Federal Register, Volume 72 Issue 83 (Tuesday, May 1, 2007)

[Federal Register Volume 72, Number 83 (Tuesday, May 1, 2007)]
[Proposed Rules]
[Pages 24116-24170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2120]

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Part VII

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Part 418

Medicare Program; Hospice Wage Index for Fiscal Year 2008; Proposed
Rule

Federal Register / Vol. 72, No. 83 / Tuesday, May 1, 2007 / Proposed
Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 418

[CMS-1539-P]
RIN 0938-AO72

Medicare Program; Hospice Wage Index for Fiscal Year 2008

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would set forth the hospice wage index for
fiscal year 2008. This proposed rule would also revise the methodology
for updating the wage index for rural areas without hospital wage data
and provide clarification of selected existing Medicare hospice
regulations and policies.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on July 2, 2007.

ADDRESSES: In commenting, please refer to file code CMS-1539-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-1539-P, P.O. Box 8012, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1539-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-9994 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Terri Deutsch, (410) 786-9462.

SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-1539-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.

I. Background

A. General

1. Hospice Care
Hospice care is an approach to treatment that recognizes that the
impending death of an individual warrants a change in the focus from
curative care to palliative care for relief of pain and for symptom
management. The goal of hospice care is to help terminally ill
individuals continue life with minimal disruption to normal activities
while remaining primarily in the home environment. A hospice uses an
interdisciplinary approach to deliver medical, social, psychological,
emotional, and spiritual services through use of a broad spectrum of
professional and other caregivers, with the goal of making the
individual as physically and emotionally comfortable as possible.
Counseling services and inpatient respite services are available to the
family of the hospice patient. Hospice programs consider both the
patient and the family as a unit of care.
Section 1861(dd) of the Social Security Act (the Act) provides for
coverage of hospice care for terminally ill Medicare beneficiaries who
elect to receive care from a participating hospice. Section 1814(i) of
the Act provides payment for Medicare participating hospices.
2. Medicare Payment for Hospice Care
Our regulations at 42 CFR part 418 establish eligibility
requirements, payment standards and procedures, define covered
services, and delineate the conditions a hospice must meet to be
approved for participation in the Medicare program. Part 418 subpart G
provides for payment in one of four prospectively-determined rate
categories (routine home care, continuous home care, inpatient respite
care, and general inpatient care) to hospices based on each day a
qualified Medicare beneficiary is under a hospice election.

B. Hospice Wage Index

Our regulations at Sec. 418.306(c) require each hospice's labor
market to be established using the most current hospital wage data
available, including any changes to the Metropolitan Statistical Areas
(MSAs) definitions, which have been superseded by Core Based
Statistical Areas (CBSAs). Section 1814(i)(2)(D) of the Act requires
Medicare to pay for hospice care furnished in an individual's home on

