Medicare Program; Schedules of Per-Visit and Per-Beneficiary Limitations on Home Health Agency Costs for Cost Reporting Periods Beginning On or After October 1, 1998

SUMMARY: This notice with comment period sets forth revised schedules

of limitations on home health agency costs that may be paid under the

Medicare program for cost reporting periods beginning on or after

October 1, 1998. These limitations replace the limitations that were

set forth in our January 2, 1998 notice with comment period (63 FR 89)

and our March 31, 1998 final rule with comment period (63 FR 15718).

DATES: Effective Date: These schedules of limitations are effective for

cost reporting periods beginning on or after October 1, 1998.

Comment Date: Written comments will be considered if we receive

them at the appropriate address, as provided below, no later than 5 p.

m. on October 13, 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-1035-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 and address of the sender and must be submitted to the

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

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

attachments.

Because of staffing and resource limitations, we cannot accept

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

to file code HCFA-1035NC. 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 5:00 p.m.

(Phone: (202) 690-7890).

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

SUPPLEMENTARY INFORMATION: 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 MasterCard 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 log in as guest

(no password required). Dial-in users would use communications software

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

password required).

I. Background

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

authorizes the Secretary to establish limitations on allowable costs

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

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

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

maintained limitations on home health agency (HHA) costs since 1979.

Additional statutory provisions specifically governing the limitations

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

Section 1861(v)(1)(L)(i)(IV) of the Act specifies that the per-

visit limits shall not exceed 105 percent of the median of the labor-

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

reasonable costs used in the per-visit calculations will be updated by

the home health market basket excluding any change 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.

Section 1861(v)(1)(L)(v)(I) of the Act requires the per-beneficiary

annual limitation be a blend of: (1), an agency-specific per-

beneficiary limitation based on 75 percent of 98 percent of the

reasonable costs (including nonroutine medical supplies) for the

agency's 12-month cost reporting period ending during Federal fiscal

year (FY) 1994, and (2), a census region division per-beneficiary

limitation based on 25 percent of 98 percent of the regional average of

such costs for the agency's census division for cost reporting periods

ending during FY 1994, standardized by the hospital wage index. The

reasonable costs used in the per-beneficiary limitation calculations in

1 and 2 above will be updated by the home health market basket

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. This per-beneficiary limitation based on the blend of the

agency-specific and census region division per-beneficiary limitations

will then be multiplied by the agency's unduplicated census count of

beneficiaries (entitled to benefits under Medicare) to calculate the

HHA's aggregate per-beneficiary limitation for the cost reporting

period subject to the limitation.

For new providers and providers without a 12-month cost reporting

period ending in fiscal 1994, the per-beneficiary limitation will be a

national per-beneficiary limitation which will be equal to the median

of these limitations applied to other HHAs as determined under section

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

Payments by Medicare under this system of payment limitations must

be the lower of an HHA's actual reasonable allowable costs, per-visit

limitations in the aggregate, or a per-beneficiary limitation in the

aggregate.

This notice with comment period sets forth cost limitations for

cost reporting periods beginning on or after October 1, 1998. As

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

[[Page 42913]]

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

Act 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 rendered. For purposes of this notice, the

HHA wage index is based on the most recent published final hospital

wage index, that is, the preclassified hospital wage index effective

for hospital discharges on or after October 1, 1997, which uses 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 Board (MGCRB) under section

1886(d)(10) of the Act, or decisions by the Secretary.

II. Analysis of and Responses to Public Comments to the January 2,

1998 Per-Visit Limitation Notice

We received 24 items of timely correspondence on the January 2,

1998 notice with comment period. A large percentage of the commenters

also expressed concern over various aspects of the BBA `97 including

the per-beneficiary limitations and the surety bond requirement which

are not pertinent to the January 2, 1998 notice. Nonetheless, we will

address the comments regarding the per-beneficiary limitations under

section IV. of this notice. The issues not related to the limitations

will be taken into account under separate notices specific to those

issues. The comments pertaining to the per-visit limitations and our

responses are discussed below.

Comment: The hospital wage indices do not include wages and wage-

related data for home health services. The most appropriate measure

would be a home health agency specific wage index by geographic area.

Response: The use of the hospital wage indices is required by

statute. Section 1861(v)(1)(L)(iii) of the Act specifically states, in

part, ``the Secretary shall establish limits under this subparagraph

for cost reporting periods beginning on or after such date by utilizing

the area wage index applicable under section 1886 (d)(3)(E) 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 * * * '' Furthermore, in 1989 we

published a schedule of per-visit limitations using a home health

agency-specific wage index in the Federal Register (54 FR 27742). Even

though we placed a limit of 20 percent on the amount that HHAs cost

limitation may increase or decrease when compared to the prior year's

cost limitation which applied the hospital wage indices, the HHA

industry questioned the validity of the data used in developing the

HHA-specific wage indices. A change in legislation was pursued to

prohibit the use of a HHA-specific wage index. In 1991 we had to

republish the 1989 per-visit limitations in the Federal Register at 56

FR 12934 using the hospital wage indices as required by section 6222 of

the Budget Reconciliation Act of 1989, Pub. L. 99-239. From that time

forward we have been required to use the hospital wage indices in

developing the per-visit limitations.

Comment: Agencies may be forced into more stringent evaluations of

what patients are suitable for home care, rejecting those whose needs

are going to make them candidates for lengthy and expensive visits.

Overall quality of care to patients will fall as field staff are placed

under greater pressure to perform more visits in a given time at a

lower cost.

Response: We recognize that there will be valid circumstances not

anticipated by the per-visit limitation methodology that will cause an

agency to incur cost in excess of that allowed by the per-visit

limitation. We provide for those unique situations through the

exceptions process as ``atypical'' home health services at 42 CFR

413.30(f)(1). It is desirable for all agencies to monitor continually

the cost of providing each discipline and to take steps to control the

cost of any discipline as soon as there are indications that costs are

increasing. We believe that a per-visit limitation of 105 percent of

the median will give all agencies an added incentive to improve their

management controls with immediate and ongoing benefit to the Medicare

program and its beneficiaries through a reduction in cost and a

moderation in the future rate of increase in costs.

Comment: There are additional costs which the home health industry

must bear in order to meet new HCFA requirements such as implementation

of the home health patient Outcome and Assessment Information Set

(OASIS). There should be an add-on to the per-visit limitations in

recognition of the costs associated with implementing OASIS

requirements.

Response: We recognize that when agencies are required to implement

OASIS, the agencies will incur training costs that they would not have

otherwise incurred for this activity. These costs are almost

exclusively associated with training staff in the disciplines (skilled

nursing, physical, speech pathology, and occupational therapy) that

will be performing OASIS assessments at the start of care and on a

continuing basis. Accordingly, we have calculated for these disciplines

an adjustment factor to be applied to the labor portion of the per-

visit limitations applicable to these disciplines. This adjustment is

intended as an offset to foregone patient care time that will be

required for the necessary OASIS training and for gaining experience in

performing assessments during the year of implementation. This offset

is applied as an adjustment factor to be applied to the labor portion

of the affected disciplines. See section III.G. for a discussion of the

methodology used to calculate the adjustment factor.

Comment: The rise in utilization of home health has been due, in

part, to the implementation of the hospital prospective payment system

by hospitals which now discharge the patient quicker and sicker knowing

that the patient can be treated adequately at home and the realization

by physicians that home health care is useful, desirable, and

economical alternative to institutionalization.

Response: There are several reasons why home health utilization has

grown. Although it has been said that the hospital prospective payment

system has resulted in patients being discharged sicker and quicker,

and transferred to the home health setting, this is not the case

overall. A study published in The New England Journal of Medicine in

August 1996 found, ``less than a quarter of home health visits (22

percent) were preceded by a hospital stay within 30 days. Nearly half

the visits (43 percent.) were unassociated with an inpatient stay in

the previous six months.'' Also, the hospital prospective payment

system has been in existence since October 1983. Any impact on the

costs of services of providing home health care should have already

been reflected in our data base which is approximately ten years after

the implementation of the hospital prospective payment system.

Comment: The per-visit limitations should not be published and

applied on a retroactive basis.

Response: The statute is quite explicit in establishing both the

effective date of the per-beneficiary limitation, as well as the date

by which the per-visit limitations were to be published. As much

information as possible was disseminated to the home health trade

organizations regarding the impact of the limitations without

jeopardizing our rulemaking process. We were aware that

[[Page 42914]]

these home health trade organizations had been forwarding this

information to their home health care members as quickly as possible so

that agencies could estimate the effect of the per-visit on their

financial operations. To the extent possible we made as much

information available to the home health industry as we could for

preparation to the revised per-visit limitations.

Comment: The update factors proposed by HCFA appear to be

understated by approximately 4.5 percent.

Response: The update factors displayed in the notice which are

applied to the data used in developing the per-visit limitations are

reduced update factors as mandated by the statute. Section

1861(v)(1)(L)(iv) of the Act specifically 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, the update factors displayed in the

notice do not include the changes for this period of time.

Comment: A seventh discipline should be established to set out

chronic illness (such as insulin dependent diabetic and wound care)

skilled nursing services from other skilled nursing visits. This would

assist the definition of patient acuity and would create significant

savings to the Medicare program by developing a lower level of skilled

nursing visit category that would account for reduced time and effort

associated with chronic illness.

Response: The home health benefit as set forth in 1861(m) of the

Act sets forth the disciplines covered for home health services and

does not provide for a seventh discipline along the lines suggested by

the commenter.

