Federal Register, Volume 63 Issue 61 (Tuesday, March 31, 1998)

[Federal Register Volume 63, Number 61 (Tuesday, March 31, 1998)]
[Rules and Regulations]
[Pages 15718-15738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8480]

[[Page 15717]]

_______________________________________________________________________

Part VIII

Department of Health and Human Services

_______________________________________________________________________

Health Care Financing Administration

_______________________________________________________________________

42 CFR Part 413

Medicare Program; Schedule of Per-Beneficiary Limitations on Home
Health Agency Costs for Cost Reporting Periods; Final Rule

Federal Register / Vol. 63, No. 61 / Tuesday, March 31, 1998 / Rules
and Regulations

[[Page 15718]]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 413

[HCFA-1905-FC]
RIN 0938-AI84

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

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

ACTION: Final rule with comment period.

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

SUMMARY: This final rule with comment period sets forth, in accordance
with section 4602 of the Balanced Budget Act of 1997, a new schedule 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, 1997. These limitations are in addition to the per-visit
limitations that were set forth in our January 2, 1998 notice with
comment period.

DATES: Effective Date: This rule is effective October 1, 1997.
Applicability Date: The schedule of per-beneficiary limitations is
applicable for cost reporting periods beginning on or after October 1,
1997.
Comment Date: Written comments will be considered if we receive
them at the appropriate address, as provided below, no later than 5
p.m. on June 1, 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-1905-FC, 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, D.C. 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-1905-FC.
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, D.C., on Monday through Friday
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FOR FURTHER INFORMATION CONTACT: Michael Bussacca, (410) 786-4602.

SUPPLEMENTARY INFORMATION:

I. Background

A. Program History

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) per-visit costs
since 1979. Additional statutory provisions specifically governing the
limitations applicable to HHAs are contained at section 1861(v)(1)(L)
of the Act. These limits will be replaced by the establishment of a
prospective payment system for home health services. However, section
1861(v)(1)(L)(v) of the Act, as added by section 4602(c) of the
Balanced Budget Act of 1997 (BBA '97), Pub. L. 105-33, requires the
Secretary to establish an interim system of payment limitations prior
to implementation of the prospective payment system. Payments by
Medicare under this interim 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 as described in sections 1861(v)(1)(L)(v)(I) and
(v)(1)(L)(vi)(I) of the Act.
Section 1861(v)(1)(L)(v)(I) 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 Federal fiscal year 1994, the per-beneficiary
limitation 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.

[[Page 15719]]

B. Relevant Provisions of the Balanced Budget Act of 1997

The BBA '97 made several changes that affect the amount of costs to
be paid under Medicare for services provided by HHAs. The provisions of
BBA '97 that we are implementing in this final rule with comment period
are as follows.
1. Additions to Cost Limitations
Section 1861(v)(1)(L)(v) was added to the Act by section 4602(c) of
BBA `97 and requires the establishment of an interim system of
limitations for services furnished by home health agencies.
Payment will not exceed the lesser of reasonable costs or the
aggregate effect of the per-visit limitations published on January 2,
1998 (63 FR 89) or if lower, the aggregate per-beneficiary limitation
as described in this final rule with comment.
A per-beneficiary limitation for agencies with a 12-month cost
reporting period ending during Federal FY 1994 is determined as
follows: (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.
How these per-beneficiary limitations are determined is explained
further in section V of this document.
2. New Providers and Providers Without a 12-Month Cost Reporting Period
Ending in FY 1994
Section 1861(v)(1)(L)(vi) was added to the Act by section 4602(c)
of BBA '97 and requires the per-beneficiary limitation for new
providers and those providers without a 12-month cost reporting period
ending in FY 1994 be equal to the median of the section
1861(v)(1)(L)(v) per-beneficiary limitations applied to other HHAs.
Also, an HHA that had a 12-month cost reporting period ending
during Federal FY 1994 and had altered its corporate structure or name
will not be considered a new provider for purposes of determining the
per-beneficiary limitation. Examples of an HHA that has altered its
corporate structure but has kept its operational structure as a
freestanding or provider-based HHA would be an agency that has gone
from being a non-profit entity to a profit entity or an agency that has
gone from being a subchapter S corporation to a proprietary individual.
The most common occurrence of an agency changing its name would be a
change in ownership whereby the new owners change the name of the
agency but continue operating as a freestanding or provider-based HHA.
The per-beneficiary limitation that applies to these types of changes
will be determined under section 1861(v)(1)(L)(v).
3. Reduction in Market Basket Updates
Section 1861(v)(1)(L)(iv) was added to the Act by section 4601(a)
of BBA '97 and requires the Secretary not to take into account any
changes in the home health market basket with respect to cost reporting
periods which began on or after July 1, 1994 and before July 1, 1996 in
establishing the section 1861(v)(1)(L) limitations for cost reporting
periods beginning after September 30, 1997. This, in effect, reduces
the factors for increasing the costs in the data base used in
calculating the per-beneficiary limitations. These factors are set
forth in section IV. of this document.
4. Application of the Wage Index Based on Site of Service Rendered
Section 1861(v)(1)(L)(iii) was amended by section 4604(b) of BBA
'97 to require that the utilization of the area wage index applicable
under section 1886(d)(3)(E) of the Act be determined using the survey
of the most recent available wages and wage-related costs of hospitals
located in the geographic area in which the home health services are
furnished. In effect, the regional component of the per-beneficiary
limitation that will apply for the beneficiary receiving services from
the HHA will be the appropriate census region per-beneficiary
limitation and adjusted by the appropriate wage index for the
geographic area where the beneficiary received home health services. A
Program Memorandum (Rev. AB-97-18), published in September 1997,
outlined the billing changes that are needed to properly implement this
provision.
5. Effective Date
Section 1861(v)(1)(L)(vii) of the Act was added by section 4602(c)
of BBA '97.
Beginning in FY 1998, the Secretary is required to establish the
per-beneficiary limitations by August 1 of each year. However, for cost
reporting periods beginning on or after October 1, 1997, the Secretary
need only establish those limitations by April 1, 1998. In accordance
with section 1861(v)(1)(L)(vii)(I), we are establishing by April 1,
1998, the per-beneficiary limitations for cost reporting periods
beginning on or after October 1, 1997.

II. Per-Beneficiary Limitations

The cost report data used to develop the schedule of per-
beneficiary limitations set forth in this final rule are for cost
reporting periods ending in Federal FY 1994, as required by section
4602(c) of BBA '97. 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, 1998 (excluding, as required by statute, any changes in the home
health market basket for cost reporting periods beginning on or after
July 1, 1994 and before July 1, 1996).
The interim payment 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

[[Page 15720]]

labor component of the national per-beneficiary limitation at the end
of the cost reporting period beginning on or after October 1, 1997, and
is based on where the home health services are rendered.
The detailed methodologies for calculating the per-beneficiary
limitations and how they are applied to agencies' costs for cost
reporting periods beginning on or after October 1, 1997 are described
below.

A. Agency-Specific Rates

Section 1861(v)(1)(L)(v)(I) of the Act requires that 75 percent of
the per-beneficiary limitation be based on 98 percent of the reasonable
costs for the agency's 12-month cost reporting period that ended during
FY 1994. Reasonable costs are the lesser of the actual Medicare costs
of the discipline services or the aggregate discipline limitation, plus
nonroutine medical supplies. This amount is multiplied by 98 percent
and divided by the HHA's Federal FY 1994 unduplicated census count of
beneficiaries to calculate the agency-specific per-beneficiary amount.
An intricate and important part of the agency-specific per-beneficiary
computation is the use of the Federal FY 1994 unduplicated census count
of beneficiaries. After BBA '97 was enacted, many HHAs and their trade
association representatives asserted that the unduplicated census
counts of beneficiaries, as reported on the Federal FY 1994 Medicare
cost report, was frequently an incorrect figure. Even though this
number was a statistic required to be reported to Medicare, it was
apparently not carefully monitored by HHAs because it did not impact
Medicare payments at that time.
Through an analysis of our database to be used in establishing the
regional per-beneficiary limitations, which includes the same cost
reporting period used in establishing the agency-specific per-
beneficiary limitation, we confirmed that the unduplicated census count
was not reliable. Based upon this determination, we generated a more
accurate unduplicated census count from HCFA's Standard Analytical File
(SAF), which is generated from our National Claims History File. The
unduplicated census count was created from the SAF by matching all
claims to each agency's cost reporting period ending in Federal FY 1994
and identifying individual beneficiaries represented in the claims.
Each beneficiary was counted only once for all the claim(s) identified
for that cost reporting period for each agency. A list of HHAs and
associated unduplicated census counts from the SAF has been
disseminated to the intermediaries for calculating the agency-specific
per-beneficiary limitations. If the intermediary has an HHA that has a
12-month cost reporting period that ended in Federal FY 1994 and that
agency was not on the list for an unduplicated census count from SAF,
the intermediary must contact HCFA so that an unduplicated census count
can be generated from SAF.

B. Regional Rates by Census Division

Section 1861(v)(1)(L)(v)(I) of the Act requires that 25 percent of
the per-beneficiary limitation be based on 98 percent of the
standardized regional average of reasonable costs for the agency's
census division for cost reporting periods ending during Federal FY
1994. To develop the schedule of per-beneficiary limitations by census
region, we extracted the totals of the Medicare allowable costs, the
aggregate cost per-visit limitation, and the Medicare nonroutine
medical supply costs from settled Medicare cost reports of all HHAs for
cost reporting periods ending in Federal FY 1994. How this data was
used in calculating the regional rates by census division is explained
further in section V.B..
Section 1861(v)(1)(L)(v)(I) requires that the costs used in
calculating the per-beneficiary limitations be updated using the home
health market basket index. However, section 1861(v)(1)(L)(iv)
prohibits the Secretary from taking into account any changes in the
home health market basket with respect to cost reporting periods which
began on or after July 1, 1994 and before July 1, 1996. Therefore, we
adjusted the database used in calculating the regional per-beneficiary
limitations by the market basket index 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.

C. Wage Index

A wage index is used to adjust the labor-related portion of the
standardized regional average per-beneficiary limitation to reflect
differing wage levels among areas. In establishing the regional average
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 schedule of standardized
regional average per-beneficiary 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 standardized
regional average per-beneficiary 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), amended by section 4604(b) of BBA '97,
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

[[Page 15721]]

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. Effective
with cost reporting periods beginning on or after October 1, 1997, the
wage-index, as applied to the labor portion of the regional per-
beneficiary 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.

III. Determination of Old or New Home Health Agencies

The per-beneficiary limitation determined under section
1861(v)(1)(L)(v)(''clause v'' HHAs) will apply to all HHAs that have a
12-month cost reporting period ending during FY 1994. There are,
however, HHAs that had a 52/53 week cost reporting cycle that ended in
Federal FY 1994, or a 13-month cost reporting period that ended during
Federal FY 1994 (as allowed in accordance with Medicare principles of
reimbursement). For purposes of determining the per-beneficiary
limitation, these HHAs will be deemed to be ``clause v'' HHAs. Also, an
HHA that had a 12-month cost reporting period ending in Federal FY 1994
and altered its corporate structure or name is a ``clause v'' HHA for
purposes of determining the per-beneficiary limitation.
Section 1861(v)(1)(L)(vi) of the Act states that for new HHAs and
agencies without a 12-month cost reporting that ended in FY 1994
(``clause vi'' HHAs), the per-beneficiary limitation is the median of
these limitations applied to other HHAs, as determined by the
Secretary.

A. Less Than a Twelve-Month Cost Reporting Period During Federal FY
1994

Without exception, all HHAs that did not have a 12-month cost
reporting period that ended in Federal FY 1994 will have the national
per-beneficiary limitation applied to the agency's unduplicated census
count of Medicare beneficiaries for the cost reporting period beginning
on and after October 1, 1997. The national per-beneficiary limitation
that applies to the unduplicated census count of Medicare beneficiaries
for ``clause vi'' HHAs is in Table 3b.

B. HHAs Entering the Medicare Program After Federal FY 1994

New HHAs that entered the Medicare program after Federal FY 1994
will have the national per-beneficiary limitation applied to the
unduplicated census count of Medicare beneficiaries for cost reporting
periods beginning on or after October 1, 1997. A new HHA is one that
did not have approval to participate in the Medicare program under
present or previous ownership prior to October 1, 1993.