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the basis of the geographic location where the service is furnished. We
have interpreted this to mean that the wage index value used is based
upon the location of the beneficiary's home for routine home care and
continuous home care and the location of the hospice agency for general
inpatient and respite care.
The hospice wage index is used to adjust payment rates for hospice
agencies under the Medicare program to reflect local differences in
area wage levels. The original hospice wage index was based on the 1981
Bureau of Labor Statistics hospital data and had not been updated since
1983. In 1994, because of disparity in wages from one geographical
location to another, a committee was formulated to negotiate a wage
index methodology that could be accepted by the industry and the
government. This committee, functioning under a process established by
the Negotiated Rulemaking Act of 1990, was comprised of national
hospice associations; rural, urban, large and small hospices; multi-
site hospices; consumer groups; and a government representative. On
April 13, 1995, the Hospice Wage Index Negotiated Rulemaking Committee
signed an agreement for the methodology to be used for updating the
hospice wage index.
In the August 8, 1997 Federal Register (62 FR 42860), we published
a final rule implementing a new methodology for calculating the hospice
wage index based on the recommendations of the negotiated rulemaking
committee. The committee statement was included in the appendix of that
final rule (62 FR 42883). The hospice wage index is updated annually.
Our most recent annual update notice published in the September 1, 2006
Federal Register (71 FR 52080), set forth updates to the hospice wage
index for FY 2007. On October 3, 2006, we published a correction notice
in the Federal Register (71 FR 58415) and we published a subsequent
correction notice on January 26, 2007 (72 FR 3856), to correct
technical errors that appeared in the September 1, 2006 notice.
1. Changes to Core-Based Statistical Areas
The annual update to the hospice wage index is published in the
Federal Register and is based on the most current available hospital
wage data, as well as any changes by the Office of Management and
Budget (OMB) to the definitions of MSAs. The August 4, 2005 final rule
(70 FR 45130) set forth the adoption of the changes discussed in the
OMB Bulletin No. 03-04 (June 6, 2003), which announced revised
definitions for Micropolitan Statistical Areas and the creation of MSAs
and Combined Statistical Areas. In adopting the OMB Core-Based
Statistical Area (CBSA) geographic designations, we provided for a 1-
year transition with a blended wage index for all providers for FY
2006. For FY 2006, the hospice wage index for each provider consisted
of a blend of 50 percent of the FY 2006 MSA-based wage index and 50
percent of the FY 2006 CBSA-based wage index. As discussed in the
August 4, 2005 final rule and in the September 1, 2006 notice, we will
use the full CBSA-based wage index values as presented in Tables A and
B of this proposed rule for FY 2008.
2. Raw Wage Index Values
Raw wage index values (that is, inpatient hospital pre-floor and
pre-reclassified wage index values) as described in the August 8, 1997
hospice wage index final rule (62 FR 42860), are subject to either a
budget neutrality adjustment or application of the wage index floor.
Raw wage index values of 0.8 or greater are adjusted by the budget
neutrality adjustment factor. Budget neutrality means that, in a given
year, estimated aggregate payments for Medicare hospice services using
the updated wage index values will equal estimated payments that would
have been made for these services if the 1983 wage index values had
remained in effect. To achieve this budget neutrality, the raw wage
index is multiplied by a budget neutrality adjustment factor. The
budget neutrality adjustment factor is calculated by comparing what we
would have paid using current rates and the 1983 wage index to what
would be paid using current rates and the new wage index. The budget
neutrality adjustment factor is computed and applied annually. For the
FY 2008 hospice wage index in the proposed rule, FY 2007 hospice
payment rates were used in the budget neutrality adjustment factor
calculation.
Raw wage index values below 0.8 are adjusted by the greater of: (1)
The hospice budget neutrality adjustment factor; or (2) the hospice
wage index floor (a 15 percent increase) subject to a maximum wage
index value of 0.8. For example, if County A has a pre-floor, pre-
reclassified hospital wage index (raw wage index value) of 0.4000, we
would perform the following calculations using the budget neutrality
factor (which for this example is 1.060988) and the hospice wage index
floor to determine County A's hospice wage index:
Raw wage index value below 0.8 multiplied by the budget neutrality
adjustment factor: (0.4000 x 1.060988 = 0.4244).
Raw wage index value below 0.8 multiplied by the hospice wage index
floor: (0.4000 x 1.15 = 0.4600).
Based on these calculations, County A's hospice wage index would be
0.4600.
3. Hospice Payment Rates
Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended
section 1814(i)(1)(C)(ii) of the Act to establish updates to hospice
rates for FYs 1998 through 2002. Hospice rates were to be updated by a
factor equal to the market basket index, minus 1 percentage point.
However, neither the BBA nor subsequent legislation specified the
market basket adjustment to be used to compute payment for FY 2008.
Therefore, payment rates for FY 2008 will be updated according to
section 1814(i)(1)(C)(ii)(VII) of the Act, which states that the update
to the payment rates for subsequent FYs will be the market basket
percentage for the fiscal year. Accordingly, the FY 2008 update to the
payment rates will be the full market basket percentage increase for FY
2008. This rate update is implemented through a separate administrative
instruction and is not part of this notice. Historically, the rate
update has been published through a separate administrative instruction
issued annually in July to provide adequate time to implement system
change requirements. Providers determine their payment rates by
applying the wage index in this notice to the labor portion of the
published hospice rates.
4. Proxy for the Hospital Market Basket
As discussed above, the hospice payment rates are adjusted each
year based upon the full hospital market basket. In the FY 2007 update
notice (72 FR 52082) issued on September 1, 2006, we indicated that
beginning in April 2006, with the publication of March 2006 data, the
Bureau of Labor Statistic's (BLS's) Employment Cost Index (ECI) began
using a different classification system, the North American Industrial
Classification System (NAICS), instead of the Standard Industrial
Classification System (SIC), which no longer exists. The ECIs had been
used as the data source for wages and salaries and other price proxies
in the hospital market basket. In the FY 2007 update notice we noted
that no changes would be made to the usage of the NAICS-based ECI,
however, input was solicited on this issue. We received

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no comments and as a result, we are not proposing any changes.

