[Federal Register Volume 59, Number 198 (Friday, October 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25638]

[[Page Unknown]]

[Federal Register: October 14, 1994]



Health Care Financing Administration

42 CFR Part 418

RIN 0938-AG93


Hospice Services Under Medicare Program; Intent To Form 
Negotiated Rulemaking Committee

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

ACTION: Notice of intent.


SUMMARY: We are considering establishing a Negotiated Rulemaking 
Committee under the Federal Advisory Committee Act (FACA). The 
Committee's purpose would be to negotiate the wage index used to adjust 
payment rates for hospice services under the Medicare program. The 
Committee would consist of representatives of interests that are likely 
to be significantly affected by the proposed rule. The Committee would 
be assisted by a neutral facilitator.
    We request public comment on whether:
     We should establish a Federal Advisory Committee;
     We have properly identified interests that will be 
affected by key issues listed below;
     Negotiated rulemaking is appropriate for this issue.

EFFECTIVE DATE: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on 
November 14, 1994.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPD-820-N, P.O. Box 26676, 
Baltimore, MD 21207.

    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, 
MD 21207.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-820-N. 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, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).


Randal S. Ricktor, (410) 966-5650--For issues related to hospice 
Maryann Troanovitch, (202) 690-7890--For issues related to the 
establishment of the committee or administrative matters.
Judith Ballard, (202) 690-7419--Convener.


I. Negotiated Rulemaking Act

    The Negotiated Rulemaking Act (Public Law 101-648, 5 U.S.C. 581-
590) establishes a framework for the conduct of negotiated rulemaking 
and encourages agencies to use negotiated rulemaking to enhance the 
informal rulemaking process. Under the Act, the head of an agency must 
consider whether--
     There is a need for a rule;
     There are a limited number of identifiable interests that 
will be significantly affected by the rule;
     There is a reasonable likelihood that a committee can be 
convened with a balanced representation of persons who--
    (1) can adequately represent the interests identified; and
    (2) are willing to negotiate in good faith to reach a consensus on 
the proposed rule;
     There is a reasonable likelihood that a committee will 
reach a consensus on the proposed rule within a fixed period of time;
     The negotiated rulemaking procedure will not unreasonably 
delay the notice of proposed rulemaking and the issuance of a final 
     The agency has adequate resources and is willing to commit 
such resources, including technical assistance, to the committee; and
     The agency, to the maximum extent possible consistent with 
the legal obligations of the agency, will use the consensus of the 
committee with respect to the proposed rule as the basis for the rule 
proposed by the agency for notice and comment.
    Negotiations are conducted by a committee chartered under the 
Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2). The committee 
includes an agency representative and is assisted by a neutral 
facilitator. The goal of the Committee is to reach consensus on the 
language or issues involved in a rule. If consensus is reached, it is 
used as the basis of the agency's proposal. The process does not affect 
otherwise applicable procedural requirements of the FACA, the 
Administrative Procedure Act and other statutes.

