Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Changes to the Hospital Inpatient Prospective Payment System and Fiscal Year 2006 Rates

Highlights

GAO reviewed the Centers for Medicare and Medicaid Services (CMS) new rule on changes to the Hospital Inpatient Prospective Payment System and Fiscal Year 2006 rates. GAO found that (1) the rule revises the Medicare hospital inpatient prospective payment systems for operating and capital-related costs to implement changes arising from CMS's continuing experience with these systems; and (2) with the exception of the 60-day delay in the effective date, CMS complied with applicable requirements in promulgating the rule.

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Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2006 Rates, GAO-05-985R, August 26, 2005

B-296997

August 26, 2005

The Honorable Charles E. Grassley
Chairman
The Honorable Max Baucus
Ranking Minority Member
Committee on Finance
United States Senate

The Honorable William M. Thomas
Chairman
The Honorable Charles B. Rangel
Ranking Minority Member
Committee on Ways and Means
House of Representatives

Subject: Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2006 Rates

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS), entitled Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2006 Rates (RIN: 0938-AN57). We received the rule on August 1, 2005. It was published in the Federal Register as a final rule on August 12, 2005. 70 Fed. Reg. 47278.

The final rule revises the Medicare hospital inpatient prospective payment systems for operating and capital-related costs to implement changes arising from CMS's continuing experience with these systems.

We note the final rule, with the exception of section 412.230(d)(2), has an announced effective date of October 1, 2005. The Congressional Review Act requires a 60-day delay in the effective date of a major rule from the date of publication in the Federal Register or receipt of the rule by Congress, whichever is later. 5 U.S.C. 801(a)(3)(A). The rule was published in the Federal Register on August 12, 2005. It was received by Congress on August 1, 2005. Therefore, the final rule does not have the required 60-day delay.

Enclosed is our assessment of the CMS's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. Our review indicates that, with the exception of the 60-day delay in the effective date, CMS complied with the applicable requirements.

If you have any questions about this report, please contact James W. Vickers, Assistant General Counsel, at (202) 512-8210. The official responsible for GAO evaluation work relating to the subject matter of the rule is Marjorie Kanof, Managing Director, Health Care. Ms. Kanof can be reached at (202) 512-7101.

signed

Kathleen E. Wannisky
Managing Associate General Counsel

Enclosure

cc: Ann Stallion
Regulations Coordinator
Department of Health and
Human Services

ENCLOSURE

ANALYSIS UNDER 5 U.S.C. sect. 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
ISSUED BY THE
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
CENTERS FOR MEDICARE AND MEDICAID SERVICES
ENTITLED
"MEDICARE PROGRAM; CHANGES TO THE HOSPITAL INPATIENT
PROSPECTIVE PAYMENT SYSTEMS AND
FISCAL YEAR 2006 RATES"
(RIN: 0938-AN57)

(i) Cost-benefit analysis

CMS states that, based on the overall percentage change in payments per case estimated using the payment simulation model, it is estimated the total impact of these changes for fiscal year 2006 compared to fiscal year 2005 payments to be approximately a $3.33 billion increase.

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. sections 603-605, 607, and 609

CMS prepared a Final Regulatory Impact Analysis in conjunction with its Regulatory Impact Analysis. The analysis discusses the impact of the final rule on hospitals by geographic location, size, and payment classification.

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. sections 1532-1535

The final rule does not contain either an intergovernmental or private sector mandate, as defined in title II, of more than $100 million in any one year.

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. sections 551 et seq.

The final rule was issued using the notice and comment procedures found at 5 U.S.C. 553. On May 4, 2005, CMS published a Notice of Proposed Rulemaking in the Federal Register. 70 Fed. Reg. 23306. In the preamble to the final rule, CMS responds to the 2,000 comments it received.

Paperwork Reduction Act, 44 U.S.C. sections 3501-3520

The final rule contains information collections that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act. In the preamble to the final rule, CMS discusses the collections and whether they have already been approved or whether they are exempt from the requirements of the Act. For the collection that still must be reviewed by OMB, CMS has included the annual burden estimate.

Statutory authorization for the rule

The final rule is promulgated under the authority found in sections 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).

Executive Order No. 12866

The final rule was reviewed by OMB and found to be an economically significant regulatory action under the order.

Executive Order No. 13132 (Federalism)

CMS has determined that the final rule will not have any negative impact on the rights, roles, or responsibilities of state, local, or tribal governments.