[Federal Register: May 8, 1998 (Proposed Rules)] [Page 25675-25715] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr08my98-17] [[pp. 25675-25715]] Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1999 Rates [[Continued from page 25674]] [[Page 25675]] 294..................................... 82039 4.9200 1 2 4 6 9 295..................................... 3593 3.9585 1 2 3 5 7 296..................................... 235524 5.3934 2 3 4 7 10 297..................................... 32715 3.6521 1 2 3 4 7 298..................................... 91 3.7253 1 1 2 4 8 299..................................... 968 5.3657 1 2 4 7 10 300..................................... 16820 6.2855 2 3 5 8 12 301..................................... 2395 3.8113 1 2 3 5 7 302..................................... 7784 10.1382 5 6 8 12 18 303..................................... 19638 9.2247 4 5 7 10 16 304..................................... 12813 8.9904 2 4 7 11 18 305..................................... 2552 3.8985 1 2 3 5 7 306..................................... 10658 5.5019 1 2 3 7 12 307..................................... 2355 2.3996 1 1 2 3 4 308..................................... 9167 6.0165 1 2 4 8 13 309..................................... 3541 2.5945 1 1 2 3 5 310..................................... 26694 4.2835 1 2 3 5 9 311..................................... 7805 1.9543 1 1 1 2 4 312..................................... 1731 4.3437 1 1 3 6 9 313..................................... 587 2.3799 1 1 2 3 5 314..................................... 1 10.0000 10 10 10 10 10 315..................................... 28283 8.0413 1 2 5 10 18 316..................................... 93071 6.8024 2 3 5 9 14 317..................................... 787 2.8666 1 1 2 3 6 318..................................... 6194 6.1022 1 3 5 8 12 319..................................... 407 2.9902 1 1 2 4 6 320..................................... 177474 5.5698 2 3 4 7 10 321..................................... 23679 4.0416 2 2 3 5 7 322..................................... 82 4.1098 2 2 3 4 7 323..................................... 16931 3.2166 1 1 2 4 6 324..................................... 7513 1.9385 1 1 1 2 4 325..................................... 7409 3.9591 1 2 3 5 8 326..................................... 2192 2.7199 1 1 2 3 5 327..................................... 9 2.8889 1 1 2 3 4 328..................................... 759 3.7167 1 2 3 5 7 329..................................... 87 2.2644 1 1 1 3 4 331..................................... 43598 5.5769 1 3 4 7 11 332..................................... 4517 3.5603 1 1 3 5 7 333..................................... 306 4.9477 1 2 4 6 11 334..................................... 18572 4.9690 3 3 4 6 8 335..................................... 10338 3.7163 2 3 3 4 5 336..................................... 54082 3.6046 1 2 3 4 7 337..................................... 31770 2.2858 1 1 2 3 4 338..................................... 2767 4.7879 1 2 3 6 10 339..................................... 1987 4.1726 1 1 3 5 9 340..................................... 2 1.0000 1 1 1 1 1 341..................................... 4909 2.9589 1 1 2 3 6 342..................................... 1007 3.4518 1 2 2 4 7 344..................................... 3882 2.6285 1 1 1 3 5 345..................................... 1343 3.6389 1 1 2 4 8 346..................................... 4844 5.8179 1 3 4 7 11 347..................................... 365 3.1370 1 1 2 4 6 348..................................... 3181 4.2521 1 2 3 5 8 349..................................... 632 2.7658 1 1 2 4 5 350..................................... 6114 4.3999 2 2 4 5 8 352..................................... 638 3.6160 1 2 3 4 7 353..................................... 2816 6.9457 3 4 5 8 12 354..................................... 9926 5.7743 3 3 4 6 10 355..................................... 5640 3.4624 2 3 3 4 5 356..................................... 28862 2.6478 1 2 2 3 4 357..................................... 6330 9.0289 3 5 7 11 17 358..................................... 27373 4.3708 2 3 3 5 7 359..................................... 27990 2.9775 2 2 3 3 4 360..................................... 17843 3.1581 1 2 3 4 5 361..................................... 540 3.3259 1 1 2 3 7 363..................................... 3943 3.3109 1 2 2 3 6 364..................................... 1828 3.5656 1 1 2 5 8 365..................................... 2298 6.8903 1 2 5 9 14 366..................................... 4368 6.8116 1 3 5 8 14 367..................................... 506 2.8893 1 1 2 3 6 [[Page 25676]] 368..................................... 2895 6.3530 2 3 5 8 12 369..................................... 2588 3.0622 1 1 2 4 6 370..................................... 1154 5.4610 2 3 4 5 9 371..................................... 1157 3.4754 2 3 3 4 5 372..................................... 975 3.1549 1 2 2 3 5 373..................................... 3868 2.1171 1 1 2 2 3 374..................................... 147 3.0340 1 2 2 3 3 375..................................... 9 5.1111 2 2 3 9 10 376..................................... 214 2.9252 1 2 2 3 6 377..................................... 52 4.4808 1 2 3 6 9 378..................................... 168 2.5952 1 1 2 3 4 379..................................... 334 3.5868 1 1 2 3 7 380..................................... 87 2.0345 1 1 2 2 3 381..................................... 187 2.1283 1 1 1 2 4 382..................................... 40 1.2750 1 1 1 1 2 383..................................... 1460 3.7301 1 2 3 4 8 384..................................... 123 2.6585 1 1 2 3 6 385..................................... 1 2.0000 2 2 2 2 2 389..................................... 9 8.6667 1 3 7 10 15 390..................................... 13 6.0000 2 2 4 5 17 392..................................... 2513 10.3828 4 5 7 12 21 394..................................... 1805 7.0853 1 2 4 8 16 395..................................... 70948 4.7241 1 2 3 6 9 396..................................... 15 18.4667 1 2 5 11 15 397..................................... 18814 5.5200 1 2 4 7 11 398..................................... 18127 6.0414 2 3 5 7 11 399..................................... 1322 3.7239 1 2 3 5 7 400..................................... 7225 9.3664 2 3 6 12 20 401..................................... 6653 11.0137 2 4 8 14 23 402..................................... 1464 3.8907 1 1 3 5 9 403..................................... 38919 8.1409 2 3 6 10 17 404..................................... 3797 4.4464 1 2 3 6 9 406..................................... 3308 9.5299 2 4 7 12 20 407..................................... 634 4.3202 1 2 4 5 8 408..................................... 2667 7.5047 1 2 5 9 16 409..................................... 4644 5.8404 2 3 4 6 11 410..................................... 59252 3.4182 1 2 3 4 6 411..................................... 18 2.8889 1 1 2 2 6 412..................................... 24 2.3333 1 1 2 3 4 413..................................... 7781 7.4429 2 3 6 9 15 414..................................... 676 4.2219 1 2 3 5 8 415..................................... 45158 14.3432 4 7 11 18 28 416..................................... 230365 7.3967 2 4 6 9 14 417..................................... 41 5.9024 2 2 5 7 11 418..................................... 21184 6.1906 2 3 5 8 11 419..................................... 15269 5.0200 2 3 4 6 9 420..................................... 2680 3.9474 1 2 3 5 7 421..................................... 12113 3.9569 1 2 3 5 7 422..................................... 86 3.3372 1 2 2 5 7 423..................................... 10723 7.7520 2 3 6 9 15 424..................................... 1621 14.2961 2 5 10 18 29 425..................................... 15405 4.1352 1 2 3 5 8 426..................................... 4449 4.9020 1 2 3 6 10 427..................................... 1633 4.8010 1 2 3 6 10 428..................................... 940 7.1755 1 2 4 8 14 429..................................... 32769 7.1661 2 3 5 8 14 430..................................... 56829 8.7198 2 4 7 11 17 431..................................... 217 7.3088 1 3 5 9 13 432..................................... 409 5.2152 1 2 3 6 12 433..................................... 6811 3.2053 1 1 2 4 7 434..................................... 21537 5.1804 2 3 4 6 9 435..................................... 14552 4.4078 1 2 4 5 8 436..................................... 3322 13.9618 4 7 13 21 28 437..................................... 12779 9.2061 3 5 8 12 16 439..................................... 1138 7.7065 1 3 5 9 16 440..................................... 5155 8.9081 2 3 6 10 19 441..................................... 570 3.4333 1 1 2 4 7 442..................................... 16247 8.1177 1 3 6 10 17 443..................................... 3153 3.3321 1 1 2 4 7 444..................................... 3425 4.5007 1 2 3 5 8 [[Page 25677]] 445..................................... 1243 3.3628 1 2 3 4 6 446..................................... 1 2.0000 2 2 2 2 2 447..................................... 4257 2.5130 1 1 2 3 5 449..................................... 27905 3.7822 1 1 3 5 8 450..................................... 6171 2.0826 1 1 1 2 4 451..................................... 9 2.7778 1 1 1 4 5 452..................................... 22863 5.0341 1 2 4 6 10 453..................................... 3796 2.9236 1 1 2 4 6 454..................................... 3855 4.6905 1 2 3 6 9 455..................................... 758 2.7401 1 1 2 3 5 461..................................... 3047 4.4322 1 1 2 4 11 462..................................... 10348 12.4504 4 6 10 16 23 463..................................... 13983 4.4209 1 2 3 5 8 464..................................... 3556 3.3751 1 2 3 4 6 465..................................... 210 2.9095 1 1 1 3 5 466..................................... 1748 4.0955 1 1 2 4 9 467..................................... 1332 4.3949 1 1 2 4 7 468..................................... 61704 13.4718 3 6 10 17 27 471..................................... 12918 6.0694 3 4 5 7 10 473..................................... 8429 12.7713 2 3 7 18 33 475..................................... 109339 11.1900 2 5 9 15 22 476..................................... 5924 11.9158 3 6 10 15 22 477..................................... 28747 8.1623 1 3 6 11 17 478..................................... 123286 7.4571 1 3 5 9 15 479..................................... 18337 3.8430 1 2 3 5 7 480..................................... 400 26.7550 8 11 20 32 53 481..................................... 256 27.1133 16 20 24 32 43 482..................................... 6596 12.7329 4 7 10 15 23 483..................................... 41763 40.0560 14 21 33 50 73 484..................................... 391 14.6931 2 6 11 18 27 485..................................... 3471 9.5906 4 5 7 11 18 486..................................... 