II. Subject and Scope of the Rule

A. Need for the Rule

    The Medicare hospice benefit was enacted in the Tax Equity and 
Fiscal Responsibility Act of 1982 and implemented effective November 1, 
1983. The statutory authority for payment to Medicare hospices is 
contained in section 1814(i) of the Social Security Act (the Act). 
Final regulations for Medicare hospice care services were published in 
the Federal Register on December 16, 1983 (48 FR 56008), effective for 
hospice services furnished on or after November 1, 1983, and are 
codified at 42 CFR part 418. These regulations provide for payment to 
hospices based on one of four prospectively determined rates for each 
day in which a qualified Medicare beneficiary is under the care of the 
hospice. The four rate categories are routine home care, continuous 
home care, inpatient respite care, and general inpatient care. Payment 
rates are established for each rate category. Our regulations at 42 CFR 
418.306(c) authorize adjustment to the payment rates to reflect local 
differences in area wage levels. Since hospice care is labor intensive, 
this local adjustment is necessary to permit payment of higher rates in 
areas with high wage levels and proportionately lower rates in areas 
with wage levels below the national average.
    In the preamble to the final rule, we specified that the wage index 
used to adjust the hospice payment rates is the wage index published in 
the Federal Register on September 1, 1983 (48 FR 39871) for purposes of 
determining Medicare inpatient hospital prospective payment rates. This 
hospital wage index, which is still in use for hospices, was based on 
calendar year 1981 hospital wage and employment data obtained from the 
Bureau of Labor Statistics' (BLS) ES 202 Employment, Wages and 
Contributions file for hospital workers. In applying the hospital wage 
index to the hospice rates, our rules provide for the use of a 
``floor'' index value of 0.8 if a particular hospital wage index value 
is lower than 0.8. The use of the ``floor'' on the index reflected our 
belief that use of an index below 0.8 would unduly jeopardize the 
availability of the benefit in rural areas by preventing hospices from 
attracting and retaining sufficient skilled staff to provide the 
hospice benefit.
    While Medicare hospice payment rates have been periodically updated 
since the inception of the Medicare hospice program in late 1982, we 
have never updated the wage index. Previous attempts to begin to 
develop an updated wage index through rulemaking brought to our 
attention the divergent views within the hospice industry itself and 
between the industry and HCFA on how best to update the index. During 
discussions preliminary to developing a new wage index, the industry 
voiced concerns over the adverse financial impact of a new wage index 
on individual hospices and a possible reduction in overall Medicare 
hospice care payments, the effect of overarching Federal budgetary 
constraints. The end result is that, in the absence of agreement, we 
continue to use a wage index to geographically adjust payment to 
Medicare hospices that is over a decade old and clearly obsolete.
    We believe it is appropriate and desirable to take prompt steps to 
update the hospice wage index. We believe the index must be changed 
through the rulemaking process because a specific wage index was named 
in the initial Medicare hospice regulations and there will be a 
significant impact on hospices when we adopt a new wage index. Any new 
index developed through this proposed negotiated rulemaking would be 
subject to public notice and comment procedures.
    We believe that the hospice wage index is an appropriate subject 
for development through the negotiated rulemaking process. With the 
assistance of a neutral facilitator, we believe it may be possible to 
reach consensus with hospice industry groups and other affected 
interests on how best to propose an update of the present outdated 
hospice wage index. We also believe a new wage index based on consensus 
would be less controversial and easier to administer. We solicit 
comment on the appropriateness of this issue for negotiated rulemaking.

B. Subject and Scope of the Rule

    The current hospice wage index is based on 1981 BLS data that 
contained serious deficiencies. In fact, those deficiencies led us to 
construct our own survey-based hospital wage index for use in 
geographically adjusting Medicare hospital payments. We have 
periodically updated the hospital wage index and the survey database 
since that time. The most recent survey is based on hospital wage data 
beginning in fiscal year 1991 (that is, cost reporting periods 
beginning October 1, 1990 and ending before October 1, 1991). Those 
survey data are the basis for the current HCFA Fiscal Year 1995 
hospital wage index, which was published in the Federal Register on 
September 1, 1994.
    We are considering pursuing an update to the Medicare hospice wage 
index based on the HCFA hospital wage index. We are considering using 
the hospital wage index since hospice-specific data have been 
unreliable. We believe the HCFA hospital wage index provides a good 
measure of area wage differences, not only for hospitals, but also for 
hospices since hospitals and hospices generally compete in the same 
labor market. The HCFA hospital wage index and related information data 
base are available and we will share that information with negotiation 
    While recognizing that it is difficult to predict the end product 
of negotiated rulemaking on the hospice wage index, we anticipate that 
the scope of the proposed rule resulting from negotiations will include 
a specific recommended wage index, adjustments to that index, a 
decision on retaining a floor index value, and a possible phase-in 

