MEDICARE, MEDICAID, AND SCHIP BENEFITS IMPROVEMENT AND PROTECTION ACT OF 2000

Flagship Provisions

MEDICARE INPATIENT PAYMENT UPDATE

  • Medicare inpatient PPS payments will increase on average by 3.4 percent in FY2001, up from 2.3 percent set in the BBA. Based on current estimates, inpatient PPS payments will increase 3.05 percent in FY2002, up from 2.5 percent set in the BBA. In FY2003, the increase will be 0.55 percentage points less than the increase in the market basket index. In FY2004 and FY2005, payments will rise by the full increase in the market basket index. HCFA is given the authority to adjust the standardized payment amounts for actual or anticipated changes in the coding of inpatient cases.

Restored to hospitals: $3.7 billion over five years.

MEDICARE INPATIENT PPS HOSPITAL UPDATE
 
  BIPA BBA
FY2001 October 1 -March 31 2.30% 3.4% (Full Market Basket Average) 2.30%
April 1 - September 30 4.50%
FY2002 3.05% (Market Basket minus 0.55 percentage points) 2.50%
FY2003 Market Basket minus 0.55 percentage points Full Market Basket
FY2004 Full Market Basket Full Market Basket
FY2005 Full Market Basket Full Market Basket

MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) ALLOTMENTS

  • State Medicaid DSH allotments are increased for two years. DSH allotments for FY2001 are set at the higher FY2000 level with an inflation increase. Allotments in FY2002 are set at the FY2001 level with an inflation increase. Medicaid DSH allotments beginning in FY2003 and after revert back to BBA levels (current law), and then are updated for inflation.
  • Very low-DSH states, with DSH allotments representing less than 1 percent of their overall Medicaid spending, will have their DSH allotments increased to 1 percent of their overall Medicaid spending.
  • States are allowed to increase DSH reimbursement to public hospitals up to 175 percent of the current hospital-specific limit (a hospital's Medicaid shortfall plus its uncompensated care) for two years beginning in the state fiscal year that follows September 30, 2002. (See section on other Medicaid provisions regarding Medicaid upper payment limit regulation interaction with DSH.)
  • Congress mandates that HHS implement accountability standards by September 30, 2002 to ensure that federal DSH funds going to states and hospitals are used to offset the costs of uncompensated care services provided to low-income populations.

Restored to hospitals: $1.25 billion over five years (estimate includes only first two provisions above).

MEDICAID DISPROPORTIONATE SHARE HOSPITAL ALLOTMENTS
 
  BIPA BBA
FY2001 FY2000 state allotments plus CPI increase Fixed state allotments
FY2002 FY2001 state allotments plus CPI increase Fixed state allotments
FY2003 BBA level FY2002 + CPI
FY2004 Same as BBA FY2003 + CPI
FY2005 Same as BBA FY2004 + CPI

General Medicare Provisions

WAGE INDEX

  • Changes the current geographic reclassification process, beginning in FY2001. Reclassification decisions made by the Medicare Geographic Classification Review Board are effective for three years, but a hospital can choose to terminate the reclassification decision before the end of the three-year period. In addition, reclassifications for purposes of the wage index will be based on three-year average wage data.
  • In FY2002, a new voluntary process will allow states to create a single, statewide geographic area.
  • HHS will collect occupational mix data and create an occupational mix-adjusted wage index beginning in FY2005.

BAD DEBT

  • Increases from 55 percent to 70 percent what Medicare pays hospitals for "bad debt" - i.e., beneficiaries' unpaid deductibles and coinsurance amounts.

Restored to hospitals: $700 million over five years.

TEACHING HOSPITAL ADJUSTMENTS

  • Increases the adjustment from current law for indirect medical education (IME) to an average of 6.5 percent in FY2001 and 6.5 percent in FY2002. The adjustment equals 5.5 percent in FY2003 and beyond.

INDIRECT MEDICAL EDUCATION
 
  BIPA BBA/BBRA
FY2001 October 1 -March 31 6.25% 6.50% average adjustment 6.25%
April 1 -September 30 6.75%
FY2002 6.50% 5.50%
FY2003 5.50% 5.50%
FY2004 5.50% 5.50%
FY2005 5.50% 5.50%
  • For cost reporting periods beginning during FY2002, a hospital's per resident amount - its direct graduate medical education payments - will not be less than 85 percent of the locality-adjusted national average per resident amount.