2244 12.3382 1 5 10 16 25 487..................................... 4210 7.3983 2 3 6 9 14 488..................................... 865 17.0532 4 7 12 22 35 489..................................... 14894 8.9049 2 4 6 11 19 490..................................... 4863 5.4148 1 2 4 7 11 491..................................... 11011 3.6593 2 2 3 4 6 492..................................... 2334 17.1418 4 5 12 27 36 493..................................... 56210 5.6284 1 2 5 7 11 494..................................... 25155 2.4285 1 1 2 3 5 495..................................... 125 16.9920 7 10 13 19 31 496..................................... 895 10.5821 4 6 8 13 20 497..................................... 21969 6.2886 2 3 5 7 11 498..................................... 12500 3.5058 1 2 3 5 6 499..................................... 36205 4.9604 2 2 4 6 9 500..................................... 36448 2.8726 1 2 2 4 5 501..................................... 1895 10.4391 4 6 8 12 19 502..................................... 468 6.5876 3 4 6 8 10 503..................................... 6317 4.2169 1 2 3 5 8 504..................................... 157 31.5669 8 14 25 39 57 505..................................... 171 5.8421 1 1 1 4 11 506..................................... 1130 16.7522 4 8 13 21 34 507..................................... 391 8.9668 2 4 7 12 17 508..................................... 1206 7.7355 2 3 5 9 16 509..................................... 462 4.8528 1 2 3 6 10 510..................................... 1006 6.8897 2 3 5 8 13 511..................................... 311 4.8135 1 2 3 6 9 ---------------- 11244775 -------------------------------------------------------------------------------------------------------------------------------------------------------- [[Page 25678]] Table 8A.--Statewide Average Operating Cost-to-Charge Ratios For Urban and Rural Hospitals (Case Weighted) March 1998 ------------------------------------------------------------------------ State Urban Rural ------------------------------------------------------------------------ ALABAMA............................................... 0.373 0.446 ALASKA................................................ 0.503 0.731 ARIZONA............................................... 0.375 0.540 ARKANSAS.............................................. 0.515 0.457 CALIFORNIA............................................ 0.363 0.481 COLORADO.............................................. 0.467 0.565 CONNECTICUT........................................... 0.546 0.532 DELAWARE.............................................. 0.506 0.488 DISTRICT OF COLUMBIA.................................. 0.521 ....... FLORIDA............................................... 0.384 0.389 GEORGIA............................................... 0.497 0.497 HAWAII................................................ 0.430 0.559 IDAHO................................................. 0.564 0.582 ILLINOIS.............................................. 0.445 0.546 INDIANA............................................... 0.559 0.597 IOWA.................................................. 0.513 0.640 KANSAS................................................ 0.429 0.644 KENTUCKY.............................................. 0.496 0.519 LOUISIANA............................................. 0.442 0.496 MAINE................................................. 0.620 0.576 MARYLAND.............................................. 0.765 0.818 MASSACHUSETTS......................................... 0.540 0.571 MICHIGAN.............................................. 0.467 0.580 MINNESOTA............................................. 0.532 0.611 MISSISSIPPI........................................... 0.478 0.499 MISSOURI.............................................. 0.441 0.516 MONTANA............................................... 0.524 0.569 NEBRASKA.............................................. 0.482 0.639 NEVADA................................................ 0.320 0.584 NEW HAMPSHIRE......................................... 0.573 0.586 NEW JERSEY............................................ 0.436 ....... NEW MEXICO............................................ 0.466 0.510 NEW YORK.............................................. 0.553 0.633 NORTH CAROLINA........................................ 0.523 0.461 NORTH DAKOTA.......................................... 0.620 0.666 OHIO.................................................. 0.533 0.576 OKLAHOMA.............................................. 0.460 0.529 OREGON................................................ 0.546 0.624 PENNSYLVANIA.......................................... 0.407 0.527 PUERTO RICO........................................... 0.481 0.569 RHODE ISLAND.......................................... 0.571 ....... SOUTH CAROLINA........................................ 0.472 0.494 SOUTH DAKOTA.......................................... 0.537 0.620 TENNESSEE............................................. 0.481 0.508 TEXAS................................................. 0.427 0.536 UTAH.................................................. 0.538 0.635 VERMONT............................................... 0.615 0.577 VIRGINIA.............................................. 0.476 0.499 WASHINGTON............................................ 0.599 0.662 WEST VIRGINIA......................................... 0.592 0.573 WISCONSIN............................................. 0.568 0.641 WYOMING............................................... 0.495 0.694 ------------------------------------------------------------------------ Table 8B.--Statewide Average Capital Cost-to-Charge Ratios (Case Weighted) March 1998 ------------------------------------------------------------------------ State Ratio ------------------------------------------------------------------------ ALABAMA........................................................ 0.047 ALASKA......................................................... 0.066 ARIZONA........................................................ 0.043 ARKANSAS....................................................... 0.054 CALIFORNIA..................................................... 0.038 COLORADO....................................................... 0.052 CONNECTICUT.................................................... 0.042 DELAWARE....................................................... 0.058 DISTRICT OF COLUMBIA........................................... 0.040 FLORIDA........................................................ 0.046 GEORGIA........................................................ 0.049 HAWAII......................................................... 0.045 IDAHO.......................................................... 0.054 ILLINOIS....................................................... 0.042 INDIANA........................................................ 0.059 IOWA........................................................... 0.054 KANSAS......................................................... 0.052 KENTUCKY....................................................... 0.051 LOUISIANA...................................................... 0.067 MAINE.......................................................... 0.040 MARYLAND....................................................... 0.013 MASSACHUSETTS.................................................. 0.056 MICHIGAN....................................................... 0.046 MINNESOTA...................................................... 0.056 MISSISSIPPI.................................................... 0.054 MISSOURI....................................................... 0.049 MONTANA........................................................ 0.052 NEBRASKA....................................................... 0.057 NEVADA......................................................... 0.068 NEW HAMPSHIRE.................................................. 0.066 NEW JERSEY..................................................... 0.039 NEW MEXICO..................................................... 0.047 NEW YORK....................................................... 0.053 NORTH CAROLINA................................................. 0.047 NORTH DAKOTA................................................... 0.075 OHIO........................................................... 0.053 OKLAHOMA....................................................... 0.054 OREGON......................................................... 0.055 PENNSYLVANIA................................................... 0.043 PUERTO RICO.................................................... 0.054 RHODE ISLAND................................................... 0.033 SOUTH CAROLINA................................................. 0.053 SOUTH DAKOTA................................................... 0.061 TENNESSEE...................................................... 0.056 TEXAS.......................................................... 0.052 UTAH........................................................... 0.056 VERMONT........................................................ 0.047 VIRGINIA....................................................... 0.058 WASHINGTON..................................................... 0.066 WEST VIRGINIA.................................................. 0.056 WISCONSIN...................................................... 0.052 WYOMING........................................................ 0.056 ------------------------------------------------------------------------ Appendix A--Regulatory Impact Analysis I. Introduction We generally prepare a regulatory flexibility analysis that is consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 through 612), unless we certify that a proposed rule would not have a significant economic impact on a substantial number of small entities. For purposes of the RFA, we consider all hospitals to be small entities. Also, section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis for any proposed rule that may have a significant impact on the operations of a substantial number of small rural hospitals. Such an analysis must conform to the provisions of section 603 of the RFA. With the exception of hospitals located in certain New England counties, for purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital with fewer than 100 beds that is located outside of a Metropolitan Statistical Area (MSA) or New England County Metropolitan Area (NECMA). Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New England counties as belonging to the adjacent NECMA. Thus, for purposes of the prospective payment system, we classify these hospitals as urban hospitals. It is clear that the changes being proposed in this document would affect both a substantial number of small rural hospitals as well as other classes of hospitals, and the effects on some may be significant. Therefore, the discussion below, in combination with the rest of this proposed rule, constitutes a combined regulatory impact analysis and regulatory flexibility analysis. In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the Office of Management and Budget. II. Objectives The primary objective of the prospective payment system is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs. In addition, we share national goals of deficit reduction and restraints on government spending in general. We believe the proposed changes would further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries. We expect that these proposed changes would ensure that the outcomes of this payment system are reasonable and equitable while avoiding or minimizing unintended adverse consequences. III. Limitations of Our Analysis As has been the case in previously published regulatory impact analyses, the following quantitative analysis presents the projected effects of our proposed policy changes, as well as statutory changes effective for FY 1999, on various hospital groups. We estimate the effects of individual policy changes by estimating payments per case while holding all other payment policies constant. We use the best data available, but we do not attempt to predict behavioral responses to our policy changes, and we do not make adjustments for future changes in such variables as admissions, lengths of stay, or case mix. As we have done in previous proposed rules, we are soliciting comments and information about the anticipated effects of these changes on hospitals and our methodology for estimating them. IV. GME Payment to Nonhospital Providers In the past, Medicare only paid hospitals for GME costs. Therefore, FQHCs, RHCs and Medicare+Choice organizations may have been reluctant to train many residents since they would incur costs in training the residents but would not be reimbursed for those costs by Medicare. Under this proposed regulation, where the non- hospital site incurs all or substantially all of the costs of the training at that site, Medicare will reimburse [[Page 25679]] the provider for Medicare's share of the reasonable costs of the training. The proposal to allow for payments directly to these non- hospital sites for the costs of training residents in approved programs will facilitate more training of residents in settings that will be similar to the settings that many of those residents will ultimately practice after their training is completed. Additionally, this could result in an increase in the number of physicians practicing in underserved areas. In addition, hospitals are currently allowed to count residents, working in nonhospital sites in their count of residents and the hospital would be paid GME payments, if it paid for all or substantially all of the costs of the program at the non-hospital site. Previously the regulation defined the statutory requirement of "all or substantially all" to mean at least the residents" salaries and fringe benefits. Under the proposal we would redefine "all or substantially all" of the costs of the program at the nonhospital site to also include the GME portion of the teaching physicians' salaries and fringe benefits. This will require hospitals to incur more of the costs of the training at the nonhospital site in order to receive both direct and indirect GME payments for those residents. Section 4625 of the Balanced Budget Act, which provides for direct graduate medical education payments to nonhospital providers, would have minimal impact in the context of total graduate medical education costs. We believe that the most significant impact resulting from section 4625 will be the movement of resident training from the inpatient setting to the nonhospital setting. We expect that such a shift in the site where resident training occurs will result in little if any additional cost to Medicare. In addition to the expected shift in training from the inpatient setting to the nonhospital setting, in relatively few cases, section 4625 could result in additional resident training being paid by Medicare. However, Medicare's share of costs incurred in those nonhospital sites based on Medicare utilization is often generally low, so we expect the impact of the cost of training of any additional residents to be negliglible. V. Hospitals Included In and Excluded From the Prospective Payment System The prospective payment systems for hospital inpatient operating and capital-related costs encompass nearly all general, short-term, acute care hospitals that participate in the Medicare program. There were 45 Indian Health Service hospitals in our database, which we excluded from the analysis due to the special characteristics of the prospective payment method for these hospitals. Among other short- term, acute care hospitals, only the 50 such hospitals in Maryland remain excluded from the prospective payment system under the waiver at section 1814(b)(3) of the Act. Thus, as of March 1998, we have included 4,956 hospitals in our analysis. This represents about 82 percent of all Medicare-participating hospitals. The majority of this impact analysis focuses on this set of hospitals. The remaining 18 percent are specialty hospitals that are excluded from the prospective payment system and continue to be paid on the basis of their reasonable costs (subject to a rate-of- increase ceiling on their inpatient operating costs per discharge). These hospitals include psychiatric, rehabilitation, long-term care, children's, and cancer hospitals. The impacts of our proposed policy changes on these hospitals are discussed below. VI. Impact on Excluded Hospitals and Units As of March 1998, there were 1,082 specialty hospitals excluded from the prospective payment system and instead paid on a reasonable cost basis subject to the rate-of-increase ceiling under Sec. 413.40. In addition, there were 2,393 psychiatric and rehabilitation units in hospitals otherwise subject to the prospective payment system. These excluded units are also paid in accordance with Sec. 413.40. As required by section 1886(b)(3)(B) of the Act, the update factor applicable to the rate-of-increase limit for excluded hospitals and units for FY 1999 would be between 0 and 2.5 percent, depending on the hospital's costs in relation to its limit. The impact on excluded hospitals and units of the proposed update in the rate-of-increase limit depends on the cumulative cost increases experienced by each excluded hospital or unit since its applicable base period. For excluded hospitals and units that have maintained their cost increases at a level below the percentage increases in the rate-of-increase limits since their base period, the major effect will be on the level of incentive payments these hospitals and units receive. Conversely, for excluded hospitals and units with per-case cost increases above the cumulative update in their rate-of-increase limits, the major effect will be the amount of excess costs that would not be reimbursed. We note that, under Sec. 413.40(d)(3), an excluded hospital or unit whose costs exceed 110 percent of its rate-of-increase limit receives its rate-of-increase limit plus 50 percent of the difference between its reasonable costs and 110 percent of the limit, not to exceed 110 percent of its limit. In addition, under the various provisions set forth in Sec. 413.40, certain excluded hospitals and units can obtain payment adjustments for justifiable increases in operating costs that exceed the limit. At the same time, however, by generally limiting payment increases, we continue to provide an incentive for excluded hospitals and units to restrain the growth in their spending for patient services. VII. Quantitative Impact Analysis of the Proposed Policy Changes Under the Prospective Payment System for Operating Costs A. Basis and Methodology of Estimates In this proposed rule, we are announcing policy changes and payment rate updates for the prospective payment systems for operating and capital-related costs. We estimate the total payment impact of these changes on FY 1999 payments compared to FY 1998 payments, to be approximately a $400 million reduction. We have prepared separate impact analyses of the proposed changes to each system. This section deals with changes to the operating prospective payment system. The data used in developing the quantitative analyses presented below are taken from the FY 1997 MedPAR file and the most current provider-specific file that is used for payment purposes. Although the analyses of the changes to the operating prospective payment system do not incorporate cost data, the most recently available hospital cost report data were used to categorize hospitals. Our analysis has several qualifications. First, we do not make adjustments for behavioral changes that hospitals may adopt in response to these proposed policy changes. Second, due to the interdependent nature of the prospective payment system, it is very difficult to precisely quantify the impact associated with each proposed change. Third, we draw upon various sources for the data used to categorize hospitals in the tables. In some cases, particularly the number of beds, there is a fair degree of variation in the data from different sources. We have attempted to construct these variables with the best available source overall. For individual hospitals, however, some miscategorizations are possible. Using cases in the FY 1997 MedPAR file, we simulated payments under the operating prospective payment system given various combinations of payment parameters. Any short-term, acute care hospitals not paid under the general prospective payment systems (Indian Health Service hospitals and hospitals in Maryland) are excluded from the simulations. Payments under the capital prospective payment system, or payments for costs other than inpatient operating costs, are not analyzed here. Estimated payment impacts of proposed FY 1999 changes to the capital prospective payment system are discussed below in section VII of this Appendix. The proposed changes discussed separately below are the following: --- The effects of implementing the expanded transfer definition enacted by section 4407 of the BBA, which counts as a transfer any discharge from one of 10 DRGs if upon discharge the patient is admitted to an excluded hospital or distinct part unit or a skilled nursing facility, or is provided home health care that is related to the hospitalization within 3 days of the date of discharge. --- The effects of the annual reclassification of diagnoses and procedures and the recalibration of the DRG relative weights required by section 1886(d)(4)(C) of the Act. --- The effects of changes in hospitals' wage index values reflecting the wage index update (FY 1995 data). --- The effects of two proposed changes to the wage index: (1) including the costs associated with Part A physician costs under contract; and (2) removing the overhead costs related to departments excluded from the wage data used to calculate the wage index (for example, skilled nursing facilities and distinct part units). --- The effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB) that will be effective in FY 1999. [[Page 25680]] --- The total change in payments based on FY 1999 policies relative to payments based on FY 1998 policies. To illustrate the impacts of the FY 1999 