Comment: The total impact on home health agencies of the reduction

in per-visit cost limitations has been understated due to HCFA's

separate analysis of the per-visit and the per-beneficiary limitations.

Response: The impact analysis on the revised per-visit limitation

notice is correct in that the analysis can only address the limitations

addressed in that notice. At the time the notice was published, the

per-beneficiary limitations were not calculated and the impact of both

the per-visit and the per-beneficiary limitations was unknown. We did,

however, address the dual impact of the revised per-visit limitations

and the new per-beneficiary limitations in the final rule with comment

for the per-beneficiary limitation which was published on March 31,

1998. This impact is addressed in the Federal Register published on

March 31, 1998 at 63 FR 15736.

Comment: After the adjustment of the labor and nonlabor portions

from 112 percent of the mean to 105 percent of the median, the amount

that would be paid under the labor portion is significantly smaller

than what the 1982 wage-index would indicate. Therefore, in order to

remain budget neutral, it would appear that a significantly larger

budget neutrality factor should be applied to raise the labor-related

portion back up to be in line with the 1982 wage-index base.

Response: Budget neutrality with respect to the wage index requires

that aggregate Medicare payments to home health agencies be equal to

the payments that would have been made had the 1982 wage index been

used. Because the level of the per-visit limitations was adjusted

downward from the previous per-visit limitations that were in effect, a

different distribution of HHAs are under the revised per-visit

limitations. These are the HHAs that largely affect the budget

neutrality adjustment factor. These HHAs would have been only slightly

better off using the 1982 wage index. Therefore, the adjustment factor

reflects the slight increase in payments to obtain budget neutrality.

Comment: HCFA has stated that fiscal year 1994 is the most current

information available for computation of the home health per-visit

limitations. Excluding the results of cost reports finalized after

October 10, 1995 from the data base seriously skews the cost per-visit

limitation calculations with older cost and per-visit data,

artificially lowering the median.

Response: Unlike the per-beneficiary limitations which require the

use of Federal FY 1994 as the base period for establishing the

limitations, neither the statute nor the Medicare regulations dictate

the data base to be used in establishing the per-visit limitations.

Moreover, we update the data base by rates of increase in the home

health market basket from the end of the FYs of the cost report data

used in the data base to the FY end to which the per-visit limitations

apply. In keeping with past practices, we updated the data base used

for the July 1997 notice in establishing the per-visit limitations. We

believe the per-visit limitations reflect the per-visit costs reported

by HHAs and these per-visit limitations have been updated appropriately

in accordance with the statute.

Comment: The home health market-basket index does not measure

specific costs.

Response: The home health market-basket is a measurement of costs

and inflation overall and is not a measurement of increase in agency-

specific costs.

III. Update of Per-Visit Limitations

The methodology used to develop the schedule of per-visit

limitations in this notice is the same as that used in setting the

limitations effective October 1, 1997. We are using the latest settled

cost report data from freestanding HHAs to develop the per-visit cost

limitations. We have updated the per-visit cost limitations to reflect

the expected cost increases between the cost reporting periods in the

data base and September 30, 1999 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.

A. Data Used

To develop the schedule of per-visit limitations effective for cost

reporting periods beginning on or after October 1, 1998, we extracted

actual cost per-visit data from the most recent settled Medicare cost

reports for periods beginning on or after January 1, 1994 and settled

by May 1998. The majority of the cost reports were from Federal fiscal

year 1996. 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 data base and September 30,

1999, 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. Therefore, we excluded this time period when

we adjusted the database for the market basket increases.

B. Wage Index

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

per-visit limitation to reflect differing wage levels among areas. In

establishing the per-visit limitation, 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 most recently published hospital wage index

(that is, the FY 1998 hospital wage index, which was published in the

Federal Register on August 29, 1997 (62

[[Page 42915]]

FR 46070)) without regard to whether such hospitals have been

reclassified to a new geographic area, to establish the HHA cost

limitations. Therefore, the schedule of per-visit limitations 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 limitations 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 (Public Law 98-11). 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 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

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 Fall-Warwick, RI MSA

We are continuing to grant these urban exceptions for the purpose

of applying the Medicare hospital wage index to the HHA per-visit

limitations. These exceptions result in the same New England County

Metropolitan Area definitions for hospitals, skilled nursing

facilities, 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, these four counties are urban under

either definition, New England County Metropolitan Area or MSA.

Section 1861(v)(1)(L)(iii) requires the use of the area wage index

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

the survey of the most recently published wages and wage-related costs

of hospitals located in the geographic area in which the home health

service is furnished without regard to whether such hospitals have been

reclassified to a new geographic area pursuant to section 1886(d)(8)(B)

of the Act. 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.

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

Section 4207(d)(2) of the Omnibus Budget Reconciliation Act of 1990

(OBRA '90) (Public Law 101-508) requires that, in updating the wage

index, aggregate payments to HHAs will remain the same as they would

have been if the wage index had not been updated. Therefore, overall

payments to HHAs are not affected by changes in the wage index values.

To comply with the requirements of section 4207(d)(2) of OBRA '90

that updating the wage index be budget neutral, we determined that it

is necessary to apply a budget neutrality adjustment factor of 1.03 to

the labor-related portion of the per-visit limitations effective for

cost reporting periods beginning on or after October 1, 1998. This

adjustment ensures that aggregate payments to HHAs are not affected by

the change to a wage index based on the hospital wage index published

on August 29, 1997.

To determine the adjustment factor, we analyzed both the data

obtained from the freestanding agencies used to determine the per-visit

limitations and the settled cost report data covering the same time

period for the provider-based agencies. For each agency in this data

base, we replaced their current wage index with the one corresponding

to the 1982 hospital wage index. Some Metropolitan Statistical Areas

(MSAs) that currently exist did not exist at the time this index was

created and therefore have no matching 1982 wage index. In the data

base we are currently using, these unmatchable MSAs represented 1.3

percent of the total visits. Since this percentage was small, we

deleted these agencies from the analysis. We then determined what

Medicare program payments would be using the 1982 wage index. Next, we

determined payments using the new wage index and adjusted the labor

portion of the payment by the factor necessary to match program

payments if the 1982 wage index was used. (See the example in section

VIII.B. of this notice regarding the adjustment of per-visit

limitations by the wage index and the budget neutrality factor.)

D. 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

cost (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 cost

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

adjusted labor cost.

E. 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 less than 10 dollars and per-visit costs

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

standard deviations of the median in each service.

F. Basic Service Limitation

We calculate a basic service limitation 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 3a in section

VIII.)

G. Offset Adjustment for the Implementation of the Home Health Outcome

Assessment Information (OASIS)

When HHAs are required to use an assessment tool, such as OASIS,

for ongoing collection of quality of care data, they will incur costs

associated with this requirement. Any costs associated with a new type

of reporting system are not reflected in the database used to calculate

the per-visit limitations. We have, therefore, decided to provide an

offset adjustment factor to be applied to the labor-related component

of the per-visit limitations for skilled nursing, physical therapy,

speech pathology, and occupational therapy which should be the only

disciplines affected by this new requirement.

Since any new assessment performance tool will replace or be

integrated into an agency's existing assessment activities, we believe

that there will be no permanent ongoing incremental costs associated

with these types of assessment systems. This has been shown through

data derived from the ongoing Medicare Quality and Improvement

Demonstration using OASIS as an assessment tool. This demonstration

shows that the OASIS assessment requires either the same amount of time

or less time than the

[[Page 42916]]

patient assessment methods currently in use.

Absent other types of data, we are using the information from this

demonstration to derive an offset adjustment for any new assessment

tool that may be imposed on the HHAs effective during the per-visit

limitations effective for cost reporting periods beginning on or after

October 1, 1998. Data from the OASIS demonstration show that OASIS

implementation burden consists of foregone staff time that would

otherwise be devoted to patient care activities. There are three types

of costs associated with staff time for a typical 18-person staff. The

first would be training time for an agency coordinator who conducts

training or supervision of the clinical staff. This individual would

probably need to spend four hours reading the assessment tool training

manual and eight hours attending an assessment tool training session.

Training would also be necessary for staff who will be performing the

assessment process. The affected disciplines are skilled nursing,

physical therapy, speech pathology, and occupational therapy. Each

member of these disciplines would probably require four to six hours of

training. Since agencies currently conduct inservices for clinical

staff, usually on a monthly basis, the training for a new assessment

tool would replace at least one of these sessions. The incremental

training costs would be approximately half of the total costs, or two

to three hours per trained staff member.

The second type of costs would be increases in assessment time

during initial implementation. Experience from the demonstration

indicates that total visit time increases by approximately 15 minutes

during the first six to seven visits when newly trained staff have

begun to perform OASIS assessments. After this initial period of

becoming familiar with and acquiring experience with the new assessment

tool, there is no net increase in visit duration.

The third type of costs would be the costs associated with the

staff time to revise assessment forms and integrate OASIS elements. For

a typical 18-person professional staff this is estimated to require

sixteen hours of staff time: twelve hours of professional staff time

(skill nursing, physical therapy, etc. * * *) and 4 hours of clerical

time.