Restored to hospitals: $1 billion over five years.

MEDICARE DSH PAYMENTS

  • Increases Medicare DSH payments in FY2001 and FY2002 from current law. Payment cuts would be limited to an average of 2 percent in FY2001 and to 3 percent in FY2002, rather than the current 3 and 4 percent cuts, respectively. Full payments would be made in FY2003 and beyond. The Medicare DSH-qualifying threshold will be lowered to 15 percent for rural and small urban hospitals beginning April 1, 2001, yielding a single, uniform threshold for all hospitals. The DSH adjustment formula will increase DSH payments for small rural hospitals, for urban hospitals with fewer than 100 beds, and for sole community hospitals, rural referral centers, and hospitals classified as both. However, those eligible under the payment formula, prior to this change, will receive the same amount or more in their payment adjustments.

Restored to hospitals: $1.45 billion over five years.

MEDICARE DISPROPORTIONATE SHARE ADJUSTMENT
 
  BIPA BBA/BBRA
FY2001 October 1 -March 31 3% reduction 2% average reduction 3% reduction
April 1 -September 30 1% reduction
FY2002 3% reduction 4% reduction
FY2003 No reduction No reduction
FY2004 No reduction No reduction
FY2005 No reduction No reduction

MEDICARE TECHNOLOGY ADJUSTMENT

  • HHS must report by April 1, 2001 on ways to more quickly incorporate new medical services and technologies into inpatient payments. A new method must be implemented by FY2002 that does not result in increased payments.

BLOOD PRODUCTS

  • HHS Secretary is directed to consider the prices of blood and blood products purchased by hospitals in the next rebasing and revisions of the hospital market basket index, to determine whether those prices are adequately reflected in the index.
  • MedPAC is to study and report to Congress, within one year, on the costs to hospitals of blood safety improvements and the extent to which Medicare payment mechanisms recognize these increased costs in a timely manner. MedPAC also is to recommend any changes in laws or regulations, and to consult with representatives of the blood community and hospitals in preparing its report.

OUTPATIENT PPS

  • Medicare hospital outpatient payments will rise by 3.4 percent in CY2001, up from 2.4 percent set by the BBA. In CY2002, the increase will be 1 percentage point less than the increase in the market basket index, as required by the BBA. Adjustments to future payments can be made for actual or anticipated changes in the coding of outpatient cases. In addition, the law is changed to allow all hospitals to be eligible for transitional payments under the outpatient PPS.
  • Existing provider-based designations, applicable to any department of a hospital on- or off-site, would continue for two years beginning October 1, 2000. Beginning October 1, 2000, a provider-based applicant can meet the geographic location standard if it is located not more than 35 miles from the main campus of the hospital. Off-site clinic services that are provided to indigent patients are exempt from the market area criterion if they provide such services under contract with the state or are a public hospital.

Restored to hospitals: $1.1 billion over five years.

BENEFICIARY COINSURANCE BUY-DOWN

  • Beneficiaries' co-payments for hospital outpatient services will be limited. Co-payment rates will be reduced to a maximum of 60 percent beginning January 1, 2001 and will be reduced an additional 5 percentage points each year in CY2002 through CY2006.

GRANDFATHER CERTAIN HOSPITAL INDEPENDENT LAB ARRANGEMENTS

  • Permits certain independent labs, under a grandfather arrangement, to continue direct billing for the technical component of pathology services provided to hospital inpatients and outpatients for two years. These independent labs must have had arrangements with hospitals in effect since July 22, 1999. Requires a GAO report by April 1, 2002 recommending whether such grandfathering should be extended beyond two years.

MEDICARE APPEALS PROCESS

  • Establishes strict processes and timeframes for beneficiary appeals and reconsiderations, including access to external review that parallels similar arrangements in the private sector. Providers can appeal on behalf of beneficiaries. Similar appeals can be aggregated.

MEDICARE COVERAGE

  • Provides a mechanism to challenge coverage policy at the national and local levels.

RETENTION OF HCPCS LEVEL III CODES

  • The Secretary is required to maintain and continue the use of local codes (Level III HCPCS codes) through December 31, 2003. This postpones the elimination of local codes for one additional year.

