[Federal Register Volume 74, Number 78 (Friday, April 24, 2009)]
[Proposed Rules]
[Pages 18912-18970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-9417]



[[Page 18911]]

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

Part IV





Department of Health and Human Services





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



Centers for Medicare & Medicaid Services



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



42 CFR Parts 405 and 418



Medicare Program; Proposed Hospice Wage Index for Fiscal Year 2010; 
Proposed Rule

  Federal Register / Vol. 74 , No. 78 / Friday, April 24, 2009 / 
Proposed Rules  

[[Page 18912]]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405 and 418

[CMS-1420-P]
RIN 0938-AP45


Medicare Program; Proposed Hospice Wage Index for Fiscal Year 
2010

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

ACTION: Proposed rule; request for comments.

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

SUMMARY: This proposed rule would set forth the hospice wage index for 
fiscal year 2010. The proposed rule would adopt a MedPAC recommendation 
regarding a process for certification and recertification of terminal 
illness. This proposed rule would also continue the phase-out of the 
wage index budget neutrality adjustment factor (BNAF), which will 
conclude in 2011. In addition, we are requesting comments on a 
suggestion to require recertification visits by physicians or advanced 
practice nurses, and on issues of payment reform for use in possible 
future policy development. Finally, the proposed rule would make 
several technical and clarifying changes to the regulatory text.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 22, 2009.

ADDRESSES: In commenting, please refer to file code CMS-1420-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1420-P, P.O. Box 8012, 
Baltimore, MD 21244-8012.
    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-1420-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 before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey 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.)
    b. For delivery in Baltimore, MD--7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    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.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
    Randy Throndset (410) 786-0131. Katie Lucas (410) 786-7723.

SUPPLEMENTARY INFORMATION:
    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.regulations.gov. Follow the search instructions 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.

Table of Contents

I. Background
    A. General
    1. Hospice Care
    2. Medicare Payment for Hospice Care
    B. Hospice Wage Index
    1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified Hospital 
Wage Index)
    2. Changes to Core-Based Statistical Area (CBSA) Designations
    3. Definition of Urban and Rural Areas
    4. Areas Without Hospital Wage Data
    5. CBSA Nomenclature Changes
    6. Wage Data for Multi-Campus Hospitals
    7. Hospice Payment Rates
II. Provisions of the Proposed Rule
    A. FY 2010 Proposed Hospice Wage Index
    1. Background
    2. Areas Without Hospital Wage Data
    3. FY 2010 Wage Index With 75% Reduced Budget Neutrality 
Adjustment Factor (BNAF)
    4. Effects of Phasing Out the BNAF
    B. Proposed Change to the Physician Certification and 
Recertification Process, Sec.  418.22
    C. Proposed Update of Covered Services, Sec.  418.202(f)
    D. Proposed Clarification of Payment Procedures for Hospice 
Care, Sec.  418.302
    E. Proposed Clarification of Intermediary Determination and 
Notice of Amount of Program Reimbursement, Sec.  405.1803
    F. Proposed Technical and Clarifying Changes
III. Requests for Comments on Other Policy Issues
    A. Recertification Visits, Sec.  418.22
    B. Hospice Aggregate Calculation
    C. Hospice Payment Reform
IV. Update on Additional Hospice Data Collection
V. Collection of Information Requirements
VI. Regulatory Impact Analysis

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

[[Page 18913]]