C. Other

There are cases in which there could be changes in a ``clause v''
type HHA's operational structure, after Federal FY 1994, that could
have an impact on the determination of the per-beneficiary limitation
that is applicable to the HHA for cost reporting periods beginning on
or after October 1, 1997. Examples of such changes are mergers,
consolidations, and changes in ownership resulting in a change in the
operational structure. The policies that apply when there are changes
in the operational structure of an HHA after its cost reporting ended
after FY 1994 are as follows:
1. Mergers or Consolidations of Like HHAs (Two or More Freestanding or
Two or More Provider-Based Agencies) With Cost Reporting Periods Ending
in Federal Fiscal Year 1994
There could be cases in which the merger or consolidation of two or
more like HHAs (freestanding or provider-based) would not alter the
surviving HHA's corporate structure, but applying the surviving HHA's
per-beneficiary limitation to the combined operational structure would
not be appropriate. Therefore, if two or more like HHAs (two or more
freestanding agencies or two or more provider-based agencies) that had
cost reporting periods that ended in Federal FY 1994 merge or
consolidate after Federal FY 1994, the per-beneficiary limitation will
be recalculated based on an average of the agencies' Medicare costs
weighted by their unduplicated census counts in Federal FY 1994. If the
agencies have different cost reporting period year ends, the costs must
be inflated to common year end dates. For example, HHA 1, with a cost
reporting period that ended March 31, 1994, merged on December 1, 1996
with HHA 2, with a cost reporting period that ended November 30, 1993.
HHA 2's corporate structure did not change, but the operational
structure changed with the inclusion of HHA 1. The Medicare allowable
reasonable costs, the aggregate per-visit limitation, and the
nonroutine medical supply costs of HHA 1 will be updated to November
30, 1996. The Medicare allowable costs, the aggregate per-visit
limitation, and the nonroutine medical supply costs of HHA 2 will be
updated to November 30, 1996. The lesser of the combined updated
Medicare allowable reasonable costs or the combined updated aggregate
per-visit limitation, plus the combined updated nonroutine medical
supply costs will be divided by the combined unduplicated patient
census counts. The weighted average per-beneficiary amount will then be
further updated to October 31, 1998 to derive the per-beneficiary
limitation that applies to the HHA's cost reporting period which began
November 1, 1997. The same procedures would apply if HHA 1 and HHA 2
were subunits in Federal FY 1994.
2. Mergers or Consolidations When Only One of the HHAs Had a Cost
Report That Ended in Federal Fiscal 1994
There could be situations in which two or more HHAs merge or
consolidate into one after Federal FY 1994 and only one of the HHAs had
a cost reporting period ending in Federal FY 1994. The statute is
specific as to what per-beneficiary limitation applies to agencies with
cost reporting periods ending in Federal FY 1994 and what per-
beneficiary limitation applies to agencies that do not have a cost
reporting period ending in Federal FY 1994. The two methodologies do
not interrelate sufficiently to allow the application of a methodology
similar to the methodology described in section III. C.1. above.
Because the two methodologies do not interrelate, we have taken a
position that we believe is equitable within the constraints of the
statute. If HHAs merge or consolidate after Federal FY 1994 and only
one of the HHAs had a cost reporting period that ended in Federal FY
1994, the agency will be considered a ``clause vi'' agency with respect
to applying the per-beneficiary limitation. That is, the per-
beneficiary limitation will be the national per-beneficiary limitation
that applies to new agencies.
3. Complete Changes in the Operational Structure of the HHA
There are situations when the costs of operations of the HHA could
change either through a change of ownership or an internal
reconfiguration of the operational structure within the same HHA after
Federal FY 1994. Examples of this would be a freestanding agency
becoming a provider-based agency or vice-versa. Even though this could
be construed as an agency which has merely altered its corporate
structure, the costs of operations are significantly different between
a freestanding agency and a provider-based agency. We do not

[[Page 15722]]

believe the statute was intended to advantage or disadvantage different
classes of agencies whose means of determining overhead costs are
completely different. Generally, a freestanding agency has control over
the overhead costs it incurs while a provider-based agency has little,
if any, control over the overhead costs it incurs. Therefore, if
``clause v'' freestanding HHAs become provider-based, and vice versa,
through a change in ownership or other means, after Federal FY 1994,
these agencies will be considered ``clause vi'' agencies with respect
to applying the per-beneficiary limitation. We also noted that branches
within HHAs generally do not have direct overhead costs specifically
identified to them on the Medicare cost report. HHAs that have branches
report costs on the Medicare cost report as a single agency. As such,
the branch does not exist as an independent agency certified by
Medicare. The branch is encompassed in the parent agency's
certification. Therefore, when branches within HHAs that have a cost
reporting period ending in Federal FY 1994 become subunits after
Federal fiscal 1994, whereby they are certified under Medicare to
operate as a freestanding HHA, these new subunits will be considered
``clause vi'' agencies with respect to applying the per-beneficiary
limitation.

IV. 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
------------------------------------------------------------------------
1993-based
market
Cost category basket Price proxy
weight
------------------------------------------------------------------------
Compensation, including allocated 77.668
Contract Services' Labor.
Wages and Salaries, Including 64.226 HHA Occupational Wage
allocated Contract Services' Index.
Labor.
Employee benefits, including 13.442 HHA Occupational
allocated Contract Services' Benefits Index.
Labor.
Operations & Maintenance......... 0.832 CPI-U Fuel & Other
Utilities.
Administrative & General, 9.569
including allocated Contract
Services' Non-Labor
Telephone.................... 0.725 CPI-U Telephone.
Paper & Printing............. 0.529 CPI-U Household Paper,
Paper Products &
Stationery Supplies.
Postage...................... 0.724 CPI-U Postage.
Other Administrative & 7.591 CPI-Services.
General, including Allocated
Contract Services Non-Labor.
Transportation................... 3.405 CPI-U Private
Transportation.
Capital-Related.................. 3.204
Insurance.................... 0.560 CPI-U Household
Insurance.
Fixed Capital................ 1.764 CPI-U Household
Insurance.
Movable Capital.............. 0.880 PPI Machinery &
Equipment.
Other Expenses, including 5.322 CPI-U All Items Less
allocated Contract Services' Non- Food & Energy.
Labor..
-------------
Total...................... 100.000
------------------------------------------------------------------------

V. Methodology for Determining Per-Beneficiary Limitation

A. Agency-Specific Per-Beneficiary Limitation

Section 1861(v)(1)(L)(v) of the Act, in part, requires that 75
percent of the per-beneficiary limitation be based on 98 percent of the
reasonable costs for the agency's 12-month cost reporting period during
Federal FY 1994. Reasonable costs are defined as the lesser of the
actual Medicare aggregate costs of discipline services or the aggregate
discipline per-visit limitation. The Medicare allowable costs of
nonroutine supplies is added to this amount and multiplied by 98
percent. The result of this computation is then divided by the HHA's
Federal FY 1994 unduplicated census count of Medicare beneficiaries to
derive the agency-specific limitation which will be 75 percent of the
per-beneficiary limitation.
The computation of the agency-specific per-beneficiary limitation
is performed by the HHA's intermediary. For provider-based HHAs, the
reasonable costs are the lesser of line 7, columns 8 and 9, or line 14
columns 8 and 9, plus line 15, columns 8 and 9, as reported on
Supplemental Worksheet H-5 (Form HCFA-2552-92-H (4/93)), of the
Medicare cost report for the cost reporting period ending in Federal
fiscal 1994, multiplied by 98 percent. The results are divided by the
unduplicated census count of Medicare beneficiaries, as provided by
HCFA. For freestanding HHAs, the reasonable costs are the lesser of
line 7, column 9, or line 14, column 9, plus line 17, columns 7 and 8,
as reported on Worksheet C (Form HCFA-1728-86 (6/76)) of the Medicare
cost report for the cost reporting period ending during Federal FY
1994, multiplied by 98 percent. The results are divided by the
unduplicated census count for Medicare beneficiaries, as provided by
HCFA.
The agency-specific per-beneficiary limitation must also be
adjusted using the latest available market basket factors to reflect
expected cost increases occurring between the cost reporting period
ending during Federal FY 1994 and the cost reporting period ending
during FY 1998. The factors for inflating the agency-specific per-
beneficiary limitation are provided on Tables 2 and 5 or determined
using Table 6.
In establishing the agency-specific per-beneficiary limitation, it
is important that the amount determined is an accurate reflection of
the home health services provided to Medicare beneficiaries in Federal
FY 1994. Because the per-beneficiary limitation required by section
1861(v)(1)(L)(v)(I) of the Act is established, in part, using agency-
specific cost report data during Federal FY 1994, and the unduplicated
census count of Medicare beneficiaries

[[Page 15723]]

as may have been reported on the cost report is not being used in the
computation, we are allowing HHAs to request a review of the
calculation of the agency-specific limitation which includes the number
of unduplicated counts of Medicare beneficiaries used in the
computation. HHAs will have 180 days from the notification date of the
agency-specific per-beneficiary limitation to request a review from its
intermediary that the number of unduplicated census counts of Medicare
beneficiaries as provided by HCFA is incorrect or other data from the
Federal FY 1994 cost report used in the calculation of the agency-
specific amount is/are incorrect. The HHA would bear the burden of
proof to document its proffer of the appropriate number of unduplicated
census counts of Medicare beneficiaries or the other appropriate data
used in the calculation. An unduplicated census count of Medicare
beneficiaries is a count of one for each Medicare patient receiving
home health services from an HHA during its cost reporting period,
regardless of the number of services or the number of different plans
of care that the patient may have been under during the HHA's cost
reporting period. If the agency can demonstrate to the satisfaction of
the intermediary that a change should be made, the intermediary would
appropriately recalculate the agency-specific per-beneficiary
limitation. The intermediary must provide to the HHA its determination,
in writing, whether or not an adjustment is provided.

B. Census Division Standardized Regional Average Per-Beneficiary
Limitations

Section 1861(v)(1)(L)(v)(I) of the Act requires, in part, that 25
percent of the per-beneficiary limitation be based on 98 percent of the
standardized regional average of such costs for the agency's census
division for cost reporting periods ending during Federal FY 1994 and
such costs updated by the home health market basket index.
The standardized regional average per-beneficiary limitations by
census region were determined by extracting settled actual data from
Medicare cost reports ending in Federal FY 1994 for freestanding and
provider-based HHAs. The unduplicated census counts in the data file
were replaced with the unduplicated census counts of Medicare
beneficiaries generated using the SAF. Section 1861(v)(1)(L)(iii) of
the Act, as amended by section 4604 of BBA '97, requires that we base
the payments for home health services on the location where the
services are provided. The file created from the SAF accumulated the
number of beneficiaries in each MSA/non-MSA area serviced by each HHA.
This file was created by matching all claims to each agency's cost
reporting period to determine the unduplicated census counts by MSA/
non-MSA area. This file was merged with the cost report file and
replaced the unduplicated census counts reported by the HHAs on the
Medicare cost report. HHAs were grouped within their appropriate census
region based on the HHAs' State and county code. Agencies not located
in a census region, e.g. Puerto Rico, were grouped separately rather
than arbitrarily assigned to a census region.
In order to account for the statutory requirement that the wage
index used in calculating the limitations be based on the location
where the home health service was furnished rather than the location of
the HHA, it was necessary to develop a wage-index weighted by the
number of beneficiaries in each MSA/non-MSA in each census region. The
unduplicated census counts of Medicare beneficiaries for each MSA/non-
MSA serviced by the HHA were multiplied by the appropriate wage index
that applied to that MSA/non-MSA. The product of these computations
were totaled for each HHA to yield a wage index adjusted unduplicated
census count of Medicare beneficiaries. The lesser of the Medicare
reasonable costs or aggregate per-visit limitation plus nonroutine
medical supplies for each HHA were totaled for each census region. The
total costs in each census region was divided by the total wage index
adjusted unduplicated census counts of Medicare beneficiaries in each
region to arrive at a standardized average cost per-beneficiary for the
labor component. This approximates the same effect as though each HHA
in the census region had its average costs per-beneficiary adjusted by
its average wage-index for the beneficiaries serviced in its service
areas. We then adjusted the average per-beneficiary limitations using
the latest available market basket factors to reflect expected cost
increases occurring between the cost reporting periods that ended in
Federal FY 1994 and September 30, 1998 excluding any changes in the
home health market basket with respect to cost reporting periods which
began on or after, July 1, 1994 and before July 1, 1996 as shown in
Table 2 below.
The statute is silent with respect to the regional per-beneficiary
limitation that would apply to Puerto Rico and Guam. Neither of these
areas fall within the census divisions referred in the statute. We do
not believe it was the intent of Congress to have HHAs in Puerto Rico
and Guam subject to a blend of 75 percent agency-specific per
beneficiary limitation and 25 percent of zero since they do not fall
within the census divisions. Therefore, based on the HHAs in our data
base that are located in Puerto Rico and Guam, we have developed
regional per-beneficiary limitations specific to Puerto Rico and Guam
using the same methodology as we used for the census divisions. These
per-beneficiary limitations for which 25 percent of the per-beneficiary
limitation will be based can be found on Table 3c.

