Medicare Program; Schedule of Limits on Home Health Agency Costs Per Visit for Cost Reporting Periods Beginning on or After October 1, 1997

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[HCFA-1904-NC]

RIN 0938-AI24

Medicare Program; Schedule of Limits on Home Health Agency Costs

Per Visit for Cost Reporting Periods Beginning on or After October 1,

1997

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

ACTION: Notice with comment period.

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SUMMARY: This notice sets forth a revised schedule of limits on home

health agency costs that may be paid under the Medicare program for

cost reporting periods beginning on or after October 1, 1997. These

limits replace the per visit limits that were set forth in our July 1,

1996 notice with comment period (61 FR 34344) and supersede those set

forth in our July 1, 1997 notice with comment period (62 FR 35608).

This notice also provides, in accordance with the Balanced Budget Act

of 1997, that there be no changes in the home health per visit limits

for cost reporting periods beginning on or after July 1, 1997 and

before October 1, 1997 (that is, the cost limits set forth in our July

1, 1996 notice will apply to cost reporting

[[Page 90]]

periods beginning during this time period); that the establishment of

the cost per visit limitations for cost reporting periods beginning on

or after October 1, 1997 be based on 105 percent of the median of the

labor-related and nonlabor per visit costs for freestanding home health

agencies; that there be no updates in the home health costs limits

(including no adjustments for changes in the wage index or other

updates) for cost reporting periods beginning on or after July 1, 1994

and before July 1, 1996; and the wage index value that is applied to

the labor portion of the per visit limitations be based on the

geographic area in which the home health service is furnished.

DATES: Effective Date: This is a major rule under title 5, United

States Code, section 804(2). As indicated in section XI.A. of the

preamble of this notice with comment period, pursuant to 5 U.S.C.

553(b)(B), for good cause we find that prior notice and comment

procedures are impracticable and unnecessary. Pursuant to 5 U.S.C.

section 808(2), as well as section 1861(v)(1)(L)(i) of the Social

Security Act (as amended by section 4602(a)(5) of Pub. L. 105-33), this

schedule of limits is effective for cost reporting periods beginning on

or after October 1, 1997.

Comment Period: Written comments will be considered if we receive

them at the appropriate addresses, as provided below, no later than 5

p.m. on March 3, 1998.

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

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: HCFA-1904-NC, P.O. Box 7517,

Baltimore, Maryland 21207-0517

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, Central Building, 7500 Security Boulevard, Baltimore,

Maryland 21244-1850.

Comments may also be submitted electronically to the following e-

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

full name, postal address, and affiliation (if applicable) 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.

Because of staffing and resource limitations, we cannot accept

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

to file code HCFA-1904-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 may view

and photocopy the Federal Register document at most libraries

designated as Federal Deposit Libraries and at many other public and

academic libraries throughout the country that receive the Federal

Register.

This Federal Register document is also available from the Federal

Register online database through GPO Access, a service of the U.S.

Government Printing Office. Free public access is available on a Wide

Area Information Server (WAIS) through the Internet and via

asynchronous dial-in. Internet users can access the database by using

the World Wide Web; the Superintendent of Documents home page address

is http://www.access.gpo.gov/su__docs/, by using local WAIS client

software, or by telnet to swais.access.gpo.gov, then login as guest (no

password required). Dial-in users should use communications software

and modem to call (202) 512-1661; type swais, then login as guest (no

password required).

FOR FURTHER INFORMATION CONTACT: Michael Bussacca, (410) 786-4602.

SUPPLEMENTARY INFORMATION:

I. Background

A. Summary

Section 1861(v)(1)(A) of the Social Security Act (the Act)

authorizes the Secretary to establish limits on allowable costs

incurred by a provider of services that may be paid under the Medicare

program, based on estimates of the costs necessary in the efficient

delivery of needed health services. Under this authority, we have

maintained limits on home health agency (HHA) per-visit costs since

1979. The limits may be applied to direct or indirect overall costs or

to the costs incurred for specific items or services furnished by the

provider. Implementing regulations are located at 42 CFR 413.30.

Additional statutory provisions specifically governing the limits

applicable to HHAs are contained at section 1861(v)(1)(L) of the Act.

Section 1861(v)(1)(L)(i) of the Act, as amended by section 4602(a) of

the Balanced Budget Act of 1997 (BBA '97), Pub. L. 105-33, specifies

that the cost limits must not exceed 105 percent of the median of the

labor-related and nonlabor per-visit costs for freestanding HHAs.

Section 1861(v)(1)(L)(vii) of the Act, as added by section 4602(c) of

BBA '97, requires that the Secretary establish HHA cost limits on an

annual basis for cost reporting periods beginning on or after October 1

of each year beginning in 1998, (except the cost limits established for

cost reporting periods beginning on or after October 1, 1997 must be

established by January 1, 1998). In establishing these limits, the

statute directs the Secretary to use the applicable hospital wage

index, as discussed below.

This notice with comment period sets forth revised cost limits for

cost reporting periods beginning on or after October 1, 1997. As

required by section 1861(v)(1)(L)(iii) of the Act, we are using the

area wage index applicable under section 1886(d)(3)(E) of the Act which

were determined using the survey of the most recent available wages and

wage-related costs of hospitals located in the geographic area in which

the home health service is furnished. For purposes of this notice, the

HHA wage index is based on the most recent hospital wage index, that

is, the prereclassified hospital wage index effective for hospital

discharges on or after October 1, 1997, which uses Federal fiscal year

(FY) 1994 wage data. As the statute also specifies, in applying the

hospital wage index to HHAs, no adjustments are to be made to account

for hospital reclassifications under section 1886(d)(8)(B) of the Act,

decisions of the Medicare Geographic Classification Review Board

(MGCRB) under section 1886(d)(10) of the Act, or decisions by the

Secretary.

B. Relevant Provisions of the Balanced Budget Act of 1997

The BBA '97 made major changes that affect the cost per visit

limitations applicable to services provided by HHAs. The provisions of

Pub. L. 105-

[[Page 91]]

33 that we are implementing in this notice with comment period are as

follows:

1. Delay in Updates

Section 4602(b) of BBA '97 amended section 1861(v)(1)(L)(iii) of

the Act to provide that there be no changes in the home health per

visit cost limits for cost reporting periods beginning on or after July

1, 1997 and before October 1, 1997. The effect of this provision is

that a HHA's latest per-visit cost limit for a cost reporting period

beginning on or after July 1, 1996 and before October 1, 1996, as

calculated under the notice published July 1, 1996 (61 FR 34344), will

remain in effect until its cost reporting period beginning on or after

October 1, 1997. For providers entering the Medicare program on or

after July 1, 1997 and before October 1, 1997, the applicable cost

limit will be the cost limit that would have applied for the identical

cost reporting period beginning on or after July 1, 1996 and before

October 1, 1996. (For example, if a provider enters the Medicare

program on July 1, 1997, with a 12-month cost reporting period, its

cost limit will be determined in the same manner as a cost limit for a

period beginning July 1, 1996 and ending June 30, 1997. If the provider

entering the Medicare program has a short cost reporting period, for

example, a period beginning July 1, 1997 and ending December 31, 1997,

the cost limit will be determined in the same manner as a cost limit

for a period beginning July 1, 1996, and ending December 31, 1996.)

Therefore, the notice of schedule of limits on HHA costs per visit for

cost reporting periods beginning on or after July 1, 1997, which was

published in the Federal Register (62 FR 35608) on July 1, 1997 has

been superseded by the change in the statute.

The notice of schedule of limits on HHA costs per visit, which was

published in the Federal Register on July 1, 1997 (62 FR 35608) also

contained comments and responses to the notice of schedule of limits

published in the Federal Register on July 1, 1996 (61 FR 34344). The

comments and responses in the July 1, 1997 Federal Register (62 FR

35609 through 35611) are not repeated in this notice. Even though the

cost limitations in the July 1, 1997 Federal Register have been

superseded by Pub. L. 105-33, the responses to the comments to the July

1, 1996 notice are still relevant and effective.

2. Reduction to limits

Section 1861(v)(1)(L)(i)(IV) was added to the Act by section

4602(a)(5) of the BBA '97 and requires the establishment of the cost

per visit limitations based on 105 percent of the median of labor-

related and nonlabor-related per visit costs for freestanding HHAs.

This is a change to the previous requirement that the cost limitations

be established based on 112 percent of the mean of the labor-related

and nonlabor per visit cost for freestanding HHAs.

The impact of this change will be discussed in general in the

impact statement in section XI of this notice with comment period.

3. Reduction in Market Basket Updates

Section 1861(v)(1)(L)(iv) was added to the Act by section 4601(a)

of BBA 97 and requires the Secretary not to take into account any

changes in the home health market basket with respect to cost reporting

periods which began on or after July 1, 1994 and before July 1, 1996 in

establishing the limitations for cost reporting periods beginning after

September 30, 1997. This, in effect, reduces the factors for increasing

the database dollars used in calculating the limits. How these factors

are determined is explained further in section VII of this notice with

comment period.

4. Application of per Visit Limitation

Section 1861(v)(1)(L)(iii) was amended by section 4604(b) of BBA

'97 to require that the utilization of the area wage index applicable

under section 1886(d)(3)(E) of the Act be determined using the survey

of the most recent available wages and wage-related costs of hospitals

located in the geographic area in which the home health services are

furnished. Previously, the survey was from hospitals located in the

geographic area in which the home health agency is located, and applied

to cost limitations for cost reporting periods beginning prior to

October 1, 1997. In effect, the cost per visit limitation that will

apply for the service furnished by the HHA will be the urban or rural

limit and the appropriate wage index for the geographic area where the

home health service is furnished. A Program Memorandum (Rev. AB-97-18),

which was published in September 1997, outlined the billing changes

that are needed to properly implement this provision.

5. Effective Date

Section 1861(v)(1)(L)(vii) of the Act was added by section 4602(c)

of BBA '97. Beginning in 1998, the Secretary is required to establish

the per-visit limits by August 1 of each year. However, for cost

reporting periods beginning on or after October 1, 1997, the Secretary

need only establish those limits by January 1, 1998. In accordance with

section 1861(v)(1)(L)(vii)(I), we are establishing by January 1, 1998,

the per-visit limits for cost reporting periods beginning on or after

October 1, 1997.