proposed changes, our analysis begins with a FY 1999 baseline simulation model using: The FY 1998 GROUPER (version 15.0); the FY 1998 wage index; the transfer definition prior to implementation of section 4407 of the BBA; and no MGCRB reclassifications. Outlier payments are set at 5.1 percent of total DRG payments. Each proposed and statutory policy change is then added incrementally to this baseline model, finally arriving at an FY 1999 model incorporating all of the changes. This allows us to isolate the effects of each change. Our final comparison illustrates the percent change in payments per case from FY 1998 to FY 1999. Four factors have significant impacts here. First is the update to the standardized amounts. In accordance with section 1886(d)(3)(A)(iv) of the Act, we are proposing to update the large urban and the other areas average standardized amounts for FY 1999 using the most recently forecasted hospital market basket increase for FY 1999 of 2.6 percent minus 1.9 percentage points. Similarly, section 1886(b)(3)(C)(ii) of the Act provides that the update factor applicable to the hospital-specific rates for sole community hospitals (SCHs), essential access community hospitals (EACHs) (which are treated as SCHs for payment purposes), and Medicare-dependent, small rural hospitals (MDHs) is equal to the market basket increase of 2.6 percent minus 1.9 percentage points (for an update of 0.7 percent). A second significant factor impacting changes in hospitals' payments per case from FY 1998 to FY 1999 is a change in MGCRB reclassification status from one year to the next. That is, hospitals reclassified in FY 1998 that are no longer reclassified in FY 1999 may have a negative payment impact going from FY 1998 to FY 1999; conversely, hospitals not reclassified in FY 1998 that are reclassified in FY 1999 may have a positive impact. In some cases, these impacts can be quite substantial, so if a relatively small number of hospitals in a particular category lose their reclassification status, the percentage increase in payments for the category may be below the national mean. A third significant factor is that we currently estimate that actual outlier payments during FY 1998 will be 5.4 percent of actual total DRG payments. When the FY 1998 final rule was published, we projected FY 1998 outlier payments would be 5.1 percent of total DRG payments, and the standardized amounts were reduced correspondingly. The effects of the slightly higher than expected outlier payments during FY 1998 (as discussed in the Addendum to this proposed rule) are reflected in the analyses below comparing our current estimates of FY 1998 payments per case to estimated FY 1999 payments per case. Fourth, payments per case in FY 1999 are reduced from FY 1998 for hospitals that receive the indirect medical education (IME) or the disproportionate share (DSH) adjustments. Section 1886(d)(5)(B)(ii) of the Act provides that the IME adjustment is reduced from approximately a 7.0 percent increase for every 10 percent increase in a hospital's resident-to-bed ratio in FY 1998, to a 6.5 percent increase in FY 1999. Similarly, in accordance with section 1886(d)(5)(F)(ix) of the Act, the DSH adjustment for FY 1999 is reduced by 2 percent from what would otherwise have been paid, compared to a 1 percent reduction for FY 1998. Table I demonstrates the results of our analysis. The table categorizes hospitals by various geographic and special payment consideration groups to illustrate the varying impacts on different types of hospitals. The top row of the table shows the overall impact on the 4,956 hospitals included in the analysis. This is 132 fewer hospitals than were included in the impact analysis in the FY 1998 final rule with comment period (62 FR 46119). The next four rows of Table I contain hospitals categorized according to their geographic location (all urban, which is further divided into large urban and other urban, or rural). There are 2,792 hospitals located in urban areas (MSAs or NECMAs) included in our analysis. Among these, there are 1,588 hospitals located in large urban areas (populations over 1 million), and 1,204 hospitals in other urban areas (populations of 1 million or fewer). In addition, there are 2,164 hospitals in rural areas. The next two groupings are by bed-size categories, shown separately for urban and rural hospitals. The final groupings by geographic location are by census divisions, also shown separately for urban and rural hospitals. The second part of Table I shows hospital groups based on hospitals' FY 1999 payment classifications, including any reclassifications under section 1886(d)(10) of the Act. For example, the rows labeled urban, large urban, other urban, and rural show the numbers of hospitals paid based on these categorizations (after consideration of geographic reclassifications) are 2,877, 1,681, 1,196, and 2,079, respectively. The next three groupings examine the impacts of the proposed changes on hospitals grouped by whether or not they have residency programs (teaching hospitals that receive an IME adjustment), receive DSH payments, or some combination of these two adjustments. There are 3,875 nonteaching hospitals in our analysis, 841 teaching hospitals with fewer than 100 residents, and 240 teaching hospitals with 100 or more residents. In the DSH categories, hospitals are grouped according to their DSH payment status, and whether they are considered urban or rural after MGCRB reclassifications. Hospitals in the rural DSH categories, therefore, represent hospitals that were not reclassified for purposes of the standardized amount or for purposes of the DSH adjustment. (They may, however, have been reclassified for purposes of the wage index.) The next category groups hospitals considered urban after geographic reclassification, in terms of whether they receive the IME adjustment, the DSH adjustment, both, or neither. The next row separately examines hospitals that available data show may qualify under section 4401(b) of the BBA for the special temporary relief provision, which grants an additional 0.3 percent update to the standardized amounts (in addition to the 0.7 percent update other hospitals would receive during FY 1999), resulting in a 1.0 percent update for this category of hospitals. To be eligible, a hospital must not be an MDH, nor may it receive either IME or DSH payments. It must also experience a negative margin on its operating prospective payments during FY 1999. We estimated eligible hospitals based on whether they had a negative operating margin on their FY 1995 cost report (latest available data). Finally, to qualify, a hospital must be located in a State where the aggregate FY 1995 operating prospective payments were less than the aggregate associated costs for all of the non-IME, non-DSH, non-MDH hospitals in the State. There are 356 hospitals in this row. The next four rows examine the impacts of the proposed changes on rural hospitals by special payment groups (SCHs, rural referral centers (RRCs), MDHs, and EACHs), as well as rural hospitals not receiving a special payment designation. The RRCs (137), SCH/EACHs (633), MDHs (351), and SCH/EACH and RRCs (54) shown here were not reclassified for purposes of the standardized amount. There is one SCH that will be reclassified for the standardized amount in FY 1999 that, therefore, is not included in these rows. There are six EACHs included in our analysis and three EACH/RRCs. The next two groupings are based on type of ownership and the hospital's Medicare utilization expressed as a percent of total patient days. These data are taken primarily from the FY 1995 Medicare cost report files, if available (otherwise FY 1994 data are used). Data needed to determine ownership status or Medicare utilization percentages were unavailable for 95 hospitals. For the most part, these are new hospitals. The next series of groupings concern the geographic reclassification status of hospitals. The first three groupings display hospitals that were reclassified by the MGCRB for both FY 1998 and FY 1999, or for either of those 2 years, by urban/rural status. The next rows illustrate the overall number of FY 1999 reclassifications, as well as the numbers of reclassified hospitals grouped by urban and rural location. The final row in Table I contains hospitals located in rural counties but deemed to be urban under section 1886(d)(8)(B) of the Act. [[Page 25681]] Table I.--Impact Analysis of Changes for FY 1999 Operating Prospective Payment System [Percent changes in payments per case] PAC tran. Contract Allocated MGCRB recl- Number of prov- DRG re- New wage phys. pt a overhead DRG & WI assifi- All FY 99 hosps.\1\ ision \2\ calib. \3\ data \4\ costs \5\ costs \6\ changes cation \8\ changes (0) (1) (2) (3) (4) (5) (6) (7) (8) -------------------------------------------------------------------------------------------------------------------------------------------------------- (BY GEOGRAPHIC LOCATION): ALL HOSPITALS........................... 4,956 -0.6 0.1 0.1 0.0 -0.1 0.0 0.0 -0.7 URBAN HOSPITALS......................... 2,792 -0.7 0.1 0.0 0.0 -0.2 -0.2 -0.4 -1.1 LARGE URBAN......................... 1,588 -0.7 0.1 -0.3 0.0 -0.2 -0.5 -0.4 -1.4 OTHER URBAN......................... 1,204 -0.6 0.1 0.4 0.0 -0.2 0.2 -0.3 -0.5 RURAL HOSPITALS......................... 2,164 -0.4 0.1 0.9 -0.1 0.3 1.3 2.4 1.5 BED SIZE (URBAN): 0-99 BEDS........................... 690 -0.8 0.2 -0.3 0.0 -0.1 -0.3 -0.5 -0.7 100-199 BEDS........................ 936 -0.8 0.2 -0.2 0.0 -0.1 -0.3 -0.4 -1.0 200-299 BEDS........................ 566 -0.7 0.1 -0.1 0.0 -0.1 -0.3 -0.3 -0.9 300-499 BEDS........................ 448 -0.6 0.1 0.0 0.0 -0.2 -0.3 -0.5 -1.2 500 OR MORE BEDS.................... 152 -0.5 0.1 0.3 0.0 -0.3 0.1 -0.2 -1.2 BED SIZE (RURAL): 0-49 BEDS........................... 1,135 -0.3 0.1 0.9 -0.1 0.5 1.3 -0.1 1.3 50-99 BEDS.......................... 635 -0.4 0.1 0.8 -0.1 0.3 1.1 0.9 1.1 100-149 BEDS........................ 229 -0.5 0.1 0.8 -0.1 0.4 1.3 3.3 1.3 150-199 BEDS........................ 91 -0.5 0.1 1.0 -0.1 0.3 1.5 3.9 2.7 200 OR MORE BEDS.................... 74 -0.4 0.1 1.0 0.0 0.2 1.4 4.6 1.6 URBAN BY CENSUS DIVISION: NEW ENGLAND......................... 152 -0.7 0.1 -2.4 -0.1 0.1 -2.7 0.1 -3.5 MIDDLE ATLANTIC..................... 425 -0.4 0.2 0.4 0.3 -0.2 0.6 -0.5 -0.5 SOUTH ATLANTIC...................... 413 -0.6 0.1 0.8 -0.1 -0.2 0.6 -0.6 -0.3 EAST NORTH CENTRAL.................. 475 -0.8 0.1 0.0 -0.1 -0.4 -0.6 -0.3 -1.5 EAST SOUTH CENTRAL.................. 159 -0.6 0.1 0.5 -0.1 -0.4 0.0 -0.5 -0.7 WEST NORTH CENTRAL.................. 186 -0.7 0.0 0.9 0.0 0.1 1.0 -0.6 0.1 WEST SOUTH CENTRAL.................. 350 -0.9 0.1 -1.1 0.1 -0.2 -1.4 -0.1 -2.0 MOUNTAIN............................ 126 -0.8 0.1 0.4 0.2 -0.2 0.5 -0.6 -0.3 PACIFIC............................. 458 -0.8 0.1 -0.5 -0.1 0.0 -0.7 -0.3 -1.4 PUERTO RICO......................... 48 -0.2 0.3 0.8 -0.3 -0.3 0.3 -0.5 0.3 RURAL BY CENSUS DIVISION: NEW ENGLAND......................... 53 -0.4 0.0 1.3 0.1 0.0 1.4 0.6 -0.4 MIDDLE ATLANTIC..................... 80 -0.3 0.1 0.9 0.1 0.0 1.2 1.2 1.1 SOUTH ATLANTIC...................... 