INCREASES IN RENAL DIALYSIS COMPOSITE RATE

  • The composite rate payment for renal dialysis services would be increased by 2.4 percent for 2001. HHS is required to collect data and develop an end-stage renal disease (ESRD) market basket index.

Restored to hospitals: $50 million over five years.

AMBULANCE

  • Payments in CY2002 would be increased by the full inflation update, as measured by the Consumer Price Index. From July 1, 2001 through December 31, 2001, payments will be increased by 4.7 percent.

GAO REPORT ON IMPACT OF EMTALA ON HOSPITAL EMERGENCY DEPARTMENTS

  • GAO is required to submit a report by May 1, 2001 on the effect of the EMTALA requirements on hospitals, emergency physicians, and physicians with on-call responsibilities for hospital emergency departments. The study will focus on how the regulatory requirements affect uncompensated care.

Post-Acute Medicare Provisions

HOME HEALTH AGENCIES HOME HEALTH AGENCIES

  • Delays for one year, from October 1, 2001 to October 1, 2002, the 15 percent reduction in the interim payment system (IPS) payment limits used for determining Medicare home health agency (HHA) PPS rates. (The 15 percent reduction in IPS limits translates to an estimated 7 percent reduction in HHA PPS payment rates.) The General Accounting Office (GAO), rather than the Secretary, would submit by April 1, 2002 a report analyzing the need for the 15 percent or other reduction.
  • Home health payments will increase, on average, by the full increase in the market basket index in FY2001, rather than the market basket less 1.1 percentage points as required by BBA. The increase will be implemented by maintaining the current market basket reduction through March 31, 2001 and then adding 2.2 percentage points to the increase in the market basket index for April 1, 2001 through September 30, 2001.
  • Payment rates will be increased by 10 percent, or about $210 per episode on average, for home health services furnished to beneficiaries in rural areas, effective April 1, 2001 through March 31, 2003. This provision is intended to assist rural agencies, which tend to be smaller and disproportionately hospital-based.
  • HCFA is given the authority to adjust PPS rates after October 1, 2001 for actual or anticipated changes in coding of home health cases. · Provides for a temporary two-month extension of Periodic Interim Payments (PIP), through December 2000.
  • GAO is to conduct a study on home health agencies' purchasing of non-routine medical supplies under consolidated billing. Study to be completed by August 15, 2001 and to include recommendations on whether to continue to include supplies in PPS or pay for them separately.
  • Clarifies the use of telehealth in the delivery of home health care, as well as the criteria used by HCFA to determine branch office designations, and liberalizes requirements for "homebound" status.

Restored to hospitals: $675 million over five years.

SKILLED NURSING FACILITIES (SNF)

  • Increases SNF payments, on average, by 3.2 percent in FY 2001; implemented by maintaining the current market basket reduction through March 31, 2001 and then adding 1 percentage point to the increase in the full market basket index for April 1, 2001 through September 30, 2001. In FY2002 and FY2003 the increase will be 0.5 percentage points less than the increase in the market basket index. Requires GAO to submit a report on adequacy of Medicare SNF payment rates by July 1, 2002, and requires the HHS secretary to report on alternative patient classification systems by January 1, 2005.
  • The nursing component of the rate (about one-third of total payments) is increased by 16.66 percent for services furnished from April 1, 2001 through October 1, 2002. GAO is required to study whether SNFs spend increased payments on staffing and recommend whether the added payments be continued; report to be completed by August 1, 2002.
  • Provides for an increase of 6.7 percent in the 14 "rehabilitation" resource utilization groups (RUGs), financed by eliminating the 20 percent add-on payments for three of the 15 current RUGs that receive an add-on payment: RHC, RMC, and RMB. The Inspector General of HHS would be required to report to Congress by October 1, 2001 on whether the 20 percent add-on payments established under the BBRA include incentives for delivery of inadequate care.
  • Effective January 1, 2001, consolidated billing requirements would be limited to items and services furnished to SNF residents in a Medicare Part A covered stay and to therapy services furnished in Part A and Part B covered stays. The Inspector General of HHS would be required to monitor Part B payments to SNFs on behalf of residents not in a Part A covered stay.
  • Establishes a geographic reclassification process for SNFs, which is similar to the hospitals' process, contingent upon implementation of a SNF wage index.