II. Updating the Wage Index on a Budget-Neutral Basis

Section 4207(d)(2) of the Omnibus Budget Reconciliation Act of

1990, Pub. L. 101-508, requires that in updating the wage index,

aggregate payments to HHAs should be equal to the amount that would

result from use of the 1982 wage index. On July 1, 1997, we published

the appropriate adjustment factor to comply with this requirement to

ensure that payments were not affected by the hospital wage index

published on August 30, 1996.

As stated before, BBA '97 was passed and included legislation that

affected the cost per-visit limitations. The effect of the changes in

the cost limit calculations (reducing per visit limits from 112% of the

mean to 105% of the median and freezing market basket updates) impacts

the level of payments and, therefore, affects the budget neutrality

factor. To determine the new adjustment factor, we used the same

methodology as explained in the July 1, 1997 Federal Register, page

35611, using the cost limits specified in this notice. As has been the

case with each of the new wage indices used in calculating home health

limits since the requirement of budget neutrality was established,

agencies would have received a higher adjusted cost limitation in the

aggregate. Aggregate payments to HHAs can only be affected to the

extent that agencies have costs exceeding the limits. When only a small

portion of total costs exceed the limits, the adjustment is effectively

spread over agencies, and the labor portion of the limits needs to be

increased by a large factor to reach the amount by which agencies, in

the aggregate, would have benefited using the 1982 wage index. It

follows that as the portion of costs exceeding the limits becomes

larger, the adjustment factor becomes smaller. Because the new cost

limits are lower, more providers are affected by the limits. Under the

old cost limit, 31% of home health agencies were over the limit, as

compared to 65% of home health agencies over the new cost limit. In

order to achieve the level of savings that would have occurred if the

1982 wage index was used, less of an increase is necessary to raise the

limits to achieve budget neutrality. We used the same methodology as

contained in the Federal Register published July 1, 1997 and determined

the new budget neutrality factor to be 1.009.

[[Page 92]]

III. Update of Limits

The cost report data used to develop the schedule of limits set

forth in this notice is for the same period as that used in setting the

limits that were effective July 1, 1996. We have updated the cost

limits to reflect the expected cost increases occurring between the

cost reporting periods for the data contained in the database and

September 30, 1998 (excluding, as required by statute, any changes in

the home health market basket for cost reporting periods beginning on

or after July 1, 1994 and before July 1, 1996).

A. Data Used

To develop the schedule of limits that is effective for cost

reporting periods beginning on or after October 1, 1997, we extracted

actual cost per-visit data from settled Medicare cost reports of

freestanding HHAs for periods ending on or after June 30, 1991, and

settled by October 1, 1995. The majority of the cost reports were from

FY 1993. We then adjusted the data using the latest available market

basket indexes to reflect expected cost increases occurring between the

cost reporting periods contained in our database and September 30,

1998. However, section 1861(v)(1)(L)(iv) prohibits the Secretary from

taking into account any changes in the home health market basket with

respect to cost reporting periods which began on or after July 1, 1994

and before July 1, 1996. Therefore, we excluded this time period when

we adjusted the database for the market basket increases.

B. Wage Index

The wage index is used to adjust the labor-related portion of the

limits to reflect differing wage levels among areas. In setting this

schedule of limits, we used the FY 1998 hospital wage index, which is

based on 1994 hospital wage data.

Each HHA's labor market area is determined based on the definitions

of Metropolitan Statistical Areas (MSAs) issued by the Office of

Management and Budget (OMB). Section 1861(v)(1)(L)(iii) of the Act

requires us to use the current hospital wage index (that is, the FY

1998 hospital wage index, which was published in the Federal Register

on August 29, 1997 (62 FR 46070)) to establish the HHA cost limits.

Therefore, this schedule of limits reflects the MSA definitions that

are currently in effect under the hospital prospective payment system.

We are continuing to incorporate exceptions to the MSA

classification system for certain New England counties that were

identified in the July 1, 1992 notice (57 FR 29410). These exceptions

have been recognized in setting hospital cost limits for cost reporting

periods beginning on and after July 1, 1979 (45 FR 41218), and were

authorized under section 601(g) of the Social Security Amendments of

1983 (Pub. L. 98-21). Section 601(g) of Public Law 98-21 requires that

any hospital in New England that was classified as being in an urban

area under the classification system in effect in 1979 will be

considered urban for the purposes of the hospital prospective payment

system. This provision is intended to ensure equitable treatment under

the hospital prospective payment system. Under this authority, the

following counties have been deemed to be urban areas for purposes of

payment under the inpatient hospital prospective payment system:

Litchfield County, CT in the Hartford, CT MSA.

York County, ME and Sagadahoc County, ME in the Portland,

ME MSA.

Merrimack County, NH in the Boston-Brockton-Nashua, MA-NH

MSA.

Newport County, RI in the Providence-Warwick-Pawtucket, RI

MSA.

We are continuing to grant these urban exceptions for the purpose

of applying the Medicare hospital wage index to the HHA cost limits.

These exceptions result in the same New England County Metropolitan

Area (NECMA) definitions for hospitals, skilled nursing facilities

(SNFs), and HHAs. In New England, MSAs are defined on town boundaries

rather than on county lines but exclude parts of the four counties

cited above that would be considered urban under the MSA definition.

Under this notice, those four counties are urban under either

definition, NECMA or MSA.

Section 1861(v)(1)(L)(iii), as amended by section 4604(b) of BBA

'97, requires us to establish these limits using the area wage index

applicable under section 1886(d)(3)(E) of the Act and determined using

the survey of the most recent available wages and wage-related costs of

hospitals located in the geographic area in which the home health

service is furnished. Prior to the amendment, the wage index as applied

to the labor portion of the per visit limitation was based on the

location of the HHA. Effective with cost reporting periods beginning on

or after October 1, 1997, the wage-index as applied to the labor

portion of the per visit limitation must be based on the geographic

location in which the home health service is actually furnished rather

than the physical location of the HHA itself. Therefore, in

establishing the limits for the HHAs, we will apply the wage index

based upon the location of where the service is furnished. See

discussion in section VII.

IV. Provisions of the HHA Schedule of Limits

The schedule of limits set forth below was calculated using 105

percent of the median per-visit costs of freestanding HHAs and is

adjusted by the latest estimates in the market basket index, excluding

any changes in the home health market basket for cost reporting periods

beginning on or after July 1, 1994 and before July 1, 1996.

The schedule of limits effective for cost reporting periods

beginning on or after October 1, 1997, is based on the actual cost per-

visit data from settled Medicare cost reports from freestanding HHAs

for periods ending on or after June 30, 1991, and settled by October 1,

1995, updated by the market basket rate of increase, excluding any

changes in the home health market basket with respect to cost reporting

periods that began on or after July 1, 1994 and before July 1, 1996,

and provides for the following:

A classification system based on whether an HHAs services

are furnished within an MSA, a NECMA, and/or a non-MSA area. (See

Tables 4a and 4b in section IX. of this notice for the listing of MSAs,

NECMAs, and rural areas.)

The use of a single schedule of limits for hospital-based

and freestanding agencies. This single limit is based on the cost

experience of freestanding agencies in accordance with section

1861(v)(1)(L)(i) of the Act.

The use of a market basket index, which was developed from

the price of goods and services purchased by HHAs to account for the

impact of changing wage and price levels on HHA costs.

The current hospital wage index that is used to adjust the

labor-related portion of the limits. The employee wage portion of the

market basket index, including a proportionate share of contract

services (64.226 percent), and the employee benefits portion (13.442

percent) are used to determine the labor component (77.668 percent) of

all HHA per-visit costs used to set the limits.

Separate treatment of the labor and nonlabor components of

per-visit costs. The separate components of costs are calculated by

obtaining actual HHA cost data for each agency for cost periods ending

on or after June 30, 1991 and settled before October 1, 1995, and

increasing those data by the actual and projected increases in the HHA

market basket index excluding any changes in the home health market

basket with respect to cost reporting periods that

[[Page 93]]

began on or after, July 1, 1994 and before July 1, 1996. We then

separated each HHA's per-visit costs into labor and nonlabor portions,

and divided the labor portion by the wage index value for the agency's

location to control for the effect of geographic variations in

prevailing wage levels. Separate means are computed for the labor and

nonlabor components of per-visit costs. For each comparison group, the

resulting amounts are shown in Table 3 of section VIII of this notice.

The application of a cost-of-living adjustment to the

nonlabor portion of the limit for HHAs located in Alaska, Hawaii,

Puerto Rico, and the U.S. Virgin Islands.

Limits are determined for the per-visit cost of each type

of home health service: skilled nursing care, physical therapy, speech

pathology, occupational therapy, medical social services, and home

health aide.

Application of the limits in the aggregate after an HHA's

actual costs are adjusted. An HHA's actual costs are adjusted for

individual items of cost that are found to be excessive under Medicare

principles of provider payment and for costs that are not included in

the limitation amount. The limits are applied in the aggregate to the

cost remaining after these adjustments are made. Payment is limited to

the lesser of the actual costs, the cost aggregated limits, or the per

beneficiary limitation. The per-beneficiary limitation must be

established by April 1, 1998, under section 1861(v)(1)(L)(vii), as

added by section 4602(c) of BBA '97 and will be effective for cost

reporting periods beginning October 1, 1997.

V. Market Basket

The 1993-based cost categories and weights are listed in Table 1

below.

Table 1.--1993-Based Cost Categories, Weights, and Price Proxies

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

1993-based

market

Cost category basket Price proxy

weight

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

Compensation, including allocated 77.668

Contract Services' Labor.

Wages and Salaries, including 64.226 HHA Occupational Wage

allocated Contract Services' Index.

Labor.

Employee benefits, including 13.442 HHA Occupational

allocated Contract Services' Benefits Index.

Labor.

Operations & Maintenance......... 0.832 CPI-U Fuel & Other

Utilities.

Administrative & General, 9.569

including allocated Contract

Services' Non-Labor.

Telephone.................... 0.725 CPI-U Telephone.

Paper & Printing............. 0.529 CPI-U Household Paper,

Paper Products &

Stationery Supplies.

Postage...................... 0.724 CPI-U Postage.