C. Issues and Questions To Be Resolved

    Hospice wage index rulemaking will address a limited number of 
specific issues. Issues that we anticipate are outlined below. We also 
invite public comment on other wage index issues not identified.
    Since Medicare regulations require only that the hospice rates be 
adjusted to reflect local differences in wages, there is a range of 
wage index options that could potentially be acceptable. We believe the 
well-developed hospital wage data base will enhance meaningful 
discussion and resolution of these issues.
1. What Data Should Be Used for a Wage Index for Hospices?
    We propose to use hospital data for a hospice wage index since 
previous efforts to collect hospice cost data have resulted in 
unreliable data. Hospices contend that there are differences in the way 
hospices and hospitals operate that are relevant in determining 
geographic differences in wages. If hospital data are used, the 
negotiations would address whether such differences exist, whether they 
are relevant to the wage index, and, if so, whether there should be 
adjustments to the hospital data to account for such differences.
    We also invite discussion on and encourage participants to share 
any alternative data upon which a hospice wage index can be 
constructed. The Committee will need to ascertain how those data might 
be adaptable and whether they may be appropriate to the hospice 
2. How Would a New Wage Index Be Phased In?
    Projections by both HCFA and the industry indicate that most 
hospices would have their wage indices lowered if a new wage index were 
based on unadjusted current hospital data. These decreases would occur 
for any hospices in areas where the current indices are artificially 
high due to flaws in the 1981 BLS data or where wages have gone down 
relative to other geographic areas. The negotiations would address what 
phase-in period, if any, is appropriate (1) to enable these hospices to 
plan and implement strategies to reduce costs or obtain other funding; 
or (2) to offset decreases in reimbursement due to a lower index by 
automatic yearly increases in hospice payment rates provided for by 
statute. (These automatic increases are based on the rate of increase 
in the hospital market-basket index, but recent legislation reduces the 
increase by 2 percent in fiscal year 1994, and by 1.5 percent in 1995 
and 1996.) For those hospices whose wage index would be increased, the 
negotiations may also address what phase-in period is appropriate. A 
related issue to discussions on the phase-in period is what should be 
the effective date of any new index.
3. Should the 0.8 Floor Be Retained?
    The wage index uses a value of one (1.0) for national average 
wages. The current hospice rule provides for the use of a ``floor'' 
index value of 0.8 if the applicable wage index value for any 
particular area is lower than 0.8. The rationale for the ``floor'' was 
that hospices needed to attract and retain sufficient skilled staff to 
provide the hospice benefit, and use of an index below 0.8 would unduly 
jeopardize the availability of the benefit in rural areas. We 
anticipate that retaining, replacing, or eliminating this ``floor'' 
will be a discussion issue. Also, if participants agree to retain a 
``floor,'' discussion may arise on the appropriateness and methods of 
adjusting the wage index to offset the cost of the ``floor'' wage index 
value of 0.8 against wage index values above the ``floor.''
4. How Can Budget Neutrality Be Achieved?
    As mentioned above, we are considering pursuing an update to the 
Medicare hospice wage index based on the HCFA hospital wage index. 
Since the latest HCFA hospital wage index generally results in lower 
payments to hospices in the aggregate than the existing hospice wage 
index, whether to adjust the new index and addressing its aggregate 
budget impact are likely to be a key issue. We anticipate discussion on 
the budget impact of the new wage index and on acceptable methodologies 
to compute and apply an adjustment factor to the baseline hospital wage 
index data, if participants agree that an adjustment factor is 
appropriate. We consider it a given parameter of negotiations that any 
revised wage index would have to be at least budget neutral; that is, 
total aggregate payments for the same services could not be more using 
the revised wage index than if such payments were made using the 
current index.
5. Should the Wage Index Be Updated More Frequently?
    We anticipate discussion addressing future updates to the Medicare 
hospice wage index, including which data sources will be used and the 
frequency of updates.