The adjustment factor is calculated in terms of per-FTE foregone

staff time spent on these training and form revision activities as

follows: (a) One hour for the agency coordinator--based on twelve hours

total training time allocated over an 18-person professional staff, (b)

three hours per staff for training, (c) two hours for increased

assessment time during the initial implementation--based on fifteen

minutes additional time for each of the first eight visits (rounded up

from 7) during which the assessments are performed, and (d) one hour of

supervisory time--based on sixteen hours of time spent revising

assessment forms allocated over an 18-person professional staff. These

four items total seven hours of time per-FTE during the year of OASIS

implementation. Using a normal work year of 2000 hours (50 weeks times

40 hours) less the seven hours for additional training time for a new

assessment program, the offset adjustment for foregone patient care

would be .35 percent (2000 hours divided by 1993 hours less one equals

.003513). This offset factor will be applied to the labor portion of

the skilled nursing, physical therapy, speech pathology and

occupational therapy per-visit limitations for both urban and nonurban

areas. This factor will only be applied to the labor portion of these

per-visit limitations for cost reporting periods beginning on or after

October 1, 1998 if HHAs are required to implement OASIS.

In addition to training and forms revision, agencies will incur

printing costs for the revised assessment forms. Data from the OASIS

demonstration show that for the typical HHA, i.e., one that has 486

admissions per year and an 18-person professional staff, printing the

new assessment forms will cost $280. Cost report data for 1994 and 1995

show that an HHA with 486, plus or minus 50, admissions, provides a

total of thirty thousand visits of all types annually to patients.

Allocating the $280 over 30 thousand visit yields an incremental cost

of .93 cents per visit, which for estimation purposes is rounded up to

one cent per visit for all disciplines.

The total offset adjustment is applied by first multiplying the

labor portion of the per-visit limitation for skill nursing, physical

therapy, speech pathology, and occupational therapy by the factor of

1.003513 for training and forms revision (the labor-portion is also

adjusted by the appropriate wage index and budget neutrality factor),

second, the non-labor portion is added to the adjusted labor-portion,

and third, one cent is added for printing costs. The OASIS adjustment

is only done after the implementation of OASIS is effective.

Because we believe that there will be no ongoing incremental costs

to perform assessments under a new protocol, this adjustment offset

will only apply to the labor component of the specified per-visit

limitations in the first year of implementation of a new assessment

tool.

While we have based this adjustment on the best data we have

available to us, we are concerned that we may not have captured all

relevant costs, particularly ongoing and automation costs. In part,

this is because our data is based on agencies whose costs in this

regard may not have been fully representative of agency costs

generally. Therefore, we are asking for specific comments, including

documented data, which would inform future decision making on this

issue.

IV. Analysis of and Responses to Public Comments to the March 31,

1998 Per-Beneficiary Final Rule

We received 125 comments with respect to the March 31, 1998 Federal

Register final rule with comment addressing the implementation of the

per-beneficiary limitations. A number of comments were on the statutory

requirements for which we do not have discretionary authority to change

or not implement. These included comments such as: do not apply the

per-beneficiary limitations for cost reporting periods beginning on or

after October 1, 1997, delay implementation of the per-beneficiary

limitations to October 1, 1998, repeal the statutory provisions

requiring the application of the per-beneficiary limitations, and the

use of fiscal year 1994 as a base year for establishing the per-

beneficiary limitations is inadequate and should not be used in

establishing the per-beneficiary limitations. These comments cannot be

adopted without legislative amendments to the Act pertaining to the

per-beneficiary limitations. The remaining comments are given below.

Comment: Agencies that have a per-beneficiary limitation lower than

the national per-beneficiary limitation should be allowed to have the

higher national per-beneficiary limitation apply.

Response: The statute is very specific with respect to how the per-

beneficiary limitations are to be calculated for agencies that have a

12-month cost reporting period ending in Federal fiscal year 1994

(``clause v'' agencies) and new agencies (``clause vi'' agencies). Once

the agency is classified as either a ``clause v'' or ``clause vi''

provider, the per-beneficiary limitation is established by statute. We

have no discretion to apply a most beneficial test.

Comment: The requirement to prorate the unduplicated census count

of Medicare beneficiaries when a beneficiary is serviced by more than

one HHA for cost reporting periods beginning on or after October 1,

1997

[[Page 42917]]

should also apply in determining the unduplicated census count of

Medicare beneficiaries for the base year, i.e., cost reporting periods

ending during Federal FY 1994.

Response: The statute does not provide for this. Section

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

BBA '97, states, ``For beneficiaries who use services furnished by more

than one home health agency, the per-beneficiary limitation shall be

prorated among the agencies.'' This provision is specific for services

furnished by HHAs for cost reporting periods beginning on or after

October 1, 1997. It applies to the application of the per-beneficiary

limitation and not the calculation of the per-beneficiary limitation.

Comment: Many agencies were required to operate under a new system

of reimbursement for a full six months before being told precisely what

the system was. HCFA should provide some form of leniency for those

agencies which have large overpayments due to the delay in publishing

the new limitations.

Response: We recognize that providers with cost reporting periods

that began prior to the publication of the per-beneficiary limitations

may have experienced some uncertainty in budgeting their costs.

Nonetheless, the BBA '97 is quite explicit in establishing both the

effective date of these provisions and the date by which these

limitations needed to be established. We made as much information as

possible available to the home health industry prior to the publication

of the limitations. We tried to make a smooth transition into the

interim payment system (IPS) for HHAs by providing such information

through major home health trade organizations. The IPS was highly

publicized through home health trade news articles such that the effect

of the IPS should have been anticipated by the home health industry.

While there were certain technical issues which could only be addressed

through the publication of the limitations, agencies could, to a large

degree, estimate the effect of the new limitations on the financial

operations. In fact, a trade organization developed computer software

packages for estimating the impact of the IPS. Even though the

limitations were not available prior to publication, we believe the

home health industry had sufficient advanced knowledge to properly

react to an estimated impact of the limitations on their operations. If

an agency had suspected that overpayments might result from the interim

payments received prior to the publication of the limitations, a

prudent agency would set the estimated overpayment aside as a potential

liability. This way, the agency would not put itself in a financial

hardship to pay back any overpayments resulting from the newly

published limitations.

Comment: The 1994 base period is not reflective of the sicker

patients being released from the hospitals due to the hospital

prospective payment system.

Response: As stated in the comments addressing the per-visit

limitations, although it has been said that the hospital prospective

payment system has resulted in patients being discharged quicker and

sicker and transferred to a home health setting, this is not the case

overall. A study published in The New England Journal of Medicine in

August 1996 found , ``less than a quarter of home health visits (22

percent) were preceded by a hospital stay within 30 days. Nearly half

the visits (43 percent) were unassociated with an inpatient stay in the

previous six months.'' Also, the hospital prospective payment system

has been in existence since October 1983. Any impact on the costs of

services of providing home health care should have already been

reflected in our data base which is approximately ten years after the

implementation of the hospital prospective payment system.

Comment: The IPS per-beneficiary limitation puts a cap on the

expenses a beneficiary can receive in one year.

Response: We cannot stress enough that the per-beneficiary

limitation is not a cap on an individual beneficiary's amount of

services or the costs of services. The per-beneficiary limitation is an

aggregate limitation on each agency's total costs. Agencies now have a

global budget that increases with the number of beneficiaries served

and promotes efficiency in planning and delivering total services to

all patients throughout the entire home health episodes. Applying the

per-beneficiary limitation in the aggregate, not just to an individual

patient, allows HHAs to balance the costs of caring for one patient

against the cost of caring for other patients. HHAs have the

flexibility to provide the appropriate amount of care (duration of

visits, number of visits, and skill level of care given) for all

patients within the aggregate per-beneficiary limitation.

Comment: Do not apply the freeze to inflation for the 1994-1996

period. This freeze should only apply to the per-visit limitations.

Response: The statute applies the freeze to both the per-visit and

the per-beneficiary limitations. Section 1861(v)(1)(L)(iv) of the Act

states, ``In establishing limits under this subparagraph for cost

reporting periods beginning after September 30,1997, the Secretary

shall not take into account any changes in the home health market

basket, as determined by the Secretary, with respect to cost reporting

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

1996.'' The amendment in section 4601 of the B.B.A. '97 to amend

section 1861(v)(1)(L) of the Act encompasses all limits established

under section 1861(v)(1)(L) of the Act, including the per-beneficiary

limitations. Therefore, the application of the freeze in the market

basket increases to both the per-visit limitations and the per-

beneficary limitations is in accordance with the statutory language.

Comment: The requirement to apply the wage-index based on the

location of the service furnished rather than the location of the HHA

should only apply to the per-visit limitations.

Response: Again the statute requires the wage index based upon the

location of the service furnished be applied to both the per-visit and

the per-beneficiary limitations. Section 1861(v)(1)(L) of the Act,

states in part, `` * * * the Secretary shall establish limits under

this subparagraph for cost reporting periods beginning on or after such

date by utilizing the area wage index applicable under section

1886(d)(3)(E) 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 * * * ''

This language encompasses all the limitations noted under section

1861(v)(1)(L) of the Act, which includes both the per-visit and the

per-beneficiary limitations.

Comment: HCFA should utilize the median amount for each census

region for new providers. This will be the best reflection of both

wages and utilization for agencies in a given area.

Response: Section 1861(v)(1)(L)(vi) of the Act as added by section

4602(c) of the B.B.A. '97, states, ``For new providers and those

providers without a 12-month cost reporting period ending in fiscal

year 1994, the per beneficiary limitation shall be equal to the median

of these limits (or the Secretary's best estimates thereof) applied to

other home health agencies as determined by the Secretary.'' The

statute clearly contemplates the use of a single, and therefore

national, median as the basis for the new provider limitation. The

statute requires the per-beneficiary limitation to be ``the median'' of

all the per-beneficiary limitations applied to the other HHAs, i.e.,

the per-beneficiary

[[Page 42918]]

limitations of the old providers. The statutory language refers to a

single median and not several medians, which would be the case if the

statute required a regional system suggested by commenters. Moreover,

in direct contrast to the language governing the per-beneficiary

limitation for old providers, section 1861(v)(1)(L)(vi) does not

contain any reference to a calculation based upon the home health

agency's census division.