Other Administrative & 7.591 CPI-Services.

General, including allocated

Contract Services Non-Labor.

Transportation................... 3.405 CPI-U Private

Transportation.

Capital-Related.................. 3.204

Insurance.................... 0.560 CPI-U Household

Insurance.

Fixed Capital................ 1.764 CPI-U Owner's Equivalent

Rent.

Movable Capital.............. 0.880 PPI Machinery &

Equipment.

Other Expenses, including 5.322 CPI-U All Items Less

allocated Contract Services' Non- Food & Energy.

Labor.

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

Total...................... 100.000

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

VI. Methodology for Determining Cost-Per-Visit Limits

A. Data

For this notice, the cost-per-visit limit values were determined by

extracting settled actual cost-per-visit data from Medicare cost

reports for cost reporting periods ending on or after June 30, 1991,

and settled before October 1, 1995. We then adjusted the data using the

latest available market basket factors to reflect expected cost

increases occurring between the cost reporting periods contained in our

database and September 30, 1998 excluding any changes in the home

health market basket with respect to cost reporting periods which began

on or after, July 1, 1994 and before July 1, 1996. The following

adjustment factors were used to compute the per-visit costs:

Table 2.--Factors for Inflating Database Dollars to September 30, 1998

[Inflation Adjustment Factors1]

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

Fiscal year end 1992 1993 1994

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

January 31............................. ......... 1.11250 1.07813

February 28............................ ......... 1.10947 1.07550

March 31............................... ......... 1.10642 1.07295

April 30............................... ......... 1.10336 1.07046

May 31................................. ......... 1.10033 1.06800

June 30................................ 1.13438 1.09737 1.06565

July 31................................ 1.13111 1.09450 1.06354

August 31.............................. 1.12791 1.09168 1.06165

September 30........................... 1.12476 1.08891 1.05993

October 31............................. 1.12166 1.08619 1.05838

November 30............................ 1.11859 1.08349 1.05706

[[Page 94]]

December 31............................ 1.11554 1.08080 1.05599

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

\1\ Source: The Home Health Agency Input Price Index, produced by HCFA.

The forecasts are from Standard and Poor's DRI 3rd QTR 1997; @USSIM/

[email protected]/Control973 forecast exercise which has historical

data through 1997:2.

Multiplying nominal dollars for a given fiscal year end by their

respective inflation adjustment factor will express those dollars in

the dollar levels for the fiscal year ending September 30, 1998.

The procedure followed to develop these revised tables, based on

requirements from the BBA '97, was to hold the June 1994 level for

input price index constant through June 1996. From July 1996 forward,

we trended the revised index forward using the percentage gain each

month from the HCFA Home Health Agency Input Price Index. Thus the

monthly trend of the revised index is the same as that of the HCFA

market basket for the period from July 1996 forward.

B. Cost Reporting Periods Consisting of Fewer Than 12 Months

HHAs may have cost reporting periods that are less than 12 months

in length. This may happen, for example, when a new provider enters the

Medicare program after its selected fiscal year has already begun, or

when a provider experiences a change of ownership before the end of the

cost reporting period. As explained in section IV. of this preamble,

the data used in calculating the cost limits were updated to September

30, 1998. Therefore, the cost limits published in this notice are for a

12-month cost reporting period beginning October 1, 1997 and ending

September 30, 1998. For 12-month cost reporting periods beginning after

October 1, 1997 and before October 1, 1998, cost reporting year

adjustment factors are provided in Table 5. However, when a cost

reporting period consists of fewer than 12 months, adjustments must be

made to the data that have been developed for use with 12-month cost

reporting periods. To promote the efficient dissemination of cost

limits to providers with cost reporting periods of fewer than 12

months, we are publishing the following examples and tables to enable

intermediaries to calculate the applicable adjustment factors.

Cost reporting periods of fewer than 12 months may not necessarily

begin on the first of the month or end on the last day of the month. In

order to simplify the process in calculating ``short period''

adjustment factors, if the short cost reporting period begins before

the sixteenth of the month, we will consider the period to have begun

on the first of that month. If the start period begins on or after the

sixteenth of the month, it will be considered to have begun at the

beginning of the next month. Also, if the short period ends before the

sixteenth of the month, we will consider the period to have ended at

the end of the preceding month; if the short period ends on or after

the sixteenth of the month, it will be considered to have ended at the

end of that month.

Examples:

1. After approval by its intermediary, an HHA changes its fiscal

year end from June 30 to December 31. Therefore, the HHA had a short

cost reporting period beginning on July 1, 1998 and ending on

December 31, 1998. The cost limits that apply to this short period

must be adjusted as follows:

Step 1--From Table 6, sum the index levels for the months of July

1998 through December 1998: 6.63687.

Step 2--Divide the results from Step 1 by the number of months in

the short period.

6.636876=1.106145

Step 3--From Table 6, sum the index levels for the months in the

common period of October 1997 through September 1998.

13.06926

Step 4--Divide the results in Step 3 by the number of months in the

common period.

13.0692612=1.089105

Step 5--Divide the results from Step 2 by the results from Step 4.

This is the adjustment factor to be applied to the published limits.

1.1061451.089105=1.015646

Step 6--Apply the results from Step 5 to the published cost limits.

a. Urban Skilled Nursing Labor Portion, $67.91 x 1.015646=$68.97

b. Urban Skilled Nursing Nonlabor Portion,

$19.18 x 1.015646=$19.48

2. An HHA with a fiscal year end of November 30, 1998 changes

ownership on September 21, 1998. The HHA is required to file a

terminated cost report for the period of December 1, 1997 to

September 21, 1998. The cost limits that apply to this short period

must be adjusted as follows:

Step 1--From Table 6, sum the index level for the month of December

1997 through September 1998.

10.91945

Step 2--Divide the results from Step 1 by the number of months in

the short period.

10.9194510=1.091945

Step 3--From Table 6, sum the index levels for the months in the

common period of October 1997, through September 1998.

13.06926

Step 4--Divide the results from Step 3 by the number of months in

the common period.

13.0692612=1.089105

Step 5--Divide the results from Step 2 by the results from Step 4.

1.0919451.089105=1.002608

Step 6--Apply the results from Step 5 to the published cost limits.

a. Urban Skilled Nursing Labor Portion, $67.91 x 1.002608=$68.09

b. Urban Skilled Nursing Non-Labor Portion,

$19.18 x 1.002608=$19.23

C. Standardization for Wage Levels

After adjustment by the market basket index, we divided each HHA's

per-visit costs into labor and nonlabor portions. The labor portion of

costs (77.668 percent as determined by the market basket) represents

the employee wage and benefit factor plus the contract services factor

from the market basket. We then divided the labor portion of per-visit

costs by the wage index applicable to the HHA's location to arrive at

an adjusted labor cost.

D. Adjustment for ``Outliers''

We transformed all per-visit cost data into their natural

logarithms and grouped them by type of service and MSA, NECMA, or non-

MSA location, in order to determine the median cost and standard

deviation for each group. We then eliminated all ``outlier'' costs

which were all per-visit costs under 10 dollars and per visit costs

over 800 dollars, retaining only those per-visit costs within two

standard deviations of the median in each service.

E. Basic Service Limit

We calculate a basic service limit equal to 105 percent of the

median labor and nonlabor portions of the per-visit costs of

freestanding HHAs for each type of service. (See Table 3 in section

IX.)

VII. Computing the Adjusted Limit

A. Adjustment of Cost Limits by Wage Index

To arrive at the adjusted limit, which is to be applied to each

service furnished by an HHA based on where the service is furnished,

the HHA's

[[Page 95]]

intermediary first determines the adjusted labor-related component by

multiplying the labor-related component of the limit by the appropriate

wage index and by multiplying the adjusted labor-related component by

the special labor adjustment for budget neutrality. (See example below

and Tables 4a and 4b in section VIII. of this notice.) The sum of the

nonlabor component plus the labor-related component is the adjusted

limit applicable to the service furnished by the HHA.

Example--Calculation of Adjusted Occupational Therapy Limit for an

Occupational Therapy Service Furnished in Dallas, TX by a Freestanding

HHA

Labor component (Table 3)................................... $73.20

Wage index value (Table 4a)................................. 0.9703

Labor portion............................................... $71.03

Special labor adjustment for budget neutrality.............. 1.009

Adjusted labor portion...................................... $71.67

Nonlabor component (Table 3)................................ $21.00

Adjusted occupational therapy limit......................... $92.67

B. Adjustment for Reporting Year

If an HHA has a 12-month cost reporting period beginning on or

after November 1, 1997, the adjusted per-visit limit for each service

is again revised by an adjustment factor from Table 5 that corresponds

to the month and year in which the cost reporting period begins. Each

factor represents the compounded rate of monthly increase derived from

the projected annual increase in the market basket index, and is used

to account for inflation in costs that will occur after the date on

which the limits become effective.

For example, if the HHA in the example above had a cost reporting

period beginning January 1, 1998, its per-visit therapy limit would be

further adjusted as follows:

Computation of Revised Limit for Occupational Therapy

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

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

Adjusted per-visit limit................................. $92.67

Adjustment factor from Table 5........................... 1.00781

Revised per-visit limit.................................. $93.39

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

In this example, the revised adjusted per-visit limit for

occupational therapy services furnished in Dallas, TX by this HHA for

the cost reporting period beginning January 1, 1998, is $93.39 per

visit.

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

duration, a special calculation of the adjustment factor must be made.

This results from the fact that projections are computed to September

30, 1998. This calculation is done using the methodology described in

section VII.B.

VIII. Schedule of Limits

The schedule of limits set forth below applies to cost reporting

periods beginning on or after October 1, 1997. The intermediaries will

compute the adjusted limits using the wage index published in Tables 4a

and 4b of section IX. and will notify each HHA they service of its

applicable cost per-visit limit for the areas where the HHA furnishes

each type of service. Each HHA's aggregate limit cannot be determined

prospectively, but depends on each HHA's Medicare visits for each type

of service furnished by location of the service for the cost reporting

periods subject to this notice.

The HHA costs that are subject to the limits include the cost of

medical supplies routinely furnished in conjunction with patient care.