D. Issues and Questions Not Open to Negotiation

    Two additional issues have been raised which are related to hospice 
payments, but which we have determined cannot be resolved as part of 
the proposed negotiations because no reliable data exist.
Occupational Mix Issue
    The occupational mix issue refers to the argument of some in the 
industry that the mix of occupations represented in the hospital wage 
data differs from that encountered in the hospice setting, and, 
therefore, these critics argue, adjustments to the hospital wage data 
may be necessary and appropriate to adapt such data to the hospice 
setting. We believe any adjustment to the underlying wage data of 
hospital workers to isolate hospice-type services is impractical. We 
believe attempts to compare hospital services with hospice services may 
be difficult because of differences in the palliative rather than 
curative approach to care unique to the hospice setting. Also, Medicare 
experience with the collection of practitioner-level hospital wage data 
has shown that such data have been highly unreliable. Presently, we do 
not possess reliable national practitioner-level hospital wage data. We 
are open to the possibility of a separate study of this issue in the 
future provided reliable data become available. We plan to provide an 
explanation of the occupational mix issue to Committee members when 
appropriate to the discussion of other wage index issues. We do not, 
however, intend to negotiate an occupational mix adjustment based on 
practitioner-level hospital wage data.
Possible Changes to Labor-Related Portion of the Hospice Rates
    Final hospice regulations published in 1983 established labor and 
non-labor components of the Medicare hospice rates for purposes of 
determining what portion of the rates would be subject to adjustment by 
the wage index. These labor/non-labor components were established in 
1983, using existing Medicare program data. The same ratios reflected 
in the original labor/non-labor breakdown have been applied to all 
subsequent updates to the hospice rates. We plan to explain the labor/
non-labor breakdown to the Committee. We have determined, however, that 
it would be impractical to include in these negotiations a change to 
the labor/non-labor proportions of the hospice rates based on hospice-
specific data. Including this issue would require examining the entire 
spectrum of hospice costs and divert resources from discussions on the 
wage index.

III. Affected Interests and Potential Participants

    The Convener has proposed and we agree to accept the following 
individuals as negotiation participants. We believe these individuals 
represent an appropriate mix of interests and backgrounds:

Donna Bales, Kansas Hospice Association
Janice Casey, Hospice of Stamford, Connecticut
Kate Colburn, Hospice of Des Moines, Iowa
Randall DuFour, Hospice of Louisville, Kentucky
Thomas Hoyer, Bureau of Policy Development, HCFA
Mary Labiak, Hospice of the Florida Suncoast, Florida
John J. Mahoney, National Hospice Organization
Janet Neigh, Hospice Association of America
Mark Sterling, VITAS Healthcare
Claire Tehan, Hospital Home Health and Hospice, Torrance, California

    We also propose to include Mary Ellen Bliss, a representative of 
the American Association of Retired Persons. We invite public comment 
on this list of negotiation participants.
    The intent in establishing the negotiating committee is that all 
interests are represented, not necessarily all parties. We believe this 
proposed list of participants represents all interests associated with 
adoption of a new wage index for hospices. The proposed participants 
include the two major hospice associations, as well as hospice 
organizations representing differences in geographic location (the 
major characteristic related to the wage index) and other differences 
in the hospice community (such as proprietary versus non-profit). One 
participant is with a State association which has been active with 
rural hospices and understands their concerns. Consumers and hospice 
employees were also identified as being potentially affected by any 
change in the wage index. This effect would be relatively minimal, 
however, and would vary depending on whether the wage index in any 
particular area is increased or decreased. Because of our strong 
commitment to obtaining consumer input, we nonetheless are proposing a 
consumer representative for the committee. We preliminarily determined 
that any employee interest could best be represented by the hospices 
themselves, who have an even stronger interest in the wage index, and 
by the hospice associations. Both associations have employee members.

IV. Schedule for the Negotiation

    We have set a deadline of 6 months beginning with the date of the 
first meeting for the Committee to complete work on the proposed rule. 
We intend to terminate the activities of the Committee if it does not 
appear likely to reach consensus on a schedule that is consistent with 
HCFA's rulemaking needs.
    If we make a final decision to negotiate, the first meeting is 
scheduled for Wednesday, November 30, 1994 through Friday, December 2, 
1994 at the Comfort Inn, 6921 Baltimore Annapolis Blvd., Baltimore 
Maryland, 21225. The first day's meeting will begin at 10 a.m. The 
purpose of this meeting will be to discuss in detail how the 
negotiations will proceed and how the Committee will function. Also, 
HCFA will present technical information related to the rule. The 
Committee will agree to groundrules for Committee operation, will 
determine how best to address the principal issues, and, if time 
permits, will begin to address those issues.
    A second meeting is scheduled for Tuesday, January 17, 1995 through 
Wednesday, January 18, 1995. We expect that by this meeting the 
Committee can complete action on any procedural matters outstanding 
from the organizational meeting and either begin or continue to address 
the issues.
    Subsequent meetings of the Committee would be held approximately 
once a month in the Baltimore, Maryland/Washington, D.C. area.