Restored to hospitals: $350 million over five years.

DEVELOPMENT OF PATIENT ASSESSMENT INSTRUMENTS

  • HCFA is required to report to Congress by January 1, 2005, on the development of standard instruments to assess health and functional status of patients and for possible use in payments.

PSYCHIATRIC AND MENTAL HEALTH SERVICES

  • Provides a one-year increase in the incentive payment from 2 percent to 3 percent of the target amount, or 15 percent of the difference between the operating costs and the target amount, whichever is lower.

Restored to hospitals: $25 million over five years.

REHABILITATION HOSPITALS, UNITS AND SERVICES

  • Payments to rehabilitation hospitals and units in FY2002 are increased by 2 percent - the level they would have been had PPS not been enacted. Rehabilitation hospitals are also given the one-time option to be paid immediately based on the fully phased-in PPS rates. The BBRA moratorium on outpatient therapy caps is extended through FY2002.

Restored to hospitals: $200 million over five years.

LONG TERM CARE HOSPITALS

  • The BBA-imposed payment cap set at the 75th percentile of all target amounts is increased to the 77th percentile. Hospitals that are under the cap will have their target amounts increased by 25 percent. (This will also increase incentive payments for those who keep costs under the new, higher targets.)

Restored to hospitals: $300 million over five years.

HOSPICE

  • In FY2001, hospice payment rates will increase by the full increase in the market basket index for the period October 1, 2000 to March 31, 2001. Rates for the period from April 1 to September 30, 2001, will be increased by 5 percent. In FY2002, the increase will be 0.25 percentage points less than the increase in the market basket index.

Restored to hospitals: $125 million over five years.

Rural Hospital Provisions

CRITICAL ACCESS HOSPITALS

  • Medicare beneficiaries will not be liable for cost-sharing amounts for clinical lab services furnished in the outpatient setting in critical access hospitals (CAHs) effective with the enactment of BBRA. Effective as of BBRA, CAH lab services will be reimbursed on the basis of reasonable cost. Beginning on April 1, 2001, CAH professional services will be reimbursed at 115 percent of the Medicare fee schedule for facilities electing to receive an all-inclusive payment rate for outpatient hospital and physician services. Effective for cost reporting periods beginning on or after October 1, 2001, CAHs will be able to receive Medicare payment for emergency room on-call physicians who are not on the premises. In addition, CAH swing bed services will be paid on a reasonable cost basis starting on or after the date of enactment of the law, as will ambulance services if they are the only ambulance service within a 35-mile drive of the CAH. Also, GAO will be required to conduct a study concerning average length of stay and bed-size limitations, including the feasibility of distinct part units and the effect of seasonal variations.

Restored to hospitals: $350 million over five years.

SOLE COMMUNITY HOSPITALS

  • Extends last year's BBRA option to have payments rebased to all sole community hospitals, including those paid at the federal rate and the hospital-specific rate. Hospitals electing this option would use 1996 as the base cost reporting period.

Restored to hospitals: $100 million over five years.

MEDICARE DEPENDENT HOSPITALS

  • Allows small rural hospitals to qualify as Medicare-dependent hospitals if at least 60 percent of their days or discharges were attributable to Medicare Part A beneficiaries for at least two of the three most recently audited cost reporting periods.

Restored to hospitals: $100 million over five years.

PROVIDER-BASED RURAL HEALTH CLINIC (RHC) CAP EXEMPTION

  • Permits small urban hospitals with fewer than 50 beds to qualify for exemption from RHC per-visit payment limitation.

TELEHEALTH SERVICES

  • Expands Medicare payment for telehealth services furnished via a telecommunications system by a physician or practitioner to an eligible beneficiary in a rural area. The payment to the distant provider shall be equal to the amount that would have been paid if such a service were not furnished via a telecommunications system. In addition, a facility fee would be paid to the originating site, which includes a physician or practitioner office, a CAH, RHC, federally qualified health center or hospital.

Restored to hospitals: $25 million over five years.

RURAL AMBULANCE

  • Makes additional payments to providers of ground ambulance services for trips that originate in rural areas and are between 17 and 50 miles in distance. GAO is required to conduct a study of costs in low population rural areas and recommend adjustments to the fee schedule effective in FY2004.