II. Provisions of the Proposed Rule

A. Annual Update to the Hospice Wage Index

The hospice wage index presented in this proposed rule would be
effective October 1, 2007 through September 30, 2008. We note that we
are not proposing any modifications to the hospice wage index
methodology. In accordance with our regulations and the agreement
signed with other members of the Hospice Wage Index Negotiated
Rulemaking Committee, we are using the most current hospital data
available to us. For this proposed rule, the FY 2007 hospital wage
index was the most current hospital wage data available for calculating
the FY 2008 hospice wage index values. We used the FY 2007 pre-
reclassified and pre-floor hospital area wage index data for this
calculation.
Payment rates for each of the four levels of care are adjusted
annually based upon the hospital market basket for that year and are
promulgated administratively to allow for sufficient time for system
changes and provider notification. Due to the need to ensure
appropriate time for implementing changes, the latest adjustments to
these payment rates were not incorporated into this proposed rule.
As noted above, for FY 2008, the hospice wage index values will be
based solely on the adoption of the CBSA-based labor market definitions
and its wage index. We continue to use the most recent pre-floor and
pre-reclassified hospital wage index data available (FY 2003 hospital
wage data).
A detailed description of the methodology used to compute the
hospice wage index is contained in both the September 4, 1996 proposed
rule (61 FR 46579) and the August 8, 1997 final rule (62 FR 42860). All
wage index values are adjusted by a budget-neutrality factor of
1.066028 and are subject to the wage index floor adjustment, if
applicable. We completed all of the calculations described in section
2.B below and included them in the wage index values reflected in
Tables A and B of the Addendum. Specifically, Table A reflects the FY
2008 wage index values for urban areas under the CBSA designations.
Table B reflects the FY 2008 wage index values for rural areas under
the CBSA designations.

B. Rural Areas Without Hospital Wage Data

(If you choose to comment on issues in this section, please include
the caption ``Rural Areas without Wage Data'' at the beginning of your
comments.)
When adopting OMB's new labor market designations, we identified
some geographic areas where there were no hospitals, and thus, no
hospital wage index data on which to base the calculation of the
hospice wage index (70 FR 45135, August 4, 2005). For FY 2006 and FY
2007, we adopted a policy to use the FY 2005 pre-floor, pre-
reclassified hospital wage index value for rural areas when no rural
hospital wage data were available. We also adopted the policy that for
urban labor markets without an urban hospital from which a hospital
wage index data could be derived, all of the CBSAs within the State
would be used to calculate a statewide urban average wage index data to
use as a reasonable proxy for these areas. We did not receive any
public comments regarding our policy to calculate an urban wage index,
using an average of all of the urban CBSA wage index data within the
State, for urban labor markets without an urban hospital from which a
hospital wage index could be derived. Consequently, in the August 2005
final rule and in the August 2006 update notice, we applied the average
wage index data from all urban areas lacking hospital wage data in that
state. Currently, the only CBSA that is affected by this is CBSA 25980
Hinesville-Fort Stewart, Georgia. We propose to continue this approach
for urban areas where there are no hospitals and, thus, no hospital
wage index data on which to base the calculations for the FY 2008 and
subsequent hospice wage indexes. Therefore, the pre-floor, pre-
reclassified wage index data for urban CBSA 25980, Hinesville-Fort
Stewart, GA is calculated as the average wage index data of all urban
areas in Georgia with a value of 0.9178.
Under the CBSA labor market areas, there are no rural hospitals in
rural locations in Massachusetts and Puerto Rico. Since there was no
rural proxy for more recent rural data within those areas, in the
August 2005 proposed rule (70 FR 45135), we proposed applying the FY
2005 pre-floor, pre-reclassified hospital wage index value to rural
areas where no hospital wage data are available. We did not receive any
public comments on this matter, either. Consequently, in the August
2005 final rule and in the August 2006 update notice, we applied the FY
2005 pre-floor, pre-reclassified hospital wage index data for rural
areas lacking hospital wage data in that state in both FY 2006 and FY
2007 for rural Massachusetts and rural Puerto Rico.
Since we have used the same wage index value from FY 2005 for these
areas for the previous two fiscal years, we believe it is appropriate
to consider alternatives in our methodology to update the wage index
for rural areas without hospital wage index data. We believe that the
best imputed proxy for rural areas, would: (1) Use pre-floor, pre-
reclassified hospital data; (2) use the most local data available to
impute a rural wage index; (3) be easy to evaluate; and, (4) be easy to
update from year-to-year. Although our current methodology uses local,
rural pre-floor, pre-reclassified hospital wage data, this method
cannot be updated from year-to-year.
Therefore, in cases where there is a rural area without rural
hospital wage data, we propose using the average pre-floor, pre-
reclassified wage index data from all contiguous CBSAs to represent a
reasonable proxy for the rural area. While this approach does not use
rural data, it does use pre-floor, pre-reclassified hospital wage data,
it is easy to evaluate, it is easy to update from year-to-year, and it
uses the most local data available.
In determining an imputed rural wage index, we interpret the term
contiguous to mean as sharing a border. For example, in the case of
Massachusetts, the entire rural area consists of Dukes and Nantucket
counties. We have determined that the borders of Dukes and Nantucket
counties are contiguous with Barnstable and Bristol counties. Under the
proposed methodology, the pre-floor, pre-reclassified wage index values
for the counties of Barnstable (CBSA 12700, Barnstable Town, MA) of
1.2539 and Bristol (CBSA 39300, Providence-New Bedford-Fall River, RI-
MA) of 1.0783 would be averaged resulting in an imputed pre-floor, pre-
reclassified rural wage index of 1.1661 for rural Massachusetts for FY
2008. The impact of utilizing the proposed methodology is captured in
the impact analysis (Table 1). As shown in Table B, the proposed wage
index value for FY 2008 for rural Massachusetts is 1.2431. If we had
retained the current methodology, the rural Massachusetts wage index
would have been 1.0891.
While we believe that this policy could be readily applied to other
rural areas that lack hospital wage data (possibly due to hospitals
converting to a different provider type, such as a CAH, that do not
submit the appropriate wage data), should a similar situation arise in
the future, we may re-examine this policy.
However, we do not believe that this policy would be appropriate
for Puerto Rico. There are sufficient economic