an interdisciplinary approach to deliver medical, nursing, 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 that the wage index for 
all labor markets in which Medicare-participating hospices do business 
be established using the most current hospital wage data available, 
including any changes by Office of Management and Budget (OMB) to the 
Metropolitan Statistical Areas (MSAs) definitions. OMB revised the MSA 
definitions beginning in 2003 with new designations called the Core 
Based Statistical Areas (CBSAs). For the purposes of the hospice 
benefit, the term ``MSA-based'' refers to wage index values and 
designations based on the previous MSA designations before 2003. 
Conversely, the term ``CBSA-based'' refers to wage index values and 
designations based on the OMB revised MSA designations in 2003, which 
now include CBSAs. In the August 11, 2004 IPPS final rule (69 FR 
49026), the revised labor market area definitions were adopted at Sec.  
412.64(b), which were effective October 1, 2004 for acute care 
hospitals. We also revised the labor market areas for hospices using 
the new OMB standards that included CBSAs. In the FY 2006 hospice wage 
index final rule (70 FR 45130), we implemented a 1-year transition 
policy using a 50/50 blend of the CBSA-based wage index values and the 
MSA-based wage index values for FY 2006. The one-year transition policy 
ended on September 30, 2006. For FY 2007, FY 2008, and FY 2009, we used 
wage index values based on CBSA designations.
    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, using a hospital wage index rather than continuing to use 
the Bureau of Labor Statistics (BLS) data. The committee statement was 
included in the appendix of that final rule (62 FR 42883). The 
reduction in overall Medicare payments if a new wage index were adopted 
was noted in the November 29, 1995 notice transmitting the 
recommendations of the negotiated rulemaking committee (60 FR 61264). 
Therefore, the Committee also decided that for each year in updating 
the hospice wage index, aggregate Medicare payments to hospices would 
remain budget neutral to payments as if the 1983 wage index had been 
used.
    As decided upon by the Committee, budget neutrality means that, in 
a given year, estimated aggregate payments for Medicare hospice 
services using the updated hospice values will equal estimated payments 
that would have been made for these services if the 1983 hospice wage 
index values had remained in effect. Although payments to individual 
hospice programs may change each year, the total payments each year to 
hospices would not be affected by using the updated hospice wage index 
because total payments would be budget neutral as if the 1983 wage 
index had been used. To implement this policy, a BNAF would be computed 
and applied annually to the pre-floor, pre-reclassified hospital wage 
index, when deriving the hospice wage index.
    The BNAF is calculated by computing estimated payments using the 
most recent completed year of hospice claims data. The units (days or 
hours) from those claims are multiplied by the updated hospice payment 
rates to calculate estimated payments. For this proposed rule, that 
means estimating payments for FY 2010 using FY 2007 hospice claims 
data, and applying the estimated FY 2010 hospice payment rates 
(updating the FY 2009 rates by the FY 2010 estimated hospital market 
basket update). The FY 2010 hospice wage index values are then applied 
to the labor portion of the payment rates only. The procedure is 
repeated using the same claims data and payment rates, but using the 
1983 BLS-based wage index instead of the updated raw pre-floor, pre-
reclassified hospital wage index (note that both wage indices include 
their respective floor adjustments). The total payments are then 
compared, and the adjustment required to make total payments equal is 
computed; that adjustment factor is the BNAF.
    The hospice wage index is updated annually. Our most recent update, 
published in the Federal Register (73 FR 46464) on August 8, 2008, set 
forth updates to the hospice wage index for FY 2009. That update also 
finalized a provision for a 3-year phase-out of the BNAF, which was 
applied to the wage index values. As discussed in detail below, the 
update was later revised with the February 17, 2009 passage of the 
American Recovery and Reinvestment Act (ARRA), which eliminated the 
BNAF phase-out for FY 2009.
1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified Hospital Wage 
Index)
    As described in the August 8, 1997 hospice wage index final rule 
(62 FR 42860), the pre-floor and pre-reclassified hospital wage index 
is used as the raw wage index for the hospice benefit. These raw wage 
index values are then subject to either a BNAF or application of the 
hospice floor calculation to compute the hospice wage index used to 
determine payments to hospices.
    Pre-floor, pre-reclassified hospital wage index values of 0.8 or 
greater are adjusted by the BNAF. Pre-floor, pre-reclassified hospital 
wage index values below 0.8 are adjusted by the greater of:

[[Page 18914]]

