washington, AR

2620 Flagstaff, AZ-UT....................................... 0.9019

Coconino, AZ

Kane, UT

2640 Flint, MI............................................... 1.1248

Genesee, MI

2650 Florence, AL........................................... 0.7938

Colbert, AL

Lauderdale, AL

2655 Florence, SC........................................... 0.8594

Florence, SC

2670 Fort Collins-Loveland, CO.............................. 1.0562

Larimer, CO

2680 Ft. Lauderdale, FL..................................... 1.0548

Broward, FL

2700 Fort Myers-Cape Coral, FL.............................. 0.9032

Lee, FL

2710 Fort Pierce-Port St. Lucie, FL......................... 1.0169

Martin, FL

St. Lucie, FL

2720 Fort Smith, AR-OK...................................... 0.7864

Crawford, AR

Sebastian, AR

Sequoyah, OK

2750 Fort Walton Beach, FL.................................. 0.9192

Okaloosa, FL

2760 Fort Wayne, IN......................................... 0.8800

Adams, IN

Allen, IN

DeKalb, IN

Huntington, IN

Wells, IN

Whitley, IN

2800 Forth Worth-Arlington, TX.............................. 1.0153

Hood, TX

Johnson, TX

Parker, TX

Tarrant, TX

2840 Fresno, CA............................................. 1.1183

Fresno, CA

Madera, CA

2880 Gadsden, AL............................................ 0.8881

[[Page 51545]]