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differences between hospitals in the United States and those in Puerto
Rico, including the payment of hospitals in Puerto Rico using blended
Federal/Commonwealth-specific rates that we believe that a separate and
distinct policy for Puerto Rico is necessary. Consequently, any
alternative methodology for imputing a wage index for rural Puerto Rico
would need to take into account those differences. Our policy of
imputing a rural wage index based on the wage index(es) of CBSAs
contiguous to the rural area in question does not recognize the unique
circumstances of Puerto Rico. While we have not yet identified an
alternative methodology for imputing a wage index for rural Puerto
Rico, we will continue to evaluate the feasibility of using existing
hospital wage data and, possibly, wage data from other sources.
Accordingly, we propose to continue using the most recent pre-floor,
pre-reclassified wage index previously available for Puerto Rico, which
is 0.4047.

C. Nomenclature Changes

(If you choose to comment on issues in this section, please include
the caption ``Nomenclature Changes'' at the beginning of your
comments.)
In the August 4, 2005 final rule and in the September 1, 2006
update notice, we noted that the Office of Management and Budget (OMB)
published a bulletin that changed the titles to certain CBSAs. Since
the publication of the Hospice FY 2006 update notice, OMB published
additional bulletins that updated the CBSAs. Specifically, OMB added or
deleted certain CBSA numbers and revised certain titles. Accordingly,
in this proposed rule, we are proposing to clarify that this and all
subsequent Hospice rules and notices are considered to incorporate the
CBSA changes published in the most recent OMB bulletin, that applies to
the hospital wage data used to determine the current hospice wage
index. The proposed tables reflect changes made by these bulletins. The
OMB bulletins may be accessed at http://www.whitehouse.gov/omb/bulletins/index.html.

D. Payment for Hospice Care Based on Location Where Care Is Furnished

(If you choose to comment on issues in this section, please include
the caption ``Site of Service'' at the beginning of your comments)
Hospice providers receive payment for four levels of care based
upon the individual's needs. Section 4442 of the BBA amended section
1814(i)(2) of the Act, effective for services furnished on or after
October 1, 1997, required the application of the local wage index value
of the geographic location at which the service is furnished for
hospice care provided in the home. This provision has been codified in
our regulations at 418.302(g). Prior to this provision, local wage
index values were applied based on the geographic location of the
hospice provider, regardless of where the hospice care was furnished.
We believe that for the majority of hospice providers the office and
the site for the provision of home and inpatient care occur in the same
geographic area. However, with the substantial growth of hospice
providers in multiple states and with multiple sites within a State,
hospice providers have been able to inappropriately maximize
reimbursement by locating their offices in high-wage areas and
delivering services in a lower-wage area. We also believe that hospice
providers are also able to inappropriately maximize reimbursement by
locating their inpatient services either directly or under contractual
arrangements in lower wage areas than their offices.
Section 4442 of the BBA applies the wage index value of a home's
geographic location for services provided there, but is silent as to
what wage index value should be used for hospice services provided in
an inpatient setting. We believe that the application of the wage index
values, for rate adjustments on the geographic area, where the hospice
care is furnished provides a reimbursement rate that is a more accurate
reflection of the wages paid by the hospice for the staff used to
furnish care. We also believe that payment should reflect the location
of the services provided and not the location of an office.
As a result, we are proposing that effective January 1, 2008, all
payment rates (routine home care, continuous home care, inpatient
respite and general inpatient care) be adjusted by the geographic wage
index value of the area where hospice services are provided. In other
words, the wage component of each payment rate is multiplied by the
wage index value applicable to the location in which the hospice
services are provided. We are proposing to amend 418.302(g) to reflect
this proposed change.
Currently, hospice claims do not contain information identifying
the location of the facility where general inpatient and respite care
are provided. Therefore, we are unable to predict the savings or costs
associated with the changes associated with this proposed provision.
However, we believe that the impact of implementing this proposal will
be negligible.