C. National Per-Beneficiary Limitation

Section 1861(v)(1)(L)(vi)(I) of the Act, as added by section
4602(c) of BBA '97, requires that for new HHAs and HHAs without a 12-
month cost reporting period ending in Federal FY 1994, the per-
beneficiary limitation will be the median of these limitations applied
to other HHAs. This means that we must establish a national per-
beneficiary limitation based on ``the median of these limits (or the
Secretary's best estimates thereof) applied to other HHAs as determined
by the Secretary'', referring back to the per-beneficiary limitations
that apply to HHAs that have a cost reporting period ending in Federal
FY 1994. This required us to calculate the per-beneficiary limitation
for each HHA in our data base, blending the 75 percent agency-specific
per-beneficiary component with the 25 percent census region per-
beneficiary component. Because the wage index will be applied to the
labor component of the census region per-beneficiary limitation for
``clause v'' HHAs in determining the aggregate per-beneficiary
limitation, we adjusted the census region per-beneficiary limitations
for the varying effects of the wage indexes. This adjustment
methodology used a beneficiary-weighted wage adjustment factor based on
the geographic location of beneficiaries in our data base as described
in B. above. We blended the agency-specific per-beneficiary component
with the standardized census region per-beneficiary component, arrayed
the results, and established the median per-beneficiary amount. This is
the ``unadjusted median per-beneficiary limitation''. In order to apply
a wage index adjustment factor to the national per-beneficiary
limitation, the median per-beneficiary limitation had to be adjusted to
standardize the agency-specific per-beneficiary component in the same
fashion as the census region per-beneficiary limitation component so
that the final labor component to which the new agencies

[[Page 15724]]

would apply their appropriate wage indexes would be uniformly
standardized in both its agency-specific per-beneficiary limitation
component and its census region per-beneficiary component. To
standardize the agency-specific per-beneficiary component of the median
per-beneficiary limitation, we calculated an adjustment factor to apply
to the median per-beneficiary limitations. The adjustment factor was
determined by calculating the ratio of the fully standardized per-
beneficiary median (standardized for both the agency specific and the
census region amounts) and the unadjusted blended median of the
``clause v'' agencies. It is the labor component of this adjusted
median of the per-beneficiary limitations for the agencies in our data
base, standardized in both the 75 percent agency-specific per
beneficiary limitation and the 25 percent census region per-beneficiary
limitation components to which new agencies will apply their
appropriate wage indexes.
In summary, we calculated a national per-beneficiary limitation
based on the median of the per-beneficiary limitations that apply to
HHAs that have a cost reporting period ending during Federal FY 1994.
To establish this national per-beneficiary limitation, we blended 75
percent agency-specific per-beneficiary component with the 25 percent
census region division per-beneficiary component for each agency in our
data base, arrayed the results and determined the median. The
application of this median per-beneficiary limitation requires that we
apply a wage index to the labor component of the national per-
beneficiary limitation. In calculating the median to be used as the
national per-beneficiary limitation for new agencies and agencies
without a 12-month cost reporting period ending during Federal FY 1994,
we recognized that the agency-specific component was not standardized
for the effects of area wage differences. In order to apply a wage
index, we determined an appropriate adjustment factor to apply to the
national per-beneficiary limitation that effectively took out any
differences in area wages for the agency-specific component of the
median per-beneficiary limitation. The result is a fully standardized
national per-beneficiary limitation.

D. Update of Data Base

The data used to develop the per-beneficiary limitations and the
national per-beneficiary limitation was 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, 1998, excluding any changes in the home health market
basket with respect to cost reporting periods which began on or after
July 1, 1994 and before July 1, 1996. The following inflation factors
were used in calculating the Census region and national per-beneficiary
limitations:

Table 2.--Factors for Inflating Database Dollars to September 30, 1998
[Inflation adjustment factors ^{1]
------------------------------------------------------------------------
Fiscal Year End 1993 1994
------------------------------------------------------------------------
October 31.................................... 1.08619 ...........
November 30................................... 1.08349 ...........
December 31................................... 1.08080 ...........
January 31.................................... ........... 1.07813
February 28................................... ........... 1.07550
March 31...................................... ........... 1.0729
April 30...................................... ........... 1.07046
May 31........................................ ........... 1.06800
June 30....................................... ........... 1.06565
July 31....................................... ........... 1.06354
August 31..................................... ........... 1.06165
September 30.................................. ........... 1.05993
------------------------------------------------------------------------
^{1 Source: The Home Health Agency Price Index, produced by HCFA. 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.

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.

E. 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,
1997 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. As explained in section V. of this preamble, the data
used in calculating the census region and the national per-beneficiary
limitations were updated to September 30, 1998. Therefore, the cost
limitations published in this document are for a 12-month cost
reporting period beginning October 1, 1997 and ending September 30,
1998. For 12-month cost reporting periods beginning after October 1,
1997 and before October 1, 1998, cost reporting 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

[[Page 15725]]

period'' adjustment factors, if the short cost reporting period begins
before the sixteenth of the month, we will consider the period to have
begun on the first of that month. If the start period begins on or
after the sixteenth of the month, it will be considered to have begun
at the beginning of the next month. Also, if the short period ends
before the sixteenth of the month, we will consider the period to have
ended at the end of the preceding month; if the short period ends on or
after the sixteenth of the month, it will be considered to have ended
at the end of that month.

Example

1. After approval by its intermediary, a ``clause v'' HHA
changed its FY end from June 30 to December 31. Therefore, the HHA
had a short cost reporting period beginning on July 1, 1998 and
ending on December 31, 1998. The cost reporting period ending during
Federal FY 1994 would have been the cost reporting period ending on
June 30, 1994. The per visit limitation that applies to this short
period must be adjusted as follows:
Step 1--From Table 6, sum the index levels for the months of
July 1998 through December 1998: 6.63687
Step 2--Divide the results from Step 1 by the number of months
in short period: 6.6387 =1.106145
Step 3--From Table 6, sum the index levels for the months in the
common period of October 1997 through September 1998: 13:06926
Step 4--Divide the results in Step 3 by the number of months in
the common period: 13.06926 12 = 1.089105
Step 5--Divide the results from Step 2 by the results from Step
4. This is the adjustment factor to be applied to the published per-
beneficiary limitations: 1.106145 1.1089106 = 1.015646
Step 6--Apply the results from Step 5 to the published per-
beneficiary limitations in the same manner as shown in the example
in VIII.C.

VI. Exceptions or Adjustments to Per-beneficiary Limitation

The Medicare regulations at 42 CFR 413.30 contain the general rules
under which HCFA may establish limitations on provider costs, including
provisions under which a provider may request a reclassification,
exception, or exemption from the cost limitations under that section.
We do not believe that the Congress intended these general rules to
apply to the establishment of the per-beneficiary limitations. First,
we note that unlike other provisions of the statute that provide
specific language for exceptions or exemptions to the limitations on
costs, the statute is silent with respect to providing exceptions or
exemptions to the per-beneficiary limitations. Section
1861(v)(1)(L)(ii) of the Act, which addresses the application of the
per-visit limitations, is very specific that the Secretary may provide
exemptions or exceptions to the per-visit limitations that are applied
on a discipline basis. There is no similar language under sections
1861(v)(1)(L)(v) and 1861(v)(1)(L)(vi) of the Act, which provides for
the establishment of the per-beneficiary limitations. Moreover, it
seems unlikely that Congress intended for exceptions or exemptions to
apply to the per-beneficiary limitations since in establishing the mid-
session budget, there were no monies earmarked from the projected
Medicare savings to pay for exemptions or exceptions to the per-
beneficiary limitation.
Therefore, we are not allowing agencies to file for exceptions or
exemptions to the per-beneficiary limitations.
We are revising section 413.30(a) to recognize the addition of the
per-beneficiary cost limitation as a limitation on costs. Also, we are
revising section 413.30(c) to state that HHAs may not request a
reclassification, an exception, or an exemption from the per-
beneficiary cost limitation.

VII. Review of the Agency-Specific Per-Beneficiary Limitation

For HHAs with a cost reporting period ending during Federal FY
1994, 75 percent of the per-beneficiary limitation is based on the
Medicare data contained in that cost report.
We recognize that for most HHAs, that cost report has been settled
and unless the HHA has an appeal with respect to the cost settlement
pending for that FY, the data contained within the agency-specific per-
beneficiary calculation has been settled. HHAs that have pending
appeals (for example, an outstanding cost limitation exception to the
per-visit limitation or appeals of adjustments resulting from Medicare
principles of reimbursement) that may impact the cost reporting data
used in calculation of the agency-specific portion of the per-
beneficiary limitation, will have the agency-specific per-beneficiary
limitation recalculated when the appeal is favorably resolved on behalf
of the HHA.
There are, however, certain data used from the cost report in
calculating the per-beneficiary limitations that do not impact the
settlement of the cost report, that is, the use of the number of
unduplicated census counts of Medicare beneficiaries whereby a
reopening request of the cost report would not be warranted. This is
particularly of concern since the unduplicated census counts on the
Medicare cost reports have been alleged to be incorrect and HCFA will
be providing the unduplicated census counts to be used by the
intermediaries in calculating the agency-specific per-beneficiary
limitation.
Given the importance of the calculation of the agency-specific per-
beneficiary limitation, we are allowing HHAs 180 days after the date of
the notice by the intermediary of the HHA's agency-specific per-
beneficiary limitation to request a review of the agency-specific per-
beneficiary calculation. The request may address the specific data used
in calculating the agency-specific per-beneficiary limitation as shown
on the Medicare cost report (that is, the lesser of Medicare reasonable
costs or the aggregate per-visit limitation), the costs of nonroutine
medical supplies, the unduplicated census count provided by HCFA, or
the appropriate market basket increases, as provided in this document.
This request for review may also address the calculation such as
addition, subtraction, multiplication, or division. This request for
review is not applicable to those cost report settlement appeals, which
may have an impact on the data used in calculating the agency-specific
per-beneficiary limitation and are pending under another authority
under the Medicare regulations or statute. The agency's request must
include sufficient documentation for the intermediary to determine that
a recalculation of the agency-specific per-beneficiary limitation is
warranted.
After receipt of all the necessary documentation needed to make a
sound determination on the agency's request, the intermediary must
respond to the request within 90 days of receiving the fully documented
request.

VIII. Computing the Per-Beneficiary Limitation

A. Agency-Specific Per-Beneficiary Limitation
To arrive at the agency-specific limitation, which will represent
75 percent of the total per-beneficiary limitation that is to apply to
the unduplicated census count of the Medicare beneficiaries for cost
reporting periods beginning on or after October 1, 1997, the
intermediary will calculate as follows from data on the Medicare cost
report for the cost reporting period ending during Federal FY 1994:
For provider-based HHAs, the lesser of line 7, columns 8 and 9, or
line 14, columns 8 and 9 plus line 15 columns 8 and 9, as reported on
Supplemental Worksheet H-5 (Form HCFA-2552-92-H(4/93) OMB approval
number 0938-0050, expiration date 08/31/2000), multiplied by 98 percent
and the product divided by the unduplicated census count of Medicare
beneficiaries,

[[Page 15726]]

as provided by HCFA, times the appropriate market basket increases from
Tables 2 and 5; determined using Table 6.
For freestanding HHAs, the lesser of line 7, column 9, or line 14,
column 9, plus line 17, columns 7 and 8, as reported on Worksheet C
(Form HCFA-1728-86 (6/76)), multiplied by 98 percent and the product
divided by the unduplicated census count of Medicare beneficiaries, as
provided by HCFA, times the appropriate market basket increases from
Tables 2 and 5 or determined using Table 6.
The product of the calculation of the agency-specific limitation is
multiplied by 75 percent to arrive at the agency-specific portion of
the per-beneficiary limitation.
To arrive at the regional census division per-beneficiary
limitation, which will represent 25 percent of the overall per-
beneficiary limitation, the HHA's intermediary first determines the
adjusted labor-related component by multiplying the labor-related
component of the appropriate regional census division per-beneficiary
limitation where the beneficiary(s) received HHA services by the
appropriate wage index based on where the beneficiary(s) received HHA
services. The nonlabor component of the appropriate regional census
division per-beneficiary limitation is added to the adjusted labor
component and multiplied by 98 percent. The results are then multiplied
by 25 percent. The 75 percent agency-specific portion is added to the
25 percent adjusted regional census division portion to arrive at the
adjusted per-beneficiary limitation, which will be multiplied by the
total unduplicated patient census count of patients for whom services
were furnished in that area.
A separate per-beneficiary limitation has to be calculated for each
MSA and/or nonMSA serviced by the HHA.
The aggregate limitation for all MSA and/or non-MSA areas for each
HHA will be compared to the lower of the Medicare reasonable costs or
the aggregate per-visit limitation and the lowest amount after this
comparison is the allowable Medicare reasonable costs for payment
purposes. The following is an example of how the per-beneficiary
limitations are calculated for ``clause v'' type agencies which provide
services to Medicare beneficiaries in more than one MSA area. The
aggregate per-beneficiary limitation calculation example is given at
section IX.

Example: Calculation of Per-Beneficiary Limitations for an HHA
Furnishing Services to Patients Both in Dallas, Texas and Patients in
Rural Texas

Blended Per-Beneficiary Limitation for Services in Dallas MSA

Agency-Specific Component

1. Agency-Specific Per-beneficiary Limitation $6,000. (As
calculated by the intermediary)
2. Adjusted Agency-Specific Per-beneficiary Limitation (Line 1
x .75)=$4,500.

