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<strong>CMS</strong>-1403-FC<br />

by at least 5 percent, the State became a Statewide<br />

locality. If the highest locality remained a distinct<br />

locality, the process was repeated for the second highest<br />

locality and so on until the variation among remaining<br />

localities fell below the 5 percent threshold. The rest of<br />

the localities within the State were combined into a single<br />

rest-of-State locality as their costs were relatively<br />

homogeneous. The revised locality structure (which is the<br />

one currently in use) reduced the number of localities from<br />

210 to 89. The number of Statewide localities increased<br />

from 22 to 34. The development of the current locality<br />

structure is described in detail in the CY 1997 PFS<br />

proposed rule (61 FR 34615) and the subsequent final rule<br />

(61 FR 59494).<br />

Although there have <strong>been</strong> no changes to the locality<br />

structure since 1997, we have proposed changes in recent<br />

years, although we did not finalize them. As we have<br />

frequently noted, any changes to the locality configuration<br />

must be made in a budget neutral manner. Therefore,<br />

changes in localities can lead to significant<br />

redistributions in payments. For many years, we have not<br />

considered making changes to localities without the support<br />

of a State Medical Association, which we believed would<br />

demonstrate consensus for the change among the<br />

81

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