E. Clarification of Selected Existing Medicare Hospice Regulations and
Policies

1. Educational Requirements for Nurse Practitioners
(If you choose to comment on issues in this section, please include
the caption ``Nurse Practitioners'' at the beginning of your comments.)
On December 8, 2003, the Congress enacted the Medicare Prescription
Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-
173). Section 408 of the MMA, Recognition of Attending Nurse
Practitioners as Attending Physicians to Serve Hospice Patients,
amended sections 1861(dd)(3)(B) and 1814(a)(7) of the Act to add nurse
practitioners (NPs) to the definition of an attending physician for
beneficiaries who have elected the hospice benefit. Section 408 of the
MMA was implemented through an administrative issuance (Change Request
(CR) 3226, Transmittals 22 and 304, September 24, 2004).
In the FY 2006 Final Rule (70 FR 45130, August 4, 2005), we revised
Sec. 418.3 to implement the provisions of section 408 of the MMA.
Section 418.3 indicated (under clause (1)(ii) of the definition of
``attending physician'') that the nurse practitioner ``* * * meet the
training, education, and experience requirements as the Secretary may
prescribe * * *''. We believe that the definition for nurse
practitioners under the Medicare hospice benefit should reflect the
definition as established for the Medicare benefit found at Sec.
410.75. To ensure consistency, we propose to revise the definition of
``attending physician'' at Sec. 418.3 to cross reference the
requirement in Sec. 410.75(b).
2. Care Giver Breakdown and General Inpatient Care
(If you choose to comment on issues in this section, please include
the caption ``Care Giver and General Inpatient Care'' at the beginning
of your comments.)
The Medicare hospice benefit places emphasis on the provision of
items and services to enable an individual to remain at home in the
company of family and friends. Section 1861(dd)(1)(G) of the Act
provides for short term inpatient hospice care to be available when an
individual's pain and symptoms must be closely monitored or the
intensity of interventions that are required cannot be provided in any
other settings. In recognition of the stress in providing care for an

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individual with a terminal diagnosis, inpatient respite care is
available for family members, who serve as the primary caregivers, to
obtain rest for a period of no more than five days at a time.
Medicare policy as described in chapter 9 of the Medicare Benefit
Policy Manual, states that skilled nursing care may be required by a
patient whose home support has broken down, if this breakdown makes it
no longer feasible to furnish needed care in the home setting. If the
hospice and the caregiver, working together, are no longer able to
provide the necessary skilled nursing care in the individual's home,
and if the individual's pain and symptom management can no longer be
provided at home, then the individual may be eligible for a short term
general inpatient level of care. However, it has come to our attention
that some hospice providers are requesting payment for the ``general
inpatient'' level of care for circumstances that do not qualify under
the statute, our regulations at Sec. 418.202(e) or Medicare hospice
policy. In other words, some hospices are billing Medicare for
``caregiver breakdown'' at the higher ``general inpatient'' level,
rather than the lower payment for ``inpatient respite'' or ``routine
home care'' levels of care.
To receive payment for ``general inpatient care'' under the
Medicare hospice benefit, beneficiaries must require an intensity of
care directed towards pain control and symptom management that cannot
be managed in any other setting. While there is nothing prohibiting a
Medicare approved facility from serving as the individual's home, it is
the level of care provided to meet the individual's needs which
determine payment rates for Medicare services. ``Caregiver breakdown''
should not be billed as ``general inpatient care'' regardless of where
services are provided, unless the intensity-of-care requirement is met.
If the individual is no longer able to remain in his or her home, but
the required care does not meet the requirements for ``general
inpatient care'', hospices should bill this care as ``inpatient respite
care'', payable for no more than 5 days, until alternative arrangements
can be made.
As explained, this is a clarification of current Medicare policy
and is not anticipated to create new limitations on access to hospice
care. However, we are clarifying that the level of care provided, not
the location of care, is what determines the appropriate level of
payment. Additionally, the circumstances addressed with this policy,
and the clarification discussed above, should not be construed as
similar to situations where an individual does not have family or
friends or other means that are able to take on the role of a caregiver
when a hospice election is made. The Medicare hospice benefit provides
for care that is medically reasonable and necessary for the palliation
and management of the terminal and related conditions, and is
structured in such a way to enable the individual with a terminal
condition to remain at home, as long as possible, in the company of
family and friends. We recognize the difficulties surrounding the
provision of hospice care to an individual who is terminally ill and
who does not have caregivers at home. This may be a challenge in rural
areas. Section 409 of the MMA established the Rural Hospice
Demonstration which hopes to test alternative mechanisms for providing
hospice services for beneficiaries who lack an appropriate caregiver
and who reside in rural areas. However, we intend to monitor the usage
of the general inpatient care.
We are providing this as clarification and therefore are not
proposing any changes in existing statute, regulation or policy manual.
3. Certification of Terminal Illness
(If you choose to comment on issues in this section, please include
the caption ``Certification'' at the beginning of your comments.)
Section 1814(a)(7)(A)(i) of the Act stipulates that the
individual's attending physician and the hospice medical director
initially certify the individual's terminal diagnosis with prognosis of
six months or less if the disease runs its normal course. The
requirements of the physician certification, including supportive
documentation were discussed in the hospice care amendment proposed
rule (67 CFR 70363) and final rule (70 CFR 70548). In these rules, we
indicated that a direct consultation between the hospice medical
director and the attending physician was not a requirement and that
information supporting the terminal diagnosis could be obtained through
the hospice admission nurse. We are aware that the intent of this has
been construed by some providers, to permit the admission nurse,
utilizing documents such as local coverage decisions, to determine
eligibility for hospice services and certify the individual's terminal
diagnosis. This interpretation is incorrect. We have permitted the
hospice nurses to obtain information to be used by the hospice medical
director as part of the medical documents used in his or her
determination of the terminal diagnosis and eligibility for the
Medicare hospice benefit. The statute is explicit in the requirement
that the physician and medical director determine the prognosis and his
or her signature on the certification attests to that fact. We will
provide further clarification in administrative instructions.