Durable medical equipment, orthotics, prosthetics, and other medical

supplies directly identifiable as services to an individual patient are

excluded from the per-visit costs and are paid without regard to this

schedule of limits. (See Chapter IV of the Home Health Agency Manual

(HCFA Pub. 11).)

The intermediary will determine the limit for each HHA by

multiplying the number of Medicare visits for each type according to

the location of where the service is furnished by the HHA, by the

respective per-visit cost limit. The sum of these amounts is compared

to the HHA's total allowable cost.

Example: HHA X, a freestanding agency located in Richmond, VA, and

all its services in the Richmond, VA, MSA furnished 5,000 covered

skilled nursing visits, 2,000 physical therapy visits, and 4,000 home

health aide visits to Medicare beneficiaries during its 12-month cost

reporting period beginning October 1, 1997. The aggregate cost limit

for the HHA is calculated as follows:

Determining the Aggregate Cost Limit

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

Adjusted

Type of visit Visits Nonlabor labor Adjusted Aggregate

portion portion 1 limit limit

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

Skilled nursing................................ 5,000 $19.18 $62.71 $81.89 $409,450

Physical therapy............................... 2,000 20.78 67.78 88.56 177,120

Home health aide............................... 4,000 9.35 30.39 39.74 158,960

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

Total Visits............................... 11,000

Aggregate cost limit....................... ........... ........... ........... ........... $745,530

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

\1\ Includes special labor adjustment of 1.009 for budget neutrality.

Before the limits are applied during settlement of the cost report,

the HHA's actual costs are reduced by the amount of individual items of

cost (for example, administrative compensation and contract services)

that are found to be excessive under the Medicare principles of

provider payment. That is, the intermediary reviews the various

reported costs, taking into account all the Medicare payment

principles; for example, the cost guidelines for physical therapy

furnished under arrangements (42 CFR 413.106) and the limitation on

costs that are substantially out of line with those comparable HHAs (42

CFR 413.9).

Table 3.--Per Visit Limits For Home Health Agencies

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

Labor Nonlabor

Type of visit Limit portion portion \1\

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

MSA (NECMA) location:

Skilled nursing care......... $87.09 $67.91 $19.18

[[Page 96]]

Physical therapy............. 94.18 73.40 20.78

Speech pathology............. 94.57 73.50 21.07

Occupational therapy......... 94.20 73.20 21.00

Medical social services...... 119.76 93.23 26.53

Home health aide............. 42.26 32.91 9.35

Non-MSA location:

Skilled nursing care......... 97.09 79.25 17.84

Physical therapy............. 103.81 84.49 19.32

Speech pathology............. 109.94 89.45 20.49

Occupational therapy......... 111.00 90.25 20.75

Medical social services...... 149.21 121.56 27.65

Home health aide............. 42.09 34.34 7.75

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

\1\ Nonlabor portion of limits for HHAs located in Alaska, Hawaii,

Puerto Rico, and the Virgin Islands are increased by multiplying them

by the following cost-of-living adjustment factors:

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

Adjustment

Location factor

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

Alaska..................................................... 1.150

Hawaii:

County of Honolulu..................................... 1.225

County of Hawaii....................................... 1.150

County of Kauai........................................ 1.200

County of Maui......................................... 1.225

County of Kalawao...................................... 1.225

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

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

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

IX. Wage Indexes

Table 4a--Wage index for Urban Areas

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

Wage

Urban Area (Constituent Counties or County Equivalents) Index

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

0040 Abilene, TX............................................. 0.8287

Taylor, TX

0060 Aguadilla, PR........................................... 0.4188

Aguada, PR

Aguadilla, PR

Moca, PR

0080 Akron, OH............................................... 0.9772

Portage, OH

Summit, OH

0120 Albany, GA.............................................. 0.7914

Dougherty, GA

Lee, GA

0160 Albany-Schenectady-Troy, NY............................. 0.8480

Albany, NY

Montgomery, NY

Rensselaer, NY

Saratoga, NY

Schenectady, NY

Schoharie, NY

0200 Albuquerque, NM......................................... 0.9309

Bernalillo, NM

Sandoval, NM

Valencia, NM

0220 Alexandria, LA.......................................... 0.8162

Rapides, LA

0240 Allentown-Bethlehem-Easton, PA.......................... 1.0086

Carbon, PA

Lehigh, PA

Northampton, PA

0280 Altoona, PA............................................. 0.9137

Blair, PA

0320 Amarillo, TX............................................ 0.9425

Potter, TX

Randall, TX

0380 AK Anchorage, AK........................................ 1.2842

Anchorage,

0440 Ann Arbor, MI........................................... 1.1785

Lenawee, MI

Livingston, MI

Washtenaw, MI

0450 Anniston, AL............................................ 0.8266

Calhoun, AL

0460 Appleton-Oshkosh-Neenah, WI............................. 0.8996

Calumet, WI

Outagamie, WI

Winnebago, WI

0470 Arecibo, PR............................................. 0.4218

Arecibo, PR

Camuy, PR

Hatillo, PR

0480 Asheville, NC........................................... 0.9072

Buncombe, NC

Madison, NC

0500 Athens, GA.............................................. 0.9087

Clarke, GA

Madison, GA

Oconee, GA

0520 Atlanta, GA............................................. 0.9823

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.............................. 1.1155

Atlantic City, NJ

Cape May, NJ

0600 Augusta-Aiken, GA-SC.................................... 0.9333

Columbia, GA

McDuffie, GA

Richmond, GA

Aiken, SC

Edgefield, SC

0640 Austin-San Marcos, TX................................... 0.9133

Bastrop, TX

Caldwell, TX

Hays, TX

Travis, TX

Williamson, TX

0680 Bakersfield, CA......................................... 1.0014

Kern, CA

0720 Baltimore, MD........................................... 0.9689

[[Page 97]]

Anne Arundel, MD

Baltimore, MD

Baltimore City, MD

Carroll, MD

Harford, MD

Howard, MD

Queen Annes, MD

0733 Bangor, ME.............................................. 0.9478

Penobscot, ME

0743 Barnstable-Yarmouth, MA................................. 1.4291

Barnstable, MA

0760 Baton Rouge, LA......................................... 0.8382

Ascension, LA

East Baton Rouge, LA

Livingston, LA

West Baton Rouge, LA

0840 Beaumont-Port Arthur, TX................................ 0.8593

Hardin, TX

Jefferson, TX

Orange, TX

0860 Bellingham, WA.......................................... 1.1221

Whatcom, WA

0870 Benton Harbor, MI....................................... 0.8634

Berrien, MI

0875 Bergen-Passaic, NJ...................................... 1.2156

Bergen, NJ Passaic, NJ

0880 Billings, MT............................................ 0.9783

Yellowstone, MT

0920 Biloxi-Gulfport-Pascagoula, MS.......................... 0.8415

Hancock, MS

Harrison, MS

Jackson, MS

0960 Binghamton, NY.......................................... 0.8914

Broome, NY

Tioga, NY

1000 Birmingham, AL.......................................... 0.9005

Blount, AL

Jefferson, AL

St. Clair, AL

Shelby, AL

1010 Bismarck, ND............................................ 0.7695

Burleigh, ND

Morton, ND

1020 Bloomington, IN......................................... 0.9128

Monroe, IN

1040 Bloomington-Normal, IL.................................. 0.8733

McLean, IL

1080 Boise City, ID.......................................... 0.8856

Ada, ID

Canyon, ID

1123 Boston-Worcester Lawrence-Lowell-....................... 1.1506

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.................................... 1.0015

Boulder, CO

1145 Brazoria, TX............................................ 0.9341

Brazoria, TX

1150 Bremerton, WA........................................... 1.0999

Kitsap, WA

1240 Brownsville-Harlingen-San Benito, TX.................... 0.8740

Cameron, TX

1260 Bryan-College Station, TX............................... 0.8571

Brazos, TX

1280 Buffalo-Niagara Falls, NY............................... 0.9272

Erie, NY

Niagara, NY

1303 Burlington, VT.......................................... 1.0142

Chittenden, VT

Franklin, VT

Grand Isle, VT

1310 Caguas, PR.............................................. 0.4459

Caguas, PR

Cayey, PR

Cidra, PR

Gurabo, PR

San Lorenzo, PR

1320 Canton-Massillon, OH.................................... 0.8961

Carroll, OH

Stark, OH

1350 Casper, WY.............................................. 0.9013

Natrona, WY

1360 Cedar Rapids, IA........................................ 0.8529

Linn, IA

1400 Champaign-Urbana, IL.................................... 0.8824

Champaign, IL

1440 Charleston-North Charleston, SC......................... 0.8807

Berkeley, SC

Charleston, SC

Dorchester, SC

1450 Charleston, WV.......................................... 0.9142

Kanawha, WV

Putnam, WV

1520 Charlotte-Gastonia-Rock Hill, NC-SC..................... 0.9710

Cabarrus, NC

Gaston, NC

Lincoln, NC

Mecklenburg, NC

Rowan, NC

Union, NC

York, SC

1540 Charlottesville, VA..................................... 0.9051

Albemarle, VA

Charlottesville City, VA

Fluvanna, VA

Greene, VA

1560 Chattanooga, TN-GA...................................... 0.8658

Catoosa, GA

Dade, GA

Walker, GA

Hamilton, TN

Marion, TN

1580 Cheyenne, WY............................................ 0.7555

Laramie, WY

1600 Chicago, IL............................................. 1.0860

Cook, IL

DeKalb, IL

DuPage, IL

Grundy, IL

Kane, IL

Kendall, IL

Lake, IL

McHenry, IL

Will, IL

1620 Chico-Paradise, CA...................................... 1.0429

Butte, CA

1640 Cincinnati, OH-KY-IN.................................... 0.9474

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......................... 0.7852