Census Region Division Component

3. Labor Portion of West South Central Region Per-beneficiary
Limitation $4,456.47. (From Table 3a)
4. Dallas, TX Wage Index .9703. (From Table 4a)
5. Adjusted Labor Portion (Line 3 Times Line 4)= $4,324.11.
6. Nonlabor Portion of West South Central Region Per-beneficiary
Limitation $1,281.37. (From Table 3a)
7. Adjusted West South Central Region Per-beneficiary Limitation
(((Line 5 Plus Line 6)X .98) X .25)= $1,373.34.

Agency-Specific/Census Region Division Blended Per-Beneficiary
Limitation

8. Blended Per-beneficiary Limitation for HHA services furnished
to Medicare beneficiaries in Dallas, Texas(Line 2 Plus Line 7) =
$5,873.34.

Per-Beneficiary Limitation for Services in Rural Texas/Census
Region Division Component

9. Labor Portion of West South Central Region Per-beneficiary =
$4,456.47. (From Table 3a)
10. Rural Texas Wage Index = .7404. (From Table 4b)
11. Adjusted Labor Portion (Line 9 X Line 10) = $3,299.57.
12. Nonlabor portion of West South Central Region Per-
beneficiary Limitation = $1,281.37. (From Table 3a)
13. Adjusted Per-beneficiary Limitation (((Line 11 Plus Line
12)X .98) X.25) = $1,122.33.

Agency-Specific/Census Region Division Blended Per-Beneficiary
Limitation

14. Blended Rural Per-beneficiary Limitation for HHA services
furnished to Medicare beneficiaries in rural Texas (Line 2 Plus Line
13) = $5,622.33.

The process shown in the above examples would have to be repeated
for each MSA and/or non-MSA where the HHA has an unduplicated census
count of Medicare beneficiaries which received HHA services.

B. National Per-Beneficiary Limitation

New HHAs, HHAs without a 12-month cost reporting period ending
during Federal FY 1994, and certain other HHAs described in section
III.C. will be subject to a national per-beneficiary limitation.
As with the census region division per-beneficiary limitations, the
national per-beneficiary limitation has a labor-related component and a
nonlabor component. To arrive at the adjusted national per-beneficiary
limitation, which is to apply to each unduplicated census count of
Medicare beneficiary based on where the HHA services were furnished,
the intermediary first determines the adjusted labor-related component
by multiplying the labor-related component of the national per-
beneficiary limitation by the appropriate wage index based on where the
beneficiary received the HHA services.
The sum of the adjusted labor-related component and nonlabor
component is the adjusted national per-beneficiary limitation
applicable to the unduplicated census count of Medicare beneficiaries
in the area for which the wage index was used. The following is an
example of the calculation of the per-beneficiary limitations for a new
HHA providing services to Medicare beneficiaries in more than one MSA
area.

Example: Calculation of Adjusted National Per-Beneficiary Limitations
for a Provider-Based HHA Providing HHA Services to an Unduplicated
Census Count of Medicare Beneficiaries of in Dallas, Texas, and an
Unduplicated Census Count of Medicare Beneficiaries in Rural Texas

National Per-Beneficiary Limitation for Dallas, Texas

1. Labor component of national per-beneficiary limitation =
$2,607.07. (From Table 3b)
2. Wage-index applicable to Dallas, Texas = .9703 (From Table
4a)
3. Adjusted labor component (Line 1 X Line 2) = $2,529.64.
4. Nonlabor component of national per-beneficiary limitation
$749.62. (From Table 4b)
5. Adjusted national per-beneficiary limitation (Line 3 Plus
Line 4) X .98 = $3,213.67.

National Per-Beneficiary Limitation for Rural Texas

6. Labor component of national per-beneficiary limitation =
$2,607.07. (From Table 4b)
7. Wage index applicable to rural Texas = .7404. (From Table 4b)
8. Adjusted labor component of national per-beneficiary (Line 6
X Line 7) = $1,930.27.
9. Nonlabor component of national per-beneficiary limitation =
$749.62. (From Table 3b)
10. Adjusted national per-beneficiary limitation ((Line 8 Plus
Line 9) X .98) = $2,626.29.

C. Adjustment Factor for Reporting Year Beginning After October 1, 1997
and Before October 1, 1998

If an HHA has a 12-month cost reporting period beginning on or
after November 1, 1997, the adjusted census region division per-
beneficiary

[[Page 15727]]

limitation or the adjusted national per-beneficiary limitation is again
revised by an adjustment factor from Table 5 that corresponds to the
month and year in which the cost reporting period begins. Each factor
represents the compounded rate of monthly increase derived from the
projected annual increase in the market basket index, and is used to
account for inflation in costs that will occur after the date on which
the 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 should increase the
agency-specific per-beneficiary limitation to September 30, 1998. Thus,
when the per-beneficiary limitation needs to be further adjusted for
the cost reporting period, the adjusted blended per-beneficiary
limitation can be adjusted by the same factor. For example, if the HHAs
in the examples above had a cost reporting period beginning January 1,
1998, its per-beneficiary limitations would be further adjusted as
follows:
Computation of Revised Per-Beneficiary Limitations Blended per-
beneficiary limitation for Dallas MSA = $5,873.34.

Adjustment factor from Table 5. 1.00781
Adjusted blended per-beneficiary limitation for Dallas MSA $5,919.21
National per-beneficiary limitation for Dallas, Texas = 3,213.67
Adjustment factor from Table 5. 1.00781
Adjusted national per-beneficiary limitation = $3,238.77

IX. Schedule of Per-Beneficiary Limitations

The schedule of per-beneficiary limitations set forth below applies
to cost reporting periods beginning on or after October 1, 1997. The
intermediaries will compute the adjusted per-beneficiary 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 per-beneficiary limitation(s) for the area(s) where the HHA
furnishes HHA services to Medicare beneficiaries. Each HHA's aggregate
per-beneficiary limitation cannot be determined prospectively, but
depends on each HHA's unduplicated census count of Medicare
beneficiaries 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 as added by section
4602(c) of BBA ``97, 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, 1998, 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,
1998.
The HHA costs that are subject to the per-beneficiary limitations
include the costs of nonroutine medical supplies furnished in
conjunction with patient care. Durable medical equipment and drugs
directly identifiable as services to an individual 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 per-beneficiary
limitation for each HHA by multiplying the unduplicated census count of
Medicare beneficiaries according to the location where the services are
furnished by the HHA, by the respective per-beneficiary limitation. The
sum of these amounts is compared to the lesser of the HHA's total
allowable costs or the aggregate per-visit limitation plus the
allowable Medicare costs of nonroutine medical supplies. An example of
how the aggregate per-beneficiary limitation is computed for an HHA
providing HHA services to Medicare beneficiaries in both Dallas, Texas
and rural Texas is as follows:

Example: HHA X, a HHA located in Dallas, TX, has unduplicated
census count of 400 Medicare beneficiaries in the Dallas MSA and an
unduplicated census count of 200 Medicare beneficiaries in rural
Texas during its 12-month cost reporting period ending September 30,
1998. For simplicity, we are using the same blended per-beneficiary
limitation that is used in the example under VIII. A above. The
aggregate per-beneficiary limitation is calculated as follows:

Determining the Aggregate Per-Beneficiary Limitation
------------------------------------------------------------------------
Per Unduplicated
beneficiary census count Total
MSA/non-MSA area limitation of Medicare limitation
(\1\) beneficiaries
------------------------------------------------------------------------
Dallas, TX..................... $5,873.34 400 $2,349,336
Rural, TX...................... 5,622.33 200 1,124,466
------------
Aggregate Limitation..... ........... ............. 3,473,802
------------------------------------------------------------------------
\1\ Blended per-beneficiary limitation adjusted by the appropriate wage
index.

Table 3a.--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).... $2,670.73 $ 767.92
Middle Atlantic (NJ, NY, PA)............ 1,979.21 569.08
South Atlantic (DE, DC, FL, GA, MD, NC,
SC, VA, WV)............................ 2,985.69 858.48
East North Central (IL, IN, MI, OH, WI). 2,421.00 696.11

[[Page 15728]]

East South Central (AL, KY, MS, TN)..... 4,590.61 1,319.94
West North Central (IA, KS, MN, MO, NE,
ND, SD)................................ 2,325.36 668.62
West South Central (AR, LA, OK, TX)..... 4,456.47 1,281.37
Mountain (AZ, CO, ID, MT, NV, NM, UT,
WY).................................... 2,936.88 844.44
Pacific (AK, CA, HI, OR, WA)............ 2,275.12 654.17
------------------------------------------------------------------------

Table 3b.--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................................ $2,607.07 $ 749.62
------------------------------------------------------------------------

Table 3c.--Standardized Per-Beneficiary Limitations for Puerto Rico and
Guam
------------------------------------------------------------------------
Labor Nonlabor
component component
------------------------------------------------------------------------
Puerto Rico............................. $1,940.26 $ 557.88
Guam.................................... $1,873.76 $ 538.76
------------------------------------------------------------------------

X. Wage Indexes

Table 4a.--Wage Index for Urban Areas
------------------------------------------------------------------------
Urban area (constituent counties or
county equivalents) Wage index
------------------------------------------------------------------------
0040.................. Abilene, TX; Taylor, TX............ 0.8287
0060.................. Aguadilla, PR; Aguada, PR; 0.4188
Aguadilla, PR; Moca, PR.
0080.................. Akron, OH; Portage, OH; Summit, OH. 0.9772
0120.................. Albany, GA; Dougherty, GA; Lee, GA. 0.7914
0160.................. Albany-Schenectady-Troy, NY; 0.8480
Albany, NY; Montgomery, NY;
Rensselaer, NY; Saratoga, NY;
Schenectady, NY; Schoharie, NY.
0200.................. Albuquerque, NM; Bernalillo, NM; 0.9309
Sandoval, NM; Valencia, NM.
0220.................. Alexandria, LA; Rapides, LA........ 0.8162
0240.................. Allentown-Bethlehem-Easton, PA; 1.0086
Carbon, PA; Lehigh, PA;
Northampton, PA.
0280.................. Altoona, PA; Blair, PA............. 0.9137
0320.................. Amarillo, TX; Potter, TX; Randall, 0.9425
TX.
0380.................. AK Anchorage, AK; Anchorage........ 1.2842
0440.................. Ann Arbor, MI; Lenawee, MI; 1.1785
Livingston, MI; Washtenaw, MI.
0450.................. Anniston, AL; Calhoun, AL.......... 0.8266
0460.................. Appleton-Oshkosh-Neenah, WI; 0.8996
Calumet, WI; Outagamie, WI;
Winnebago, WI.
0470.................. Arecibo, PR; Arecibo, PR; Camuy, 0.4218
PR; Hatillo, PR.
0480.................. Asheville, NC; Buncombe, NC; 0.9072
Madison, NC.
0500.................. Athens, GA; Clarke, GA; Madison, 0.9087
GA; Oconee, GA.
0520.................. Atlanta, GA; Barrow, GA; Bartow, 0.9823
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; Columbia, GA; 0.9333
McDuffie, GA; Richmond, GA; Aiken,
SC; Edgefield, SC.
0640.................. Austin-San Marcos, TX; Bastrop, TX; 0.9133
Caldwell, TX; Hays, TX; Travis,
TX; Williamson, TX.
0680.................. Bakersfield, CA; Kern, CA.......... 1.0014
0720.................. Baltimore, MD; Anne Arundel, MD; 0.9689
Baltimore, MD; Baltimore City, MD;
Carroll, MD; Harford, MD; Howard,
MD; Queen Anne, MD.
0733.................. Bangor, ME; Penobscot, ME.......... 0.9478
0743.................. Barnstable-Yarmouth, MA; 1.4291
Barnstable, MA.
0760.................. Baton Rouge, LA; Ascension, LA; 0.8382
East Baton Rouge, LA; Livingston,
LA; West Baton Rouge, LA.
0840.................. Beaumont-Port Arthur, TX; Hardin, 0.8593
TX; Jefferson, TX; Orange, TX.
0860.................. Bellingham, WA; Whatcom, WA........ 1.1221
0870.................. Benton Harbor, MI; Berrien, MI..... 0.8634
0875.................. Bergen-Passaic, NJ; Bergen, NJ; 1.2156
Passaic, NJ.
0880.................. Billings, MT; Yellowstone, MT...... 0.9783
0920.................. Biloxi-Gulfport-Pascagoula, MS; 0.8415
Hancock, MS; Harrison, MS;
Jackson, MS.
0960.................. Binghamton, NY; Broome, NY; Tioga, 0.8914
NY.
1000.................. Birmingham, AL; Blount, AL; 0.9005
Jefferson, AL; St. Clair, AL;
Shelby, AL.
1010.................. Bismarck, ND; Burleigh, ND; Morton, 0.7695
ND.
1020.................. Bloomington, IN; Monroe, IN........ 0.9128
1040.................. Bloomington-Normal, IL; McLean, IL. 0.8733

[[Page 15729]]