Restored to hospitals: $50 million over five years.

Medicare+Choice Provisions

  • Raises the minimum payment rate in CY2001 from $415.01 for all areas to $525 in MSAs with greater than 250,000 population, and to $475 in all other areas in the 50 states, and raises the minimum annual increase in CY2001 from 2 percent to 3 percent. The current risk adjuster based on inpatient data would continue to apply to only 10 percent of the payment rate (except that the adjuster would apply to the entire payment in 2001 for enrollees with congestive heart failure). The new risk adjuster based on data from inpatient hospitals and ambulatory settings (expected to be implemented in 2004) will be phased in over 7 years. Rates paid to all plans for end-stage renal disease enrollees would be increased by adopting the rates developed for such enrollees under the social HMO (SHMO) demonstration project. The new entry bonus enacted in 1999 is extended to geographic areas where no plans would be available in 2001 due to withdrawal notices submitted this year. HHS is required to report to Congress by January 2003 on phasing DOD and VA costs into calculation of area M+C rates. Additional payment would be provided to plans whenever new benefits are implemented mid-year.
  • Plans that notified HCFA of their intent to withdraw in CY2001 have an opportunity to reenter the program, or areas from which they planned to withdraw. They also must revise their Adjusted Community Rate (ACR) premium/benefit proposals for CY2001 to reflect the revised rates resulting from these changes. Any additional payment in CY2001 can be used only to reduce M+C premiums, reduce cost sharing, enhance benefits, contribute to the benefit stabilization fund, increase health care provider payments, or stabilize/enhance beneficiary access to providers (as long as beneficiary costs are not increased). Beginning in CY2002, plans can reduce Part B premiums for their enrollees as part of the additional benefits package proposed in their ACRs. The HCFA Chief Actuary is charged with reviewing all ACR proposals submitted for CY2001 and thereafter.
  • Also included are several administrative and other changes that affect enrollment, add plan requirements, and extend demonstration projects.

Medicaid, State Children's Health Insurance Program (SCHIP) and Other Provisions

MEDICAID UPPER PAYMENT LIMIT (UPL) RULE CODIFICATION

Codifies HCFA's October 10, 2000 proposed rule, which restricts the flexibility of the Medicaid upper payment limit policy. All DSH payment increases and policy changes are tied to the publication of the final rule. Congress instructs HCFA to publish the final rule by December 31, 2000.

UPL Proposed Rule - The October 10 proposed rule modifies the current upper payment limit policy to create three different categories for the calculation of the aggregate limits. (The aggregate payment limits restrict state Medicaid payments from exceeding Medicare payments for comparable services.) These categories are applied, for purposes of calculating the upper payment limit, to nursing facilities, hospital inpatient, and hospital outpatient payments.

  • The categories are: 1. private facilities; 2. state-owned or -operated facilities; 3. other government-owned or -operated facilities. Medicaid payments in the aggregate for the first two categories (private facilities and state-owned or -operated facilities) cannot exceed the amount that would be paid under Medicare.
  • A special rule is proposed for payments to public hospitals in the third category - other government-owned or -operated facilities. The special rule would permit public hospital Medicaid payments, in the aggregate, to be 150 percent of the amount that would be paid under Medicare. This special rule does not apply to government-owned or -operated nursing facilities.
  • Transition periods are provided for states with existing programs that do not comply with the new rules. The states are divided into two groups: 1. states with plans effective before October 1, 1999; 2. states with plans effective after October 1, 1999 and before the final rule is published. Every state gets a two-year transition. Those states with plans effective before October 1, 1999 get the two-year transition and three additional years to phase-down their program to comply with the new rules. The three-year phase-down period begins in FY2003. States, in that year, can exceed the 100 percent aggregate limit by 75 percent; in FY2004 by 50 percent; in FY2005 by 25 percent; and must fully comply by FY2006. The proposed rule had a 30-day comment period that ended on November 9, 2000.

Congress provided for additional transition provisions for states to adjust to the new policy as outlined by the proposed rule.