Christian, KY

Montgomery, TN

1680 Cleveland-Lorain-Elyria, OH............................. 0.9804

Ashtabula, OH

Cuyahoga, OH

Geauga, OH

Lake, OH

Lorain, OH

Medina, OH

1720 Colorado Springs, CO.................................... 0.9316

El Paso, CO

1740 Columbia, MO............................................ 0.9001

Boone, MO

1760 Columbia, SC............................................ 0.9192

Lexington, SC

Richland, SC

1800 Columbus, GA-AL Russell, AL............................. 0.8288

Chattanoochee, GA

Harris, GA

Muscogee, GA

1840 Columbus, OH............................................ 0.9793

Delaware, OH

Fairfield, OH

Franklin, OH

Licking, OH

Madison, OH

Pickaway, OH

1880 Corpus Christi, TX...................................... 0.8945

Nueces, TX

San Patricio, TX

1900 Cumberland, MD-WV....................................... 0.8822

Allegany, MD

Mineral, WV

1920 Dallas, TX.............................................. 0.9703

Collin, TX

Dallas, TX

Denton, TX

Ellis, TX

Henderson, TX

Hunt, TX

Kaufman, TX

Rockwall, TX

1950 Danville, VA............................................ 0.8146

Danville City, VA

Pittsylvania, VA

1960 Davenport-Rock Island-Moline, IA-IL..................... 0.8405

Scott, IA

Henry, IL

Rock Island, IL

2000 Dayton-Springfield, OH.................................. 0.9584

[[Page 98]]

Clark, OH

Greene, OH

Miami, OH

Montgomery, OH

2020 Daytona Beach, FL....................................... 0.8375

Flagler, FL

Volusia, FL

2030 Decatur, AL............................................. 0.8286

Lawrence, AL

Morgan, AL

2040 Decatur, IL............................................. 0.7915

Macon, IL

2080 Denver, CO.............................................. 1.0386

Adams, CO

Arapahoe, CO

Denver, CO

Douglas, CO

Jefferson, CO

2120 Des Moines, IA.......................................... 0.8837

Dallas, IA

Polk, IA

Warren, IA

2160 Detroit, MI............................................. 1.0825

Lapeer, MI

Macomb, MI

Monroe, MI

Oakland, MI

St. Clair, MI

Wayne, MI

2180 Dothan, AL.............................................. 0.8070

Dale, AL

Houston, AL

2190 Dover, DE............................................... 0.9303

Kent, DE

2200 Dubuque, IA............................................. 0.8088

Dubuque, IA

2240 Duluth-Superior, MN-WI.................................. 0.9779

St. Louis, MN

Douglas, WI

2281 Dutchess County, NY..................................... 1.0632

Dutchess, NY

2290 Eau Claire, WI.......................................... 0.8764

Chippewa, WI

Eau Claire, WI

2320 El Paso, TX............................................. 1.0123

El Paso, TX

2330 Elkhart-Goshen, IN...................................... 0.9081

Elkhart, IN

2335 Elmira, NY.............................................. 0.8247

Chemung, NY

2340 Enid, OK................................................ 0.7962

Garfield, OK

2360 Erie, PA................................................ 0.8862

Erie, PA

2400 Eugene-Springfield, OR.................................. 1.1435

Lane, OR

2440 Evansville-Henderson, IN-KY............................. 0.8641

Posey, IN

Vanderburgh, IN

Warrick, IN

Henderson, KY

2520 Fargo-Moorhead, ND-MN................................... 0.9937

Clay, MN

Cass, ND

2560 Fayetteville, NC........................................ 0.8734

Cumberland, NC

2580 Fayetteville-Springdale-Rogers, AR...................... 0.7461

Benton, AR

Washington, AR

2620 Flagstaff, AZ-UT........................................ 0.9115

Coconino, AZ

Kane, UT

2640 Flint, MI............................................... 1.1171

Genesee, MI

2650 Florence, AL............................................ 0.7551

Colbert, AL

Lauderdale, AL

2655 Florence, SC............................................ 0.8711

Florence, SC

2670 Fort Collins-Loveland, CO............................... 1.0248

Larimer, CO

2680 Ft. Lauderdale, FL...................................... 1.0448

Broward, FL

2700 Fort Myers-Cape Coral, FL............................... 0.8788

Lee, FL

2710 Fort Pierce-Port St. Lucie, FL.......................... 1.0257

Martin, FL

St. Lucie, FL

2720 Fort Smith, AR-OK....................................... 0.7769

Crawford, AR

Sebastian, AR

Sequoyah, OK

2750 Fort Walton Beach, FL................................... 0.8765

Okaloosa, FL

2760 Fort Wayne, IN.......................................... 0.8901

Adams, IN

Allen, IN

DeKalb, IN

Huntington, IN

Wells, IN

Whitley, IN

2800 Forth Worth-Arlington, TX............................... 0.9979

Hood, TX

Johnson, TX

Parker, TX

Tarrant, TX

2840 Fresno, CA.............................................. 1.0607

Fresno, CA

Madera, CA

2880 Gadsden, AL............................................. 0.8815

Etowah, AL

2900 Gainesville, FL......................................... 0.9616

Alachua, FL

2920 Galveston-Texas City, TX................................ 1.0564

Galveston, TX

2960 ary, IN................................................. 0.9633

Lake, IN

Porter, IN

2975 Glens Falls, NY......................................... 0.8386

Warren, NY

Washington, NY

2980 Goldsboro, NC........................................... 0.8443

Wayne, NC

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

Polk, MN

Grand Forks, ND

2995 Grand Junction, CO...................................... 0.9090

Mesa, CO

3000 Grand Rapids-Muskegon-Holland, MI....................... 1.0147

Allegan, MI

Kent, MI

Muskegon, MI

Ottawa, MI

3040 Great Falls, MT......................................... 0.8803

Cascade, MT

3060 Greeley, CO............................................. 1.0097

Weld, CO

3080 Green Bay, WI........................................... 0.9097

Brown, WI

3120 Greensboro-Winston-Salem-High Point, NC................. 0.9351

Alamance, NC

Davidson, NC

Davie, NC

Forsyth, NC

Guilford, NC

Randolph, NC

Stokes, NC

Yadkin, NC

3150 Greenville, NC.......................................... 0.9064

Pitt, NC

3160 Greenville-Spartanburg-Anderson, SC..................... 0.9059

Anderson, SC

Cherokee, SC

Greenville, SC

Pickens, SC

Spartanburg, SC

3180 Hagerstown, MD.......................................... 0.9681

Washington, MD

3200 Hamilton-Middletown, OH................................. 0.8767

Butler, OH

3240 Harrisburg-Lebanon-Carlisle, PA......................... 1.0187

Cumberland, PA

Dauphin, PA

Lebanon, PA

Perry, PA

3283 Hartford, CT............................................ 1.2562

Hartford, CT

Litchfield, CT

Middlesex, CT

Tolland, CT

3285 Hattiesburg, MS......................................... 0.7192

Forrest, MS

Lamar, MS

3290 Hickory-Morganton-Lenoir, NC............................ 0.8686

Alexander, NC

Burke, NC

Caldwell, NC

Catawba, NC

3320 Honolulu, HI............................................ 1.1816

Honolulu, HI

3350 Houma, LA............................................... 0.7854

Lafourche, LA

Terrebonne, LA

3360 Houston, TX............................................. 0.9855

Chambers, TX

Fort Bend, TX

Harris, TX

Liberty, TX

Montgomery, TX

Waller, TX

3400 Huntington-Ashland, WV-KY-OH............................ 0.9160

Boyd, KY

Carter, KY

Greenup, KY

Lawrence, OH

Cabell, WV

Wayne, WV

3440 Huntsville, AL.......................................... 0.8485

Limestone, AL

Madison, AL

[[Page 99]]

3480 Indianapolis, IN........................................ 0.9848

Boone, IN

Hamilton, IN

Hancock, IN

Hendricks, IN

Johnson, IN

Madison, IN

Marion, IN

Morgan, IN

Shelby, IN

3500 Iowa City, IA........................................... 0.9413

Johnson, IA

3520 Jackson, MI............................................. 0.9052

Jackson, MI

3560 Jackson, MS............................................. 0.7760

Hinds, MS

Madison, MS

Rankin, MS

3580 Jackson, TN............................................. 0.8522

Madison, TN

Chester, TN

3600 Jacksonville, FL........................................ 0.8969

Clay, FL

Duval, FL

Nassau, FL

St. Johns, FL

3605 Jacksonville, NC........................................ 0.6973

Onslow, NC

3610 Jamestown, NY........................................... 0.7552

Chautaqua, NY

3620 Janesville-Beloit, WI................................... 0.8824

Rock, WI

3640 Jersey City, NJ......................................... 1.1412

Hudson, NJ

3660 Johnson City-Kingsport-Bristol, TN-VA................... 0.9114

Carter, TN

Hawkins, TN

Sullivan, TN

Unicoi, TN

Washington, TN

Bristol City, VA

Scott, VA

Washington, VA

3680 Johnstown, PA........................................... 0.8378

Cambria, PA

Somerset, PA

3700 Jonesboro, AR........................................... 0.7443

Craighead, AR

3710 Joplin, MO.............................................. 0.7510

Jasper, MO

Newton, MO

3720 Kalamazoo-Battlecreek, MI............................... 1.0668

Calhoun, MI

Kalamazoo, MI

Van Buren, MI

3740 Kankakee, IL............................................ 0.8653

Kankakee, IL

3760 Kansas City, KS-MO...................................... 0.9564

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............................................. 0.9196