286 -0.4 0.2 0.8 -0.1 0.3 1.1 3.3 2.0 EAST NORTH CENTRAL.................. 284 -0.5 0.1 1.0 -0.3 0.3 1.2 1.9 1.5 EAST SOUTH CENTRAL.................. 269 -0.4 0.1 1.5 -0.1 0.3 1.9 2.5 2.0 [[Page 25682]] WEST NORTH CENTRAL.................. 499 -0.4 0.0 1.1 0.0 0.7 1.9 2.1 1.8 WEST SOUTH CENTRAL.................. 341 -0.5 0.1 0.3 -0.1 0.5 0.8 3.1 0.7 MOUNTAIN............................ 206 -0.3 0.0 0.3 -0.1 0.5 0.8 1.6 1.2 PACIFIC............................. 141 -0.6 0.1 0.4 -0.1 0.4 1.0 2.3 1.1 PUERTO RICO......................... 5 -0.4 0.1 2.3 0.1 -0.3 2.2 1.9 0.8 (BY PAYMENT CATEGORIES): URBAN HOSPITALS......................... 2,877 -0.7 0.1 0.0 0.0 -0.2 -0.2 -0.3 -1.0 LARGE URBAN......................... 1,681 -0.7 0.1 -0.3 0.0 -0.2 -0.4 -0.3 -1.3 OTHER URBAN......................... 1,196 -0.6 0.1 0.4 0.0 -0.2 0.2 -0.4 -0.5 RURAL HOSPITALS......................... 2,079 -0.4 0.1 0.9 -0.1 0.4 1.3 2.0 1.4 TEACHING STATUS: NON-TEACHING........................ 3,875 -0.7 0.1 0.2 -0.1 0.0 0.2 0.3 -0.1 LESS THAN 100 RES................... 841 -0.7 0.1 0.0 0.0 -0.2 -0.2 -0.3 -0.9 100+ RESIDENTS...................... 240 -0.6 0.1 0.0 0.1 -0.2 -0.1 -0.3 -1.7 DISPROPORTIONATE SHARE HOSPITALS (DSH): NON-DSH............................. 3,074 -0.6 0.1 0.1 0.0 -0.1 0.1 0.3 -0.4 URBAN DSH: 100 BEDS OR MORE................ 1,402 -0.7 0.1 0.0 0.0 -0.2 -0.2 -0.3 -1.1 FEWER THAN 100 BEDS............. 93 -0.7 0.2 -0.2 -0.1 -0.1 -0.3 -0.5 -0.7 RURAL DSH: SOLE COMMUNITY (SCH)............ 156 -0.2 0.1 0.8 -0.1 0.2 1.1 -0.1 1.3 REFERRAL CENTERS (RRC).......... 47 -0.5 0.2 1.3 -0.1 0.3 1.9 4.8 2.9 OTHER RURAL DSH HOSP.: 100 BEDS OR MORE................ 64 -0.6 0.2 1.2 -0.1 0.4 1.8 1.3 0.8 FEWER THAN 100 BEDS............. 120 -0.3 0.1 1.4 -0.1 0.4 1.8 0.0 1.7 URBAN TEACHING AND DSH: [[Page 25683]] BOTH TEACHING AND DSH............... 700 -0.7 0.1 0.0 0.0 -0.2 -0.2 -0.4 -1.4 TEACHING AND NO DSH................. 328 -0.6 0.0 0.0 0.0 -0.3 -0.2 -0.1 -1.0 NO TEACHING AND DSH................. 795 -0.8 0.2 0.0 -0.1 -0.1 -0.1 -0.2 -0.6 NO TEACHING AND NO DSH.............. 1,054 -0.7 0.1 -0.2 0.0 -0.1 -0.3 -0.3 -0.6 SPECIAL UPDATE HOSPITALS (UNDER SEC. 4401(b) OF PUBLIC LAW 105-33).......... 356 -0.6 0.2 0.1 -0.1 -0.1 0.1 0.3 -0.3 RURAL HOSPITAL TYPES: NONSPECIAL STATUS HOSPITALS......... 904 -0.5 0.2 1.1 -0.1 0.5 1.6 1.1 1.0 RRC................................. 137 -0.6 0.1 1.2 0.0 0.4 1.8 5.6 2.5 SCH/EACH............................ 633 -0.2 0.0 0.4 0.0 0.2 0.6 0.1 0.8 MDH................................. 351 -0.3 0.1 1.1 -0.1 0.5 1.5 0.4 1.3 SCH/EACH AND RRC.................... 54 -0.2 0.0 0.3 0.0 0.1 0.4 1.5 1.3 TYPE OF OWNERSHIP: VOLUNTARY........................... 2,859 -0.6 0.1 0.1 0.0 -0.1 -0.1 -0.1 -0.8 PROPRIETARY......................... 671 -0.9 0.2 0.1 -0.1 -0.1 -0.1 0.1 -0.9 GOVERNMENT.......................... 1,331 -0.5 0.1 0.3 -0.1 0.0 0.3 0.3 -0.3 UNKNOWN............................. 95 -0.7 0.2 0.3 -0.1 -0.1 0.2 -0.2 -0.7 MEDICARE UTILIZATION AS A PERCENT OF INPATIENT DAYS: 0-25................................ 249 -0.7 0.2 -0.7 -0.1 -0.1 -1.0 0.1 -1.6 25-50............................... 1,267 -0.7 0.1 0.0 0.0 -0.1 -0.2 -0.2 -1.2 50-65............................... 1,975 -0.6 0.1 0.2 0.0 -0.1 0.1 0.1 -0.4 OVER 65............................. 1,370 -0.6 0.1 0.3 0.0 0.0 0.4 0.0 0.0 UNKNOWN............................. 95 -0.7 0.2 0.3 -0.1 -0.1 0.2 -0.2 -0.7 HOSPITALS RECLASSIFIED BY THE MEDICARE GEOGRAPHIC REVIEW BOARD: RECLASSIFICATION STATUS DURING FY 98 AND FY 99: RECLASSIFIED DURING BOTH FY98 AND FY99............................... 311 -0.5 0.1 0.6 -0.1 0.1 0.8 6.6 -0.1 URBAN........................... 70 -0.5 0.1 0.2 -0.1 -0.3 -0.1 5.4 -0.5 RURAL........................... 241 -0.5 0.1 1.0 -0.1 0.4 1.5 7.5 0.2 RECLASSIFIED DURING FY99 ONLY....... 178 -0.5 0.1 0.8 -0.1 0.2 1.0 4.0 4.7 [[Page 25684]] URBAN........................... 25 -0.5 0.1 0.4 -0.1 0.0 0.4 3.1 1.9 RURAL........................... 153 -0.5 0.1 1.0 -0.1 0.3 1.3 4.4 6.1 RECLASSIFIED DURING FY98 ONLY....... 111 -0.7 0.1 0.6 0.0 -0.2 0.5 -0.5 -3.1 URBAN........................... 38 -0.7 0.1 0.5 0.1 -0.3 0.2 -0.6 -2.2 RURAL........................... 73 -0.4 0.1 0.9 -0.1 0.4 1.3 -0.5 -6.1 FY 99 RECLASSIFICATIONS: ALL RECLASSIFIED HOSP............... 489 -0.5 0.1 0.7 -0.1 0.1 0.9 5.7 1.6 STAND. AMOUNT ONLY.............. 94 -0.6 0.1 0.6 0.1 -0.3 0.5 1.0 -0.3 WAGE INDEX ONLY................. 281 -0.5 0.1 0.5 -0.1 0.3 0.8 6.6 -0.9 BOTH............................ 47 -0.6 0.2 0.9 -0.1 -0.4 0.6 3.8 -1.6 NONRECLASSIFIED................. 4,507 -0.7 0.1 0.1 0.0 -0.1 -0.1 -0.4 -0.7 ALL URBAN RECLASS................... 95 -0.5 0.1 0.3 -0.1 -0.2 0.0 4.7 0.2 STAND. AMOUNT ONLY.............. 25 -0.4 0.2 0.9 0.1 -0.4 0.7 0.7 0.0 WAGE INDEX ONLY................. 45 -0.5 0.1 0.0 -0.1 0.1 -0.1 6.5 0.6 BOTH............................ 25 -0.5 0.1 0.6 -0.2 -0.6 -0.1 2.9 -0.5 NONRECLASSIFIED................. 2,670 -0.7 0.1 0.0 0.0 -0.2 -0.2 -0.6 -1.1 ALL RURAL RECLASS................... 394 -0.5 0.1 1.0 -0.1 0.4 1.4 6.3 2.5 STAND. AMOUNT ONLY.............. 57 -0.5 0.1 1.1 -0.2 0.3 1.5 5.1 2.4 WAGE INDEX ONLY................. 309 -0.5 0.1 0.9 -0.1 0.4 1.4 6.1 2.3 BOTH............................ 28 -0.6 0.1 1.1 -0.1 0.3 1.6 9.2 3.8 NONRECLASSIFIED................. 1,770 -0.3 0.1 0.9 -0.1 0.3 1.2 -0.5 0.8 OTHER RECLASSIFIED HOSPITALS (SECTION 1886(d)(8)(B))......................... 27 -0.5 0.1 -0.9 0.2 -0.3 -0.9 0.7 -0.6 .......... .......... .......... .......... .......... .......... .......... .......... .......... -------------------------------------------------------------------------------------------------------------------------------------------------------- \1\ Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Discharge data are from FY 1997, and hospital cost report data are from reporting periods beginning in FY 1994 and FY 1995. \2\ This column displays the impact of the change enacted by section 4407 of the BBA, which defines discharges from 1 of 10 DRGs to postacute care as transfers. Under our proposed policy, 3 of the 10 DRGs would be paid under an alternative methodology where they would receive 50 percent of the full DRG amount on the first day and 50 percent of the current per diem transfer payment amount for each remaining day of the stay. The remaining seven DRGs would be paid using our current transfer payment methodology. \3\ This column displays the payment impact of the recalibration of the DRG weights based on FY 1997 MedPAR data and the DRG classification changes, in accordance with section 1886(d)(4)(C) of the Act. [[Page 25685]] \4\ This column shows the payment effects of updating the data used to calculate the wage index with data from the FY 1995 cost reports. \5\ This column displays the impact of adding contract Part A physician costs to the wage data. \6\ This column illustrates the payment impact of removing the overhead costs allocated to departments where the directly assigned costs are already excluded from the wage index calculation (for example, SNFs and distinct part units). \7\ This column displays the combined impact of the reclassification and recalibration of the DRGs, the updated and revised wage data used to calculate the wage index, and the budget neutrality adjustment factor for these two changes, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act. Thus, it represents the combined impacts shown in columns 2, 3, 4, and 5, and the FY 1999 budget neutrality factor of 0.999227. \8\ Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB). The effects shown here demonstrate the FY 1999 payment impact of going from no reclassifications to the reclassifications scheduled to be in effect for FY 1999. Reclassification for prior years has no bearing on the payment impacts shown here. \9\ This column shows changes in payments from FY 1998 to FY 1999. It incorporates all of the changes displayed in columns 1, 6, and 7 (the changes displayed in columns 2, 3, 4 and 5 are included in column 6). It also displays the impact of the FY 1999 update, changes in hospitals' reclassification status in FY 1999 compared to FY 1998, the difference in outlier payments from FY 1998 to FY 1999, and the reductions to payments through the IME and DSH adjustments taking effect during FY 1999. The sum of these columns may be different from the percentage changes shown here due to rounding and interactive effects. B. Impact of the Proposed Implementation of the Expanded Transfer Definition (Column 1) Section 1886(d)(5)(J) of the Act (added by section 4407 of the BBA) requires the Secretary to select 10 DRGs for which discharges (from any one of these DRGs) to a postacute care provider will be treated as a transfer beginning with discharges on or after October 1, 1998. Column 1 shows the impact of this provision. Although the expanded definition encompasses only 10 DRGs, they were selected, in accordance with the statute, based upon their large and disproportionate volume of cases receiving postacute care. We estimate that approximately 25 percent of all cases receiving follow-up postacute care come from these 10 DRGs. Therefore, the overall payment impact of this change is significant (a 0.6 percent decrease in payments per case). The 10 DRGs that we are proposing to include under this provision are identified in section V.A. of the preamble to this proposed rule. In addition to selecting 10 DRGs, the statute authorizes the Secretary to develop an alternative transfer payment methodology for DRGs where a substantial portion of the costs of the cases occur very early in the stay. This is particularly likely to happen in some surgical DRGs because of the high cost of the surgical procedure. Based on our analysis comparing the costs per case for these cases with payments under our current transfer payment methodology, we are proposing to pay the current transfer per diem for all DRGs except DRGs 209, 210, and 211. For those three DRGs, the alternative payment methodology we are proposing is 50 percent of the full DRG payment amount for the first day of the stay, plus 50 percent of the current per diem transfer payment for each remaining day, up to the full DRG payment. To simulate the impact of these proposed policies, we adjusted hospitals' transfer-adjusted discharges and case-mix index values (using version 15 of the GROUPER) to reflect the impact of this expansion in the transfer definition. The transfer-adjusted discharge amount is calculated one of two ways, depending on the transfer payment methodology. Under our current transfer payment methodology, and for all but the three DRGs receiving special payment consideration, this adjustment is made simply by adding one to the length of stay and dividing that amount by the geometric mean length of stay for the DRG (not to exceed 1.0). For example, a transfer after 3 days from a DRG with a geometric mean length of stay of 6 days would have a transfer-adjusted discharge weight of 0.667 ((3+1)/6). For transfers from any one of the three DRGs receiving the alternative payment methodology, the transfer-adjusted discharge amount is 0.5 (to reflect that these cases