  • All states are allowed to increase DSH reimbursement to public hospitals up to 175 percent of the current hospital-specific limit (a hospital's Medicaid shortfall plus its uncompensated care) for two years beginning in the state fiscal year that follows September 30, 2002 (noted in previous section).
  • States with Medicaid 1115 waivers can increase reimbursement to public hospitals up to 175 percent of the hospital-specific limit, for the above noted two-year period, without such increases affecting the state's Medicaid DSH allotments.
  • For a state that has a hospital with a low-income utilization (LIU) rate of 65 percent (the LIU is specified in the Medicaid DSH law) and did not receive Medicaid DSH as of September 30, 2000, an increase in that state's federal DSH allotments is provided for five years.
  • A special transition rule is created for states with UPL programs in place on or before October 1, 1992. These states receive an additional five years to transition from their current UPL program and comply with the new federal rules. That transition begins in FY2003 and ends in FY2007, and these states must reduce any excess payment above the aggregate cap in place as of that state's fiscal year 2000 by 15 percent in each of the five transition years.

RURAL HEALTH CLINICS (RHC) AND FEDERALLY QUALIFIED HEALTH CENTERS (FQHC)

  • The current law phase-down of the RHC and FQHC Medicaid cost-based reimbursement system is eliminated, replaced with a Medicaid prospective payment system based on a per-visit payment rate. The per-visit rate is clinic-specific and, for FY2001, is based on 100 percent of the average of the costs of the RHC or FQHC for fiscal years 1999 and 2000. Subsequent fiscal year updates are based on an inflation index for medical services for primary care services and adjusted for changes in the scope of services provided by the clinic or the center. States are permitted to use alternate payment methodologies, but only if the clinic or center agrees, and if the resulting payment is at least equal to the amount that has been paid under the new PPS. Provides for a GAO study of future rebasing of Medicaid FQHC or RHC payments.

MEDICAID MANAGED CARE PATIENT DAY CALCULATIONS

  • States are required to include Medicaid managed care enrollees, and those in primary care case management organizations, in calculations of the Medicaid utilization rate and the low-income utilization rate for determining, in particular, a hospital's Medicaid DSH eligibility. States are also required to include the managed care entity's sponsorship code on the Medicaid beneficiary's identification card.

STATE MEDICAID 1115 WAIVER APPROVAL PROCESS

  • A new streamlined approval process is established for states with approved Medicaid 1115 waivers that have already received a three-year extension.

ENROLLMENT OUTREACH FOR LOW-INCOME INDIVIDUALS ELIGIBLE FOR MEDICARE AND MEDICAID

  • The Social Security Administration is instructed to conduct outreach efforts to identify individuals eligible for Medicaid payment of Medicare cost sharing, to provide enrollment information to the beneficiary, and to work with the state Medicaid program to facilitate enrollment assistance.

STATE CHILDREN'S HEALTH INSURANCE PROGRAM (SCHIP)

  • A new method for distributing unspent SCHIP funds for FY1998 and FY1999 is established. States that have not exhausted their FY1998 and FY1999 funds would be able to retain a portion of the unspent funds. States that have exhausted their FY1998 and FY1999 funds would receive a portion of the pooled unspent funds. States can pay for Medicaid SCHIP expansions from their SCHIP allotments.

WELFARE TO WORK TRANSITION - MEDICAID COVERAGE

  • Extends for an additional year the current requirement that states provide transitional Medicaid coverage to families losing Medicaid coverage as a result of employment.

EXPANDS TYPES OF ENTITIES WITH MEDICAID/SCHIP PRESUMPTIVE ELIGIBILITY AUTHORITY

  • Elementary and secondary schools are now qualified entities that can presumptively determine that low-income children are eligible for Medicaid and SCHIP coverage without delay of medical services while an application for enrollment is pending.

MATERNAL AND CHILD HEALTH (MCH) BLOCK GRANT AND RICKY RAY HEMOPHILIA FUND

  • The MCH block grant appropriations for FY 2001 is increased to $850 million. The Ricky Ray fund appropriation is increased to $475 million for FY 2001.

MEDICARE COVERAGE OF INDIVIDUALS WITH AMYOTROPHIC LATERAL SCLEROSIS (ALS)

  • Waives the 24-month waiting period for Medicare eligibility for individuals with ALS.

MEDICAL SAVINGS ACCOUNTS

  • Extends the availability of medical savings accounts (MSAs) for two additional years (until 2002). Expands the maximum number of MSA enrollees per year to 750,000.
 

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