Kenosha, WI

3810 Killeen-Temple, TX...................................... 1.0252

Bell, TX

Coryell, TX

3840 Knoxville, TN........................................... 0.8831

Anderson, TN

Blount, TN

Knox, TN

Loudon, TN

Sevier, TN

Union, TN

3850 Kokomo, IN.............................................. 0.8416

Howard, IN

Tipton, IN

3870 La Crosse, WI-MN........................................ 0.8749

Houston, MN

La Crosse, WI

3880 Lafayette, LA........................................... 0.8206

Acadia, LA

Lafayette, LA

St. Landry, LA

St. Martin, LA

3920 Lafayette, IN........................................... 0.9174

Clinton, IN

Tippecanoe, IN

3960 Lake Charles, LA........................................ 0.7776

Calcasieu, LA

3980 Lakeland-Winter Haven, FL............................... 0.8806

Polk, FL

4000 Lancaster, PA........................................... 0.9481

Lancaster, PA

4040 Lansing-East Lansing, MI................................ 1.0088

Clinton, MI

Eaton, MI

Ingham, MI

4080 Laredo, TX.............................................. 0.7325

Webb, TX

4100 Las Cruces, NM.......................................... 0.8646

Dona Ana, NM

4120 Las Vegas, NV-AZ........................................ 1.0592

Mohave, AZ

Clark, NV

Nye, NV

4150 Lawrence, KS............................................ 0.8608

Douglas, KS

4200 Lawton, OK.............................................. 0.9045

Comanche, OK

4243 Lewiston-Auburn, ME..................................... 0.9536

Androscoggin, ME

4280 Lexington, KY........................................... 0.8390

Bourbon, KY

Clark, KY

Fayette, KY

Jessamine, KY

Madison, KY

Scott, KY

Woodford, KY

4320 Lima, OH................................................ 0.9185

Allen, OH

Auglaize, OH

4360 Lincoln, NE............................................. 0.9231

Lancaster, NE

4400 Little Rock-North Little Rock, AR....................... 0.8490

Faulkner, AR

Lonoke, AR

Pulaski, AR

Saline, AR

4420 Longview-Marshall, TX................................... 0.8613

Gregg, TX

Harrison, TX

Upshur, TX

4480 Los Angeles-Long Beach, CA.............................. 1.2232

Los Angeles, CA

4520 Louisville, KY-IN....................................... 0.9507

Clark, IN

Floyd, IN

Harrison, IN

Scott, IN

Bullitt, KY

Jefferson, KY

Oldham, KY

4600 Lubbock, TX............................................. 0.8400

Lubbock, TX

4640 Lynchburg, VA........................................... 0.8228

Amherst, VA

Bedford, VA

Bedford City, VA

Campbell, VA

Lynchburg City, VA

4680 Macon, GA............................................... 0.9227

Bibb, GA

Houston, GA

Jones, GA

Peach, GA

Twiggs, GA

4720 Madison, WI............................................. 1.0055

Dane, WI

4800 Mansfield, OH........................................... 0.8639

Crawford, OH

Richland, OH

4840 Mayaguez, PR............................................ 0.4475

Anasco, PR

Cabo Rojo, PR

Hormigueros, PR

Mayaguez, PR

Sabana Grande, PR

San German, PR

4880 McAllen-Edinburg-Mission, TX............................ 0.8371

Hidalgo, TX

4890 Medford-Ashland, OR..................................... 1.0354

Jackson, OR

4900 Melbourne-Titusville-Palm Bay, FL....................... 0.8819

Brevard, Fl

4920 Memphis, TN-AR-MS....................................... 0.8589

Crittenden, AR

DeSoto, MS

Fayette, TN

Shelby, TN

Tipton, TN

4940 Merced, CA.............................................. 1.0947

Merced, CA

5000 Miami, FL............................................... 0.9859

Dade, FL

5015 Middlesex-Somerset-Hunterdon, NJ........................ 1.1059

Hunterdon, NJ

Middlesex, NJ

Somerset, NJ1

5080 Milwaukee-Waukesha, WI.................................. 0.9819

Milwaukee, WI

Ozaukee, WI

Washington, WI

Waukesha, WI

[[Page 100]]

5120 Minneapolis-St. Paul, MN-WI............................. 1.0733

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

5160 Mobile, AL.............................................. 0.8455

Baldwin, AL

Mobile, AL

5170 Modesto, CA............................................. 1.0794

Stanislaus, CA

5190 Monmouth-Ocean, NJ...................................... 1.0934

Monmouth, NJ

Ocean, NJ

5200 Monroe, LA.............................................. 0.8414

Ouachita, LA

5240 Montgomery, AL.......................................... 0.7671

Autauga, AL

Elmore, AL

Montgomery, AL

5280 Muncie, IN.............................................. 0.9173

Delaware, IN

5330 Myrtle Beach, SC........................................ 0.8072

Horry, SC

5345 Naples, FL.............................................. 1.0109

Collier, FL

5360 Nashville, TN........................................... 0.9182

Cheatham, TN

Davidson, TN

Dickson, TN

Robertson, TN

Rutherford TN

Sumner, TN

Williamson, TN

Wilson, TN

5380 Nassau-Suffolk, NY...................................... 1.3807

Nassau, NY

Suffolk, NY

5483 New Haven-Bridgeport-Stamford-Danbury-Waterbury, CT..... 1.2618

Fairfield, CT

New Haven, CT

5523 New London-Norwich, CT.................................. 1.2013

New London, CT

5560 New Orleans, LA......................................... 0.9566

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............................................ 1.4449

Bronx, NY

Kings, NY

New York, NY

Putnam, NY

Queens, NY

Richmond, NY

Rockland, NY

Westchester, NY

5640 Newark, NJ.............................................. 1.1980

Essex, NJ

Morris, NJ

Sussex, NJ

Union, NJ

Warren, NJ

5660 Newburgh, NY-PA......................................... 1.1283

Orange, NY

Pike, PA

5720 Norfolk-Virginia Beach-Newport News, VA-NC.............. 0.8316

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............................................. 1.5068

Alameda, CA

Contra Costa, CA

5790 Ocala, FL............................................... 0.9032

Marion, FL

5800 Odessa-Midland, TX...................................... 0.8660

Ector, TX

Midland, TX

5880 Oklahoma City, OK....................................... 0.8481

Canadian, OK

Cleveland, OK

Logan, OK

McClain, OK

Oklahoma, OK

Pottawatomie, OK

5910 Olympia, WA............................................. 1.0901

Thurston, WA

5920 Omaha, NE-IA............................................ 0.9421

Pottawattamie, IA

Cass, NE

Douglas, NE

Sarpy, NE

Washington, NE

5945 Orange County, CA....................................... 1.1605

Orange, CA

5960 Orlando, FL............................................. 0.9397

Lake, FL

Orange, FL

Osceola, FL

Seminole, FL

5990 Owensboro, KY........................................... 0.7480

Daviess, KY

6015 Panama City, FL......................................... 0.8337

Bay, FL

6020 Parkersburg-Marietta, WV-OH............................. 0.8046

Washington, OH

Wood, WV

6080 Pensacola, FL........................................... 0.8193

Escambia, FL

Santa Rosa, FL

6120 Peoria-Pekin, IL........................................ 0.8571

Peoria, IL

Tazewell, IL

Woodford, IL

6160 Philadelphia, PA-NJ..................................... 1.1398

Burlington, NJ

Camden, NJ

Gloucester, NJ

Salem, NJ

Bucks, PA

Chester, PA

Delaware, PA

Montgomery, PA

Philadelphia, PA

6200 Phoenix-Mesa, AZ........................................ 0.9606

Maricopa, AZ

Pinal, AZ

6240 Pine Bluff, AR.......................................... 0.7826

Jefferson, AR 0.7826

6280 Pittsburgh, PA.......................................... 0.9725

Allegheny, PA

Beaver, PA

Butler, PA

Fayette, PA

Washington, PA

Westmoreland, PA

6323 Pittsfield, MA.......................................... 1.0960

Berkshire, MA 1.0960

6340 Pocatelo, ID............................................ 0.9586

Bannock ID

6360 Ponce, PR............................................... 0.4589

Guayanilla, PR

Juana Diaz, PR

Penuelas, PR

Ponce, PR

Villalba, PR

Yauco, PR

6403 Portland, ME............................................ 0.9627

Cumberland, ME

Sagadahoc, ME

York, ME

6440 Portland-Vancouver, OR-WA............................... 1.1344

Clackamas, OR

Columbia, OR

Multnomah, OR

Washington, OR

Yamhill, OR

Clark, WA

6483 Providence-Warwick-Pawtucket, RI........................ 1.1049

Bristol, RI

Kent, RI

Newport, RI

Providence, RI

Washington, RI

Statewide, RI

6520 Provo-Orem, UT.......................................... 1.0073

Utah, UT

6560 Pueblo, CO.............................................. 0.8450

Pueblo, CO

6580 Punta Gorda, FL......................................... 0.8725

Charlotte, FL

6600 Racine, WI.............................................. 0.8934

Racine, WI

6640 Raleigh-Durham-Chapel Hill, NC.......................... 0.9818

Chatham, NC

Durham, NC

Franklin, NC

Johnston, NC

[[Page 101]]

Orange, NC

Wake, NC

6660 Rapid City, SD.......................................... 0.8345

Pennington, SD

6680 Reading, PA............................................. 0.9516

Berks, PA

6690 Redding, CA............................................. 1.1790

Shasta, CA

6720 Reno, NV................................................ 1.0768

Washoe, NV

6740 Richland-Kennewick-Pasco, WA............................ 0.9918

Benton, WA

Franklin, WA

6760 Richmond-Petersburg, VA................................. 0.9152

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............................ 1.1307

Riverside, CA

San Bernardino, CA

6800 Roanoke, VA............................................. 0.8402

Botetourt, VA

Roanoke, VA

Roanoke City, VA

Salem City, VA

6820 Rochester, MN........................................... 1.0502

Olmsted, MN

6840 Rochester, NY........................................... 0.9524

Genesee, NY

Livingston, NY

Monroe, NY

Ontario, NY

Orleans, NY

Wayne, NY

6880 Rockford, IL............................................ 0.9081

Boone, IL

Ogle, IL

Winnebago, IL

6895 Rocky Mount, NC......................................... 0.9029

Edgecombe, NC

Nash, NC

6920 Sacramento, CA.......................................... 1.2202

El Dorado, CA

Placer, CA

Sacramento, CA

6960 Saginaw-Bay City-Midland, MI............................ 0.9564

Bay, MI

Midland, MI

Saginaw, MI

6980 St. Cloud, MN........................................... 0.9544

Benton, MN

Stearns, MN

7000 St. Joseph, MO.......................................... 0.8366

Andrews, MO

Buchanan, MO

7040 St. Louis, MO-IL........................................ 0.9130

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............................................... 0.9935