Comment: The base year for the surviving provider number should be

utilized in computing the per-beneficiary limitation. Because the

agency still carries assets and liabilities of the agency it purchased,

the base year and resulting per-beneficiary limitation should be

considered an asset or a liability, as applicable.

Response: The per-beneficiary limitation is neither an asset nor a

liability for an HHA. The per-beneficiary limitation is a limit on the

amount of payments made by Medicare. The limitations are not intended

to be used as bargaining tools for selling or buying agencies.

Comment: Extend authorizations for exceptions to the new interim

payment system per-beneficiary limitations as well as the per-visit

limitations.

Response: As we stated in the March 31, 1998 Federal Register, we

do not believe that Congress intended the general rules at 42 CFR

413.30 to apply to the establishment of the per-beneficiary

limitations. The statute does not provide any such exceptions or

exemptions to the per-beneficiary limitations.

Comment: On page 15725 of the Federal Register the example

references index levels for the period of July 1998 through December

1998 from Table 6 for calculating the market basket increase. Table 6

in the March 31, 1998 Federal Register stops at November 1997.

Response: We apologize for the inadvertent omission of the index

levels for the months of December 1997 through September 1999. Table 6

at 63 FR 103 published on January 2, 1998 contains the same index

levels that are appropriate in calculating the applicable market basket

increase and the index levels for the months of December 1997 through

September 1999 can be obtained from that table.

Comment: Under section 112 of the Provider Reimbursement Manual,

Part I, State health department home health agencies with subunits or

branches are permitted to file a combined cost report under the 7800

series of provider numbers. (1) How will those subunits and branches

that have separate provider numbers and separately bill that previously

filed a combined cost report be treated if some decide to no longer

file with the combined cost report? (2) How will the remaining agencies

that wish to file a combined report be treated? As clause ``v'' or

clause ``vi'', and will there be any adjustment to costs for the

agency-specific portion? (3) If combined State department home health

agencies that file a combined cost report has subunits, and a

beneficiary moves from one subunit to another, is that beneficiary

counted as one beneficiary in each of the subunits, or is it prorated?

Response: (1) State health departments with subunits are allowed to

file a combined Medicare cost report because of the administrative and

financial burden in filing separate Medicare cost reports for all the

agencies within the department. The State health departments were

allowed to obtain subunit provider numbers for the purposes of tracking

revenue and claims processing. Also, it is our understanding that the

State health departments did have the capability to segregate the costs

for each individual agency within the department. If State health

departments decide to start submitting individual Medicare cost reports

for the agencies within their department, they will not be allowed to

pick and choose individual agencies for which they would like to report

separately. The State agency health would have to rescind the 7800

series number and submit separate cost reports for all the agencies.

(2) Since the State health department filed a single cost report

for all the agencies under a 7800 number series, and the individual

subunits did not file a separate Medicare cost report for which an

agency-specific per-beneficiary limitation can be calculated, if the

units start filing separate Medicare cost reports under their own

numbers, they will be considered clause ``vi'' type providers.

Therefore, they will be subject to the national per-beneficiary

limitation.

(3) State health departments that file a single cost report under

the 7800 number for all its units will count a single beneficiary in

its unduplicated census count for the cost reporting period regardless

of the number of units that service that beneficiary. However, if the

subunits report separately and the beneficiary is serviced by more than

one subunit, the beneficiary must be prorated among the subunits

servicing the beneficiary.

Comment: How do you determine prorating between agencies when you

have one agency that was working hard and saw a patient on a limited

basis versus the other agency who maximized visits to reach the ceiling

of the beneficiary limitation and then discharged the patient?

Response: We cannot emphasize enough that the per-beneficiary

limitation is not a limitation on the amount of services a beneficiary

may receive or a limitation on the costs of an individual beneficiary.

The per-beneficiary limitation is applied to the total unduplicated

census count of the agency and compared to the lesser of the agency's

actual costs or per-visit limitation in the aggregate plus nonroutine

medical supplies. If an agency discharges a beneficiary with the

assumption that the beneficiary has exhausted its per-beneficiary

limitation and that beneficiary receives services from another agency,

each agency will have less than one beneficiary in its unduplicated

census count. For example, if agency ``A'' treats a Medicare

beneficiary and after 60 visits, discharges the patient and

subsequently the patient receives 40 visits from agency ``B'', agency

``A'' will count the beneficiary as .60 in its unduplicated census

count and agency ``B'' will count the beneficiary as .40 in its

unduplicated census count. Under a system based on medians and

averages, such as the per-beneficiary limitations, it should be

expected that some patients' costs and amount of services will be under

the average and some patients' costs and amounts of services will be

above the average.

Comment: The blend of an agency-specific component and a regional

census division component rewards agencies that had high costs in

Federal FY 1994 and penalizes agencies that had low costs in Federal FY

1994.

Response: By basing the per-beneficiary limitation on the HHA's own

cost experience, the per-beneficiary limitation should reflect the mix

of patients that the agency has been caring for in the past. This mix

of patients should not change drastically as compared to the mix of

patients for whom the HHA is currently providing care. While variation

does exist between agencies, it is a reflection of their actual cost

experience. All agencies were subject to the lower of their actual

costs or the aggregate per-visit limitation in FY 1994. It is the lower

of these amounts that is incorporated into the calculation of the per-

beneficiary limitations. If two agencies existing in the same area with

1994 base periods did not have a competitive advantage over each other

in 1994, it does not follow that one would have a competitive advantage

due to the application of a per-beneficiary

[[Page 42919]]

limitation. As stated before, the average per-beneficiary cost is a

reflection of the mix of patients that the HHA serviced in the base

period.

Comment: Home health agencies that have reclassified branches to

subunits should be allowed to use the parent agency's FY 1994 cost

report as the base for establishing the per-beneficiary limitation for

the new subunit.

Response: Branches within home health agencies are not providers as

recognized under Medicare principles of reimbursement. Branches within

home health agencies are part of and under the administrative control

of the parent home health agency. The branch itself does not have its

own administrative function or control. They are not independently

certified by Medicare as a provider nor are they required to file a

Medicare cost report. Because branches are not providers of service but

an intricate part of a provider, they will be considered new providers

if they become certified by Medicare as an independent provider of home

health services subsequent to Federal FY 1994.

Comment: HCFA should allow agencies which filed more than one cost

report during Federal FY 1994 to combine the cost reporting periods

when they equal or exceed a 12-month cost reporting period for

establishing the agency-specific per-beneficiary limitation.

Response: We do not agree. Medicare has always applied the

terminology of a 12-month cost reporting period as being twelve

consecutive months as reported in the Medicare cost report.

Comment: The impact analysis seems almost entirely focused on total

Medicare expenditures. It gives short shrift to the problems that will

be experienced by patients, HHAs, and other payers such as Medicaid. In

order to maintain costs below the per-beneficiary limitation, HHAs will

need to reduce the average number of visits provided to Medicare

beneficiaries below the levels patients received in 1997. The size of

this reduction was not estimated or its impact on Medicare

beneficiaries.

Response: The impact analysis did not discuss the impact on

beneficiaries because this payment system does not limit the amount of

services a beneficiary may receive from an agency. It is designed to

provide more efficient delivery of services. No beneficiary should be

denied services as a result of this payment system. These beneficiaries

continue to be eligible for Medicare home health benefits without a

specific day limit.

Comment: The use of a two-thirds offset in estimating the impact of

the aggregate per-beneficiary limitation on HHAs was not explained

adequately. What analysis was performed to justify such an offset?

Response: An impact analysis requires that we estimate the impact

of a change in policy. While there are questions about whether such an

impact analysis is needed for a notice that announces rates for a

statutorily mandated policy for which there is virtually no discretion,

if we are to estimate the impact of the home health policy, we need to

consider not just changes in Medicare payments that would be involved,

but also the incentives created by the new policy and how providers are

likely to react to the change in policy.

Home health is the highest cost Medicare service category which has

no cost-sharing. As a result, there is no direct financial consequences

to beneficiaries for use of home health services. Combined with the

fact that home health services are non-invasive and the patient does

not have to leave home to receive them, there are not the same kinds of

constraints on their use as with other medical services.

We believe that it is prudent to assume that because of the

incentives created by the B.B.A. '97 policy and the demonstrated

ability of the industry to respond, that there would be a response.

This does not necessarily mean that agencies will go out of business or

substitute care of Medicare beneficiaries from other payers or sources

of funds. It does mean that there would be changes in behavior to

recoup some of the financial effects that would otherwise occur with

the policy, such as an increase in users serving particularly low

users, or reducing the intensity of care in marginal cases, or reducing

services that should not be covered by Medicare. For the purposes of

this impact analysis, it is our judgement that a 50 percent offset for

the per-visit limitations and a 66 percent offset for the per-

beneficiary limitations is reasonable. To the extent that actual

expenditures differ from projections, after adjusting for other factors

affecting expenditure growth, we will review the offsets used for

future impact analysis.

Comment: Using HCFA's own analysis it is clear that agencies will

either have to go out of business or subsidize care of Medicare

beneficiaries from other payers or sources of funds. Layoffs of staff

and closures of HHAs will have a direct impact on access to care that

HCFA did not address.