1080.................. Boise City, ID; Ada, ID; Canyon, ID 0.8856
1123.................. Boston-Worcester Lawrence-Lowell- 1.1506
Brockton, MA-NH; Bristol, MA;
Essex, MA; Middlesex, MA; Norfolk,
MA; Plymouth, MA; Suffolk, MA;
Worcester, MA; Hillsborough, NH;
Merrimack, NH; Rockingham, NH;
Strafford, NH.
1125.................. Boulder-Longmont, CO; Boulder, CO.. 1.0015
1145.................. Brazoria, TX; Brazoria, TX......... 0.9341
1150.................. Bremerton, WA; Kitsap, WA.......... 1.0999
1240.................. Brownsville-Harlingen-San Benito, 0.8740
TX; Cameron, TX.
1260.................. Bryan-College Station, TX; Brazos, 0.8571
TX.
1280.................. Buffalo-Niagara Falls, NY; Erie, 0.9272
NY; Niagara, NY.
1303.................. Burlington, VT; Chittenden, VT; 1.0142
Franklin, VT; Grand Isle, VT;.
1310.................. Caguas, PR; Caguas, PR; Cayey, PR; 0.4459
Cidra, PR; Gurabo, PR; San
Lorenzo, PR.
1320.................. Canton-Massillon, OH; Carroll, OH; 0.8961
Stark, OH.
1350.................. Casper, WY; Natrona, WY............ 0.9013
1360.................. Cedar Rapids, IA; Linn, IA......... 0.8529
1400.................. Champaign-Urbana, IL; Champaign, IL 0.8824
1440.................. Charleston-North Charleston, SC; 0.8807
Berkeley, SC; Charleston, SC;
Dorchester, SC.
1450.................. Charleston, WV; Kanawha, WV; 0.9142
Putnam, WV.
1520.................. Charlotte-Gastonia-Rock Hill, NC- 0.9710
SC; Cabarrus, NC; Gaston, NC;
Lincoln, NC; Mecklenburg, NC;
Rowan, NC; Union, NC; York, SC.
1540.................. Charlottesville, VA; Albemarle, VA; 0.9051
Charlottesville City, VA;
Fluvanna, VA; Greene, VA.
1560.................. Chattanooga, TN-GA; Catoosa, GA; 0.8658
Dade, GA; Walker, GA; Hamilton,
TN; Marion, TN.
1580.................. Cheyenne, WY; Laramie, WY.......... 0.7555
1600.................. Chicago, IL; Cook, IL; DeKalb, IL; 1.0860
DuPage, IL; Grundy, IL; Kane, IL;
Kendall, IL; Lake, IL; McHenry,
IL; Will, IL.
1620.................. Chico-Paradise, CA; Butte, CA...... 1.0429
1640.................. Cincinnati, OH-KY-IN; Dearborn, IN; 0.9474
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; El Paso, CO.. 0.9316
1740.................. Columbia, MO; Boone, MO............ 0.9001
1760.................. Columbia, SC; Lexington, SC; 0.9192
Richland, SC.
1800.................. Columbus, GA-AL; Russell, AL; 0.8288
Chattanoochee, GA; Harris, GA;
Muscogee, GA.
1840.................. Columbus, OH; Delaware, OH; 0.9793
Fairfield, OH; Franklin, OH;
Licking, OH; Madison, OH;
Pickaway, OH.
1880.................. Corpus Christi, TX; Nueces, TX; San 0.8945
Patricio, TX.
1900.................. Cumberland, MD-WV; Allegany, MD; 0.8822
Mineral, WV.
1920.................. Dallas, TX; Collin, TX; Dallas, TX; 0.9703
Denton, TX; Ellis, TX; Henderson,
TX; Hunt, TX; Kaufman, TX;
Rockwall, TX.
1950.................. Danville, VA; Danville City, VA; 0.8146
Pittsylvania, VA.
1960.................. Davenport-Rock Island-Moline, IA- 0.8405
IL; Scott, IA; Henry, IL; Rock
Island, IL.
2000.................. Dayton-Springfield, OH; Clark, OH; 0.9584
Greene, OH; Miami, OH; Montgomery,
OH.
2020.................. Daytona Beach, FL; Flagler, FL; 0.8375
Volusia, FL.
2030.................. Decatur, AL; Lawrence, AL; Morgan, 0.8286
AL.
2040.................. Decatur, IL; Macon, IL............. 0.7915
2080.................. Denver, CO; Adams, CO; Arapahoe, 1.0386
CO; Denver, CO; Douglas, CO;
Jefferson, CO.
2120.................. Des Moines, IA; Dallas, IA; Polk, 0.8837
IA; Warren, IA.
2160.................. Detroit, MI; Lapeer, MI; Macomb, 1.0825
MI; Monroe, MI; Oakland, MI; St.
Clair, MI; Wayne, MI.
2180.................. Dothan, AL; Dale, AL; Houston, AL.. 0.8070
2190.................. Dover, DE; Kent, DE................ 0.9303
2200.................. Dubuque, IA; Dubuque, IA........... 0.8088
2240.................. Duluth-Superior, MN-WI; St. Louis, 0.9779
MN; Douglas, WI.
2281.................. Dutchess County, NY; Dutchess, NY.. 1.0632
2290.................. Eau Claire, WI; Chippewa, WI; Eau 0.8764
Claire, WI.
2320.................. El Paso, TX; El Paso, TX........... 1.0123
2330.................. Elkhart-Goshen, IN; Elkhart, IN.... 0.9081
2335.................. Elmira, NY; Chemung, NY............ 0.8247
2340.................. Enid, OK; Garfield, OK............. 0.7962
2360.................. Erie, PA; Erie, PA................. 0.8862
2400.................. Eugene-Springfield, OR; Lane, OR... 1.1435
2440.................. Evansville-Henderson, IN-KY; Posey, 0.8641
IN; Vanderburgh, IN; Warrick, IN;
Henderson, KY.
2520.................. Fargo-Moorhead, ND-MN; Clay, MN; 0.8837
Cass, ND.
2560.................. Fayetteville, NC; Cumberland, NC... 0.8734
2580.................. Fayetteville-Springdale-Rogers, AR; 0.7461
Benton, AR; Washington, AR.
2620.................. Flagstaff, AZ-UT; Coconino, AZ; 0.9115
Kane, UT.
2640.................. Flint, MI; Genesee, MI............. 1.1171
2650.................. Florence, AL; Colbert, AL; 0.7551
Lauderdale, AL.
2655.................. Florence, SC; Florence, SC......... 0.8711
2670.................. Fort Collins-Loveland, CO; Larimer, 1.0248
CO.
2680.................. Ft. Lauderdale, FL; Broward, FL.... 1.0448
2700.................. Fort Myers-Cape Coral, FL; Lee, FL. 0.8788
2710.................. Fort Pierce-Port St. Lucie, FL; 1.0257
Martin, FL; St. Lucie, FL.
2720.................. Fort Smith, AR-OK; Crawford, AR; 0.7769
Sebastian, AR; Sequoyah, OK.
2750.................. Fort Walton Beach, FL; Okaloosa, FL 0.8765
2760.................. Fort Wayne, IN; Adams, IN; Allen, 0.8901
IN; DeKalb, IN; Huntington, IN;
Wells, IN; Whitley, IN.

[[Page 15730]]

2800.................. Forth Worth-Arlington, TX; Hood, 0.9979
TX; Johnson, TX; Parker, TX;
Tarrant, TX.
2840.................. Fresno, CA; Fresno, CA; Madera, CA. 1.0607
2880.................. Gadsden, AL; Etowah, AL............ 0.8815
2900.................. Gainesville, FL; Alachua, FL....... 0.9616
2920.................. Galveston-Texas City, TX; 1.0564
Galveston, TX.
2960.................. Gary, IN; Lake, IN; Porter, IN..... 0.9633
2975.................. Glens Falls, NY; Warren, NY; 0.8386
Washington, NY.
2980.................. Goldsboro, NC; Wayne, NC........... 0.8443
2985.................. Grand Forks, ND-MN; Polk, MN; Grand 0.8745
Forks, ND.
2995.................. Grand Junction, CO; Mesa, CO....... 0.9090
3000.................. Grand Rapids-Muskegon-Holland, MI; 1.0147
Allegan, MI; Kent, MI; Muskegon,
MI; Ottawa, MI.
3040.................. Great Falls, MT; Cascade, MT....... 0.8803
3060.................. Greeley, CO; Weld, CO.............. 1.0097
3080.................. Green Bay, WI; Brown, WI........... 0.9097
3120.................. Greensboro-Winston-Salem-High 0.9351
Point, NC; Alamance, NC; Davidson,
NC; Davie, NC; Forsyth, NC
Guilford, NC; Randolph, NC;
Stokes, NC; Yadkin, NC.
3150.................. Greenville, NC; Pitt, NC........... 0.9064
3160.................. Greenville-Spartanburg-Anderson, 0.9059
SC; Anderson, SC; Cherokee, SC;
Greenville, SC; Pickens, SC;
Spartanburg, SC.
3180.................. Hagerstown, MD; Washington, MD..... 0.9681
3200.................. Hamilton-Middletown, OH; Butler, OH 0.8767
3240.................. Harrisburg-Lebanon-Carlisle, PA; 1.0187
Cumberland, PA; Dauphin, PA;
Lebanon, PA; Perry, PA.
3283.................. Hartford, CT; Hartford, CT; 1.2562
Litchfield, CT; Middlesex, CT;
Tolland, CT.
3285.................. Hattiesburg, MS; Forrest, MS; 0.7192
Lamar, MS.
3290.................. Hickory-Morganton-Lenoir, NC; 0.8686
Alexander, NC; Burke, NC;
Caldwell, NC; Catawba, NC.
3320.................. Honolulu, HI; Honolulu, HI......... 1.1816
3350.................. Houma, LA; Lafourche, LA; 0.7854
Terrebonne, LA.
3360.................. Houston, TX; Chambers, TX; Fort 0.9855
Bend, TX; Harris, TX; Liberty, TX;
Montgomery, TX; Waller, TX.
3400.................. Huntington-Ashland, WV-KY-OH; Boyd, 0.9160
KY; Carter, KY; Greenup, KY;
Lawrence, OH; Cabell, WV; Wayne,
WV.
3440.................. Huntsville, AL; Limestone, AL; 0.8485
Madison, AL.
3480.................. Indianapolis, IN; Boone, IN; 0.9848
Hamilton, IN; Hancock, IN;
Hendricks, IN; Johnson, IN;
Madison, IN; Marion, IN; Morgan,
IN; Shelby, IN.
3500.................. Iowa City, IA; Johnson, IA......... 0.9413
3520.................. Jackson, MI; Jackson, MI........... 0.9052
3560.................. Jackson, MS; Hinds, MS; Madison, 0.7760
MS; Rankin, MS.
3580.................. Jackson, TN; Madison, TN; Chester, 0.8522
TN.
3600.................. Jacksonville, FL; Clay, FL; Duval, 0.8969
FL; Nassau, FL; St. Johns, FL.
3605.................. Jacksonville, NC; Onslow, NC....... 0.6973
3610.................. Jamestown, NY; Chautaqua, NY....... 0.7552
3620.................. Janesville-Beloit, WI; Rock, WI.... 0.8824
3640.................. Jersey City, NJ; Hudson, NJ........ 1.1412
3660.................. Johnson City-Kingsport-Bristol, TN- 0.9114
VA; Carter, TN; Hawkins, TN;
Sullivan, TN; Unicoi, TN;
Washington, TN; Bristol City, VA;
Scott, VA; Washington, VA.
3680.................. Johnstown, PA; Cambria, PA; 0.8378
Somerset, PA.
3700.................. Jonesboro, AR; Craighead, AR....... 0.7443
3710.................. Joplin, MO; Jasper, MO; Newton, MO. 0.7510
3720.................. Kalamazoo-Battlecreek, MI; Calhoun, 1.0668
MI; Kalamazoo, MI; Van Buren, MI.
3740.................. Kankakee, IL; Kankakee, IL......... 0.8653
3760.................. Kansas City, KS-MO; Johnson, KS; 0.9564
Leavenworth, KS; Miami, KS;
Wyandotte, KS; Cass, MO; Clay, MO;
Clinton, MO; Jackson, MO;
Lafayette, MO; Platte, MO; Ray, MO.
3800.................. Kenosha, WI; Kenosha, WI........... 0.9196
3810.................. Killeen-Temple, TX; Bell, TX; 1.0252
Coryell, TX.
3840.................. Knoxville, TN; Anderson, TN; 0.8831
Blount, TN; Knox, TN; Loudon, TN;
Sevier, TN; Union, TN.
3850.................. Kokomo, IN; Howard, IN; Tipton, IN. 0.8416
3870.................. La Crosse, WI-MN; Houston, MN; La 0.8749
Crosse, WI.
3880.................. Lafayette, LA; Acadia, LA; 0.8206
Lafayette, LA; St. Landry, LA; St.
Martin, LA.
3920.................. Lafayette, IN; Clinton, IN; 0.9174
Tippecanoe, IN.
3960.................. Lake Charles, LA; Calcasieu, LA.... 0.7776
3980.................. Lakeland-Winter Haven, FL; Polk, FL 0.8806
4000.................. Lancaster, PA; Lancaster, PA....... 0.9481
4040.................. Lansing-East Lansing, MI; Clinton, 1.0088
MI; Eaton, MI; Ingham, MI.
4080.................. Laredo, TX; Webb, TX............... 0.7325
4100.................. Las Cruces, NM; Dona Ana, NM....... 0.8646
4120.................. Las Vegas, NV-AZ; Mohave, AZ; 1.0592
Clark, NV; Nye, NV.
4150.................. Lawrence, KS; Douglas, KS.......... 0.8608
4200.................. Lawton, OK; Comanche, OK........... 0.9045
4243.................. Lewiston-Auburn, ME; Androscoggin, 0.9536
ME.
4280.................. Lexington, KY; Bourbon, KY; Clark, 0.8390
KY; Fayette, KY; Jessamine, KY;
Madison, KY; Scott, KY; Woodford,
KY.
4320.................. Lima, OH; Allen, OH; Auglaize, OH.. 0.9185
4360.................. Lincoln, NE; Lancaster, NE......... 0.9231
4400.................. Little Rock-North Little Rock, AR; 0.8490
Faulkner, AR; Lonoke, AR; Pulaski,
AR; Saline, AR.
4420.................. Longview-Marshall, TX; Gregg, TX; 0.8613
Harrison, TX; Upshur, TX.