Etowah, AL

2900 Gainesville, FL........................................ 0.9434

Alachua, FL

2920 Galveston-Texas City, TX............................... 1.0997

Galveston, TX

2960 Gary, IN............................................... 0.9641

Lake, IN

Porter, IN

2975 Glens Falls, NY........................................ 0.8562

Warren, NY

Washington, NY

2980 Goldsboro, NC.......................................... 0.8393

Wayne, NC

2985 Grand Forks, ND-MN..................................... 0.9011

Polk, MN

Grand Forks, ND

2995 Grand Junction, CO..................................... 0.8336

Mesa, CO

3000 Grand Rapids-Muskegon-Holland, MI...................... 1.0119

Allegan, MI

Kent, MI

Muskegon, MI

Ottawa, MI

3040 Great Falls, MT........................................ 0.8681

Cascade, MT

3060 Greeley, CO............................................ 0.9690

Weld, CO

3080 Green Bay, WI.......................................... 0.9038

Brown, WI

3120 Greensboro-Winston-Salem-High Point, NC................ 0.9332

Alamance, NC

Davidson, NC

Davie, NC

Forsyth, NC

Guilford, NC

Randolph, NC

Stokes, NC

Yadkin, NC

3150 Greenville, NC......................................... 0.9078

Pitt, NC

3160 Greenville-Spartanburg-Anderson, SC.................... 0.8927

Anderson, SC

Cherokee, SC

Greenville, SC

Pickens, SC

Spartanburg, SC

3180 Hagerstown, MD.......................................... 0.9175

Washington, MD

3200 Hamilton-Middletown, OH................................ 0.9490

Butler, OH

3240 Harrisburg-Lebanon-Carlisle, PA........................ 1.0158

Cumberland, PA

Dauphin, PA

Lebanon, PA

Perry, PA

3283 Hartford, CT........................................... 1.2367

Hartford, CT

Litchfield, CT

Middlesex, CT

Tolland, CT

3285 Hattiesburg, MS........................................ 0.7252

Forrest, MS

Lamar, MS

3290 Hickory-Morganton-Lenoir, NC........................... 0.8626

Alexander, NC

Burke, NC

Caldwell, NC

Catawba, NC

3320 Honolulu, HI........................................... 1.1461

Honolulu, HI

3350 Houma, LA.............................................. 0.7853

Lafourche, LA

Terrebonne, LA

3360 Houston, TX............................................ 1.0000

Chambers, TX

Fort Bend, TX

Harris, TX

Liberty, TX

Montgomery, TX

Waller, TX

3400 Huntington-Ashland, WV-KY-OH........................... 0.9174

Boyd, KY

Carter, KY

Greenup, KY

Lawrence, OH

Cabell, WV

Wayne, WV

3440 Huntsville, AL......................................... 0.8206

Limestone, AL

Madison, AL

3480 Indianapolis, IN....................................... 0.9903

Boone, IN

Hamilton, IN

Hancock, IN

Hendricks, IN

Johnson, IN

Madison, IN

Marion, IN

Morgan, IN

Shelby, IN

3500 Iowa City, IA.......................................... 0.9361

Johnson, IA

3520 Jackson, MI............................................ 0.9045

Jackson, MI

3560 Jackson, MS............................................ 0.7884

Hinds, MS

Madison, MS

Rankin, MS

3580 Jackson, TN............................................ 0.8288

Chester, TN

Madison, TN

3600 Jacksonville, FL....................................... 0.9086

Clay, FL

Duval, FL

Nassau, FL

St. Johns, FL

3605 Jacksonville, NC....................................... 0.7055

Onslow, NC

3610 Jamestown, NY.......................................... 0.7670

Chautaqua, NY

3620 Janesville-Beloit, WI.................................. 0.8645

Rock, WI

3640 Jersey City, NJ........................................ 1.1382

Hudson, NJ

3660 Johnson City-Kingsport-Bristol, TN-VA.................. 0.8884

Carter, TN

Hawkins, TN

Sullivan, TN

Unicoi, TN

Washington, TN

Bristol City, VA

Scott, VA

Washington, VA

3680 Johnstown, PA.......................................... 0.8398

Cambria, PA

Somerset, PA

3700 Jonesboro, AR.......................................... 0.7220

Craighead, AR

3710 Joplin, MO............................................. 0.7638

Jasper, MO

Newton, MO

3720 Kalamazoo-Battlecreek, MI.............................. 1.0542

Calhoun, MI

Kalamazoo, MI

Van Buren, MI

3740 Kankakee, IL........................................... 0.9115

Kankakee, IL

3760 Kansas City, KS-MO..................................... 0.9478

Johnson, KS

Leavenworth, KS

Miami, KS

Wyandotte, KS

Cass, MO

Clay, MO

Clinton, MO

Jackson, MO

Lafayette, MO

Platte, MO

Ray, MO

3800 Kenosha, WI............................................ 0.9145

Kenosha, WI

3810 Killeen-Temple, TX..................................... 1.0392

Bell, TX

Coryell, TX

3840 Knoxville, TN.......................................... 0.8502

Anderson, TN

Blount, TN

Knox, TN

Loudon, TN

Sevier, TN

Union, TN

3850 Kokomo, IN............................................. 0.8590

Howard, IN

Tipton, IN

3870 La Crosse, WI-MN....................................... 0.8618

Houston, MN

La Crosse, WI

3880 Lafayette, LA.......................................... 0.8163

Acadia, LA

Lafayette, LA

St. Landry, LA

St. Martin, LA

3920 Lafayette, IN.......................................... 0.8781

Clinton, IN

Tippecanoe, IN

3960 Lake Charles, LA....................................... 0.8034

Calcasieu, LA

3980 Lakeland-Winter Haven, FL.............................. 0.8774

Polk, FL

4000 Lancaster, PA.......................................... 0.9583

Lancaster, PA

4040 Lansing-East Lansing, MI............................... 1.0010

Clinton, MI

Eaton, MI

Ingham, MI

4080 Laredo, TX............................................. 0.7073

Webb, TX

4100 Las Cruces, NM......................................... 0.8497

Dona Ana, NM

4120 Las Vegas, NV-AZ....................................... 1.0870

Mohave, AZ

Clark, NV

[[Page 51546]]