receive half the full DRG amount the first day), plus one-half of the result of dividing one plus the length of stay prior to transfer by the geometric mean length of stay for the DRG. As with the above adjustment, the result is equal to the lesser of the transfer-adjusted DRG or 1. The transfer-adjusted case-mix index values are calculated by summing the transfer-adjusted DRG weights and dividing by the transfer-adjusted discharges. The transfer-adjusted DRG weights are calculated by multiplying the DRG weight by the lesser of 1 or the transfer-adjusted discharge for the case, divided by the geometric mean length of stay for the DRG. In this way, simulated payments per case can be compared before and after the change to the transfer policy. This change has the greatest impact among urban hospitals (0.7 percent decrease). Among urban hospitals, smaller hospitals (under 200 beds) are most affected, with a 0.8 percent reduction in payments. For urban hospitals grouped by census division, Puerto Rico and the Middle Atlantic division have the smallest negative impacts, 0.2 and 0.4 percent decreases, respectively. The Middle Atlantic division has traditionally had the longest average lengths of stay, therefore, it is not surprising that the impact is smallest here. Transfer cases with a length of stay more than the (geometric) mean length of stay minus one day do not experience any payment impact under this provision. (Full payment is reached one day prior to the mean length of stay due to the double per diem paid for the first day under our current transfer payment methodology.) The small impact in Puerto Rico would indicate that these hospitals also are not discharging patients to postacute care early in the stay. Rural hospitals experience a smaller payment impact overall, especially the smallest rural hospitals: Those with fewer than 50 beds (a 0.3 percent decrease). The smallest impacts among rural census divisions are in the Middle Atlantic and the Mountain. The largest rural impact is in the Pacific division, with a 0.6 percent decrease. This change is consistent with the shorter lengths of stay in this geographic region. The largest negative impact is a 0.9 percent decrease in payments, observed among urban West South Central hospitals, and proprietary hospitals. The smallest negative impact besides urban Puerto Rico hospitals occurs in SCHs (0.2 percent decrease). Those SCHs paid based on their hospital-specific amount would see no impact related to this change, since there is no transfer adjustment made to the hospital-specific amount. C. Impact of the Proposed Changes to the DRG Classifications and Relative Weights (Column 2) In column 2 of Table I, we present the combined effects of the DRG reclassifications and recalibration, as discussed in section II of the preamble to this proposed rule. Section 1886(d)(4)(C)(I) of the Act requires us to annually make appropriate classification changes and to recalibrate the DRG weights in order to reflect changes in treatment patterns, technology, and any other factors that may change the relative use of hospital resources. We compared aggregate payments using the FY 1998 DRG relative weights (GROUPER version 15) to aggregate payments using the proposed FY 1999 DRG relative weights (GROUPER version 16). Overall, payments increase by 0.1 percent due to the DRG changes, although this is prior to applying the budget neutrality factor for DRG and wage index changes (see column 6). Consistent with the minor changes we are proposing for the FY 1999 GROUPER, the redistributional impacts of DRG reclassifications and recalibration across hospital groups are very small (a 0.1 percent increase for large and other urban hospitals, as well as for rural hospitals). Within hospital categories, the net effects for urban hospitals are small positive changes for all hospitals (a 0.2 percent increase for hospitals with fewer than 200 beds and a 0.1 percent increase for larger hospitals). Among rural hospitals, all hospital categories experience an increase of 0.1 percent. The breakdowns by urban census division show that the increase among urban hospitals is spread across all census categories, with the largest increase (0.3 percent) for hospitals in Puerto Rico. For rural hospitals, there is no impact (that is, a 0.0 percent change) for hospitals in the New England, West North Central, and Mountain census divisions. All other divisions experience a 0.1 percent increase. This pattern of small increases or no change applies to all other hospital categories. Overall, we attribute this change to the increasing severity of illness of [[Page 25686]] hospital inpatients. That is, as greater numbers of less acutely ill patients are treated outside the inpatient setting, the acuity of the remaining hospital inpatients increases. Although, in the past, this effect was seen more clearly in large urban and very large rural hospitals, which often had more outpatient settings available for patient treatment, hospitals in all areas now appear to be able to take advantage of this practice. Of course, in general, these positive impacts are very minor, with virtually no hospital group experiencing more than a 0.2 percent increase. D. Impact of Updating the Wage Data (Column 3) Section 1886(d)(3)(E) of the Act requires that, beginning October 1, 1993, we annually update the wage data used to calculate the wage index. In accordance with this requirement, the proposed wage index for FY 1999 is based on data submitted for hospital cost reporting periods beginning on or after October 1, 1994 and before October 1, 1995. As with the previous column, the impact of the new data on hospital payments is isolated by holding the other payment parameters constant in the two simulations. That is, column 3 shows the percentage changes in payments when going from a model using the FY 1998 wage index based on FY 1994 wage data before geographic reclassifications to a model using the FY 1999 prereclassification wage index based on FY 1995 wage data. The wage data collected on the FY 1995 cost reports includes, for the first time, contract labor costs and hours for top management positions as allowable in the wage index calculation. In addition, the changes to wage-related costs associated with hospital and home office salaries that were discussed in the September 1, 1994 final rule (59 FR 45355) are reflected in the FY 1995 data. These changes are reflected in column 3, as well as other year-to- year changes in hospitals' labor costs. The results indicate that the new wage data have an overall impact of a 0.1 percent increase in hospital payments (prior to applying the budget neutrality factor, see column 6). Rural hospitals especially appear to benefit from the update. Their payments increase by 0.9 percent. These increases are attributable to relatively large increases in the wage index values for the rural areas of particular States; South Dakota, Hawaii, Mississippi, Wyoming, New Hampshire, and Iowa all had increases greater than 6 percent in their prereclassification wage index values. Urban hospitals as a group are not significantly affected by the updated wage data. The gains of hospitals in other urban areas (0.4 percent increase) are offset by decreases among hospitals in large urban areas (0.3 percent decrease). The negative impact among large urban areas appears to be largely due to a 5.8 percent decrease in the wage index values for the Boston MSA. This impact is especially evident in the 2.4 percent decrease for urban New England hospitals. Urban West South Central hospitals experience a 1.1 percent decrease, largely due to 11 Texas MSAs with FY 1999 wage indexes that fall by more than 7 percent. These appear to be primarily related to large changes in the average hourly wages of individual hospitals in MSAs with only a few hospitals. We would point out that the wage data used for the proposed wage index is not final, and we understand that many hospitals have submitted revision requests. To the extent these requests are granted by hospitals' fiscal intermediaries, these revisions are likely to affect the impacts shown in the final rule. In addition, we continue to verify the accuracy of the data for hospitals with extraordinary changes in their data from the prior year. We anticipate that all these verifications will be completed when we calculate the final FY 1999 wage index. The largest increases are seen in the rural census divisions. Rural Puerto Rico experiences the greatest positive impact, 2.3 percent. Hospitals in three other census divisions receive positive impacts over 1.0 percent; East South Central at 1.5 percent, New England at 1.3 percent, and West North Central at 1.1 percent. We believe these positive impacts of the new wage data for rural hospitals stem from the expansion of the contract labor definition, specifically to include certain management categories. On average, the hourly cost of contract labor increased for rural hospitals by 5.9 percent. Among urban hospitals, the increase was 4.2 percent. E. Impact of Including Contract Physician Part A Costs (Column 4) As discussed in section III.C.1 of the preamble, we began collecting separate wage data for both direct and contract physician Part A services on the FY 1995 cost report. This change was made in order to address any potential inequity of including only salaried Part A physician costs in the wage index while some States had laws prohibiting their hospitals from employing physicians directly (forcing hospitals to contract with physicians for administrative services). Based on our analysis, we are proposing to include contract physician Part A costs in the wage index calculation. Column 4 shows the payment impacts of including these data. Although only two States currently maintain the prohibition against hospitals directly employing physicians (Texas and California), many hospitals in other States reported these costs as well. Thus, the impacts of this proposed change extend well beyond Texas and California. In fact, the urban Middle Atlantic census division shows the largest positive impact from this change (0.3 percent). In general, hospitals in other areas experience either no changes due to this proposed policy, or small (0.1 percent) increases or decreases. However, urban hospitals in Puerto Rico and rural hospitals in the East North Central census division experience 0.3 percent decreases. The negative rural East North Central impact is largely due to a negative impact of this change on the rural Wisconsin wage index. As noted above, the data used to prepare the proposed FY 1999 wage index are subject to revision, and we understand that many hospitals requested changes to their contract physician Part A costs prior to the March 9 deadline for all requests for wage data changes to be submitted to the fiscal intermediaries. The extent of these requests and the number which are approved by the fiscal intermediaries may change the impacts in the final rule. F. Impact of Removing Overhead Costs of Excluded Areas (Column 5) Prior years' wage index calculations have removed the direct wages and hours associated with