[[Page 15731]]

4480.................. Los Angeles-Long Beach, CA; Los 1.2232
Angeles, CA.
4520.................. Louisville, KY-IN; Clark, IN; 0.9507
Floyd, IN; Harrison, IN; Scott,
IN; Bullitt, KY; Jefferson, KY;
Oldham, KY.
4600.................. Lubbock, TX; Lubbock, TX........... 0.8400
4640.................. Lynchburg, VA; Amherst, VA; 0.8228
Bedford, VA; Bedford City, VA;
Campbell, VA; Lynchburg City, VA.
4680.................. Macon, GA; Bibb, GA; Houston, GA; 0.9227
Jones, GA; Peach, GA; Twiggs, GA.
4720.................. Madison, WI; Dane, WI.............. 1.0055
4800.................. Mansfield, OH; Crawford, OH; 0.8639
Richland, OH.
4840.................. Mayaguez, PR; Anasco, PR; Cabo 0.4475
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; Jackson, OR... 1.0354
4900.................. Melbourne-Titusville-Palm Bay, FL; 0.8819
Brevard, Fl.
4920.................. Memphis, TN-AR-MS; Crittenden, AR; 0.8589
DeSoto, MS; Fayette, TN; Shelby,
TN; Tipton, TN.
4940.................. Merced, CA; Merced, CA............. 1.0947
5000.................. Miami, FL; Dade, FL................ 0.9859
5015.................. Middlesex-Somerset-Hunterdon, NJ; 1.1059
Hunterdon, NJ; Middlesex, NJ;
Somerset, NJ.
5080.................. Milwaukee-Waukesha, WI; Milwaukee, 0.9819
WI; Ozaukee, WI; Washington, WI;
Waukesha, WI.
5120.................. Minneapolis-St. Paul, MN-WI; Anoka, 1.0733
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; Baldwin, AL; Mobile, AL 0.8455
5170.................. Modesto, CA; Stanislaus, CA........ 1.0794
5190.................. Monmouth-Ocean, NJ; Monmouth, NJ; 1.0934
Ocean, NJ.
5200.................. Monroe, LA; Ouachita, LA........... 0.8414
5240.................. Montgomery, AL; Autauga, AL; 0.7671
Elmore, AL; Montgomery, AL.
5280.................. Muncie, IN; Delaware, IN........... 0.9173
5330.................. Myrtle Beach, SC; Horry, SC........ 0.8072
5345.................. Naples, FL; Collier, FL............ 1.0109
5360.................. Nashville, TN; Cheatham, TN; 0.9182
Davidson, TN; Dickson, TN;
Robertson, TN; Rutherford TN;
Sumner, TN; Williamson, TN;
Wilson, TN.
5380.................. Nassau-Suffolk, NY; Nassau, NY; 1.3807
Suffolk, NY.
5483.................. New Haven-Bridgeport-Stamford- 1.2618
Danbury-Waterbury, CT; Fairfield,
CT; New Haven, CT.
5523.................. New London-Norwich, CT; New London, 1.2013
CT.
5560.................. New Orleans, LA; Jefferson, LA; 0.9566
Orleans, LA; Plaquemines, LA; St.
Bernard, LA; St. Charles, LA; St.
James, LA; St. John Baptist, LA;
St. Tammany, LA.
5600.................. New York, NY; Bronx, NY; Kings, NY; 1.4449
New York, NY; Putnam, NY; Queens,
NY; Richmond, NY; Rockland, NY;
Westchester, NY.
5640.................. Newark, NJ; Essex, NJ; Morris, NJ; 1.1980
Sussex, NJ; Union, NJ; Warren, NJ.
5660.................. Newburgh, NY-PA; Orange, NY; Pike, 1.1283
PA.
5720.................. Norfolk-Virginia Beach-Newport 0.8316
News, VA-NC; Currituck, NC;
Chesapeake City, VA; Gloucester,
VA; Hampton City, VA; Isle of
Wight, VA; James City, VA;
Mathews, VA; Newport News City,
VA; Norfolk City, VA; Poquoson
City, VA; Portsmouth City, VA;
Suffolk City, VA; Virginia Beach
City VA; Williamsburg City, VA;
York, VA.
5775.................. Oakland, CA; Alameda, CA; Contra 1.5068
Costa, CA.
5790.................. Ocala, FL; Marion, FL.............. 0.9032
5800.................. Odessa-Midland, TX; Ector, TX; 0.8660
Midland, TX.
5880.................. Oklahoma City, OK; Canadian, OK; 0.8481
Cleveland, OK; Logan, OK; McClain,
OK; Oklahoma, OK; Pottawatomie, OK.
5910.................. Olympia, WA; Thurston, WA.......... 1.0901
5920.................. Omaha, NE-IA; Pottawattamie, IA; 0.9421
Cass, NE; Douglas, NE; Sarpy, NE;
Washington, NE.
5945.................. Orange County, CA; Orange, CA...... 1.1605
5960.................. Orlando, FL; Lake, FL; Orange, FL; 0.9397
Osceola, FL; Seminole, FL.
5990.................. Owensboro, KY; Daviess, KY......... 0.7480
6015.................. Panama City, FL; Bay, FL........... 0.8337
6020.................. Parkersburg-Marietta, WV-OH; 0.8046
Washington, OH; Wood, WV.
6080.................. Pensacola, FL; Escambia, FL; Santa 0.8193
Rosa, FL.
6120.................. Peoria-Pekin, IL; Peoria, IL; 0.8571
Tazewell, IL; Woodford, IL.
6160.................. Philadelphia, PA-NJ; Burlington, 1.1398
NJ; Camden, NJ; Gloucester, NJ
Salem, NJ; Bucks, PA; Chester, PA;
Delaware, PA; Montgomery, PA;
Philadelphia, PA.
6200.................. Phoenix-Mesa, AZ; Maricopa, AZ; 0.9606
Pinal, AZ.
6240.................. Pine Bluff, AR; Jefferson, AR...... 0.7826
6280.................. Pittsburgh, PA; Allegheny, PA; 0.9725
Beaver, PA; Butler, PA; Fayette,
PA; Washington, PA; Westmoreland,
PA.
6323.................. Pittsfield, MA; Berkshire, MA...... 1.0960
6340.................. Pocatelo, ID; Bannock ID........... 0.9586
6360.................. Ponce, PR; Guayanilla, PR; Juana 0.4589
Diaz, PR; Penuelas, PR; Ponce, PR;
Villalba, PR; Yauco, PR.
6403.................. Portland, ME; Cumberland, ME; 0.9627
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; Utah, UT........... 1.0073
6560.................. Pueblo, CO; Pueblo, CO............. 0.8450
6580.................. Punta Gorda, FL; Charlotte, FL..... 0.8725
6600.................. Racine, WI; Racine, WI............. 0.8934

[[Page 15732]]

6640.................. Raleigh-Durham-Chapel Hill, NC; 0.9818
Chatham, NC; Durham, NC; Franklin,
NC; Johnston, NC; Orange, NC;
Wake, NC.
6660.................. Rapid City, SD; Pennington, SD..... 0.8345
6680.................. Reading, PA; Berks, PA............. 0.9516
6690.................. Redding, CA; Shasta, CA............ 1.1790
6720.................. Reno, NV; Washoe, NV............... 1.0768
6740.................. Richland-Kennewick-Pasco, WA; 0.9918
Benton, WA; Franklin, WA.
6760.................. Richmond-Petersburg, VA; Charles 0.9152
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; Botetourt, VA; 0.8402
Roanoke, VA; Roanoke City, VA;
Salem City, VA.
6820.................. Rochester, MN; Olmsted, MN......... 1.0502
6840.................. Rochester, NY; Genesee, NY; 0.9524
Livingston, NY; Monroe, NY;
Ontario, NY; Orleans, NY; Wayne,
NY.
6880.................. Rockford, IL; Boone, IL; Ogle, IL; 0.9081
Winnebago, IL.
6895.................. Rocky Mount, NC; Edgecombe, NC; 0.9029
Nash, NC.
6920.................. Sacramento, CA; El Dorado, CA; 1.2202
Placer, CA; Sacramento, CA.
6960.................. Saginaw-Bay City-Midland, MI; Bay, 0.9564
MI; Midland, MI; Saginaw, MI.
6980.................. St. Cloud, MN; Benton, MN; Stearns, 0.9544
MN.
7000.................. St. Joseph, MO; Andrews, MO; 0.8366
Buchanan, MO.
7040.................. St. Louis, MO-IL; Clinton, IL; 0.9130
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; Marion, OR; Polk, OR.... 0.9935
7120.................. Salinas, CA; Monterey, CA.......... 1.4513
7160.................. Salt Lake City-Ogden, UT; Davis, 0.9857
UT; Salt Lake, UT; Weber, UT.
7200.................. San Angelo, TX; Tom Green, TX...... 0.7780
7240.................. San Antonio, TX; Bexar, TX; Comal, 0.8499
TX; Guadalupe, TX; Wilson, TX.
7320.................. San Diego, CA; San Diego, CA....... 1.2193
7360.................. San Francisco, CA; Marin, CA; San 1.4180
Francisco, CA; San Mateo, CA.
7400.................. San Jose, CA; Santa Clara, CA...... 1.4332
7440.................. San Juan-Bayamon, PR; Aguas Buenas, 0.4625
PR; Barceloneta, PR; Bayamon, PR;
Canovanas, PR; Carolina, PR;
Catano, PR; Ceiba, PR; Comerio,
PR; Corozal, PR; Dorado, PR;
Fajardo, PR; Florida, PR;
Guaynabo, PR; Humacao, PR; Juncos,
PR; Los Piedras, PR; Loiza, PR;
Luguillo, PR; Manati, PR; Morovis,
PR; Naguabo, PR; Naranjito, PR;
Rio Grande, PR; San Juan, PR; Toa
Alta, PR; Toa Baja, PR; Trujillo
Alto, PR; Vega Alta, PR; Vega
Baja, PR; Yabucoa, PR.
7460.................. San Luis Obispo-Atascadero-Paso 1.1374
Robles, CA; San Luis Obispo, CA.
7480.................. Santa Barbara-Santa Maria-Lompoc, 1.0688
CA; Santa Barbara, CA.
7485.................. Santa Cruz-Watsonville, CA; Santa 1.4187
Cruz, CA.
7490.................. Santa Fe, NM; Los Alamos, NM; Santa 1.0332
Fe, NM.
7500.................. Santa Rosa, CA; Sonoma, CA......... 1.2815
7510.................. Sarasota-Bradenton, FL; Manatee, 0.9757
FL; Sarasota, FL.
7520.................. Savannah, GA; Bryan, GA; Chatham, 0.8638
GA; Effingham, GA.
7560.................. Scranton--Wilkes-Barre--Hazleton, 0.8539
PA; Columbia, PA; Lackawanna, PA;
Luzerne, PA; Wyoming, PA.
7600.................. Seattle-Bellevue-Everett, WA; 1.1339
Island, WA; King, WA; Snohomish,
WA.
7610.................. Sharon, PA; Mercer, PA............. 0.8783
7620.................. Sheboygan, WI; Sheboygan, WI....... 0.7862
7640.................. Sherman-Denison, TX; Grayson, TX... 0.8499
7680.................. Shreveport-Bossier City, LA; 0.9381
Bossier, LA; Caddo, LA; Webster,
LA.
7720.................. Sioux City, IA-NE; Woodbury, IA; 0.8031
Dakota, NE.
7760.................. Sioux Falls, SD; Lincoln, SD; 0.8712
Minnehaha, SD.
7800.................. South Bend, IN; St. Joseph, IN..... 0.9868
7840.................. Spokane, WA; Spokane, WA........... 1.0486
7880.................. Springfield, IL; Menard, IL; 0.8713
Sangamon, IL.
7920.................. Springfield, MO; Christian, MO; 0.7989
Greene, MO; Webster, MO.
8003.................. Springfield, MA; Hampden, MA; 1.0740
Hampshire, MA.
8050.................. State College, PA; Centre, PA...... 0.9635
8080.................. Steubenville-Weirton, OH-WV; 0.8645
Jefferson, OH; Brooke, WV;
Hancock, WV.
8120.................. Stockton-Lodi, CA; San Joaquin, CA. 1.1496
8140.................. Sumter, SC; Sumter, SC............. 0.7842
8160.................. Syracuse, NY; Cayuga, NY; Madison, 0.9464
NY; Onondaga, NY; Oswego, NY.
8200.................. Tacoma, WA; Pierce, WA............. 1.1016
8240.................. Tallahassee, FL; Gadsden, FL; Leon, 0.8832
FL.
8280.................. Tampa-St. Petersburg-Clearwater, 0.9103
FL; Hernando, FL; Hillsborough,
FL; Pasco, FL; Pinellas, FL.
8320.................. Terre Haute, IN; Clay, IN; 0.8614
Vermillion, IN; Vigo, IN.
8360.................. Texarkana, AR-Texarkana, TX; 0.8664
Miller, AR; Bowie, TX.
8400.................. Toledo, OH; Fulton, OH; Lucas, OH; 1.0390
Wood, OH.
8440.................. Topeka, KS; Shawnee, KS............ 0.9438
8480.................. Trenton, NJ; Mercer, NJ............ 1.0380
8520.................. Tucson, AZ; Pima, AZ............... 0.9180
8560.................. Tulsa, OK; Creek, OK; Osage, OK; 0.8074
Rogers, OK; Tulsa, OK; Wagoner, OK.
8600.................. Tuscaloosa, AL; Tuscaloosa, AL..... 0.8187
8640.................. Tyler, TX; Smith, TX............... 0.9567