III. Collection of Information Requirements

This document does not impose any information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Response to Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Overall Impact

We have examined the impacts of this proposed rule as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of
1995 (Pub. L. 104-4), and Executive Order 13132. We estimated the
impact on hospices, as a result of the proposed changes to the FY 2008
hospice wage index. As discussed previously, the methodology for
computing the wage index was determined through a negotiated rulemaking
committee and implemented in the August 8, 1997 final rule (62 FR
42860). This proposed rule updates the hospice wage index in accordance
with our regulation and that methodology, incorporating the adoption of
the CBSA designations used in the FY 2007 hospital wage index data.
Table 1 categorizes the impact on hospices by various
geographic and provider characteristics. We estimate that the total
hospice payments will decrease $538,000 as a result of the proposed FY
2008 wage index values. We anticipate that the final rule will more
accurately project payment for FY 2008, based upon changes in the wage
index values.

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Table A reflects the FY 2008 wage index values for urban
areas designations.
Table B reflects the FY 2008 wage index values for rural
areas designations.
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) directs agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We have determined that this notice is not an economically significant
rule under this Executive Order.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospices and most other providers and suppliers are
small entities, either by nonprofit status or by having revenues of
$6.5 million to $31.5 million in any 1 year (for details, see the Small
Business Administration's regulation at 65 FR 69432, that sets forth
size standards for health care industries). For purposes of the RFA,
most hospices are small entities. As indicated in Table 1 below, there
are 2,819 hospices. Approximately 81 percent of Medicare certified
hospices are identified as voluntary, government, or other agencies
and, therefore, are considered small entities. Because the National
Hospice and Palliative Care Organization estimates that approximately
79 percent of hospice patients are Medicare beneficiaries, we have not
considered other sources of revenue in this analysis. Furthermore, the
wage index methodology was previously determined by consensus, through
a negotiated rulemaking committee that included representatives of
national hospice associations; rural, urban, large and small hospices;
multi-site hospices; and consumer groups. Based on all of the options
considered, the committee agreed on the methodology described in the
committee statement, and it was adopted into regulation in the August
8, 1997 final rule. In developing the process for updating the wage
index in the 1997 final rule, we considered the impact of this
methodology on small entities and attempted to mitigate any potential
negative effects.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside a CBSA and has fewer
than 100 beds. We have determined that this notice would not have a
significant impact on the operations of a substantial number of small
rural hospitals. We are not preparing an analysis for the RFA because
we have determined that this rule will not have a significant economic
impact on a substantial number of small entities.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, and tribal governments, in the aggregate, or by the private
sector, of $120 million or more. This notice is not anticipated to have
an effect on State, local, or tribal governments or on the private
sector of $120 million or more.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We have reviewed this notice under the threshold criteria
of Executive Order 13132, Federalism, and have determined that it would
not have an impact on the rights, roles, and responsibilities of State,
local, or tribal governments.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.

B. Anticipated Effects

We are unable to quantify the extent of the usage of the general
inpatient level of care in the event of caregiver breakdown and are,
therefore, unable to definitively anticipate the impact of our
clarification of the general inpatient level of care policy in the
event of caregiver breakdown. For this reason, we solicit comment on
what the impact of our clarification might be. Based on anecdotal
evidence as well as substantial increases in the number of claims
submitted for general inpatient care, however, we believe a small
proportion of patient days attributed to general inpatient care would
be appropriately allocated to inpatient respite care with this
clarification. Significant savings could be realized even if only a
small proportion of patient days attributed to general inpatient care
were allocated to inpatient respite care.
For example, to determine the impact of allocating 5.0 percent of
general inpatient care days to inpatient respite care, we used the FY
2005 patient days, expenditures and number of beneficiaries electing
the hospice benefit to estimate the impact of the clarification of
existing policy in this proposed rule. The number of inpatient days was
adjusted from 1,250,678 to 1,188,144. The number of inpatient respite
days was adjusted from 96,646 to 159,180. While inpatient respite
expenditures increased from $14,000,000 to $23,058,570, general
inpatient care expenditures decreased from $737,300,000 to
$700,435,000. In total, if 5.0 percent of patient days that were
attributed to general inpatient care in FY 2005 were allocated to the
inpatient respite level of care, it would have resulted in net savings
of $27,806,430.
The impact analysis of this notice represents the projected effects
of the changes in the hospice wage index from FY 2007 to FY 2008. We
estimate the effects by estimating payments for FY 2008 utilizing the
FY 2007 wage index values and the full implementation of the CBSA
designations while holding all other payment variables constant.
We note that certain events may combine to limit the scope or
accuracy of our impact analysis, because such an analysis is future
oriented and, thus, susceptible to forecasting errors due to other
changes in the forecasted impact time period. The nature of the
Medicare program is such that the changes may interact, and the
complexity of the interaction of these changes could make it difficult
to predict accurately the full scope of the impact upon hospices.
For the purposes of this proposed rule, we compared estimated
payments using the FY 1983 hospice wage index to estimated payments
using the FY 2008 wage index and determined the hospice wage index to
be budget neutral. Budget neutrality means that, in a given year,
estimated aggregate payments for Medicare hospice services using the FY
2008 wage index would equal estimated aggregate payments that would
have been made for the same services if the 1983 wage index had
remained in effect. Budget neutrality to 1983 does not imply that
estimated payments would not increase since the