certain subprovider components excluded from the prospective payment system; however, the overhead costs associated with these excluded components have not been removed. We revised the FY 1995 cost report to allow hospitals to report separately overhead salaries and hours, and we are proposing to remove the overhead costs and hours allocated to areas of the hospital excluded from the wage index calculation. Column 5 displays the impacts on FY 1999 payments per case of implementing this change. The overall impact is a 0.1 percent decline in payments; however, once again (as with the impacts of the FY 1995 data), the impact diverges along urban and rural lines. Urban hospitals lose 0.2 percent as a result of removing these overhead costs, while rural hospitals gain 0.3 percent. Among rural hospitals by bed size, the smallest rural hospitals benefit the most, with a 0.5 percent increase for rural hospitals with fewer than 50 beds. Hospitals in the rural West North Central census division experience the largest percentage increase (0.7 percent). The largest negative impacts are in Puerto Rico (urban and rural), and urban East North Central and urban East South Central. The combined wage index changes in Table I are determined by summing the individual impacts in columns 3, 4, and 5. For example, the rural West North Central census division gains 1.1 percent from the new wage data, and 0.7 percent from removing the overhead costs allocated to excluded areas. Therefore, the combined impact of the FY 1999 wage index for these hospitals is a 1.8 percent increase. The following chart compares the shifts in wage index values for labor market areas for FY 1999 relative to FY 1998. This chart demonstrates the impact of the proposed changes for the FY 1999 wage index relative to the FY 1998 wage index. The majority of labor market areas (282) experience less than a 5 percent change. A total of 54 labor market areas experience an increase of more than 5 percent with 13 having an increase greater than 10 percent. A total of 34 areas experience decreases of more than 5 percent (all urban). Of those, 6 decline by 10 percent or more. ------------------------------------------------------------------------ Number of labor market areas Percentage change in area wage index values --------------------- FY 1998 FY 1999 ------------------------------------------------------------------------ Increase more than 10 percent..................... 2 13 Increase more than 5 percent and less than 10 percent.......................................... 24 41 Increase or decrease less than 5 percent.......... 334 282 [[Page 25687]] Decrease more than 5 percent and less than 10 percent.......................................... 9 28 Decrease more than 10 percent..................... 1 6 ------------------------------------------------------------------------ Among urban hospitals, 164 would experience an increase of more than 5 percent and 29 more than 10 percent. More rural hospitals have increases greater than 5 percent (360), but none greater than 10 percent. On the negative side, 268 urban hospitals but no rural hospitals have decreases in their wage index values of at least 5 percent (30 of the urban hospitals have decreases greater than 10 percent). The following chart shows the projected impact for urban and rural hospitals. ------------------------------------------------------------------------ Number of hospitals Percentage change in area wage index values --------------------- Urban Rural ------------------------------------------------------------------------ Increase more than 10 percent..................... 29 0 Increase more than 5 percent and less than 10 percent.......................................... 164 360 Increase or decrease less than 5 percent.......... 2440 1924 Decrease more than 5 percent and less than 10 percent.......................................... 238 0 Decrease more than 10 percent..................... 30 0 ------------------------------------------------------------------------ G. Combined Impact of DRG and Wage Index Changes--Including Budget Neutrality Adjustment (Column 6) The impact of DRG reclassifications and recalibration on aggregate payments is required by section 1886(d)(4)(C)(iii) of the Act to be budget neutral. In addition, section 1886(d)(3)(E) of the Act specifies that any updates or adjustments to the wage index are to be budget neutral. As noted in the Addendum to this proposed rule, we compared aggregate payments using the FY 1998 DRG relative weights and wage index to aggregate payments using the FY 1999 DRG relative weights and wage index. Based on this comparison, we computed a wage and recalibration budget neutrality factor of 0.999227. In Table I, the combined overall impacts of the effects of both the DRG reclassifications and recalibration and the updated wage index are shown in column 6. The 0.0 percent impact for All Hospitals demonstrates that these changes, in combination with the budget neutrality factor, are budget neutral. For the most part, the changes in this column are the sum of the changes in columns 2, 3, 4, and 5, minus approximately 0.1 percent attributable to the budget neutrality factor. There may, of course, be some variation of plus or minus 0.1 percent due to rounding. H. Impact of MGCRB Reclassifications (Column 7) Our impact analysis to this point has assumed hospitals are paid on the basis of their actual geographic location (with the exception of ongoing policies that provide that certain hospitals receive payments on bases other than where they are geographically located, such as hospitals in rural counties that are deemed urban under section 1886(d)(8)(B) of the Act). The changes in column 7 reflect the per case payment impact of moving from this baseline to a simulation incorporating the MGCRB decisions for FY 1999. As noted below, these decisions affect hospitals' standardized amount and wage index area assignments. In addition, rural hospitals reclassified for purposes of the standardized amount qualify to be treated as urban for purposes of the DSH adjustment. Beginning in 1998, by February 28 of each year, the MGCRB makes reclassification determinations that will be effective for the next fiscal year, which begins on October 1. (In previous years, these determinations were made by March 30.) The MGCRB may approve a hospital's reclassification request for the purpose of using the other area's standardized amount, wage index value, or both or for FYS 1999-2001 for purposes of qualifying for a DSH adjustment or to receive a higher DSH payment. The proposed FY 1999 wage index values incorporate all of the MGCRB's reclassification decisions for FY 1999. The wage index values also reflect any decisions made by the HCFA Administrator through the appeals and review process for MGCRB decisions as of February 27, 1998. Additional changes that result from the Administrator's review of MGCRB decisions or a request by a hospital to withdraw its application will be reflected in the final rule for FY 1999. The overall effect of geographic reclassification is required by section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, we applied an adjustment of 0.994019 to ensure that the effects of reclassification are budget neutral. (See section II.A.4 of the Addendum to this proposed rule.) As a group, rural hospitals benefit from geographic reclassification. Their payments rise 2.4 percent, while payments to urban hospitals decline 0.4 percent. Hospitals in other urban areas see a decrease in payments of 0.3 percent, while large urban hospitals lose 0.4 percent. Among urban hospital groups (that is, bed size, census division, and special payment status), payments generally decline. A positive impact is evident among all rural hospital groups except the smallest hospitals (under 50 beds), which experience a slight decrease of 0.1 percent. The smallest increase among the rural census divisions is 0.6 percent for New England. The largest increase is in rural South Atlantic, with an increase of 3.3 percent. Among rural hospitals designated as RRCs, 108 hospitals are reclassified for purposes of the wage index only, leading to the 5.6 percent increase in payments among RRCs overall. This positive impact on RRCs is also reflected in the category of rural hospitals with 200 or more beds, which has a 4.6 percent increase in payments. Rural hospitals reclassified for FY 1998 and FY 1999 experience a 6.6 percent increase in payments. This may be due to the fact that these hospitals have the most to gain from reclassification and have been reclassified for a period of years. Rural hospitals reclassified for FY 1999 only experience a 4.4 percent increase in payments, while rural hospitals reclassified for FY 1998 only experience a 0.5 percent decrease in payments. Urban hospitals reclassified for FY 1998 but not FY 1999 experience a 0.6 percent decline in payments overall. Urban hospitals reclassified for FY 1999 but not for FY 1998 experience a 3.1 percent increase in payments. The FY 1999 Reclassification rows of Table I show the changes in payments per case for all FY 1999 reclassified and nonreclassified hospitals in urban and rural locations for each of the three reclassification categories (standardized amount only, wage index only, or both). The table illustrates that the largest impact for reclassified rural hospitals is for those hospitals reclassified for both the standardized amount and the wage index. These hospitals receive a 9.2 percent increase in payments. In addition, rural hospitals reclassified just for the wage index receive a 6.1 percent payment increase. The overall impact on reclassified hospitals is to increase their payments per case by an average of 5.7 percent for FY 1999. Among the 27 rural hospitals deemed to be urban under section 1886(d)(8)(B) of the Act, payments increase 0.7 percent due to MGCRB reclassification. This is because, although these hospitals are treated as being attached to an urban area in our baseline (their redesignation is ongoing, rather than annual like the MGCRB reclassifications), they are eligible for MGCRB reclassification. For FY 1999, one hospital in this category reclassified to a large urban area. The reclassification of hospitals primarily affects payment to nonreclassified hospitals through changes in the wage index and the geographic reclassification budget neutrality adjustment required by section 1886(d)(8)(D) of the Act. Among hospitals that are not reclassified, the overall impact of hospital reclassifications is an average decrease in payments per case of about 0.4 percent. Rural nonreclassified hospitals decrease slightly more, experiencing a 0.5 percent decrease, and urban nonreclassified hospitals lose 0.6 percent (the amount of the budget neutrality offset). The number of reclassifications for purposes of the standardized amount, or for both the standardized amount and the wage index, has increased from 149 in FY 1998 to 162 in FY 1999. The number of wage index only reclassifications increased from 284 in FY 1998 to 358 in FY 1999. These increases are mainly attributable to two changes made by the BBA. Section 