[[Page 15733]]

8680.................. Utica-Rome, NY; Herkimer, NY; 0.8398
Oneida, NY.
8720.................. Vallejo-Fairfield-Napa, CA; Napa, 1.3754
CA; Solano, CA.
8735.................. Ventura, CA; Ventura, CA........... 1.0946
8750.................. Victoria, TX; Victoria, TX......... 0.8474
8760.................. Vineland-Millville-Bridgeton, NJ; 1.0110
Cumberland, NJ.
8780.................. Visalia-Tulare-Porterville, CA; 0.9924
Tulare, CA.
8800.................. Waco, TX; McLennan, TX............. 0.7696
8840.................. Washington, DC-MD-VA-WV; District 1.0911
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; Black 0.8640
Hawk, IA.
8940.................. Wausau, WI; Marathon, WI........... 1.0545
8960.................. West Palm Beach-Boca Raton, FL; 1.0372
Palm Beach, FL.
9000.................. Wheeling, OH-WV; Belmont, OH; 0.7707
Marshall, WV; Ohio, WV.
9040.................. Wichita, KS; Butler, KS; Harvey, 0.9403
KS; Sedgwick, KS.
9080.................. Wichita Falls, TX; Archer, TX; 0.7646
Wichita, TX.
9140.................. Williamsport, PA; Lycoming, PA..... 0.8548
9160.................. Wilmington-Newark, DE-MD; New 1.1538
Castle, DE; Cecil, MD.
9200.................. Wilmington, NC; New Hanover, NC; 0.9322
Brunswick, NC.
9260.................. Yakima, WA; Yakima, WA............. 1.0102
9270.................. Yolo, CA; Yolo, CA................. 1.1431
9280.................. York, PA; York, PA................. 0.9415
9320.................. Youngstown-Warren, OH; Columbiana, 0.9937
OH; Mahoning, OH; Trumbull, OH.
9340.................. Yuba City, CA; Sutter, CA; Yuba, CA 1.0324
9360.................. Yuma, AZ; Yuma, AZ................. 0.9732
------------------------------------------------------------------------

Table 4b.--Wage Index for Rural Areas
------------------------------------------------------------------------
Wage
Nonurban area Index
------------------------------------------------------------------------
Alabama...................................................... 0.7260
Alaska....................................................... 1.2302
Arizona...................................................... 0.7989
Arkansas..................................................... 0.6995
California................................................... 0.9977
Colorado..................................................... 0.8129
Connecticut.................................................. 1.2617
Delaware..................................................... 0.8925
Florida...................................................... 0.8838
Georgia...................................................... 0.7761
Hawaii....................................................... 1.0229
Idaho........................................................ 0.8221
Illinois..................................................... 0.7644
Indiana...................................................... 0.8161
Iowa......................................................... 0.7391
Kansas....................................................... 0.7203
Kentucky..................................................... 0.7772
Louisiana.................................................... 0.7383
Maine........................................................ 0.8468
Maryland..................................................... 0.8617
Massachusetts................................................ 1.0718
Michigan..................................................... 0.8923
Minnesota.................................................... 0.8179
Mississippi.................................................. 0.6911
Missouri..................................................... 0.7205
Montana...................................................... 0.8302
Nebraska..................................................... 0.7401
Nevada....................................................... 0.8914
New Hampshire................................................ 0.9717
New Jersey \1\...............................................
New Mexico................................................... 0.8070
New York..................................................... 0.8401
North Carolina............................................... 0.7937
North Dakota................................................. 0.7360
Ohio......................................................... 0.8434
Oklahoma..................................................... 0.7072
Oregon....................................................... 0.9975
Pennsylvania................................................. 0.8421
Puerto Rico.................................................. 0.3939
Rhode Island \1\.............................................
South Carolina............................................... 0.7921
South Dakota................................................. 0.6983
Tennessee.................................................... 0.7353
Texas........................................................ 0.7404
Utah......................................................... 0.8926
Vermont...................................................... 0.9314
Virginia..................................................... 0.7782
Washington................................................... 1.0221
West Virginia................................................ 0.7938
Wisconsin.................................................... 0.8471
Wyoming...................................................... 0.8247
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.

Table 5.--Cost Reporting Year--Adjustment Factor \1\
------------------------------------------------------------------------
The
If the HHA cost reporting period begins adjustment
factor is
------------------------------------------------------------------------
November 1, 1997............................................ 1.00260
December 1, 1997............................................ 1.00521
January 1, 1998............................................. 1.00781
February 1, 1998............................................ 1.01042
March 1, 1998............................................... 1.01302
April 1, 1998............................................... 1.01563
May 1, 1998................................................. 1.01823
June 1, 1998................................................ 1.02086
July 1, 1998................................................ 1.02353
August 1, 1998.............................................. 1.02626
September 1, 1998........................................... 1.02901
------------------------------------------------------------------------
\1\ Based on compounded projected market basket inflation rates.
Source: The Home Health Agency Input Price Index, produced by HCFA for
the period between 1983:1 and 2008:4. The forecasts are from Standard
and Poor's DRI 3rd QTR 1997: @USSIM/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

[[Page 15734]]

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.................................................... 1.06276
July 1997.................................................... 1.06528
August 1997.................................................. 1.06781
September 1997............................................... 1.07064
October 1997................................................. 1.07348
November 1997................................................ 1.07633
------------------------------------------------------------------------

XI. Regulatory Impact Statement

A. Introduction

HCFA has examined the impacts of this final rule with comment
period as required by Executive Order 12866, the Regulatory Flexibility
Act (RFA) (Pub. L. 96-354), and the Unfunded Mandates Reform Act 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. Since the aggregate per-beneficiary
limitation will reduce payments by approximately nine percent, we
anticipate this rule will have a significant impact on a substantial
number of small entities. We have examined the options for lessening
the burden on small entities, however, the statute does not allow for
any exceptions to the aggregate per-beneficiary limitation based on
size of entity. Therefore, we are unable to provide any regulatory
relief for small entities.
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 the
costs associated with this final rule with comment fall below $100
million both in the governmental and private sectors. Therefore, we are
not preparing an assessment.
We estimate that the impact of this final rule with comment period
will be to decrease payments to home health agencies by approximately
$1.06 billion in Federal FY 1998 and $2.14 billion in FY 1999, compared
to the payment that would have been made in Federal FY 1998 if BBA '97
had not been enacted. Therefore, this rule is a major rule as defined
in Title 5, United States Code, section 804(2) and is a significant
rule under Executive Order 12866.
It is clear that the changes being made in this document will
affect both a substantial number of small HHAs as well as other classes
of HHAs, and the effects on some may be significant. Therefore, the
discussion below, in combination with the rest of this final rule with
comment period, constitutes a combined regulatory impact analysis and
regulatory flexibility analysis. Nevertheless, in some markets new
agency limits may be higher than the limit for older agencies as a
result of the per-beneficiary limitation methodology required by the
statute.

B. Explanation of Aggregate Beneficiary Limit

HHA limits are set forth at sections 1861(v)(1)(A) and
1861(v)(1)(L)of the Act. Section 1861(v)(1)(L)(v), as added to the Act
by section 4602 of BBA '97, requires the Secretary to establish an
interim system of limits before the implementation of a prospective
payment system for home health services. Payments by Medicare under
this interim system of limits will be the lower of an HHA's actual
reasonable allowable costs, per visit limits in the aggregate, or a
per-beneficiary limit as described in sections 1861(v)(1)(L)(v)(I) and
1861(v)(1)(L)(vi)(I) of the Act.
Section 1861(v)(1)(L)(v)(I) requires that the aggregate per-
beneficiary annual limit be determined as follows: blend of 75 percent
on 98 percent of the reasonable costs (including nonroutine medical
supplies) for the agency's 12-month cost reporting period ending during
Federal FY 1994, and 25 percent on 98 percent of the standardized
regional average of such costs for the agency's census division for
cost reporting periods ending during Federal FY 1994 (both updated by
the home health market basket 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 results will be
multiplied by the agency's unduplicated census count of beneficiaries
(entitled to benefits under Medicare) for the cost reporting period
subject to the limit. As stated in section II.A. of this preamble, we
determined the unduplicated census count as reported on the Medicare
cost report by HHA providers was not reliable. As a result, we
generated an unduplicated census count from our Standard Analytical
File which is generated from our National Claims History File.
In regards to the home health market basket, section
1861(v)(1)(L)(iv) was added to the Act by section 4601(a) of BBA '97,
and requires the Secretary not to take into account any changes in the
home health market basket with respect to cost reporting periods which
began on or after July 1, 1994 and before July 1, 1996 in establishing
the limitations for cost reporting periods beginning after September
30, 1997.
In regards to the wage index, the appropriate census region per-
beneficiary limitation will be the applicable census region where the
beneficiary received services from the HHA and the applicable wage
index will be the geographic area where the beneficiary received home
health services.

[[Page 15735]]

For new providers and providers without a 12-month cost reporting
period ending in Federal FY year 1994, the per-beneficiary limitation
will be equal to the median of these limits applied to other HHAs as
determined in this document.
For Medicare beneficiaries using more than one HHA, the per-
beneficiary limitation will be prorated among the agencies.

C. Effect on Home Health Agencies

The following quantitative analysis presents the projected effects
of the statutory changes effective for Federal FY 1998. As discussed
below, the impact of this final rule with comment period will decrease
payments to HHAs by approximately $1.06 billion in Federal FY 1998
compared to payment that would have been made in Federal FY 1998 if BBA
'97 had not been enacted. This is a reduction of approximately nine
percent. This final rule with comment period is necessary to implement
the provisions of section 1861(v)(1)(L) of the Act, as amended by BBA
'97.
The settled cost report data that we are using have been adjusted
by the most recent market basket factors, excluding market basket
increases for cost reporting periods beginning on or after July 1, 1994
and before July 1, 1996, to reflect the expected cost increases
occurring between the cost reporting periods for the data contained in
the database and September 30, 1998.
The cost limits for HHAs are statutorily driven and the impact of
decreases in payments to HHAs have been reflected in the current law
baseline of the mid-session review of the President's Federal FY 98
budget.
We are unable to identify the effects of the changes to the cost
limits on individual HHAs. However, Table 7 below illustrates the
proportion of HHAs that are likely to be affected by the limits. This
table is a model of our estimate of the effects of the aggregate per-
beneficiary limit. The total number of HHAs in this table--6,414--is
based on HHA cost reports with a Federal FY ending in 1994 and for new
providers whose cost reports end on either December 31, 1994 or
December 31, 1995. For both old and new providers, the length of the
cost report is 12 months.
This table takes into account the behaviors that we believe HHAs
will engage in order to reduce the adverse effects of section 4602 of
BBA '97 on their allowable costs. We believe these behavioral offsets
might include an increase in the number of low cost beneficiaries
served, a general decrease in the number of visits provided, and
earlier discharge of patients who are not eligible for Medicare home
health benefits because they no longer need skilled services but have
only chronic, custodial care needs. We believe that, on average, these
behavioral offsets will result in a 65-percent reduction in the effects
these limits might otherwise have on an individual HHA.
Our projected savings of $1.06 billion in Federal FY 1998 and $2.14
billion in Federal FY 1999 are the savings that occur as a result of
implementing section 4602 of the BBA including the behavioral offsets
noted above. Column one of this table divides HHAs by a number of
characteristics including their ownership, whether they are old or new
agencies, whether they are located in an urban or rural area, and the
census region they are located in.
Column two shows the number of agencies that fall within each
characteristic or group of characteristics, for example, there are
1,197 rural freestanding HHAs in our database. Column three shows the
percent of HHAs within a group that are projected to exceed the
aggregate per-beneficiary limit before the behavioral offsets are taken
into account. Column four shows the average percent of costs over the
limits for an agency in that cell, including behavioral offsets.