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budget neutrality applies only to the wage index portion and not the
total payment rate, which accommodates inflation.
As discussed above, we use the latest claims file available to us
to develop the impact table when we issue the annual yearly wage index
update. For the purposes of this proposed rule, data were obtained from
the National Claims History file using FY 2005 claims processed through
June 2006, which were the most recent available data. We deleted bills
from hospice providers that have since closed. For the purposes of this
proposed rule, this file is adequate to demonstrate the impact of the
FY 2008 wage index values and is not intended to project the
anticipated expenditures for FY 2008. We anticipate that the final rule
will more accurately project payment for FY 2008. This impact analysis
compares hospice payments using the FY 2007 hospice wage index to the
estimated payments using the FY 2008 wage index. We note that estimated
payments for FY 2008 are determined by using the wage index for FY 2008
and payment rates for FY 2007. As noted in previous sections, payment
rates for FY 2008 are published through administrative issuance.
Table 1 demonstrates the results of our analysis. In column 1 we
indicate the number of hospices included in our analysis. In column 2,
we indicate the number of routine home care days that were included in
our analysis, although the analysis was performed on all types of
hospice care. Column 3 estimates payments using the FY 2007 wage index
values and the FY 2007 payment rates. Column 4 estimates payments using
FY 2008 wage index values as well as the FY 2007 payment rates. Column
5 compares columns 3 and 4 and shows the percentage change in estimated
hospice payments made based on the hospice category.
Table 1 also categorizes hospices by various geographic and
provider characteristics. The first row displays the aggregate result
of the impact for all Medicare-certified hospices. The second and third
rows of the table categorize hospices according to their geographic
location (urban and rural). Our analysis indicated that there are 1,858
hospices located in urban areas and 961 hospices located in rural
areas. The next two groupings in the table indicate the number of
hospices by census region, also broken down by urban and rural
hospices. The sixth grouping shows the impact on hospices based on the
size of the hospice's program. We determined that the majority of
hospice payments are made at the routine home care rate. Therefore, we
based the size of each individual hospice's program on the number of
routine home care days provided in FY 2006. The next grouping shows the
impact on hospices by type of ownership. The final grouping shows the
impact on hospices defined by whether they are provider-based or
freestanding. As indicated in Table 1 below, there are 2,819 hospices.
Approximately 81 percent of Medicare-certified hospices are identified
as voluntary, government, or other agencies and, therefore, are
considered small entities. Because the National Hospice and Palliative
Care Organization estimates that approximately 79 percent of hospice
patients are Medicare beneficiaries, we have not considered other
sources of revenue in this analysis. Furthermore, the wage index
methodology was previously determined by consensus, through a
negotiated rulemaking committee that included representatives of
national hospice associations; rural, urban, large, and small hospices;
multi-site hospices; and consumer groups. Based on all of the options
considered, the committee agreed on the methodology described in the
committee statement, and it was adopted into regulation in the August
8, 1997 final rule. In developing the process for updating the wage
index in the 1997 final rule, we considered the impact of this
methodology on small entities and attempted to mitigate any potential
negative effects.
As stated previously, the following discussions are limited to
demonstrating trends rather than projected dollars. We used the CBSA
designations and wage indices as well as the data from FY 2005 claims
processed through June 2006 in developing the impact analysis. For FY
2008 the wage index is the variable that differs between the FY 2007
payments and the FY 2008 estimated payments. FY 2007 payment rates are
used for both FY 2007 actual payments and the FY 2008 estimated
payments. The FY 2008 payment rates will be adjusted to reflect the
full FY 2007 hospital market basket, as required by section
1814(i)(1)(C)(ii)(VII) of the Act. As previously noted, we publish
these rates through administrative issuances.
As discussed in the FY 2006 final rule (70 FR 45129), hospice
agencies may utilize multiple wage indices to compute their payments
based on potentially different geographic locations of the beneficiary
for routine and continuous home care or the CBSA for the location of
the hospice agency for respite and general inpatient care. For this
analysis, we use payments to the hospice in the aggregate based on the
location of the hospice. The impact of hospice wage index changes have
been analyzed according to the type of hospice, geographic location,
type of ownership, hospice base, and size.
Our analysis shows that most hospices are in urban areas and
provide the vast majority of routine home care days. Most hospices are
medium sized followed by large hospices. Hospices are almost equal in
numbers by ownership with 1,231 designated as non-profit and 1,265 as
proprietary. The vast majority of hospices are freestanding.
1. Hospice Size
Under the Medicare hospice benefit, hospices can provide four
different levels of care days. The majority of the days provided by a
hospice are routine home care days (RHC) representing over 70 percent
of the services provided by a hospice. Therefore, the number of routine
home care days can be used as a proxy for the size of the hospice, that
is, the more days of care provided, the larger the hospice. As
discussed in the August 4, 2005 final rule, we currently use three size
designations to present the impact analyses. The three categories are:
Small agencies having 0 to 3,499 RHC days; medium agencies having 3,500
to 19,999 RHC days; and large agencies having 20,000 or more RHC days.
Using RHC days as a proxy for size, our analysis indicates that the
proposed FY 2008 wage index values are anticipated to have virtually no
impact on hospice providers, with a slight decrease of 0.1 percent
anticipated for small hospices while no change is anticipated for
medium or large hospices.
2. Geographic Location
Our analysis demonstrates that the proposed FY 2008 wage index
values will result in little change in estimated payments with urban
hospices anticipated to experience no change while rural hospices are
anticipated to experience a slight increase of 0.2 percent. The
greatest increase of 0.9 percent is anticipated to be experienced by
the Mountain regions, followed by an increase for East North Central of
0.6 percent and Pacific regions of 0.5 percent. The remaining urban
regions are anticipated to experience a decrease ranging from 0.6
percent in the East South Central region to 0.1 percent in the Middle
Atlantic region. The greatest decrease of 2.6 percent is anticipated
for Puerto Rico.
For rural hospices, the South Atlantic region and Puerto Rico are
anticipated to experience no change. Two regions are anticipated to
experience a decrease of 0.9 percent for New England and 0.4 percent
for the mountain regions. The