V. Formation of the Negotiating Committee

A. Procedure for Establishing an Advisory Committee

    As a general rule, an agency of the Federal government is required 
to comply with the requirements of FACA when it establishes or uses a 
group that includes non-federal members as a source of advice. Under 
FACA, an advisory committee is established only after both consultation 
with the General Services Administration and receipt of a charter. We 
have prepared a charter and initiated the requisite consultation 
process. Only upon successful completion of this process and the 
receipt of the approved charter will we form the Committee and begin 
negotiations. Notice of approval of the charter will be published in 
the Federal Register.

B. Participants

    The number of participants in the group is estimated to be 10 and 
should not exceed 25 participants. A number larger than this could make 
it difficult to conduct effective negotiations. One purpose of this 
notice is to help determine whether the proposed rule would 
significantly affect interests not adequately represented by the 
proposed participants. We do not believe that each potentially affected 
organization or individual must necessarily have its own 
representative. However, each interest must be adequately represented. 
Moreover, we must be satisfied that the group as a whole reflects a 
proper balance and mix of interests.

C. Requests for Representation

    If, in response to this notice, an additional individual or 
representative of an interest requests membership or representation in 
the negotiating group, we, in consultation with the facilitator, will 
determine whether that individual or representative should be added to 
the group. We will make that decision based on whether the individual 
or interest:
     Would be significantly affected by the rule; and
     Is already adequately represented in the negotiating 

D. Establishing the Committee

    After reviewing any comments on this Notice and any requests for 
representation, we will take the final steps to form the Committee 
unless the comments and other relevant considerations convince us that 
such action is inappropriate or our charter request is disapproved.

VI. Negotiation Procedures

    If a committee is formed, the following procedures and guidelines 
will apply, unless they are modified as a result of comments received 
on this notice or during the negotiating process.

A. Facilitator

    We will use a neutral facilitator. The facilitator will not be 
involved with the substantive development or enforcement of the 
regulation. The facilitator's role is to:
     Chair negotiating sessions;
     Help the negotiation process run smoothly; and
     Help participants define and reach consensus.

B. Good Faith Negotiations

    Participants must be willing to negotiate in good faith and be 
authorized to do so. We believe this may best be accomplished by 
selection of senior officials as participants. We believe senior 
officials are best suited to represent the interests and viewpoint of 
their organizations. This applies to HCFA as well, and we are 
designating Thomas Hoyer, Director, Office of Coverage and Eligibility 
Policy, Bureau of Policy Development, to represent HCFA.

C. Administrative Support

    We will supply logistical, administrative and management support. 
If it is deemed necessary and appropriate, we will provide technical 
support to the Committee in gathering and analyzing additional data or 

D. Meetings

    Meetings will be held in the Baltimore/Washington area (or in 
another location) at the convenience of the Committee. We will announce 
Committee meetings and agendas in the Federal Register. Unless 
announced otherwise, meetings are open to the public.

E. Committee Procedures

    Under the general guidance and direction of the facilitator, and 
subject to any applicable legal requirements, the members will 
establish the detailed procedures for Committee meetings which they 
consider most appropriate.

F. Defining Consensus

    The goal of the negotiating process is consensus. Under the 
Negotiated Rulemaking Act, consensus generally means that each interest 
concurs in the result unless the term is defined otherwise by the 
committee. We expect the participants to fashion their working 
definition of this term.

G. Failure of Advisory Committee To Reach Consensus

    If the Committee is unable to reach consensus, HCFA will proceed to 
develop a proposed rule. Parties to the negotiation may withdraw at any 
time. If this happens, the remaining Committee members and HCFA will 
evaluate whether the Committee should continue.

H. Record of Meetings

    In accordance with FACA's requirements, we will keep minutes of all 
Committee meetings. The minutes will be placed in the public rulemaking 

I. Other Information

    In accordance with the provisions of Executive Order 12866 this 
notice was reviewed by the Office of Management and Budget.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program; No. 93.773, Medicare--Hospital Insurance 
Program; and No. 93.774, Medicare--Supplementary Medical Insurance 

    Dated: October 11, 1994.

Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: October 12, 1994.

Donna E. Shalala,

[FR Doc. 94-25638 Filed 10-13-94; 8:45 am]