[Federal Register Volume 60, Number 229 (Wednesday, November 29, 1995)]
[Notices]
[Pages 61264-61265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29140]



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

DEPARTMENT OF HEALTH AND HUMAN SERVICES
[BPD-820-N]
RIN 0938-AG93


Medicare Program; Notice Containing the Statement Drafted by the 
Committee Established to Negotiate the Wage Index to be Used to Adjust 
Hospice Payment Rates Under Medicare

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

ACTION: Notice.

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

SUMMARY: This notice provides the statement signed on April 13, 1995, 
by the Negotiating Committee on the Hospice Wage Index, concerning the 
index to be used to adjust Medicare payment rates for hospice services 
to reflect geographic differences in wages. The statement represents a 
consensus by the committee members, who represent different interests 
affected by the hospice rules.
    The notice also announces that a proposed rule establishing the 
revised hospice wage index, with a description of the methodology used 
to calculate the index, will be published in the spring of 1996. A new 
wage index is needed because the index currently applied is based on 
1981 wage and employment data and has not been updated since 1983.

FOR FURTHER INFORMATION CONTACT: Jennifer Carter (410) 786-4615.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1814(i) of the Social Security Act (the Act) provides for 
payment to Medicare hospices. Regulations for Medicare hospice care 
services (42 CFR part 418) were published in the Federal Register on 
December 16, 1983 (48 FR 56008), effective for hospice services 
furnished on or after November 1, 1983. 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. Under Sec. 418.306(c), we adjust the payment rates to reflect 
local differences in area wage levels.
    The wage index currently 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 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.
    Although 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 for hospices. Thus, the wage 
index developed based on 1981 BLS data is still used for hospices, even 
though HCFA now uses its own wage data surveys to construct an updated, 
more accurate hospital wage index. Previous attempts to begin to 
develop an updated wage index for hospices 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 result was that, in the absence of 
agreement, we continued to use a wage index that is clearly obsolete 
for geographically adjusting Medicare hospice payments.

II. Negotiated Rulemaking Process

    In accordance with the Negotiated Rulemaking Act of 1990, we 
embarked on the use of the negotiated rulemaking process to promulgate 
a proposed rule specifying the wage index to be used to adjust payment 
rates for hospice services under Medicare. Our goal was to achieve the 
objectives associated with the use of the negotiated rulemaking 
process--reducing the time, cost, and other problems associated with 
the traditional rulemaking process.
    To determine who should participate on the negotiating committee, a 
neutral facilitator selected by the Department of Health and Human 
Services conducted a convening process to ensure the presence on the 
committee of all interests affected by changes in the wage index. The 
intent was to establish a negotiating committee that represented all 
interests, although not necessarily all interested parties. The two 
national hospice organizations, the National Hospice Organization and 
Hospice Association of America, were also contacted by the facilitator 
for their recommendations. The facilitator then interviewed a number of 
representatives in the hospice community to determine who would best 
represent different interests on the committee. The facilitator 
proposed, and we accepted, the following individuals as negotiation 
participants. We believe these individuals represent an appropriate mix 
of interests and backgrounds:

Donna Bales, Kansas Hospice Association
Mary Ellen Bliss, American Association of Retired Persons
Janice Casey, Hospice Care, Inc.
Kate Colburn, Hospice of Central 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
Dale C. Smith, Academy of Hospice Physicians
Mark Sterling, VITAS Healthcare
Claire Tehan, Hospital Home Health Care Agency of California

    With the assistance of the facilitator, we reached consensus with 
hospice industry groups and other affected interests on how best to 
propose an update to the present outdated hospice wage index. We 
believed a new wage index based on consensus would be less 
controversial and easier to administer than one developed by the 
traditional rulemaking process.
    The committee held five public meetings beginning in November 1994 
and ending in April 1995. In accordance with the Federal Advisory 
Committee Act, each meeting of the negotiating committee was announced 
in the Federal Register, at least 15 days before the meeting. The 
meeting notices indicated that the meetings were open to the public and 
that time was set aside at the end of each meeting day to hear any 
public statements.
    On April 13, 1995, the committee reached consensus on an option for 
the proposed wage index. Reaching consensus was a long and deliberative 
process. The committee stressed that consensus meant that even if 
elements of the agreement were not the choice of individual committee 
members, all committee members could live with the agreement, 
considered as a whole. The committee concurred that a wage index based 
on the committee's 

[[Page 61265]]
recommendations would be preferable to a wage index that could be 
developed by the traditional rulemaking process, both for the hospice 
community as a whole, and for the Medicare beneficiaries it serves. The 
proposed rule announcing the revised hospice wage index, including a 
description of the methodology used to calculate the index, will be 
published in the spring of 1996. The Committee Statement signed by all 
committee members is reprinted below.