(1) The hospice BNAF; or (2) the hospice 15 percent floor adjustment, 
which is 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 BNAF (which for this example is 
0.060988; we added 1 to simplify the calculation) and the hospice floor 
to determine County A's hospice wage index:
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the BNAF: (0.4000 x 1.060988 = 0.4244)
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the hospice 15 percent floor adjustment: (0.4000 x 1.15 = 
0.4600).
    Based on these calculations, County A's hospice wage index would be 
0.4600.
    The BNAF has been computed and applied annually to the labor 
portion of the hospice payment. Currently, the labor portion of the 
payment rates is as follows: For Routine Home Care, 68.71 percent; for 
Continuous Home Care, 68.71 percent; for General Inpatient Care, 64.01 
percent; and for Respite Care, 54.13 percent. The non-labor portion is 
equal to 100 percent minus the labor portion for each level of care. 
Therefore the non-labor portion of the payment rates is as follows: for 
Routine Home Care, 31.29 percent; for Continuous Home Care, 31.29 
percent; for General Inpatient Care, 35.99 percent; and for Respite 
Care, 45.87 percent.
    The August 8, 2008 FY 2009 Hospice Wage Index final rule (73 FR 
46464) implemented a phase-out of the hospice BNAF over 3 years, 
beginning with a 25 percent reduction in the BNAF in FY 2009, an 
additional 50 percent reduction for a total of 75 percent in FY 2010, 
and complete phase out of the BNAF in FY 2011. However, subsequent to 
the publication of the above rule, the American Recovery and 
Reinvestment Act of 2009 (Pub. L. 111-5) (ARRA) eliminated the BNAF 
phase-out for FY 2009. Specifically, division B, section 4301(a) of 
ARRA prohibited the Secretary from phasing out or eliminating the BNAF 
in the Medicare hospice wage index before October 1, 2009, and 
instructed the Secretary to recompute and apply the final Medicare 
hospice wage index for FY 2009 as if there had been no reduction in the 
BNAF. We have done so in an administrative instruction to our 
intermediaries, which was issued as Change Request (CR) 6418 
(Transmittal 1701, dated 3/13/2009).
    While ARRA eliminated the BNAF phase-out for FY 2009, it neither 
changed the 75 percent reduction in the BNAF for FY 2010, nor 
prohibited the elimination of the BNAF in FY 2011 that were previously 
implemented in the August 8, 2008 Hospice Wage Index final rule. The 
provision in the ARRA that eliminated the FY 2009 BNAF reduction 
provided the hospice industry additional time to prepare for the FY 
2010 75 percent BNAF reduction and the FY 2011 BNAF elimination. 
Therefore, in accordance with the August 8, 2008 FY 2009 Hospice Wage 
Index final rule, the rationale presented in that final rule, and 
consistent with section 4301(a) of ARRA, CMS plans to reduce the BNAF 
by 75 percent in FY 2010 and ultimately eliminate the BNAF in 2011. We 
are accepting comments on the BNAF reductions.
2. Changes to Core Based Statistical Area (CBSA) Designations
    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 OMB to the definitions of MSAs, 
which now include CBSA designations. The August 4, 2005 hospice wage 
index 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 CBSA 
geographic designations, we provided for a 1-year transition with a 
blended hospice wage index for all hospices for FY 2006. Subsequent 
fiscal years have used the full CBSA-based hospice wage index.
3. Definition of Rural and Urban Areas
    Each hospice's labor market is determined based on definitions of 
MSAs issued by OMB. In general, an urban area is defined as an MSA or 
New England County Metropolitan Area (NECMA) as defined by OMB. Under 
Sec.  412.64(b)(1)(ii)(C), a rural area is defined as any area outside 
of the urban area. The urban and rural area geographic classifications 
are defined in Sec.  412.64(b)(1)(ii)(A) through (C), and have been 
used for the Medicare hospice benefit since implementation.
    In the August 22, 2007 FY 2008 Inpatient Prospective Payment System 
(IPPS) final rule with comment period (72 FR 47130), Sec.  
412.64(b)(1)(ii)(B) was revised such that the two ``New England deemed 
Counties'' that had been considered rural under the OMB definitions 
(Litchfield County, CT and Merrimack County, NH) but deemed urban, were 
no longer considered urban effective for discharges occurring on or 
after October 1, 2007. Therefore, these two counties are considered 
rural in accordance with Sec.  412.64(b)(1)(ii)(C).
    The recommendations to adjust payments to reflect local differences 
in wages are codified in Sec.  418.306(c) of our regulations; however 
there had been no explicit reference to Sec.  412.64 in Sec.  
418.306(c) before implementation of the August 8, 2008 FY 2009 Hospice 
Wage Index final rule. Although Sec.  412.64 had not been explicitly 
referred to, the hospice program has used the definition of urban in 
Sec.  412.64(b)(1)(ii)(A) and (b)(1)(ii)(B), and the definition of 
rural as any area outside of an urban area in Sec.  
412.64(b)(1)(ii)(C). With the implementation of the August 8, 2008 FY 
2009 Wage Index final rule, we now explicitly refer to those provisions 
in Sec.  412.64 to make it absolutely clear how we define urban and 
rural for purposes of the hospice wage index.
    Litchfield County, CT and Merrimack County, NH are considered rural 
areas for hospital IPPS purposes in accordance with Sec.  412.64. 
Effective October 1, 2008, Litchfield County, CT was no longer 
considered part of urban CBSA 25540 (Hartford-West Hartford-East 
Hartford, CT), and Merrimack County, NH was no longer considered part 
of urban CBSA 31700 (Manchester-Nashua, NH). Rather, these counties are 
now considered to be rural areas within their respective States under 
the hospice payment system. When the raw pre-floor, pre-reclassified 
hospital wage index was adopted for use in deriving the hospice wage 
index, it was decided not to take into account IPPS geographic 
reclassifications. This policy of following OMB designations of rural 
or urban, rather than considering some counties to be ``deemed'' urban, 
is consistent with our policy of not taking into account IPPS 
geographic reclassifications in determining payments under the hospice 
wage index.
4. Areas Without Hospital Wage Data
    When adopting OMB's new labor market designations in FY 2006, 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. Beginning in FY 2006, we adopted a policy to 
use the FY 2005 pre-floor, pre-reclassified hospital wage index value 
for rural areas when no hospital wage data were available. We also 
adopted the policy that for urban labor markets without a hospital from