4202 of the BBA amended section 1886(d)(10)(D) of the Act to allow RRCs to reclassify for wage index purposes based only on comparison of the RRC's average hourly wage to the average hourly wage of the area to which it applies to be reclassified. In addition, section 4203 provides that for FYs 1999-2001, a rural [[Page 25688]] hospital may be reclassified to an other urban area for the sole purpose of receiving a higher DSH payment. The foregoing analysis was based on MGCRB and HCFA Administrator decisions made by February 27 of this year. As previously noted, there may be changes to some MGCRB decisions through the appeals, review, and applicant withdrawal process. The outcome of these cases will be reflected in the analysis presented in the final rule. I. All Changes (Column 8) Column 8 compares our estimate of payments per case, incorporating all changes reflected in this proposed rule for FY 1999 (including statutory changes), to our estimate of payments per case in FY 1998. It includes the effects of the 0.7 percent update to the standardized amounts and the hospital-specific rates for SCHs, EACHs, and MDHs. It also reflects the 0.3 percentage point difference between the projected outlier payments in FY 1999 (5.1 percent of total DRG payments) and the current estimate of the percentage of actual outlier payments in FY 1998 (5.4 percent), as described in the introduction to this Appendix and the Addendum to this proposed rule. Additional changes affecting the difference between FY 1998 and FY 1999 payments are the reductions to the IME and DSH adjustments enacted by the BBA. These changes initially went into effect during FY 1998 and include additional decreases in payment for each of several succeeding years. As noted in the introduction to this impact analysis, for FY 1999, IME is reduced to approximately a 6.5 percent rate of increase, and DSH is reduced by 2 percent from what hospitals otherwise would receive. We estimate the overall effect of these statutory changes to be a 0.4 percent reduction in FY 1999 payments. For hospitals receiving both IME and DSH, the impact is estimated to be a 0.9 percent reduction in payments per case. We also note that column 8 includes the impacts of FY 1999 MGCRB reclassifications compared to the payment impacts of FY 1998 reclassifications. Therefore, when comparing FY 1999 payments to FY 1998, the percent changes due to FY 1999 reclassifications shown in column 7 need to be offset by the effects of reclassification on hospitals' FY 1998 payments (column 7 of Table 1, August 29, 1997 final rule with comment period; 62 FR 46119). For example, the impact of MGCRB reclassifications on rural hospitals' FY 1998 payments was approximately a 2.2 percent increase, offsetting much of the 2.4 percent increase in column 7 for FY 1999. Therefore, the net change in FY 1999 payments due to reclassification for rural hospitals is actually closer to an increase of 0.2 percent relative to FY 1998. However, last year's analysis contained a somewhat different set of hospitals, so this might affect the numbers slightly. There might also be interactive effects among the various factors comprising the payment system that we are not able to isolate. For these reasons, the values in column 8 may not equal the sum of the changes in columns 1, 6, and 7, plus the other impacts that we are able to identify. The overall payment change from FY 1998 to FY 1999 for all hospitals is a 0.7 percent decrease. This reflects the 0.6 percent net change in total payments due to the postacute transfer change for FY 1999 shown in column 1; the 0.7 percent update for FY 1999, the 0.3 percent lower outlier payments in FY 1999 compared to FY 1998 (5.1 percent compared to 5.4 percent); and the 0.4 percent reduction due to lower IME and DSH payments. Hospitals in urban areas experience a 1.1 percent drop in payments per case compared to FY 1998. Urban hospitals lose 0.9 percent due to the expanded transfer definition and the DRG and wage index changes combined. The 0.4 percent negative impact due to reclassification is offset by an identical negative impact for FY 1998. The impact of reducing IME and DSH is a 0.6 percent reduction in FY 1999 payments per case. Most of this negative impact is incurred by hospitals in large urban areas, where payments are expected to fall 1.4 percent per case compared to 0.5 percent per case for hospitals in other urban areas. Hospitals in rural areas, meanwhile, experience a 1.5 percent payment increase. As discussed previously, this is primarily due to a smaller negative impact due to the expanded transfer definition (0.4 percent decrease compared to 0.6 percent nationally) and the positive effect due to the wage index and DRG changes (1.3 percent increase). Among census divisions, urban New England displays the largest negative impact, 3.5 percent. This outcome is primarily related to the 2.4 percent decrease due to the new wage data. Similarly, urban West South Central experiences a 2.0 percent drop in payments per case, due to a 1.1 percent drop due to the new wage data. The urban East North Central and the urban Pacific also experience overall payment declines of more than 1.0 percent, with 1.5 and 1.4 percent decreases, respectively. The West North Central is the only urban census category to experience a rise in payments, stemming primarily from a 0.9 percent increase due to the new wage data. Hospitals in this census division also are less reliant on IME and DSH funding, and are therefore, impacted less by these reductions. The only rural census division to experience a negative payment impact is New England (0.4 percent fall). This appears to result from a much smaller reclassification effect for rural New England hospitals in FY 1999. For FY 1998, the impact of MGCRB reclassification for these hospitals was a 2.1 percent increase (see 62 FR 46119). For FY 1999, the increase is only 0.6 percent. The largest increases by rural census division are in the South Atlantic and the East South Central, both with 2.0 percent increases in their FY 1999 payments per case. In the South Atlantic, this is primarily due to a larger FY 1999 benefit from MGCRB reclassifications. For the East South Central, it is largely due to a 1.5 percent increase from the FY 1995 wage data. Among special categories of rural hospitals, RRCs have the largest increase, 2.5 percent. This carries over to other categories as well: rural hospitals with between 150 and 200 beds have a 2.7 percent rise in payments (there are 37 RRCs in this category); and RRCs receiving DSH see a 2.9 percent increase. The largest negative payment impacts from FY 1998 to FY 1999 are among hospitals that were reclassified for FY 1998 and are not reclassified for FY 1999. Overall, these hospitals lose 3.1 percent. The urban hospitals in this category lose 2.2 percent, while the rural hospitals lose 6.1 percent. On the other hand, hospitals reclassified for FY 1999 that were not reclassified for FY 1998 would experience the greatest payment increases: 4.7 percent overall; 6.1 percent for 153 rural hospitals in this category and 1.9 percent for 25 urban hospitals. Table II.--Impact Analysis of Changes for FY 1999 Operating Prospective Payment System [Payments per case] Average FY Average FY Number of 1998 1999 hospitals payment per payment per All changes case case (1) (2) \1\ (3) \1\ (4) ---------------------------------------------------------------------------------------------------------------- (BY GEOGRAPHIC LOCATION): ALL HOSPITALS........................................... 4,956 6,764 6,715 -0.7 URBAN HOSPITALS......................................... 2,792 7,332 7,255 -1.1 LARGE URBAN AREAS....................................... 1,588 7,891 7,782 -1.4 [[Page 25689]] OTHER URBAN AREAS....................................... 1,204 6,584 6,549 -0.5 RURAL AREAS............................................. 2,164 4,461 4,528 1.5 BED SIZE (URBAN): 0-99 BEDS............................................... 690 4,922 4,890 -0.7 100-199 BEDS............................................ 936 6,127 6,069 -1.0 200-299 BEDS............................................ 566 6,921 6,860 -0.9 300-499 BEDS............................................ 448 7,839 7,744 -1.2 500 OR MORE BEDS........................................ 152 9,724 9,607 -1.2 BED SIZE (RURAL): 0-49 BEDS............................................... 1,135 3,663 3,712 1.3 50-99 BEDS.............................................. 635 4,173 4,218 1.1 100-149 BEDS............................................ 229 4,609 4,669 1.3 150-199 BEDS............................................ 91 4,799 4,927 2.7 200 OR MORE BEDS........................................ 74 5,603 5,692 1.6 URBAN BY CENSUS DIV.: NEW ENGLAND............................................. 152 7,873 7,597 -3.5 MIDDLE ATLANTIC......................................... 425 8,168 8,123 -0.5 SOUTH ATLANTIC.......................................... 413 6,973 6,955 -0.3 EAST NORTH CENTRAL...................................... 475 7,016 6,909 -1.5 EAST SOUTH CENTRAL...................................... 159 6,558 6,511 -0.7 WEST NORTH CENTRAL...................................... 186 7,001 7,011 0.1 WEST SOUTH CENTRAL...................................... 350 6,807 6,672 -2.0 MOUNTAIN................................................ 126 7,065 7,045 -0.3 PACIFIC................................................. 458 8,403 8,289 -1.4 PUERTO RICO............................................. 48 3,049 3,057 0.3 RURAL BY CENSUS DIV.: NEW ENGLAND............................................. 53 5,308 5,285 -0.4 MIDDLE ATLANTIC......................................... 80 4,802 4,857 1.1 SOUTH ATLANTIC.......................................... 286 4,606 4,697 2.0 EAST NORTH CENTRAL...................................... 284 4,492 4,559 1.5 EAST SOUTH CENTRAL...................................... 269 4,160 4,242 2.0 WEST NORTH CENTRAL...................................... 499 4,174 4,250 1.8 WEST SOUTH CENTRAL...................................... 341 3,989 4,019 0.7 MOUNTAIN................................................ 206 4,815 4,871 1.2 PACIFIC................................................. 141 5,603 5,664 1.1 PUERTO RICO............................................. 5 2,369 2,389 0.8 (BY PAYMENT CATEGORIES): URBAN HOSPITALS......................................... 2,877 7,289 7,215 -1.0 LARGE URBAN AREAS....................................... 1,681 7,795 7,691 -1.3 OTHER URBAN AREAS....................................... 1,196 6,564 6,533 -0.5 RURAL AREAS............................................. 2,079 4,440 4,501 1.4 TEACHING STATUS: NON-TEACHING............................................ 3,875 5,478 5,472 -0.1 FEWER THAN 100 RESIDENTS................................ 841 7,219 7,155 -0.9 100 OR MORE RESIDENTS................................... 240 10,987 10,796 -1.7 DISPROPORTIONATE SHARE HOSPITALS (DSH): NON-DSH................................................. 3,074 5,830 5,809 -0.4 URBAN DSH: 100 BEDS OR MORE.................................... 1,402 7,941 7,850 -1.1 FEWER THAN 100 BEDS...........................