Marion, OR

Polk, OR

7120 Salinas, CA............................................. 1.4513

Monterey, CA

7160 Salt Lake City-Ogden, UT................................ 0.9857

Davis, UT

Salt Lake, UT

Weber, UT

7200 San Angelo, TX.......................................... 0.7780

Tom Green, TX

7240 San Antonio, TX......................................... 0.8499

Bexar, TX

Comal, TX

Guadalupe, TX

Wilson, TX

7320 San Diego, CA........................................... 1.2193

San Diego, CA

7360 San Francisco, CA....................................... 1.4180

Marin, CA

San Francisco, CA

San Mateo, CA

7400 San Jose, CA............................................ 1.4332

Santa Clara, CA

7440 San Juan-Bayamon, PR.................................... 0.4625

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

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.............. 1.1374

San Luis Obispo, CA

7480 Santa Barbara-Santa Maria-Lompoc, CA.................... 1.0688

Santa Barbara, CA

7485 Santa Cruz-Watsonville, CA.............................. 1.4187

Santa Cruz, CA

7490 Santa Fe, NM............................................ 1.0332

Los Alamos, NM

Santa Fe, NM

7500 Santa Rosa, CA.......................................... 1.2815

Sonoma, CA

7510 Sarasota-Bradenton, FL.................................. 0.9757

Manatee, FL

Sarasota, FL

7520 Savannah, GA............................................ 0.8638

Bryan, GA

Chatham, GA

Effingham, GA

7560 Scranton--Wilkes-Barre--Hazleton, PA.................... 0.8539

Columbia, PA

Lackawanna, PA

Luzerne, PA

Wyoming, PA

7600 Seattle-Bellevue-Everett, WA............................ 1.1339

Island, WA

King, WA

Snohomish, WA

7610 Sharon, PA.............................................. 0.8783

Mercer, PA

7620 Sheboygan, WI........................................... 0.7862

Sheboygan, WI

7640 Sherman-Denison, TX..................................... 0.8499

Grayson, TX

7680 Shreveport-Bossier City, LA............................. 0.9381

Bossier, LA

Caddo, LA

Webster, LA

7720 Sioux City, IA-NE....................................... 0.8031

Woodbury, IA

Dakota, NE

7760 Sioux Falls, SD......................................... 0.8712

Lincoln, SD

Minnehaha, SD

7800 South Bend, IN.......................................... 0.9868

St. Joseph, IN

7840 Spokane, WA............................................. 1.0486

Spokane, WA

7880 Springfield, IL......................................... 0.8713

Menard, IL

Sangamon, IL

7920 Springfield, MO......................................... 0.7989

Christian, MO

Greene, MO

Webster, MO

8003 Springfield, MA......................................... 1.0740

Hampden, MA

Hampshire, MA

8050 State College, PA....................................... 0.9635

Centre, PA

8080 Steubenville-Weirton, OH-WV............................. 0.8645

Jefferson, OH

Brooke, WV

Hancock, WV

8120 Stockton-Lodi, CA....................................... 1.1496

San Joaquin, CA

8140 Sumter, SC.............................................. 0.7842

Sumter, SC

[[Page 102]]

8160 Syracuse, NY............................................ 0.9464

Cayuga, NY

Madison, NY

Onondaga, NY

Oswego, NY

8200 Tacoma, WA.............................................. 1.1016

Pierce, WA

8240 Tallahassee, FL......................................... 0.8832

Gadsden, FL

Leon, FL

8280 Tampa-St. Petersburg-Clearwater, FL..................... 0.9103

Hernando, FL

Hillsborough, FL

Pasco, FL

Pinellas, FL

8320 Terre Haute, IN......................................... 0.8614

Clay, IN

Vermillion, IN

Vigo, IN

8360 Texarkana, AR-Texarkana, TX............................. 0.8664

Miller, AR

Bowie, TX

8400 Toledo, OH.............................................. 1.0390

Fulton, OH

Lucas, OH

Wood, OH

8440 Topeka, KS.............................................. 0.9438

Shawnee, KS

8480 Trenton, NJ............................................. 1.0380

Mercer, NJ

8520 Tucson, AZ.............................................. 0.9180

Pima, AZ

8560 Tulsa, OK............................................... 0.8074

Creek, OK

Osage, OK

Rogers, OK

Tulsa, OK

Wagoner, OK

8600 Tuscaloosa, AL.......................................... 0.8187

Tuscaloosa, AL

8640 Tyler, TX............................................... 0.9567

Smith, TX

8680 Utica-Rome, NY.......................................... 0.8398

Herkimer, NY

Oneida, NY

8720 Vallejo-Fairfield-Napa, CA.............................. 1.3754

Napa, CA

Solano, CA

8735 Ventura, CA............................................. 1.0946

Ventura, CA

8750 Victoria, TX............................................ 0.8474

Victoria, TX

8760 Vineland-Millville-Bridgeton, NJ........................ 1.0110

Cumberland, NJ

8780 Visalia-Tulare-Porterville, CA.......................... 0.9924

Tulare, CA

8800 Waco, TX................................................ 0.7696

McLennan, TX

8840 Washington, DC-MD-VA-WV................................. 1.0911

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................................ 0.8640

Black Hawk, IA

8940 Wausau, WI.............................................. 1.0545

Marathon, WI

896 West Palm Beach-Boca Raton, FL........................... 1.0372

Palm Beach, FL

9000 Wheeling, OH-WV......................................... 0.7707

Belmont, OH

Marshall, WV

Ohio, WV

9040 Wichita, KS............................................. 0.9403

Butler, KS

Harvey, KS

Sedgwick, KS

9080 Wichita Falls, TX....................................... 0.7646

Archer, TX

Wichita, TX

9140 Williamsport, PA........................................ 0.8548

Lycoming, PA

9160 Wilmington-Newark, DE-MD................................ 1.1538

New Castle, DE

Cecil, MD

9200 Wilmington, NC.......................................... 0.9322

New Hanover, NC

Brunswick, NC

9260 Yakima, WA.............................................. 1.0102

Yakima, WA

9270 Yolo, CA................................................ 1.1431

Yolo, CA

9280 York, PA................................................ 0.9415

York, PA

9320 Youngstown-Warren, OH................................... 0.9937

Columbiana, OH

Mahoning, OH

Trumbull, OH

9340 Yuba City, CA........................................... 1.0324

Sutter, CA

Yuba, CA

9360 Yuma, AZ................................................ 0.9732

Yuma, AZ

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

*Large Urban Area.

Table 4b.--Wage Index for Rural Areas

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

Wage

Nonurban area index

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

Alabama....................................................... 0.7260

Alaska........................................................ 1.2302

Arizona....................................................... 0.7989

Arkansas...................................................... 0.6995

California.................................................... 0.9977

Colorado...................................................... 0.8129

Connecticut................................................... 1.2617

Delaware...................................................... 0.8925

Florida....................................................... 0.8838

Georgia....................................................... 0.7761

Hawaii........................................................ 1.0229

Idaho......................................................... 0.8221

Illinois...................................................... 0.7644

Indiana....................................................... 0.8161

Iowa.......................................................... 0.7391

Kansas........................................................ 0.7203

Kentucky...................................................... 0.7772

Louisiana..................................................... 0.7383

Maine......................................................... 0.8468

Maryland...................................................... 0.8617

Massachusetts................................................. 1.0718

Michigan...................................................... 0.8923

Minnesota..................................................... 0.8179

Mississippi................................................... 0.6911

Missouri...................................................... 0.7205

Montana....................................................... 0.8302

Nebraska...................................................... 0.7401

Nevada........................................................ 0.8914

New Hampshire................................................. 0.9717

New Jersey \1\................................................ ........

New Mexico.................................................... 0.8070

New York...................................................... 0.8401

North Carolina................................................ 0.7937

North Dakota.................................................. 0.7360

Ohio.......................................................... 0.8434

Oklahoma...................................................... 0.7072

Oregon........................................................ 0.9975

Pennsylvania.................................................. 0.8421

Puerto Rico................................................... 0.3939

Rhode Island \1\.............................................. ........

South Carolina................................................ 0.7921

South Dakota.................................................. 0.6983

Tennessee..................................................... 0.7353

Texas......................................................... 0.7404

Utah.......................................................... 0.8926

Vermont....................................................... 0.9314

Virginia...................................................... 0.7782

Washington.................................................... 1.0221

West Virginia................................................. 0.7938

Wisconsin..................................................... 0.8471

Wyoming....................................................... 0.8247

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

\1\ All counties within the State are classified urban.

Table 5.--Cost Reporting Year Adjustment Factor \1\

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

The

If the HHA cost reporting period begins adjustment

factor is

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

November 1, 1997........................................... 1.00260

December 1, 1997........................................... 1.00521

January 1, 1998............................................ 1.00781

February 1, 1998........................................... 1.01042

March 1, 1998.............................................. 1.01302

April 1, 1998.............................................. 1.01563

May 1,1998................................................. 1.01823

June 1, 1998............................................... 1.02086

[[Page 103]]

July 1, 1998............................................... 1.02353

August 1, 1998............................................. 1.02626

September 1, 1998.......................................... 1.02901

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

\1\ Based on compounded projected market basket inflation rates.

Source: The Home Health Agency Input Price Index, produced by HCFA for

the period between 1983:1 and 2008:4. The forecasts are from Standard

and Poor's DRI 3rd QTR 1997; @USSIM/[email protected]/Control973

forecast exercise which has historical data through 1997:2.

These adjustment factors are subject to change based on later

estimates of cost increases.

If, for any reason, we do not publish a new schedule of limits to

be effective on October 1, 1998 or do not announce other changes in the

current schedule by that date, the current limits will continue in

effect. Intermediaries will be notified of the adjustment factors to be

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

Table 6.--Monthly Index Levels for Calculating Inflation Factors To Be

Applied to Home Health Agency Cost Limits

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

Index

Month level

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

October 1997.................................................. 1.07348

November 1997................................................. 1.07633

December 1997................................................. 1.07948

January 1998.................................................. 1.08263

February 1998................................................. 1.08580

March 1998.................................................... 1.08800

April 1998.................................................... 1.09021

May 1998...................................................... 1.09242

June 1998..................................................... 1.09557

July 1998..................................................... 1.09873

August 1998................................................... 1.10189

September 1998................................................ 1.10472

October 1998.................................................. 1.10756

November 1998................................................. 1.11041

December 1998................................................. 1.11356

January 1999.................................................. 1.11671

February 1999................................................. 1.11988

March 1999.................................................... 1.12208

April 1999.................................................... 1.12429

May 1999...................................................... 1.12650

June 1999..................................................... 1.13028

July 1999..................................................... 1.13406

August 1999................................................... 1.13786

September 1999................................................ 1.14070

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

Source: The Home Health Agency Input Price Index, produced by HCFA for

the period between 1983:1 and 2008:4. The forecasts are from DRI's 3rd

QTR 1997; @USSIM/[email protected]/Control973 forecast exercise

which has historical data through 1997:2.