Nye, NV

4150 Lawrence, KS........................................... 0.8597

Douglas, KS

4200 Lawton, OK............................................. 0.8365

Comanche, OK

4243 Lewiston-Auburn, ME.................................... 0.9410

Androscoggin, ME

4280 Lexington, KY.......................................... 0.8293

Bourbon, KY

Clark, KY

Fayette, KY

Jessamine, KY

Madison, KY

Scott, KY

Woodford, KY

4320 Lima, OH............................................... 0.8732

Allen, OH

Auglaize, OH

4360 Lincoln, NE............................................ 0.9161

Lancaster, NE

4400 Little Rock-North Little Rock, AR...................... 0.8597

Faulkner, AR

Lonoke, AR

Pulaski, AR

Saline, AR

4420 Longview-Marshall, TX.................................. 0.8645

Gregg, TX

Harrison, TX

Upshur, TX

4480 Los Angeles-Long Beach, CA............................. 1.2343

Los Angeles, CA

4520 Louisville, KY-IN...................................... 0.9447

Clark, IN

Floyd, IN

Harrison, IN

Scott, IN

Bullitt, KY

Jefferson, KY

Oldham, KY

4600 Lubbock, TX............................................ 0.8510

Lubbock, TX

4640 Lynchburg, VA.......................................... 0.8052

Amherst, VA

Bedford City, VA

Bedford, VA

Campbell, VA

Lynchburg City, VA

4680 Macon, GA.............................................. 0.8824

Bibb, GA

Houston, GA

Jones, GA

Peach, GA

Twiggs, GA

4720 Madison, WI............................................ 1.0021

Dane, WI

4800 Mansfield, OH.......................................... 0.8524

Crawford, OH

Richland, OH

4840 Mayaguez, PR........................................... 0.4215

Anasco, PR

Cabo Rojo, PR

Hormigueros, PR

Mayaguez, PR

Sabana Grande, PR

San German, PR

4880 McAllen-Edinburg-Mission, TX........................... 0.8485

Hidalgo, TX

4890 Medford-Ashland, OR.................................... 1.0068

Jackson, OR

4900 Melbourne-Titusville-Palm Bay, FL...................... 0.9068

Brevard, Fl

4920 Memphis, TN-AR-MS...................................... 0.8166

Crittenden, AR

DeSoto, MS

Fayette, TN

Shelby, TN

Tipton, TN

4940 Merced, CA............................................. 1.0660

Merced, CA

5000 Miami, FL.............................................. 0.9938

Dade, FL

5015 Middlesex-Somerset-Hunterdon, NJ....................... 1.0883

Hunterdon, NJ

Middlesex, NJ

Somerset, NJ

5080 Milwaukee-Waukesha, WI................................. 0.9645

Milwaukee, WI

Ozaukee, WI

Washington, WI

Waukesha, WI

5120 Minneapolis-St. Paul, MN-WI............................ 1.0777

Anoka, MN

Carver, MN

Chicago, MN

Dakota, MN

Hennepin, MN

Isanti, MN

Ramsey, MN

Scott, MN

Sherburne, MN

Washington, MN

Wright, MN

Pierce, WI

St. Croix, WI

5160 Mobile, AL............................................. 0.7981

Baldwin, AL

Mobile, AL

5170 Modesto, CA............................................ 1.0600

Stanislaus, CA

5190 Monmouth-Ocean, NJ..................................... 1.0833

Monmouth, NJ

Ocean, NJ

5200 Monroe, LA............................................. 0.8211

Ouachita, LA

5240 Montgomery, AL......................................... 0.7876

Autauga, AL

Elmore, AL

Montgomery, AL

5280 Muncie, IN............................................. 0.9714

Delaware, IN

5330 Myrtle Beach, SC....................................... 0.7790

Horry, SC

5345 Naples, FL............................................. 1.0199

Collier, FL

5360 Nashville, TN.......................................... 0.9081

Cheatham, TN

Davidson, TN

Dickson, TN

Robertson, TN

Rutherford, TN

Sumner, TN

Williamson, TN

Wilson, TN

5380 Nassau-Suffolk, NY..................................... 1.3547

Nassau, NY

Suffolk, NY

5483 New Haven-Bridgeport-Stamford-Danbury-................. 1.2704

Waterbury,CT

Fairfield, CT

New Haven, CT

5523 New London-Norwich, CT................................. 1.2262

New London, CT

5560 New Orleans, LA........................................ 0.9294

Jefferson, LA

Orleans, LA

Plaquemines, LA

St. Bernard, LA

St. Charles, LA

St. James, LA

St. John Baptist, LA

St. Tammany, LA

5600 New York, NY........................................... 1.4154

Bronx, NY

Kings, NY

New York, NY

Putnam, NY

Queens, NY

Richmond, NY

Rockland, NY

Westchester, NY

5640 Newark, NJ............................................. 1.1762

Essex, NJ

Morris, NJ

Sussex, NJ

Union, NJ

Warren, NJ

5660 Newburgh, NY-PA........................................ 1.0803

Orange, NY

Pike, PA

5720 Norfolk-Virginia Beach-Newport News, VA-NC............. 0.8348

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

5775 Oakland, CA............................................ 1.4991

Alameda, CA

Contra Costa, CA

5790 Ocala, FL.............................................. 0.9105

Marion, FL

5800 Odessa-Midland, TX..................................... 0.8482

Ector, TX

Midland, TX

5880 Oklahoma City, OK...................................... 0.8371

Canadian, OK

Cleveland, OK

Logan, OK

McClain, OK

Oklahoma, OK

Pottawatomie, OK

5910 Olympia, WA............................................ 1.0689

Thurston, WA

[[Page 51547]]