Response: We did not address the impact on access to care due to

agency closures because we were not expecting this to be a necessary

reaction to the limitations as stated in the above response. We are

currently receiving many new applications from agencies wanting to

become Medicare certified. If there are any closures as a result of

this payment system, it is expected other new agencies or agency

expansions will offset these closures.

Comment: HCFA mentions that 15 percent of the Medicare savings are

attributable to payments to managed care plans in FY 1998 and 20

percent in FY 1999. It is unclear what this means. Are home health

services to managed care enrollees included in projected expenditures?

Does HCFA expect managed care organizations to reduce home health

services even though it is far below fee-for-service utilization?

Response: The impact notice mentions that some of the savings from

this system are attributable to payments to managed care plans.

Payments to Medicare managed care plans are based on fee-for-service

Medicare benefits. If we expect to pay less to home health agencies on

a fee-for-service basis, then the managed care rates will decrease.

Managed care payments, in total, are included as part of our cost

projections. Since payments to managed care plans are based on fee-for-

service use, there is no need to project managed care payments by type.

Since the B.B.A. '97 is directed toward changes in fee-for-service,

managed care plans are not expected to reduce home health services as a

result of this notice.

Comment: The impact section did not address the impact on per-visit

costs of reducing the average number of visits provided per patient. It

would seem logical that agencies' per-visit costs would increase as the

average reimbursed cost per patient decreases. This impact on per-visit

costs will drive agency per-visit costs higher which will result in a

greater proportion of agencies exceeding the per-visit cost limitations

than HCFA anticipates in its analysis.

Response: We believe that this system was implemented, in part,

because the number of visits per beneficiary had been increasing at

double-digit growth rate until 1996. However, the cost per-visit was

not increasing at a similar level. The impact of these limitations was

not expected to reduce the cost per-visit significantly.

Comment: The impact analysis is incomplete for two reasons. First,

the Regulatory Flexibility Act is insufficient since it does not

consider alternative interpretations of the HHA Interim Payment System

provision. Second, section 202 of the Unfunded Mandates Reform Act

requires its own assessment of costs and benefits.

[[Page 42920]]

Response: The HHA Interim Payment System provision, generally

section 4602 of the Balanced Budget Act of 1997, is narrowly

constructed such that it does not provide for exceptions or

consideration of options that reduce the burden on small entities. We

did not prepare a separate assessment of costs and benefits for

purposes of Section 202 of the Unfunded Mandates Reform Act because we

believe that this regulation did not meet the threshold requirement of

an annual expenditure by State, local, or tribal governments, in the

aggregate, or by private sector, of $100 million (adjusted annually for

inflation).

Comment: HCFA describes 1,158 new providers on the database as

those with December 1994 or December 1995 FY ends. These agencies may

not be representative of all new agencies and thus the database may be

limited in its use as a measure of the impact on new agencies.

Response: In order to meet the statutory dates for establishing the

limitation, we had a very limited time in which to collect data, but

obtained the most recent data available to assess the impact on new

agencies. Because of how new providers are defined, we are limited by

our resources in identifying all types of new providers. We believe

that the data base was sufficient to conduct a valid impact analysis.

Comment: We see no justification for the additional two percent

reduction to the per-beneficiary limitation for new agencies when

determining a specific agency's per-beneficiary limitation as shown on

page 15726 of the notice.

Response: The national per-beneficiary calculations at 63 FR 15726

should not be multiplied by 98 percent. The two percent reduction to

the per-beneficiary limitations has already been taken into account in

the calculations of the national per-beneficiary limitation. The

examples of the national per-beneficiary calculations at 63 FR 15726

should be $3,279.26 for the Dallas MSA and $2,679.89 for rural Texas.

We apologize for any inconveniences this may have caused.

Comment: The example of two merged agencies at 63 FR 15721 does not

explain the new November 1, 1997 beginning cost reporting period. The

date does not match either the agencies' previous cost reporting

periods or the merger date.

Response: The date in the example of the two merged agencies should

state that the weighted per-beneficiary limitation applies to the cost

reporting period which began December 1, 1997.

Comment: The counties listed for MSA region 8840--Washington, DC in

the March 31, 1998 Federal Register includes Charles County but those

in the January 2, 1998 Federal Register do not. Is Charles County,

Maryland in the Washington, DC region for the wage index for both the

per-beneficiary limitations and the per-visit limitations?

Response: Both Federal Registers at 63 FR 102 and 63 FR 15733 show

Charles, MD as part of the Washington, DC MSA.

Comment: Step 2 of the example at 63 FR 15725 depicts a divisor of

seven instead of six. Shouldn't the divisor be six?

Response: Yes, the divisor at step 2 of the example at 63 FR 15725

should be six.

Comment: HCFA should have made the database available when the

notice was published and should do so for all future cost limit or

payment rate notices. The database should be available for the full

comment period.

Response: We made every attempt to make the data available shortly

after the notice was published. Due to the limited time available after

finalizing the limits, we were unable to post the data to the Internet

until one month after the notice was published. We believe this allowed

sufficient time for analysis.

Comment: HCFA should make provider numbers and other requested data

available immediately.

Response: We believe it is not necessary to identify individual

providers in order to calculate the per-beneficiary limitations and

therefore did not include this information in our data base on the

public use file.

Comment: HCFA should provide a detailed explanation of how the

database was constructed. The discussion should include the method for

choosing agencies to include/exclude, the editing and verification

process, and an explanation of how denied claims were matched to

claims-based unduplicated census counts.

Response: We believe the calculations were explained fully in the

notice. Because the statute is very explicit about how the per-

beneficiary limitations are determined, we believe the explanations

provided in the notice are adequate.

Comment: All outlying areas, such as Guam, Puerto Rico, and the

Virgin Islands, should be combined into one category for purposes of

calculating the census division components.

Response: The statute did not refer specifically to Guam, Puerto

Rico, or the Virgin Islands in establishing per-beneficiary

limitations. These areas do not fall within any of the existing census

region divisions which are required by statute in establishing the

regional per-beneficiary limitations. In order to avoid advantaging or

disadvantaging any of the census division regions, we treated these

areas as separate areas in establishing the regional per-beneficiary

limitations. Puerto Rico and the Virgin Islands were combined as one

area and Guam as a separate area. We note that the wage indices for the

Virgin Islands and Guam were inadvertently omitted from the notice. The

wage index for the Virgin Islands is .4588 and the wage index for Guam

is .6516.

Comment: The standardization of the census division average per-

beneficiary costs by the appropriate wage indices should only be

applied to the labor-related component of the per-beneficiary rates.

Response: The standardization of the per-beneficiary limitations

was applied to the labor-related component of the average costs per

beneficiary. This adjustment methodology is explained on page 15723 of

the notice with respect to how the adjusted unduplicated census counts

of Medicare beneficiaries are used in the calculation of the per-

beneficiary limitations. We applied the labor-related component

percentage before calculating the wage-index weighted unduplicated

beneficiary counts.

Comment: Unless HCFA can provide a reasonable explanation for

including nonroutine supplies in the costs that were standardized by

the wage index, the cost of nonroutine supplies should have been

excluded from the standardization of these costs.

Response: When doing the standardization of the per-beneficiary

limitations, we do not separate out each individual component of costs

to determine the labor and nonlabor components. The labor-related and

nonlabor percentages are determined with respect to all costs incurred

by an HHA, and are applied to total costs accordingly.

Comment: HCFA should explain the reasons for not computing urban

and rural costs separately and weighting by patient rather than agency.

Response: The statute does not provide for establishing urban and

rural per-beneficiary limitations. Since the wage-index is applied

based on the location of the services rendered to the beneficiaries,

the standardization was done through a weighting of the beneficiaries

rather than the location of the HHA.

Comment: HCFA should ensure that HHAs are reimbursed for additional

costs associated with new regulatory requirements, such as OASIS costs.

Response: The statute requires the per-beneficiary limitations to

be based

[[Page 42921]]

upon the costs incurred during a particular base year, the Federal FY

1994, and does not contemplate adjustments due to costs incurred

subsequent to the base year.

Comment: We received numerous comments concerning the definition of

new providers under the IPS. In particular, there are concerns over the

application of national per-beneficiary limitations when there are

mergers and consolidations of unlike agencies, i.e. provider-based and

freestanding or agencies without a FY ending during Federal year 1994

with agencies with a FY ending during Federal FY 1994. Various

scenarios were written in with respect to whether HCFA would find if

such scenarios constituted a merger or consolidation which took place

since Federal FY 1994. It was recommended that HCFA limit new provider

status to those agencies without a 12-month cost reporting ending

during Federal FY 1994 and providers that did not exist at the time of

passage of the B.B.A. '97.

Response: We do not believe the policies set forth in the Federal

Register were unreasonable with respect to new provider status under

the interim payment system. The policies are not intended to redefine

or impose new policies regarding HCFA's long standing policies

regarding mergers and consolidations. With respect to provider-based

agencies or freestanding agencies, we have always made a distinction

between the two types of providers. In May 1998 we issued a Program

Memorandum (Transmittal No. A-98-15) which clarified our policies

regarding provider-based and freestanding designation. In that

memorandum we state that the main purpose of provider or facility-based

designation is to accommodate the appropriate accounting and allocation

of costs where there is more than one type of provider activity taking

place within the same facility/organization. This cost allocation and

cost reimbursement more often than not results in Medicare program

payments that exceed what would have been paid for if the same services

were rendered by a free-standing entity.