United States Department of Health and Human Services Negotiating 
Committee on the Medicare Hospice Wage Index

Committee Statement

April 13, 1995.
    The Negotiating Committee on Medicare Hospice Wage Index has 
concurred in the following recommendations, considered as a whole, 
concerning the wage index used to adjust Medicare payment rates for 
hospice services to reflect geographic differences in wages:

A. Data to be Used

    The wage index for hospices will be based on the wage index used 
by the Health Care Financing Administration (HCFA) for hospitals 
under the Medicare Prospective Payment System, prior to 
reclassification. This means that the hospital wage index will not 
be adjusted to take into account the geographic reclassification of 
hospitals in accordance with sections 1886(d)(8)(b) and 1886(d)(10) 
of the Social Security Act.
    The hospital wage index prior to reclassification will be 
referred to in this statement as the Raw Index and will be adjusted 
as provided below to calculate what will be referred to as the 
Revised Wage Index.
    Special provisions governing a transition period are described 
in paragraph D below.

B. Budget Neutrality

    HCFA will determine a Budget Neutrality Factor that will be 
applied to achieve neutrality during and after the transition 
period. Budget neutrality means that, in a given year, estimated 
aggregate payments for Medicare hospice services using the Revised 
Wage Index will equal estimated payments that would have been made 
for the same services if the wage index adopted for hospices in 1983 
(1983 Index) had remained in effect. HCFA will estimate aggregate 
payments for Medicare hospice services using the best available 
utilization data.

C. Adjustments

    Each Raw Index value will be adjusted in one of two ways to 
determine the Revised Wage Index value applicable to each area.
    (1) If the Raw Index value for any area is 0.8 or greater, the 
Revised Wage Index will be calculated by multiplying the Raw Index 
value for that area by the Budget Neutrality Factor.
    (2) If the Raw Index value for any area is less than 0.8, the 
Revised Wage Index will be the greater of either:
    (a) The Raw Index value for that area multiplied by the Budget 
Neutrality Factor; or
    (b) The Raw Index value for that area multiplied by 1.15 (in 
effect, a 15-percent increase), but subject to a maximum index value 
of 0.8.

D. Transition Period

    The Revised Wage Index will be implemented over a 3-year 
transition period beginning on or about October 1, 1996. For the 
first year of the transition period, a blended index will be 
calculated by adding two-thirds of each 1983 index value for an area 
to one-third of the Revised Wage Index value for that area. During 
the second year of the transition period, the calculation will be 
similar, except that the blend will be one-third of the 1983 Index 
values and two-thirds of the Revised Wage Index values. During the 
third year the Revised Wage Index will be fully implemented.
    Throughout the transition period, new hospices will be treated 
the same as existing hospices based in the same county.

E. Annual Updates

    The Revised Wage Index will be updated annually, so that it is 
based on the most current available data used by HCFA to construct 
the hospital wage index, as well as on changes by the Office of 
Management and Budget to Metropolitan Statistical Areas as adopted 
by HCFA in calculating the hospital wage index.
    HCFA will use the most current hospital cost report data 
available that allows HCFA to publish a proposed rule containing 
wage index values at least 4 months in advance of the effective date 
of each annual update to the Revised Wage Index.

F. Effective Date

    The effective date of a final rule revising the wage index as 
stated above should be October 1, 1996.

G. Statement to Accompany Proposed and Final Hospice Wage Index 
Notice

    The proposed rule is based upon a Committee Statement developed 
by a Negotiating Committee on the Medicare hospice wage index which 
was convened under the Negotiated Rulemaking Act. A new hospice wage 
index is needed because the existing hospice wage index is based on 
a 1983 wage index using 1981 Bureau of Labor Statistics (BLS) data 
which is inaccurate and outdated.
    The Committee reached consensus; however, this means only that 
all Committee members could ``live with'' the agreement, considered 
as a whole, even if elements of that agreement were not the 
preferred choice of individual Committee members. The Committee 
Statement reflects those issues upon which the Committee ultimately 
concurred, but does not address many issues that were considered by 
the Committee.
    The Committee considered the appropriate data to be used to 
construct a wage index, the appropriateness of retaining a 0.8 
floor, budget neutrality, and how to structure a transition to 
timely update the index yet ensure access to hospice care. In 
particular, the Committee considered the problems faced by hospices 
that would receive significant decreases under the new wage indices, 
rural hospices, hospices with low wage indices, and hospices that 
may have disproportionately high non-wage costs.
    The Committee received extensive information from experts who 
appeared before the Committee and from the hospice community, and 
sought public input. While considerable data was reviewed, the 
Committee acknowledges that hospice data collection is maturing and 
encourages its continued development. In addition, while other 
issues were identified, the scope of the Committee's negotiations 
was limited by the Notice of Intent to Negotiate.
    Given these constraints, and taking into account the differing 
and conflicting interests that would be significantly affected, the 
Committee sought to develop a wage index that would be as accurate, 
reliable, and equitable as possible, but would not threaten access 
to hospice care.
    The Committee recognizes that hospice care is still not 
universally available. The Committee further recognizes that there 
may be geographic or other circumstances that inhibit the provision 
of hospice care. The Committee strongly requests that HCFA consider 
options to address these access problems.
    Reaching consensus was a long and deliberative process. The 
Committee concurred that the wage index it recommends will be better 
both for the hospice community as a whole, and for the Medicare 
beneficiaries it serves, than a wage index developed by the 
traditional rulemaking process.

    Authority: Section 1814(i) of the Social Security Act (42 U.S.C. 
1395(f)).

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

    Dated: October 25, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-29140 Filed 11-28-95; 8:45 am]
BILLING CODE 4120-01-P