5920 Omaha, NE-IA........................................... 0.9480

Pottawattamie, IA

Cass, NE

Douglas, NE

Sarpy, NE

Washington, NE

5945 Orange County, CA...................................... 1.1966

Orange, CA

5960 Orlando, FL............................................ 0.9470

Lake, FL

Orange, FL

Osceola, FL

Seminole, FL

5990 Owensboro, KY.......................................... 0.7575

Daviess, KY

6015 Panama City, FL........................................ 0.8061

Bay, FL

6020 Parkersburg-Marietta, WV-OH............................ 0.7877

Washington, OH

Wood, WV

6080 Pensacola, FL.......................................... 0.8202

Escambia, FL

Santa Rosa, FL

6120 Peoria-Pekin, IL....................................... 0.8905

Peoria, IL

Tazewell, IL

Woodford, IL

6160 Philadelphia, PA-NJ.................................... 1.1237

Burlington, NJ

Camden, NJ

Gloucester, NJ

Salem, NJ

Bucks, PA

Chester, PA

Delaware, PA

Montgomery, PA

Philadelphia, PA

6200 Phoenix-Mesa, AZ....................................... 0.9810

Maricopa, AZ

Pinal, AZ

6240 Pine Bluff, AR......................................... 0.7886

Jefferson, AR

6280 Pittsburgh, PA......................................... 0.9701

Allegheny, PA

Beaver, PA

Butler, PA

Fayette, PA

Washington, PA

Westmoreland, PA

6323 Pittsfield, MA......................................... 1.0552

Berkshire, MA

6340 Pocatelo, ID........................................... 0.8784

Bannock ID

6360 Ponce, PR.............................................. 0.4685

Guayanilla, PR

Juana Diaz, PR

Penuelas, PR

Ponce, PR

Villalba, PR

Yauco, PR

6403 Portland, ME........................................... 0.9619

Cumberland, ME

Sagadahoc, ME

York, ME

6440 Portland-Vancouver, OR-WA.............................. 1.1235

Clackamas, OR

Columbia, OR

Multnomah, OR

Washington, OR

Yamhill, OR

Clark, WA

6483 Providence-Warwick-Pawtucket, RI....................... 1.1092

Bristol, RI

Kent, RI

Newport, RI

Providence, RI

Washington, RI

6520 Provo-Orem, UT......................................... 1.0116

Utah, UT

6560 Pueblo, CO............................................. 0.8284

Pueblo, CO

6580 Punta Gorda, FL........................................ 0.8999

Charlotte, FL

6600 Racine, WI............................................. 0.8835

Racine, WI

6640 Raleigh-Durham-Chapel Hill, NC......................... 0.9728

Chatham, NC

Durham, NC

Franklin, NC

Johnston, NC

Orange, NC

Wake, NC

6660 Rapid City, SD......................................... 0.8455

Pennington, SD

6680 Reading, PA............................................ 0.9445

Berks, PA

6690 Redding, CA............................................ 1.1605

Shasta, CA

6720 Reno, NV............................................... 1.1018

Washoe, NV

6740 Richland-Kennewick-Pasco, WA........................... 0.9970

Benton, WA

Franklin, WA

6760 Richmond-Petersburg, VA................................ 0.9194

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

6780 Riverside-San Bernardino, CA........................... 1.1379

Riverside, CA

San Bernardino, CA

6800 Roanoke, VA............................................ 0.8702

Botetourt, VA

Roanoke, VA

Roanoke City, VA

Salem City, VA

6820 Rochester, MN.......................................... 1.0428

Olmsted, MN

6840 Rochester, NY.......................................... 0.9649

Genesee, NY

Livingston, NY

Monroe, NY

Ontario, NY

Orleans, NY

Wayne, NY

6880 Rockford, IL........................................... 0.8994

Boone, IL

Ogle, IL

Winnebago, IL

6895 Rocky Mount, NC........................................ 0.8955

Edgecombe, NC

Nash, NC

6920 Sacramento, CA......................................... 1.2351

El Dorado, CA

Placer, CA

Sacramento, CA

6960 Saginaw-Bay City-Midland, MI........................... 0.9612

Bay, MI

Midland, MI

Saginaw, MI

6980 St. Cloud, MN.......................................... 0.9457

Benton, MN

Stearns, MN

7000 St. Joseph, MO......................................... 0.8551

Andrews, MO

Buchanan, MO

7040 St. Louis, MO-IL....................................... 0.9022

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

7080 Salem, OR.............................................. 0.9728

Marion, OR

Polk, OR

7120 Salinas, CA............................................ 1.3803

Monterey, CA

7160 Salt Lake City-Ogden, UT............................... 0.9677

Davis, UT

Salt Lake, UT

Weber, UT

7200 San Angelo, TX......................................... 0.7577

Tom Green, TX

7240 San Antonio, TX........................................ 0.8390

Bexar, TX

Comal, TX

Guadalupe, TX

Wilson, TX

7320 San Diego, CA.......................................... 1.2134

San Diego, CA

7360 San Francisco, CA...................................... 1.4260

Marin, CA

San Francisco, CA

San Mateo, CA

7400 San Jose, CA........................................... 1.4519

Santa Clara, CA

7440 San Juan-Bayamon, PR................................... 0.4506

Aguas Buenas, PR

Barceloneta, PR

Bayamon, PR

Canovanas, PR

Carolina, PR

Catano, PR

Ceiba, PR

Comerio, PR

Corozal, PR

Dorado, PR

[[Page 51548]]