Even though we believe our policies as stated in the March 31, 1998

Federal Register with respect to what is a ``clause vi'' agency are

reasonable, we have reevaluated our position based on comments and are

revising our interpretation as to what constitutes a new provider by

adding an alternative reading. In determining whether an agency is a

new or old provider, we will consider whether the agency's provider

number existed with a 12-month cost reporting period ending during

Federal FY 1994. In such a case, that agency can be considered an old

provider/clause v provider regardless of any changes that took place in

subsequent years. However, those agencies that did not have a 12-month

cost reporting period ending during Federal FY 1994 and those agencies

that were certified under Medicare with provider numbers that did not

exist with a 12-month cost reporting period ending during Federal FY

1994 will continue to be considered new providers/clause vi providers.

For greater detail on new providers, see section V.C. ``New

Providers.''

V. Update of the Per-Beneficiary Limitations

The methodologies and data used to develop the schedule of per-

beneficiary limitations set forth in this notice are the same as that

used in setting the per-beneficiary limitations that were effective for

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

updated the per-beneficiary limitations to reflect the expected cost

increases occurring between the cost reporting periods ended during

Federal FY 1994 and September 30, 1999, 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. Therefore, we

excluded this time period when we adjusted the database for the market

basket increases.

A. Data Used

The cost report data used to develop the schedule of per-

beneficiary limitations set forth in this notice are for cost reporting

periods ending in Federal FY 1994, as required by section 1861(v)(1)(L)

of the Act. We have updated the per-beneficiary limitations to reflect

the expected cost increases occurring between the cost reporting

periods for the data contained in the database and September 30, 1999

(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).

The interim payment system sets limitations according to two

different methodologies. For agencies with cost reporting periods

ending during Federal FY 1994, the limitation is based on 75 percent of

98 percent of the agencies' own reasonable costs and 25 percent of 98

percent of the average census region division costs. At the end of the

agency's cost reporting period subject to the per-beneficiary

limitations, the labor component of the census region division per-

beneficiary limitation is adjusted by a wage index based on where the

home health services are rendered.

For new providers and providers without a cost reporting period

ending during Federal FY 1994, the per-beneficiary limitation is based

on the standardized national median of the blended agency-specific and

census region division per-beneficiary limitations described above.

This is done by simply arraying the agencies' per-beneficiary

limitations and selecting the median case. This national per-

beneficiary limitation is then standardized for the effect of the wage

index. The wage index is applied to the labor component of the national

per-beneficiary limitation at the end of the cost reporting period

beginning on or after October 1, 1998, and is based on where the home

health services are rendered.

B. Wage Index

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

standardized regional average per-beneficiary limitation and the

national per-beneficiary limitation to reflect differing wage levels

among areas. In establishing the regional average per-beneficiary

limitation and national per-beneficiary limitation, 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)) without regard to whether such

hospitals have been reclassified to a new geographic area, to establish

the HHA cost limitations. Therefore, the schedules of standardized

regional average per-beneficiary limitations and the national per-

beneficiary limitation reflects the MSA definitions that are currently

in effect under the hospital prospective payment system.

As we did for the per-visit limitations, 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

limitations 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 (Public Law 98-11). Section 601(g)

of Public Law 98-21 requires that any

[[Page 42922]]

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 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 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 Fall-Warwick, RI MSA

We are continuing to grant these urban exceptions for the purpose

of applying the Medicare hospital wage index to the HHA standardized

regional average per-beneficiary limitations and the national per-

beneficiary limitation. These exceptions result in the same New England

County Metropolitan Area definitions for hospitals, skilled nursing

facilities, 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, these four counties are urban under

either definition, New England County Metropolitan Area or MSA.

Section 1861(v)(1)(L)(iii) requires the use of 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 without regard to whether such hospitals have been

reclassified to a new geographic area pursuant to section 1886(d)(8)(B)

of the Act. The wage-index, as applied to the labor portion of the

regional per-beneficiary limitation and the labor portion of the

national per-beneficiary limitation, must be based on the geographic

location in which the home health service is actually furnished.

C. New Providers

Section III. C. at 63 FR 15721 through 15722 provides the policy

with respect to the determination of whether an agency is a new agency

or an old agency for applying the per-beneficiary limitations.

Considering the number of comments and inquiries we have received

concerning the policies set forth in this section, particularly with

respect to what a ``clause vi'' provider is under the IPS, we have

reevaluated our position on this issue and are modifying some of the

policies.

In considering this policy we recognize there are many changes an

HHA may undergo including changes due to mergers, consolidations, and

changes in ownership. Regardless of what constitutes the change there

will be a surviving entity resulting from the change and the status of

the surviving entity will dictate how the agency will be treated under

the per-beneficiary limitations. We believe that providers fall within

the following groupings: (a) An HHA with an existing provider number

with a provider agreement with HCFA, (b) an HHA accepts assignment of

the provider agreement and provider number which had a FY 1994 base

year through a change in ownership after the FY 1994 base year, or, (c)

an HHA has gone through the certification process since the FY 1994

base period as a new provider and has a new provider number assigned

after the applicable FY 1994 base year. Under (a) or (b), if the

provider number existed as an HHA with a 12-month cost reporting period

ending during Federal FY 1994, that 12-month cost reporting period will

be the cost reporting period for calculating the agency-specific

component of the per-beneficiary limitation and considered an old

provider with an agency-specific per-beneficiary limitation. Under (c),

the agency will be a new provider and subject to the national per-

beneficiary limitation.

We are permitting providers that would be determined to be new

providers under the policies set forth in the March 31, 1998 final

notice, to elect to be considered an old provider under the policies

set forth above. Furthermore, providers that were determined to be new

providers under the March 31, 1998 policies may likewise choose to

continue to be considered new providers. These choices must be made and

conveyed to the agency's fiscal intermediary by October 1, 1998. We

note these designations of provider status is solely for purposes of

determining the per-beneficiary limitation. However, those providers

that elect to continue to be new providers pursuant to the March 31,

1998 final notice are subject to that continued new provider status for

so long as there are no changes after their October 1, 1998 election

that would affect their elected new provider option.

Our policy addressing HHA branches that become subunits set forth

at 63 FR 15722 is not affected by the change addressed above.

VI. Market Basket

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

below.

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

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

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

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, including 9.569 ......................

allocated Contract Services' Non-

labor.

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

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

Paper Products &

Stationary Supplies.

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

Other Administrative & General, 7.591 CPI-Services.

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.

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

Equipment.

Other Expenses, including allocated 5.322 CPI-U All Items Less

Contract Services' Non-Labor. Food & Energy.

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

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

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

[[Page 42923]]

VII. Update of Data Base

The data used to develop the cost per-visit limitations, the census

region per-beneficiary limitations and the national per-beneficiary

limitation were adjusted 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, 1999,

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 inflation factors were used in calculating

the per-visit, the census region per-beneficiary limitations, and

national per-beneficiary limitations:

Table 2.--Factors for Inflating Database Dollars to September 30,1999

[Inflation Adjustment Factors \1\]

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

FY end 1993 1994 1995 1996 1997

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

October 31..................................... 1.11846 1.08387 1.08361 1.08169 1.05773

November 30.................................... 1.11568 1.08773 1.08361 1.08073 1.05507

December 31.................................... 1.11291 1.08650 1.08361 1.07955 1.05241

January 31..................................... ........... 1.11015 1.08553 1.08361 1.07816

February 28.................................... ........... 1.10741 1.08483 1.08361 1.07656

March 31....................................... ........... 1.10475 1.08428 1.08361 1.07477

April 30....................................... ........... 1.10215 1.08387 1.08361 1.07279

May 31......................................... ........... 1.09963 1.08361 1.08361 1.07064

June 30........................................ ........... 1.09709 1.08361 1.08361 1.06820

July 31........................................ ........... 1.09480 1.08361 1.08342 1.06566

August 31...................................... ........... 1.09276 1.08361 1.08304 1.06303

September 30................................... ........... 1.09090 1.08361 1.08246 1.06039

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

\1\ Source: The Home Health Agency Price Index, produced by HCFA. The forecasts are from Standard and Poor's DRI

1st QTR 1998; @USSIM/TREND25YR0298@CISSIM/Control981 forecast exercise which has historical data through

1998:1.

Multiplying nominal dollars for a given FY end by their respective

inflation adjustment factor will express those dollars in the dollar

levels for the FY ending September 30, 1998.

The procedure followed to develop these tables, based on

requirements from 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.

A. Short Period Adjustment Factors for Cost Reporting Periods

Consisting of Fewer Than 12 Months

HHAs with cost reporting periods beginning on or after October 1,

1998 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 FY has already begun, or when a

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

reporting period. The data used in calculating the limitations were

updated to September 30, 1999. Therefore, the cost limitations

published in this notice are for a 12-month cost reporting period

beginning October 1, 1998 and ending September 30, 1999. For 12-month

cost reporting periods beginning after October 1, 1998 and before

October 1, 1999, cost reporting period 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 limitations to agencies with cost

reporting periods of fewer than 12 months, we are publishing an example

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 of the cost reporting 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.

Example:

1. After approval by its intermediary, an HHA that had a 1994 base

year changed its FY end from June 30 to December 31. Therefore, the HHA

had a short cost reporting period beginning on July 1, 1999 and ending

on December 31, 1999. The cost reporting period ending during Federal

FY 1994 would have been the cost reporting period ending on June 30,

1994. The limitations 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

1999 through December 1999: 6.82716.

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

short period:

6.827166=1.13787.