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remaining regions are anticipated to experience an increase ranging
from 0.2 percent for the East North Central region to 0.6 percent for
the Middle Atlantic and East South Central regions.
3. Type of Ownership
By type of ownership, non-profit hospices are anticipated to
experience no change in payment while government hospices are
anticipated to experience a slight increase of 0.1 percent. Slight
decreases are anticipated for proprietary hospices of 0.1 percent and
0.2 percent for other categories.
4. Hospice Base
For hospice-based facilities, a decrease of 0.1 percent in payment
is anticipated for freestanding facilities. Home health, hospital and
skilled nursing facilities area anticipated to experience an increase
of 0.1, 0.2 and 0.7 percent respectively.

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C. Conclusion

Our impact analysis compared hospice payments by using the FY 2007
wage index to the estimated payments using the FY 2008 wage index.
Through the analysis, we estimate that total hospice payments will
effectively be budget neutral with a negligible decrease from FY 2007
by $538,000. Additionally, we compared estimated payments using the FY
1983 hospice wage index to estimated payments using the FY 2008 wage
index and determined the current hospice wage index to be budget
neutral, as required by the negotiated rulemaking committee. As noted
above, the payment rates used reflect the FY 2007 rates. The FY 2008
payment rates will be adjusted to reflect the full FY 2008 hospital
market basket, as required by section 1814(i)(1)(C)(ii)(VII) of the
Act. We publish these rates through administrative issuances.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.

List of Subjects for 42 CFR Part 418

Health facilities, Hospice care, Medicare, Reporting and
recordkeeping requirements.

For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services would amend 42 CFR part 418 as set forth below:

PART 418--HOSPICE CARE

1. The authority citation for part 418 continues to read as
follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).

Subpart A--General Provision and Definitions

2. Section 418.3 is amended by revising paragraph (1)(ii) in the
definition of ``attending physician'' to read as follows:

Sec. 418.3 Definitions.

* * * * *
Attending Physician means a--(1)(i) * * *
(ii) Nurse practitioner who meets the training, education, and
experience requirements as described in Sec. 410.75 (b).
* * * * *

Subpart G--Payment for Hospice Care

3. Section 418.302 is amended by revising paragraph (g) to read as
follows:

Sec. 418.302 Payment procedures for hospice care.

* * * * *
(g) Payment for routine home care, continuous home care, general
inpatient care and inpatient respite care is made on the basis of the
geographic location where the services are provided.

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

Dated: March 15, 2007.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: April 11, 2007.
Michael O. Leavitt,
Secretary.
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[FR Doc. 07-2120 Filed 4-26-07; 4:00 pm]
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