Fajardo, PR

Florida, PR

Guaynabo, PR

Humacao, PR

Juncos, PR

Los Piedras, PR

Loiza, PR

Luguillo, PR

Manati, PR

Morovis, PR

Naguabo, 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

7460 San Luis Obispo-Atascadero-Paso Robles, CA............. 1.1561

San Luis Obispo, CA

7480 Santa Barbara-Santa Maria-Lompoc, CA................... 1.1242

Santa Barbara, CA

7485 Santa Cruz-Watsonville, CA............................. 1.3520

Santa Cruz, CA

7490 Santa Fe, NM........................................... 1.0823

Los Alamos, NM

Santa Fe, NM

7500 Santa Rosa, CA......................................... 1.2526

Sonoma, CA

7510 Sarasota-Bradenton, FL................................. 0.9789

Manatee, FL

Sarasota, FL

7520 Savannah, GA........................................... 0.9649

Bryan, GA

Chatham, GA

Effingham, GA

7560 Scranton--Wilkes-Barre--Hazleton, PA................... 0.8752

Columbia, PA

Lackawanna, PA

Luzerne, PA

Wyoming, PA

7600 Seattle-Bellevue-Everett, WA........................... 1.1384

Island, WA

King, WA

Snohomish, WA

7610 Sharon, PA............................................. 0.8885

Mercer, PA

7620 Sheboygan, WI.......................................... 0.7764

Sheboygan, WI

7640 Sherman-Denison, TX.................................... 0.8614

Grayson, TX

7680 Shreveport-Bossier City, LA............................ 0.9359

Bossier, LA

Caddo, LA

Webster, LA

7720 Sioux City, IA-NE...................................... 0.8313

Woodbury, IA

Dakota, NE

7760 Sioux Falls, SD........................................ 0.8620

Lincoln, SD

Minnehaha, SD

7800 South Bend, IN......................................... 0.9934

St. Joseph, IN

7840 Spokane, WA............................................ 1.0524

Spokane, WA

7880 Springfield, IL........................................ 0.8671

Menard, IL

Sangamon, IL

7920 Springfield, MO........................................ 0.7823

Christian, MO

Greene, MO

Webster, MO

8003 Springfield, MA........................................ 1.0586

Hampden, MA

Hampshire, MA

8050 State College, PA...................................... 0.9538

Centre, PA

8080 Steubenville-Weirton, OH-WV............................ 0.8266

Jefferson, OH

Brooke, WV

Hancock, WV

8120 Stockton-Lodi, CA...................................... 1.1330

San Joaquin, CA

8140 Sumter, SC............................................. 0.7699

Sumter, SC

8160 Syracuse, NY........................................... 0.9395

Cayuga, NY

Madison, NY

Onondaga, NY

Oswego, NY

8200 Tacoma, WA............................................. 1.0860

Pierce, WA

8240 Tallahassee, FL........................................ 0.8313

Gadsden, FL

Leon, FL

8280 Tampa-St. Petersburg-Clearwater, FL.................... 0.9250

Hernando, FL

Hillsborough, FL

Pasco, FL

Pinellas, FL

8320 Terre Haute, IN........................................ 0.8591

Clay, IN

Vermillion, IN

Vigo, IN

8360 Texarkana, AR-Texarkana, TX............................ 0.8503

Miller, AR

Bowie, TX

8400 Toledo, OH............................................. 1.0361

Fulton, OH

Lucas, OH

Wood, OH

8440 Topeka, KS............................................. 1.0086

Shawnee, KS

8480 Trenton, NJ............................................ 1.0549

Mercer, NJ

8520 Tucson, AZ............................................. 0.9068

Pima, AZ

8560 Tulsa, OK.............................................. 0.8095

Creek, OK

Osage, OK

Rogers, OK

Tulsa, OK

Wagoner, OK

8600 Tuscaloosa, AL......................................... 0.7784

Tuscaloosa, AL

8640 Tyler, TX.............................................. 0.9996

Smith, TX

8680 Utica-Rome, NY......................................... 0.8413

Herkimer, NY

Oneida, NY

8720 Vallejo-Fairfield-Napa, CA............................. 1.3947

Napa, CA

Solano, CA

8735 Ventura, CA............................................ 1.1454

Ventura, CA

8750 Victoria, TX........................................... 0.8393

Victoria, TX