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

common period of October 1998 through September 1999: 13.45836.

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

common period:

13.4583612=1.12153.

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 per-visit

and per-beneficiary limitations:

1.137871.12153=1.0145693.

Step 6--Apply the results from Step 5 to the published limitations.

For example:

a. Urban skilled nursing per-visit labor portion

$88.44 x 1.0145693=$89.73.

b. Urban skilled nursing per-visit nonlabor portion

$19.73 x .0145693=$20.02.

[[Page 42924]]

c. West South Central Census region division labor portion per-

beneficiary limitation

$4,588.26 x 1.0145693=$4,655.11.

d. West South Central Census region division nonlabor portion per-

beneficiary limitation

$1,319.27 x 1.0145693=$1,338.49.

Step 7. Also apply the results from Step 5 to the calculated

agency-specific per-beneficiary amount which has been updated to

September 30, 1999 using Table 2.

B. Adjustment Factor for Reporting Year Beginning After October 1, 1998

and Before October 1, 1999

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

after November 1, 1998, the per-visit limitation and the adjusted

census region division per-beneficiary limitation and the agency-

specific per-beneficiary limitation or the adjusted national per-

beneficiary limitations are 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 per-beneficiary limitations

become effective.

In adjusting the agency-specific per-beneficiary limitation for the

market basket increases since the end of the cost reporting period

ending during Federal year 1994, the intermediary will increase the

agency-specific per-beneficiary limitation to September 30, 1999. That

way when the limitations need to be further adjusted for the cost

reporting period, all elements of the limitation calculations can be

adjusted by the same factor. For example, if an HHA providing services

in the Dallas MSA only and has a cost reporting period beginning

January 1, 1999, its occupational therapy per-visit limitation and its

per-beneficiary limitation would be further adjusted as follows:

Computation of Revised Per-Visit for Occupational Therapy

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

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

Adjusted per-visit limitation........................... $123.05 \1\

Adjustment from Table 5................................. 1.00720

Revised per-visit limitation............................ $123.94

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

\1\ Adjusted by appropriate wage index applicable to the Dallas MSA and

the budget neutrality adjustment factor of 1.03.

Computation of Revised Per-beneficiary Limitations for an HHA With a

1994 Base Period

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

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

Agency-specific component inflated through December 31,

1999:

$5400.00 x .98 x .75............................ $3,969.00

West south central division component adjusted by the

Dallas MSA wage index:

$5,771.26 x .98 x .25........................... 1,413.96

Blended per-beneficiary limitation for Dallas-MSA....... $5,382.96

Adjustment factor from Table 5.......................... 1.00720

Adjusted blended per-beneficiary limitation for Dallas

MSA.................................................... $5,521.72

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

Computation of Revised Per-beneficiary Limitation for a New Provider in

the Dallas MSA

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

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

National per-beneficiary limitation for Dallas MSA...... $3,376.61 \1\

Adjustment factor from Table 5.......................... 1.00720

Adjusted national per-beneficiary limitation............ $3,400.92

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

\1\ Published limitation reflects 98 percent factor.

VIII. Schedules of Per-visit and Per-beneficiary Limitations

The schedules of limitations set forth below apply to cost

reporting periods beginning on or after October 1, 1998. The

intermediaries will compute the adjusted limitations using the wage

index(s) published in Tables 4a and 4b of section X. for each MSA and/

or non MSA for which the HHA provides services to Medicare

beneficiaries. The intermediary will notify each HHA it services of its

applicable limitations for the area(s) where the HHA furnishes HHA

services to Medicare beneficiaries. Each HHA's aggregate limitations

cannot be determined prospectively, but depends on each HHA's Medicare

utilization (visits and unduplicated census count) by location of the

HHA services furnished for the cost reporting periods subject to this

document.

Section 1861(v)(1)(L)(vi)(II) of the Act, requires the per-

beneficiary limitations to be prorated among HHAs for Medicare

beneficiaries who use services furnished by more than one HHA. The per-

beneficiary limitation will be prorated based on a ratio of the number

of visits furnished to the individual beneficiary by the HHA during its

cost reporting period to the total number of visits furnished by all

HHAs to that individual beneficiary during the same period.

The proration of the per-beneficiary limitation will be done based

on the fraction of services the beneficiary received from the HHA. For

example, if an HHA furnished 100 visits to an individual beneficiary

during its cost reporting period ending September 30, 1999, and that

same individual received a total of 400 visits during that same period,

the HHA would count the beneficiary as a .25 unduplicated census count

of Medicare patient for the cost reporting period ending September 30,

1999.

The HHA costs that are subject to the per-visit limitations include

the cost of medical supplies routinely furnished in conjunction with

patient care. Durable medical equipment orthotic, prosthetic, 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 the per-visit schedule of limitations. (See Chapter IV of the

Home Health Agency Manual (HCFA Pub. II).) The HHA costs that are

subject to the per-beneficiary limitations include the costs of medical

supplies routinely furnished and nonroutine medical supplies furnished

in conjunction with patient care. Durable medical equipment directly

identifiable as services to an individual

[[Page 42925]]

patient are excluded from the per-beneficiary limitations and are paid

without regard to this schedule of per-beneficiary limitations.

The intermediary will determine the aggregate limitations for each

HHA according to the location where the services are furnished by the

HHA. Medicare payment is based on the lower of the HHA's total

allowable Medicare costs plus the allowable Medicare costs of

nonroutine medical supplies, the aggregate per-visit limitation plus

the allowable Medicare costs of nonroutine medical supplies, or the

aggregate per-beneficiary limitation. An example of how the aggregate

limitations are computed for an HHA providing HHA service to Medicare

beneficiaries in both Dallas, Texas and rural Texas are as follows:

Example: HHA X, an HHA located in Dallas, TX, has 11,500 skilled

nursing visits, 4,300 physical therapy visits, 8,900 home health aide

visits and an unduplicated census count of 400 Medicare beneficiaries

in the Dallas MSA and 5,000 skilled nursing visits, 2,300 physical

therapy visits, 4,300 home health aide visits and an unduplicated

census count of 200 Medicare beneficiaries in rural Texas during its

12-month cost reporting period ending September 30, 1999. The

unadjusted agency-specific per-beneficiary amount for the base period

(cost reporting period ending September 30, 1994) is $4,825.00. The

aggregate limitations are calculated as follows:

Determining the Aggregate Per-Beneficiary Limitation

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

Unduplicated

census count Total per

MSA/Non-MSA area Per beneficiary limitation of Medicare beneficiary

beneficiaries limitation

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

Dallas, TX.................................. (4,825.00 x 1.09090 x .98 x .75) 400 2,113,080

plus ((4,588.36 x .9703) plus

1,319.21)) x .98 x .25.

Rural, TX................................... (4,825.00 x 1.09090 x .98 x .75) 200 1,004,852

plus ((4,588.36 x .7404) plus

1,319.21)) x .98 x .25.

Aggregate Limitation........................ ...................................... ............. 3,117,932

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

Determining the Aggregate Per-Visit Limitation

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

Number of Per-visit

Area/type of visit visits limit \1\ Total limit

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

Dallas-MSA:......................

Skilled nursing.............. 11,550 108.12 1,248,786

Physical therapy............. 4,300 121.08 520,644

Home health aide............. 8,900 45.14 401,746

Rural Texas:

Skilled nursing.............. 5,000 77.37 386,850

Physical therapy............. 2,300 88.95 204.585

Home health aide............. 4,300 43.06 185,158

Aggregate limitation............. ........... ........... 2,947,769

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

\1\ The per-visit has been adjusted by the appropriate wage-index and

the budget neutrality adjustment factor of 1.03.

For the cost reporting period ending September 30, 1999, the HHA

incurred $2,850,000 in Medicare costs for the discipline services and

$325,000 for the costs of Medicare nonroutine medical supplies.

Medicare reimbursement for this HHA would be $3,117,932, which is the

lesser of the actual costs of $2,850,000 plus the costs of nonroutine

medical supplies of $325,000 ($3,175,000) or the aggregate per-visit

limitation of $2,947,769 plus the costs of nonroutine medical supplies

of $325,000 ($3,272,769) or the aggregate per-beneficiary limitation of

$3,117,932.

Before the limitations are applied during settlement of the cost

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

items of costs (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 (see 42 CFR 413.106) and the limitation on

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

(see 42 CFR 413.9).