X. Regulatory Impact Statement

A. Introduction

HCFA has examined the impacts of this notice with comment period as

required by Executive Order 12866 and the Regulatory Flexibility Act

(RFA) (Pub. L. 96-354). Executive Order 12866 directs agencies to

assess all costs and benefits of available regulatory alternatives and,

when regulation is necessary, to select regulatory approaches that

maximize net benefits (including potential economic, environmental,

public health and safety effects; distributive impacts; and equity).

The RFA requires agencies to analyze options for regulatory relief for

small businesses. For purposes of the RFA, States and individuals are

not considered small entities. However, most providers, physicians, and

health care suppliers are small entities, either by nonprofit status or

by having revenues of $5 million or less annually.

We estimate that the impact of this notice with comment period will

be to decrease payments to home health agencies by approximately $570

million in FY 1998, compared to the payment that would have been made

in FY 1998 if BBA '97 had not been enacted. Therefore, this notice is a

major rule as defined in Title 5, United States Code, section 804(2).

It is clear that the changes being made in this document will

affect both a substantial number of small HHAs as well as other classes

of HHAs, and the effects on some may be significant. Therefore, the

discussion below, in combination with the rest of this notice with

comment period, constitutes a combined regulatory impact analysis and

regulatory flexibility analysis.

B. Changes in the Notice With Comment Period

Several provisions of Public Law 105-33 make significant changes in

payments for services provided by HHAs. The provisions that have

significant payment impacts for FY 1998 include the following:

The establishment of the cost per visit limitations be

based on 105 percent of the median of the labor-related and nonlabor

per visit costs for freestanding HHAs.

That there be no updates in the home health cost limits

for cost reporting periods beginning on or after July 1, 1994 and

before July 1, 1996.

The applicable wage index will be from the geographic area

in which the home health service is furnished.

C. Effect on Home Health Agencies

The following quantitative analysis presents the projected effects

of the statutory changes effective for FY 1998. The sum of the impacts

of the individual provisions of the statute do not equal the total

impact of the provisions when combined due to the interaction of the

various provisions. Therefore, the impact section will address total

impact in order to avoid confusion.

As discussed below, the impact of this final notice with comment

period will decrease payments to HHAs by approximately $570 million in

FY 1998 compared to payment that would have been made in FY 1998 if BBA

'97 had not been enacted. This notice is necessary to implement the

provisions of section 1861(v)(1)(L) of the Act, as amended by BBA '97,

these alternatives to the provisions set forth in this notice are not

available.

This notice with comment period sets forth a revised schedule of

HHA cost limits for cost reporting periods beginning on or after

October 1, 1997. In accordance with section 1861(v)(1)(L)(i)(IV) of the

Act, as amended by BBA '97, the limits have been set not to exceed 105

percent of the median of the labor-related and nonlabor per-visit costs

for freestanding HHAs. As required by section 1861(v)(1)(l)(iii) of the

Act, we are using the most recent hospital wage index to calculate the

HHA cost limits, that is, the hospital wage index effective for

discharges on or after October 1, 1997, which is based on 1994 wage

survey data. The wage index is used to adjust the labor-related

portions of the limits to reflect differing wage levels among areas. As

discussed in section II of this notice, we are applying a budget

neutrality adjustment factor of 1.009 to the labor-related portion of

the limits to ensure that aggregate payments to HHAs are not affected

by the updating of the wage index.

We are using settled cost report data from Medicare cost reports

for cost reporting periods ending on or after June 30, 1991, and

settled before October 1, 1995, to develop the HHA cost-per visit limit

values for each type of home health service: skilled nursing care,

physical therapy, speech pathology, occupational therapy, medical

social services, and home health aide. The majority of the cost reports

were from FY 1993. The data have been adjusted by the most recent

market basket factors, excluding market basket increases for cost

reporting periods beginning on or after July 1, 1994 and before July 1,

1996, to reflect

[[Page 104]]

the expected cost increases occurring between the cost reporting

periods for the data contained in the database and September 30, 1998.

The intermediary determines the aggregate cost limit for each HHA by

multiplying the number of Medicare visits for each type of services

furnished by the HHA by the respective per-visit cost limit. Each HHA's

aggregate limit cannot be determined prospectively, but depends on each

HHA's Medicare visits for each type of service and actual costs for the

cost reporting period subject to this notice.

The methodology used to calculate these new limits reflects the

changes resulting from the provisions in BBA '97. The projected

decrease in payments for home health services provided by HHAs when

compared to the projected expenditures under the old cost limits in

effect prior to October 1, 1997, updated by the market basket increases

since those limits took effect, is approximately $570 million.

Projected decreases in payments using this same methodology for fiscal

years prior to the implementation of a home health prospective payment

system is $990 million in FY 99.

The cost limits for HHAs are statutorily driven and the impact of

decreases in payments to HHAs have been reflected in the current law

baseline of the mid-session review of the President's FY 98 budget.

We are unable to identify the effects of the changes to the cost

limits on individual HHAs. However, Table 7 below illustrates the

proportion of HHAs that are likely to be affected by the limits. The

results are based on both the data used to determine the limits and all

available settled hospital-based cost reports for the same time period:

Table 7.--HHAs Exceeding the Cost Limits Based on 105% of the Median of

Per Visit Costs From Freestanding Home Health Agencies

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

Number of Percentage

Number of HHAs of HHAs

HHAs in exceeding exceeding

database the limits the limits

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

Total HHAs....................... 4986 3232 65

Urban:

Freestanding................. 2220 1252 56

Hospital-based............... 868 742 85

Rural:

Freestanding................. 982 539 55

Hospital-based............... 916 699 76

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

In accordance with the provisions of Executive Order 12866, this

notice was reviewed by the Office of Management and Budget.

XI. Other Required Information

A. Waiver of Proposed Notice

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, section 1871(b)(2)(B) of the Act

provides that publication of a proposed notice is not required before

the notice takes effect if ``a statute establishes a specific deadline

for implementation of a provision and the deadline is less than 150

days after the date of the enactment of the statute in which the

deadline is contained.'' In addition, we may waive the 60-day period

for public comment if we find good cause that prior notice and comment

are impracticable, unnecessary or contrary to the public interest.

On July 1, 1997, we published a notice with comment period

addressing the per-visit limits for HHAs for cost reporting periods

beginning on or after July 1, 1997. Subsequently, on August 5, 1997,

Pub. L. 105-33 was enacted. Pub. L. 105-33 changed certain factors in

the calculation of the limit for cost reporting periods beginning on or

after October 1, 1997, and added other provisions relating to this

limit. These statutory provisions were generally effective for cost

reporting periods beginning on or after October 1, 1997.

In accordance with section 1871(b)(2)(B) of the Act, publication of

a proposed notice with prior comment period is not required before

implementing the statutory provisions of Pub. L. 105-33 that take

effect for cost reporting periods beginning on or after October 1,

1997. In addition, as discussed in section III above, in accordance

with the statute, we have used the same methodology to develop the

schedule of limits that was used in setting the limits effective for

cost reporting periods beginning on or after July 1, 1996. The cost

limits have been updated by the appropriate market basket adjustment

factor to reflect the cost increases occurring between the cost

reporting periods for the data contained in the database and September

30, 1998. Moreover, as required under section 1861(v)(1)(L)(iii) of the

Act, we have updated the wage index using the most recent hospital wage

index. Therefore, we believe that in this instance, it would be

impracticable and unnecessary to publish a proposed notice and find

good cause to waive publication of a proposed notice. However, we are

providing a 60-day period for public comment on these provisions.

B. Waiver of 30-day Delay in Effective Date

Generally, the Administrative Procedure Act requires us to provide

a 30-day delay before effectuation of a final rule unless we find good

cause to dispense with that delay. 5 U.S.C. section 553(d). To the

extent this requirement applies to this Notice with comment, we find

good cause to waive the 30-day delay in effective date.

As noted previously, these per-visit cost limits are effective for

cost reporting periods beginning on or after October 1, 1997. Section

1861(v)(1)(L)(vii) of the Act requires the Secretary to establish there

per-visit cost limits by January 1, 1998 and requires that they apply

to cost reporting periods beginning on or after October 1, 1997. That

statutory requirement is clear. A 30-day delay in implementing these

cost limits is unnecessary. Therefore, we find that it is unnecessary

to provide for a 30-day delay in effective date and find good cause to

waive the delay in effective date.

C. Effect of the Contract with America Advancement Act, Pub. L. 104-121

Normally, under 5 U.S.C. Sec. 801, as added by Sec. 251 of Pub. L.

No. 104-121, the effective date of a major rule is

[[Page 105]]

delayed 60 days for Congressional review. This has been determined to

be a major rule under title 5, United States Code, section 804(2).

However, as indicated in section XI.A of the preamble to this notice

with comment period, for good cause, we find that prior notice and

comment procedures are impracticable and unnecessary. Pursuant to 5

U.S.C. section 808(2), a major rule shall take effect at such time as

the Federal agency promulgating the rule determines if for good cause

it finds that notice and public procedure is impracticable or

unnecessary. Accordingly, under the exemption provided in 5 U.S.C

section 808(2), this schedule of limits is effective for cost reporting

periods beginning on or after October 1, 1997.

D. Public Comments

Because of the large number of items of correspondence we normally

receive on a notice with comment period, we are not able to acknowledge

or respond to them individually. However, we will consider all comments

concerning the provisions of this notice that we receive by the date

and time specified in the ``Dates'' section of this notice, and we will

respond to those comments in a subsequent notice.

Authority: Section 1861(v)(1)(L) of the Social Security Act (42

U.S.C. 1395x(v)(1)(L)); section 4207(d) of Pub. L. 101-508 (42

U.S.C. 1395x (note)).

(Catalog of Federal Domestic Assistance Program No. 93.773

Medicare--Hospital Insurance)

Dated: December 8, 1997.

Nancy-Ann Min DeParle,

Administrator, Health Care Financing Administration.

Dated: December 22, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-34221 Filed 12-31-97; 8:45 am]

BILLING CODE 4120-01-P