8760 Vineland-Millville-Bridgeton, NJ....................... 0.9993

Cumberland, NJ

8780 Visalia-Tulare-Porterville, CA......................... 1.0151

Tulare, CA

8800 Waco, TX............................................... 0.7772

McLennan, TX

8840 Washington, DC-MD-VA-WV................................ 1.0823

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

8920 Waterloo-Cedar Falls, IA............................... 0.8705

Black Hawk, IA

8940 Wausau, WI............................................. 1.0323

Marathon, WI

8960 West Palm Beach-Boca Raton, FL......................... 1.0202

Palm Beach, FL

9000 Wheeling, OH-WV........................................ 0.7563

Belmont, OH

Marshall, WV

Ohio, WV

9040 Wichita, KS............................................ 0.9369

Butler, KS

Harvey, KS

Sedgwick, KS

9080 Wichita Falls, TX...................................... 0.8041

Archer, TX

Wichita, TX

9140 Williamsport, PA....................................... 0.8467

Lycoming, PA

9160 Wilmington-Newark, DE-MD............................... 1.1315

New Castle, DE

Cecil, MD

9200 Wilmington, NC......................................... 0.9046

New Hanover, NC

Brunswick, NC

[[Page 51549]]

9260 Yakima, WA............................................. 1.0026

Yakima, WA

9270 Yolo, CA............................................... 1.1444

Yolo, CA

9280 York, PA............................................... 0.9104

York, PA

9320 Youngstown-Warren, OH.................................. 0.9742

Columbiana, OH

Mahoning, OH

Trumbull, OH

9340 Yuba City, CA.......................................... 1.0414

Sutter, CA

Yuba, CA

9360 Yuma, AZ............................................... 0.9497

Yuma, AZ

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

Table V.--Wage Index for Rural Areas

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

Wage

Nonurban area index

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

Alabama...................................................... 0.7122

Alaska....................................................... 1.2444

Arizona...................................................... 0.7928

Arkansas..................................................... 0.6954

California................................................... 1.0002

Colorado..................................................... 0.8092

Connecticut.................................................. 1.2759

Delaware..................................................... 0.9447

Florida...................................................... 0.8668

Georgia...................................................... 0.7653

Hawaii....................................................... 1.0245

Idaho........................................................ 0.8277

Illinois..................................................... 0.7553

Indiana...................................................... 0.8124

Iowa......................................................... 0.7373

Kansas....................................................... 0.7107

Kentucky..................................................... 0.7753

Louisiana.................................................... 0.7232

Maine........................................................ 0.8317

Maryland..................................................... 0.8427

Massachusetts................................................ 1.0070

Michigan..................................................... 0.8830

Minnesota.................................................... 0.8144

Mississippi.................................................. 0.6793

Missouri..................................................... 0.7261

Montana...................................................... 0.8128

Nebraska..................................................... 0.7214

Nevada....................................................... 0.8775

New Hampshire................................................ 0.9745

New Jersey 1................................................. .........