Table 3A.--Per-Visit Limitations

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

Per-visit Labor Nonlabor

Type of Visit limitation portion portion \1\

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

MSA(NECMA) location:

Skilled nursing care......... 108.17 $88.4 $19.73

Physical therapy............. $121.14 98.82 22.32

Speech therapy............... 126.52 103.01 23.51

Occupational therapy......... 123.10 99.81 23.29

Medical social services...... 167.78 136.78 31.00

Home health aide............. 45.16 36.88 8.28

NonMSA location:

Skilled nursing care......... 94.97 74.13 20.84

Physical therapy............. 107.26 83.56 23.70

Speech therapy............... 107.97 83.99 23.98

Occupational therapy......... 108.15 84.05 24.10

[[Page 42926]]

Medical social services...... 130.69 101.38 29.31

Home health aides............ 43.84 34.21 9.63

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

\1\ Nonlabor portion of per-visit limitations 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 Hawaii....................................... 1.225

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

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

County of Maui......................................... 1.2225

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

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

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

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

Table 3b.--Standardized Per-Beneficiary Limitation by Census Region

Division, Labor/Nonlabor

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

Labor Nonlabor

Census region division component component

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

New England (CT, ME, MA, NH, RI, VT).......... $2,749.52 $790.58

Middle Atlantic (NJ, NY, PA).................. 2,037.88 585.96

South Atlantic (DE, DC, FL, GA, MD, NC, SC,

VA, WV)...................................... 3,073.90 883.84

East North Central (IL, IN, MI, OH, WI)....... 2,492.70 716.73

East South Central (AL, KY, MS, TN)........... 4,726.25 1,358.95

West North Central (IA, KS, MN, MO, NE, ND,

SD).......................................... 2,394.14 688.39

West South Central (AR, LA, OK, TX)........... 4,588.26 1,319.27

Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)..... 3,023.85 869.45

Pacific (AK, CA, HI, OR, WA).................. 2,342.45 673.53

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

Table 3c.--Standardized Per-Beneficiary Limitation for New Agencies and

Agencies Without a 12-Month Cost Report Ending During Federal FY 1994

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

Labor Nonlabor

component component

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

National.................................... $2,684.47 $771.87

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

Table 3d.--Standardized Per-Beneficiary Limitations for Puerto Rico and

Guam

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

Labor Nonlabor

component component

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

Puerto Rico................................... $1,996.22 $573.97

Guam.......................................... 1,929.22 554.71

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

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

[[Page 42927]]

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

Anchorage, AK

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

Anne Arundel, MD

Baltimore, MD

Baltimore City, MD

Carroll, MD

Harford, MD

Howard, MD

Queen Anne, 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-Brockton, MA-NH........ 1.1506

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

[[Page 42928]]

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......................................... 0.8288

Russell, AL

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

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................................... 0.8837

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 Gary, 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...................................... 0.8745

Polk, MN

Grand Forks, ND

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

Mesa, CO

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

Allegan, MI

[[Page 42929]]

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

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

[[Page 42930]]

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, NJ

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

Milwaukee, WI

Ozaukee, WI

Washington, WI

Waukesha, WI

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

[[Page 42931]]

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

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

Allegheny, PA

Beaver, PA

Butler, PA

Fayette, PA

Washington, PA

Westmoreland, PA

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

Berkshire, MA

6340 Pocatello, 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

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

[[Page 42932]]

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

17760 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

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

8960 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

[[Page 42933]]

Sutter, CA

Yuba, CA

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

Yuma, AZ

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

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

Guam......................................................... 0.6516

Virgin Islands............................................... 0.4588

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

\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, 1998............................................ 1.00239

December 1, 1998............................................ 1.00478

January 1, 1999............................................. 1.00720

February 1, 1999............................................ 1.00964

March 1, 1999............................................... 1.01210

April 1, 1999............................................... 1.01456

May 1, 1999................................................. 1.01702

June 1, 1999................................................ 1.01948

July 1, 1999................................................ 1.02197

August 1, 1999.............................................. 1.02448

September 1, 1999........................................... 1.02701

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

\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/TREND25YR0897@CISSIM/Control973

forecast exercise which has historical data through 1997:2.

Table 6.--Monthly Index Levels for Calculating Inflation Factors To Be

Applied to Home Health Agency

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

Index

Per-beneficiary limitations month level

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

October 1992................................................. .98566

November 1992................................................ .98800

December 1992................................................ .99099

January 1993................................................. .99399

February 1993................................................ .99700

March 1993................................................... .99933

April 1993................................................... 1.00166

May 1993..................................................... 1.00400

June 1993.................................................... 1.00666

July 1993.................................................... 1.00933

August 1993.................................................. 1.01200

September 1993............................................... 1.01400

October 1993................................................. 1.01600

November 1993................................................ 1.01800

December 1993................................................ 1.02099

January 1994................................................. 1.02399

February 1994................................................ 1.02700

March 1994................................................... 1.02866

April 1994................................................... 1.03033

May 1994..................................................... 1.03200

June 1994.................................................... 1.03499

July 1994.................................................... 1.03499

August 1994.................................................. 1.03499

September 1994............................................... 1.03499

October 1994................................................. 1.03499

November 1994................................................ 1.03499

December 1994................................................ 1.03499

January 1995................................................. 1.03499

February 1995................................................ 1.03499

March 1995................................................... 1.03499

April 1995................................................... 1.03499

May 1995..................................................... 1.03499

June 1995.................................................... 1.03499

July 1995.................................................... 1.03499

August 1995.................................................. 1.03499

September 1995............................................... 1.03499

October 1995................................................. 1.03499

November 1995................................................ 1.03499

December 1995................................................ 1.03499

January 1996................................................. 1.03499

February 1996................................................ 1.03499

March 1996................................................... 1.03499

April 1996................................................... 1.03499

May 1996..................................................... 1.03499

June 1996.................................................... 1.03499

July 1996.................................................... 1.03720

August 1996.................................................. 1.03941

September 1996............................................... 1.04162

October 1996................................................. 1.04383

November 1996................................................ 1.04604

December 1996................................................ 1.04856

January 1997................................................. 1.05108

February 1997................................................ 1.05361

March 1997................................................... 1.05582

April 1997................................................... 1.05803

May 1997..................................................... 1.06024

June 1997.................................................... 1.06370

July 1997.................................................... 1.06717

August 1997.................................................. 1.07065

September 1997............................................... 1.07317

October 1997................................................. 1.07569

November 1997................................................ 1.07822

December 1997................................................ 1.08074

January 1998................................................. 1.08327

February 1998................................................ 1.08580

March 1998................................................... 1.08769

April 1998................................................... 1.08958

May 1998..................................................... 1.09148

June 1998.................................................... 1.09494

July 1998.................................................... 1.09841

August 1998.................................................. 1.10189

September 1998............................................... 1.10441

October 1998................................................. 1.10693

November 1998................................................ 1.10946

December 1998................................................ 1.11230

January 1999................................................. 1.11514

February 1999................................................ 1.11798

March 1999................................................... 1.12019

April 1999................................................... 1.12240

May 1999..................................................... 1.12461

June 1999.................................................... 1.12776

July 1999.................................................... 1.13091

August 1999.................................................. 1.13408

September 1999............................................... 1.13660

October 1999................................................. 1.13912

November 1999................................................ 1.14165

December 1999................................................ 1.14480

January 2000................................................. 1.14795

February 2000................................................ 1.15112

March 2000................................................... 1.15332

April 2000................................................... 1.15553

May 2000..................................................... 1.15774

June 2000.................................................... 1.16120

July 2000.................................................... 1.16467

August 2000.................................................. 1.16816

September 2000............................................... 1.17099

October 2000................................................. 1.17383

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

X. Regulatory Impact Statement

A. Introduction

HCFA has examined the impacts of this notice with comment as

required by Executive Order 12866, the Regulatory Flexibility Act (RFA)

(Pub. L. 96-354), and the Unfunded Mandates Reform Act

[[Page 42934]]

of 1995 (Pub. L. 104-4). 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. Approximately 25

percent of HHAs are identified as Visiting Nurse Associations, combined

in government and voluntary, and official health agency, and therefore,

are considered small entities. We anticipate this notice, in total,

will have a significant impact on a substantial number of small

entities based on the estimates shown below. We have examined the

options for lessening the burden on small entities, however, the

statute does not allow for any exceptions to these limitations based on

size of entity. Therefore, there are no options to lessen the

regulatory burden that are consistent with the statute.

Section 202 of the Unfunded Mandates Reform Act requires agencies

to prepare an assessment of anticipated costs and benefits before

proposing any rule that may result in an annual expenditure by State,

local, or tribal governments, in the aggregate, or by private sector,

of $100 million (adjusted annually for inflation). We believe that

there are no costs associated with this notice with comment that apply

to these governmental and private sectors. Therefore, the law does not

apply.

1. Effect of This Notice

This notice is a part of the HHA IPS. As a result of rebasing the

per-visit limitations, we estimate that there will be a cost to the

Medicare program of approximately $70 million in Federal FY 1999. We

estimate that the effect of the offset adjustment for the

implementation of OASIS data collection, as discussed in section III.G.

will result in negligible costs to the Medicare program. We note that

this estimate differs from that published in the Paperwork Reduction

Act section of the March 10, 1997 proposed rule on OASIS collection

requirements (62 FR 11035). This is due to several factors. Unlike the

OASIS proposed rule which calculated impacts based on total HHA costs

on an agency basis, the offset adjustment factor in this notice is

necessarily calculated on a per-visit, Medicare basis. Moreover, we

have based these estimates on actual data collected from the home

health PPS demonstration rather than using the general estimates of the

proposed OASIS rule. We believe using actual data which was not

available at the time the OASIS proposed rule was written produces a

more accurate estimate of cost impact.

We should also note, however, that the adjustment only incorporates

the incremental costs of data collection and not any incremental costs,

if any, which may be incurred for OASIS reporting because no reliable

cost data were available at this time. We are specifically requesting

comments on these costs. Also, we cannot determine the number of

providers affected by our revised new provider policy and therefore

cannot determine what the financial impact, if any, will be.

2. Effect on March 31, 1998 Final Rule With Comment Period

As stated in the March 31, 1998 final rule with comment period (63

FR 15718) for Federal FY 1999, we estimate that the imposition of the

per-beneficiary limitations will result in savings of $2.14 billion.

However, the changes imposed through this notice to the per-visit

limitations will result in savings of $670 million instead of $740

million as stated in the March 31, 1998 final rule with comment period

(63 FR 15718). This is the result of rebasin

This text is long and has been trimmed here. Open the source document for the complete record.