Table 7.--HHA Limits Effective 10/1/97; Effects OF The Per-Beneficiary Limit
----------------------------------------------------------------------------------------------------------------
Average
Percent percent of
Area Number of exceeding per- costs
agencies beneficiary exceeding
limit limit
----------------------------------------------------------------------------------------------------------------
BY: AGENCY TYPE
ALL AGENCIES................................................ 6414 57.9 9.3
FREESTANDING............................................ 4308 65.8 10.8
HOSPITAL BASED.......................................... 2106 41.8 6.2
OLD AGENCIES............................................ 5256 60.0 8.9
FREESTANDING........................................ 3245 71.3 10.4
HOSPITAL BASED...................................... 2011 41.8 6.1
NEW AGENCIES............................................ 1158 48.2 12.6
FREESTANDING........................................ 1063 48.8 12.8
HOSPITAL BASED...................................... 95 41.1 9.4
BY: GEOGRAPHIC AREA
ALL URBAN................................................... 4137 62.3 9.5
FREESTANDING............................................ 3111 68.2 10.8
HOSPITAL BASED.......................................... 1026 44.3 6.2
OLD AGENCIES............................................ 3272 65.5 9.1
FREESTANDING........................................ 2292 74.6 10.5
HOSPITAL BASED...................................... 980 44.4 6.2
NEW AGENCIES............................................ 865 49.9 12.4
FREESTANDING........................................ 819 50.3 12.6
HOSPITAL BASED...................................... 46 43.5 9.4
ALL RURAL................................................... 2277 49.9 8.8
FREESTANDING............................................ 1197 59.5 10.6
HOSPITAL BASED.......................................... 1080 39.4 6.0
OLD AGENCIES............................................ 1984 51.0 8.3
FREESTANDING........................................ 953 63.5 10.1
HOSPITAL BASED...................................... 1031 39.4 5.9
NEW AGENCIES............................................ 293 43.0 13.3
FREESTANDING........................................ 244 43.9 13.6
HOSPITAL BASED...................................... 49 38.8 9.5
BY REGION:

[[Page 15736]]

OLD AGENCIES................................................ 5256 60.0 8.9
NEW ENGLAND............................................. 291 84.5 12.3
MIDDLE ATLANTIC......................................... 443 71.3 9.0
SOUTH ATLANTIC.......................................... 739 62.7 9.2
EAST NORTH CENTRAL...................................... 866 65.4 9.6
EAST SOUTH CENTRAL...................................... 431 58.2 8.7
WEST NORTH CENTRAL...................................... 728 52.9 8.8
WEST SOUTH CENTRAL...................................... 936 54.1 8.2
MOUNTAIN................................................ 354 48.3 7.0
PACIFIC................................................. 428 52.3 6.9
NEW AGENCIES................................................ 1158 48.2 12.6
NEW ENGLAND............................................. 44 90.9 15.6
MIDDLE ATLANTIC......................................... 51 35.3 4.7
SOUTH ATLANTIC.......................................... 44 40.9 7.1
EAST NORTH CENTRAL...................................... 151 23.2 4.4
EAST SOUTH CENTRAL...................................... 25 56.0 14.8
WEST NORTH CENTRAL...................................... 117 28.2 10.3
WEST SOUTH CENTRAL...................................... 484 60.3 16.6
MOUNTAIN................................................ 103 49.5 8.5
PACIFIC................................................. 138 41.3 10.4
----------------------------------------------------------------------------------------------------------------

D. Percent of Costs Exceeding Limit (Column Four)

Results from this column indicate that the average percent of costs
exceeding the aggregate per-beneficiary limit for an HHA in the ``all
agencies'' cell is 9.3 percent after the behavioral offset. This should
not be surprising since the intent of section 4602 of the BBA is to
control the soaring expenditures of the Medicare home health benefit
which have been driven largely by increased utilization.
For the old agencies cell (HHAs that filed a 12-month cost report
that ended during Federal FY 1994), the average percent of costs
exceeding the aggregate per-beneficiary limit is 8.9 percent. For the
new agencies cell (HHAs that did not have a 12-month cost reporting
period ended in Federal FY 1994 or that entered the Medicare program
after Federal FY 1994), the average percent of costs exceeding the
aggregate per-beneficiary limit is 12.6 percent. Old agencies will not
be affected as much as the new agencies, on average, because the new
agencies have, in general, reported higher costs related to higher
levels of utilization. Moreover, the statutory provision basing \3/4\
of old provider limits on their own cost experience would implicitly
result in less of an impact than experienced by the new providers whose
limits are based on a national median.
For the urban areas HHA cell, the average percent of costs
exceeding the aggregate per-beneficiary limit is 9.5 percent, while the
rural areas HHA cell is 8.8 percent. For the old agency census division
cells the average percent of costs exceeding the aggregate per-
beneficiary limit ranges from a low of 6.9 percent in the Pacific
census region to a high of 12.3 percent in the New England census
region. The other census regions fall between 7.0 percent and 9.2
percent. The differences between census regions reflect the pattern of
highly disparate costs that have been reported historically between
geographic areas which cannot be explained by differences in patient
characteristics but appear related to patterns of HHA practices.
For the new agency census region cells the average percent of costs
exceeding the aggregate per-beneficiary limit ranges from a low of 4.4
percent in the East North Central census region to a high of 16.6
percent in the West South Central census region. The other census
regions fall between 4.7 percent and 15.6 percent. In general, newer
agencies in census regions that have exceptionally high cost histories
are more impacted by their being limited to the national median.
Although there is considerable variation in these limits, we
believe this is a natural reflection of the wide variation in payments
that have been recognized under the present cost reimbursement system.
Moreover, we believe the differing impacts of these limits is an
inherent result of beginning to draw unexplained variation among
providers closer to national norms which existed prior to the rapid
increase in home health expenditures of the post '93-'94 period.
Because this rule limits payments to HHAs to the lesser of actual
cost, the per-visit limitations, or the aggregate per-beneficiary
limitation, we have estimated the combined impact of these limitations.
(We note, that these estimates differ from those published on January
2, 1998 in our per-visit limitation notice (63 FR 89) because of the
interaction of the two limitations, which we could not calculate until
we developed the database used in this rule.)
We estimate that in both 1998 and 1999, 35 percent of the HHAs will
be limited by the per-visit limitation and 58 percent of the HHAs will
be limited by the per-beneficiary limitation. The estimated combined
savings for 1998, however, will be $1.4 billion, of which $370 million
is attributable to the per-visit limitation, and $1.06 billion is
attributable to the per-beneficiary limitation. The estimated combined
savings for 1999 will be $2.9 billion, of which $740 million is
attributable to the per-visit limitation, and $2.14 billion is
attributable to the per-beneficiary limitation.
For FY 1998, 15 percent of the Medicare savings are attributable to
payments to managed care plans and for FY 1999, 20 percent of the
savings will be from payments to managed care plans.
The per-beneficiary limitation may impact some State Medicaid
programs. However, because of variation in State Medicaid policies and
service delivery systems, it is impossible to predict which States will
be affected or the magnitude of the impact, if any.

[[Page 15737]]

Under the Paperwork Reduction Act of 1995, agencies are required to
provide a 60-day notice in the Federal Register and solicit public
comments before a collection of information requirement is submitted to
the Office of Management and Budget for review and approval. We do not
believe this final rule has any collection of information issues
associated with it. Any collection of information requirements would be
associated with modifications to the Home Health Agency Cost Report
(HCFA Form 1728-94). These modifications are being handled in a
separate collection of information.
In accordance with the provisions of Executive Order 12866, this
notice was reviewed by the Office of Management and Budget.

XII. Other Required Information

A. Waiver of Proposed Rulemaking

We ordinarily publish a notice of proposed rulemaking in the
Federal Register to provide a period for public comment before the
provisions of the rule take effect. However, pursuant to 5 U.S.C.
(United States Code) 553(b)(B) we may waive a notice of proposed
rulemaking if we find good cause that notice and comment are
impracticable, unnecessary, or contrary to the public interest. For
good cause we find that it was impracticable to undertake notice and
comment procedures between the date of enactment of the BBA '97 (August
5, 1997) and the statutory deadline for establishing the per-
beneficiary limitations (April 1, 1998). The BBA '97 required the per-
beneficiary calculations be based on data obtained from HHA Medicare
cost reports for cost reporting periods ending during the Federal FY
'94. To comply with this statutory requirement we had to perform a
special data collection from our fiscal intermediaries to obtain these
cost report data.
In addition, the BBA '97 required HCFA to use an unduplicated
census count to calculate the aggregate per-beneficiary limitations.
The primary source for this count was also the provider cost report for
Federal FY 1994. Because the unduplicated census count on the provider
cost report was determined to be unreliable, it was necessary to
generate an unduplicated census count from the National Claims History
Standard Analytical File. In addition, we preformed a special data
collection because a significant number of FY 1994 cost reports were
not available. The internal calculation of unduplicated beneficiary
counts from 17 million records was a time-consuming effort that was
necessary to generate the information needed to calculate these
limitations. These counts could not be performed prior to the
completion of the special data collection effort and verification of
the existing database. An extraordinary amount of resources was
necessary to construct an entirely new database to compute the new per-
beneficiary limitations. Significant programming efforts were necessary
to match the individual beneficiaries to their applicable MSA areas.
Specific matching efforts were also necessary to eliminate duplicate
beneficiaries. These beneficiaries were then matched to the provider
cost reports for each agency in the database.
These lengthy procedures could not be completed before February 1,
1998. Therefore, we believe in this instance, it was impracticable to
publish a proposed rule and for good cause waive publication of a
proposed regulation. We are however, providing a 60-day period for
public comment.

B. Waiver of 30-Day Delay in Effective Date

Generally, the Administrative Procedure Act, 5 U.S.C. 553(d),
requires us to provide a 30-day delay before effectuation of a final
rule, unless we find good cause to dispense with that delay. To the
extent this requirement applies to this final rule, for good cause we
waive the 30-day delay in effective date.
As noted previously, these per-beneficiary limitations are
effective for cost reporting periods beginning on or after October 1,
1997. Section 1861(v)(1)(L)(vii) of the Act requires the Secretary to
establish these per-beneficiary limitations by April 1, 1998 and
requires that they apply to cost reporting periods beginning on or
after October 1, 1997. That statutory requirement is clear. A 30-day
delay in implementing these per-beneficiary limitations is
impracticable. Therefore, we find that it is impracticable to provide
for a 30-day delay in effective date and for good cause we waive the
delay in effective date.

C. Effect of the Contract with America Advancement Act, Pub. L. 104-121

Normally, under 5 U.S.C. 801, as added by section 251 of Pub. L.
104-121, the effective date of a major rule is delayed 60 days for
Congressional review. This has been determined to be a major rule under
5 U.S.C. 804(2). However, as indicated in section XI.A. of the preamble
to this final rule, for good cause, we find that prior notice and
comment procedures are impracticable. Pursuant to 5 U.S.C. 808(2), a
major rule shall take effect at such time as the Federal agency
promulgating the rule determines if for good cause it finds that notice
and public procedure is impracticable. Accordingly, under the exemption
provided in 5 U.S.C. 808(2), these per-beneficiary limitations are
effective for cost reporting periods beginning on or after October 1,
1997.

D. Public Comments

Because of the large number of items of correspondence we normally
receive on a rule with comment period, we are not able to acknowledge
or respond to them individually. However, we will consider all comments
concerning the provisions of this rule that we receive by the date and
time specified in the Dates section of this rule, and we will respond
to those comments in a subsequent document.

List of Subjects in 42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
For the reasons set out in the preamble, 42 CFR, chapter IV,
subchapter B, part 413 is amended as set forth below.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED
PAYMENT RATES FOR SKILLED NURSING FACILITIES

1. The authority citation for part 413 is revised to read as
follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

Sec. 413.30 [Amended]

2. In Sec. 413.30, the following amendments are made:
a. In paragraph (a)(1), in the first sentence, the reference to
``section 1861 (v)(1)(A)'' is revised to read ``sections 1861(v)(1)(A)
and (v)(1)(L)''.
b. In paragraph (a)(2), in the last sentence, after ``may be
calculated on a'' add ``per beneficiary,''.
c. In paragraph (c), in the first sentence, revise ``A provider''
to read ``Except for the per-beneficiary limitation that applies to
HHAs, a provider''.

(Catalog of Federal Domestic Assistance Program No. 93.773
Medicare--Hospital Insurance)

Authority: Section 1861(v)(1)(L) of the Social Security Act (42
U.S.C. 1395x(v)(1)(L)); section 4207(d) of Pub. L. 101-508 (42
U.S.C. 1395x (note)).

[[Page 15738]]

Dated: March 15, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

Dated: March 24, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-8480 Filed 3-30-98; 8:45 am]
BILLING CODE 4120-01-P}}