New Mexico................................................... 0.8000

New York..................................................... 0.8558

North Carolina............................................... 0.7950

North Dakota................................................. 0.7358

Ohio......................................................... 0.8332

Oklahoma..................................................... 0.6942

Oregon....................................................... 0.9664

Pennsylvania................................................. 0.8453

Puerto Rico.................................................. 0.4026

Rhode Island1................................................ .........

South Carolina............................................... 0.7668

South Dakota................................................. 0.7063

Tennessee.................................................... 0.7341

Texas........................................................ 0.7462

Utah......................................................... 0.8848

Vermont...................................................... 0.8921

Virginia..................................................... 0.7713

Virgin Islands............................................... 0.5660

Washington................................................... 0.9933

West Virginia................................................ 0.7904

Wisconsin.................................................... 0.8430

Wyoming...................................................... 0.8177

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

\1\ All counties within the State are classified urban.

Table VI.--Cost Reporting Year Adjustment Factors \1\

[Effective October 1, 1997]

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

The

If a SNF cost reporting period begins: adjustment

factor is:

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

Nov. 1, 1997................................................ 1.00285

Dec. 1, 1997................................................ 1.00560

Jan. 1, 1998................................................ 1.00846

Feb. 1, 1998................................................ 1.01149

Mar. 1, 1998................................................ 1.01424

Apr. 1, 1998................................................ 1.01729

May 1, 1998................................................. 1.02025

June 1, 1998................................................ 1.02332

July 1, 1998................................................ 1.02630

Aug. 1, 1998................................................ 1.02939

Sept. 1, 1998............................................... 1.03249

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

\1\ Based on compounded projected market basket inflation rates of 3.4

percent for 1998 and 3.6 percent for 1999.

VI. Impact Statement

For notices such as this, we generally prepare a regulatory

flexibility analysis that is consistent with the Regulatory Flexibility

Act (RFA) (5 U.S.C. 601 through 612) 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 SNFs are considered to be

small entities. Individuals and States are not included in the

definition of a small entity.

This final notice with comment period sets forth an updated

schedule of limits on SNF routine service costs for which payment may

be made under the Medicare program and sets forth an updated schedule

of payment rates for low Medicare volume skilled nursing facilities

that elect to receive prospectively determined payment rates for

routine service costs. Section 1888(a) of the Act requires that the

Secretary update the per diem cost limits for SNF routine service costs

for cost reporting periods beginning on or after October 1, 1995, and

every 2 years thereafter. In addition, section 1888(d)(4) of the Act

requires the Secretary to establish and publish prospectively

determined payment rates at least 90 days prior to the beginning of the

Federal fiscal year to which such rates are to be applied.

This final notice with comment period is the first time we are

publishing a combined schedule of cost limits and rates. Combining the

cost limits and rates in one notice is more economical in that they

both utilize the same cost report data, wage index values, and rates of

inflation. In addition, under section 1888(d) of the Act, an individual

provider's prospectively determined rate may not exceed its applicable

cost limit (see Section III.D. of this notice). This final notice with

comment period, by containing both cost limits and rates for cost

reporting periods beginning FY 1998, allows a provider to more

conveniently determine its individual rate than in previous years.

As required under section 1888(a) and 1888(d) of the Act

respectively, this final notice with comment period sets forth a

revised schedule of SNF per diem cost limits and prospectively

determined payment rates for freestanding and hospital-based SNFs for

cost reporting periods beginning in FY 1998. As explained in this

notice, we have retained the same basic methodology used to compute the

limits and rates effective for cost reporting periods beginning in FY

1997, but we are revising the schedule of limits and rates to reflect

more recent wage data, MSA designations, and inflation data.

The estimated effects of this notice are that (1) the updated cost

limits will result in a loss of savings to the Medicare program of $20

million in FY 1998, and (2) the updated rates will have a negligible

effect. These estimates are the effect of the updating the cost limits

and rates to reflect more recent wage data, MSA designations, and

inflation data compared to just updating the previous (FY 1997) cost

limits or rates only for inflation.

The table below shows the effect of updating the cost limits

contained in this notice in comparison with updating the cost limits

effective for FY 1997 by inflation (the market basket). Specifically,

column (A) of the table shows the estimated total number of SNFs to

which the cost limits effective for FY 1998 will apply. Column (B)

shows the number of SNFs that would exceed the cost limits effective

for FY 1997 updated only for inflation. Column (C) shows the number of

SNFs that would exceed the cost limits contained in this notice.

Implementing the cost limits contained in this notice, as

[[Page 51550]]

compared with maintaining the FY 1997 cost limits updated for

inflation, will result in a small decrease in the number of SNFs with

costs in excess of the limits.

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

Number of

Total SNFs Number of SNFs over

to which SNFs over FY 1998

limits FY 1997 limits

effective limits contained

for FY 1998 updated for in this

will apply inflation notice

(column A) (column B) (column C)

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

Freestanding SNFs:

Urban (MSA).................. 4873 2353 2331

Rural (non-MSA).............. 1638 900 878

Hospital-Based SNFs: ........... ........... ...........

Urban (MSA).................. 367 301 283

Rural (non-MSA).............. 348 224 217

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

We are unable to identify the effects of these provisions on

individual SNFs, but we expect that decreases in the number of SNFs

exceeding the limits generally would result in increases in payments to

those SNFs whose costs would previously have exceeded the limits but

now fall under the limits. The effects of the increase in the limits on

the total revenues of individual SNFs will depend on the SNF's ability

to operate within the cost limits and on the proportion of its revenues

that come from the Medicare program.

For purposes of the RFA, it is our practice not to consider an

economic impact to be significant unless the annual total costs or

revenues of a substantial number of entities will be increased or

decreased by at least 3 percent. Because Medicare payments generally do

not account for a high proportion of SNF revenue, we believe that the

updated SNF limits and rates will not result in a substantial number of

SNFs experiencing significant increases in their total revenues.

Therefore, we have determined, and we certify, that a regulatory

flexibility analysis under the RFA is not required.

Section 1102(b) of the Act requires us to prepare a regulatory

impact analysis if a notice such as this 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.

We have not prepared a rural impact statement since we have

determined that this final notice with comment period will not have a

significant economic 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.

VII. Waiver of Proposed Notice

In adopting notices such as this, we ordinarily publish a proposed

notice in the Federal Register with a 60-day period for public comment

as required under section 1871(b)(1) of the Act. However, we may waive

these procedures if we find good cause that prior notice and comment is

impractical, unnecessary, or contrary to the public interest.

As discussed in section II. of this notice, we have used the same

methodology to develop this schedule of limits that was used in setting

the limits published for public comment on October 7, 1992. As

discussed above, section 13503(a)(2) of OBRA' 93 delayed the update to

the schedule of limits until October 1, 1995 and then every 2 years. We

have also used the same methodology to develop this schedule of rates

that was used in setting the rates published for public comment on

September 3, 1996. Section 13503(b) of OBRA' 93 delayed the update to

the schedule of prospectively determined payment rates until October 1,

1995. Thus, in conformance with the clear direction provided in

sections 1861(v)(1) and 1888 of the Act and regulations at Secs. 413.30

and 413.320, this notice announces the update to the schedule of limits

for SNF routine service costs and the update to the schedule of

prospectively determined payment rates for SNF inpatient cost, for cost

reporting periods beginning on or after October 1, 1997. Because the

statute directs that this schedule of limits and this schedule of rates

are effective for cost reporting periods beginning October 1, 1997, and

given that we are making no changes in the methodology used to develop

these limits, we believe it is unnecessary to publish a proposed

notice. Therefore, we find good cause to waive publication of a

proposed notice. However, we are providing a 60-day period for public

comment, as indicated at the beginning of this notice.

VIII. Response to Comments

Because of the large number of items of correspondence we normally

receive on Federal Register documents published for comment, we are not

able to acknowledge or respond to them individually. We will consider

all comments we receive by the date and time specified in the DATES

section of this notice, and, if we proceed with a subsequent document,

we will respond to the comments in that document.

Authority: (Secs. 1102, 1814(b), 1861(v)(1), 1866(a), 1871, and

1888 of the Social Security Act (42 U.S.C. 1302, 1395f(b),

1395x(v)(1), 1395cc(a), 1395hh, and 1395yy); section 13503 of Pub.

L. 103-66 (42 U.S.C. 1395x(v)(1)(B) and 1395yy (note)) and 42 CFR

413.1, 413.24, 413.300 through 413.321).

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance)

Dated: September 25, 1997.

Nancy-Ann Min DeParle,

Deputy Administrator, Health Care Financing Administration.

Dated: September 25, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-25983 Filed 9-30-97; 8:45 am]

BILLING CODE 4120-01-P