[[Page 18915]]

which hospital wage index data could be derived, all of the CBSAs 
within the State would be used to calculate a Statewide urban average 
pre-floor, pre-reclassified hospital wage index value to use as a 
reasonable proxy for these areas. Consequently, in subsequent fiscal 
years, we applied the average pre-floor, pre-reclassified hospital wage 
index data from all urban areas in that state, to urban areas without a 
hospital. The only affected CBSA is 25980, Hinesville-Fort Stewart, 
Georgia.
    Under the CBSA labor market areas, there are no 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 FY 2006 
hospice wage index proposed rule (70 FR 22394, 22398), we proposed 
applying the FY 2005 pre-floor, pre-reclassified hospital wage index 
value to rural areas where no hospital wage data were available. In the 
FY 2006 final rule and in the FY 2007 update notice, we applied the FY 
2005 pre-floor, pre-reclassified hospital wage index data to areas 
lacking hospital wage data in rural Massachusetts and rural Puerto 
Rico.
    In the FY 2008 hospice wage index final rule (72 FR 50217), we 
considered alternatives to our methodology to update the pre-floor, 
pre-reclassified hospital wage index for rural areas without hospital 
wage data. We indicated that we believed 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 pre-
floor, pre-reclassified hospital wage index; (3) be easy to evaluate; 
and (4) be easy to update from year-to-year.
    Therefore, in FY 2008, and again in FY 2009, in cases where there 
was a rural area without rural hospital wage data, we used the average 
pre-floor, pre-reclassified hospital wage index data from all 
contiguous CBSAs to represent a reasonable proxy for the rural area. 
This approach does not use rural data, however, the approach uses pre-
floor, pre-reclassified hospital wage data, is easy to evaluate, is 
easy to update from year-to-year, and uses the most local data 
available. In the FY 2008 hospice wage index final rule (72 FR 50217), 
we noted that in determining an imputed rural pre-floor, pre-
reclassified hospital wage index, we interpret the term ``contiguous'' 
to mean sharing a border. For example, in the case of Massachusetts, 
the entire rural area consists of Dukes and Nantucket Counties. We 
determined that the borders of Dukes and Nantucket Counties are 
contiguous with Barnstable and Bristol Counties. Under the adopted 
methodology, the pre-floor, pre-reclassified hospital wage index values 
for the Counties of Barnstable (CBSA 12700, Barnstable Town, MA) and 
Bristol (CBSA 39300, Providence-New Bedford-Fall River, RI-MA) would be 
averaged resulting in an imputed pre-floor, pre-reclassified rural 
hospital wage index for FY 2008. We noted in the FY 2008 final hospice 
wage index rule that 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 
Critical Access Hospital, that does not submit the appropriate wage 
data), if a similar situation arose in the future, we would re-examine 
this policy.
    We also noted that we do not believe that this policy would be 
appropriate for Puerto Rico, as there are sufficient economic 
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. Therefore, we believe that a 
separate and distinct policy for Puerto Rico is necessary. Any 
alternative methodology for imputing a pre-floor, pre-reclassified 
hospital wage index for rural Puerto Rico would need to take into 
account the economic differences between hospitals in the United States 
and those in Puerto Rico. Our policy of imputing a rural pre-floor, 
pre-reclassified hospital wage index based on the pre-floor, pre-
reclassified hospital 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 pre-floor, pre-reclassified hospital 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. For FY 2008 and FY 2009, we used the most recent pre-floor, 
pre-reclassified hospital wage index available for Puerto Rico, which 
is 0.4047.
5. CBSA Nomenclature Changes
    The Office of Management and Budget (OMB) regularly publishes a 
bulletin that updates the titles of certain CBSAs. In the FY 2008 
hospice wage index final rule (72 FR 50218) we noted that the FY 2008 
rule and all subsequent hospice wage index rules and notices would 
incorporate CBSA changes from the most recent OMB bulletins. The OMB 
bulletins may be accessed at http://www.whitehouse.gov/omb/bulletins/index.html.
6. Wage Data From Multi-Campus Hospitals
    Historically, under the Medicare hospice benefit, we have 
established hospice wage index values calculated from the raw pre-
floor, pre-reclassified hospital wage data (also called the IPPS wage 
index) without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. The wage adjustment 
established under the Medicare hospice benefit is based on the location 
where services are furnished without any reclassification.
    For FY 2010, the data collected from cost reports submitted by 
hospitals for cost reporting periods beginning during FY 2005 were used 
to compute the 2009 raw pre-floor, pre-reclassified hospital wage index 
data without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. This 2009 raw pre-floor, 
pre-reclassified hospital wage index was used to derive the applicable 
wage index values for the hospice wage index because these data (FY 
2005) are the most recent complete cost data.
    Beginning in FY 2008, the IPPS apportioned the wage data for multi-
campus hospitals located in different labor market areas (CBSAs) to 
each CBSA where the campuses are located (see the FY 2008 IPPS final 
rule with comment period 72 FR 47317 through 47320). We are continuing 
to use the raw pre-floor, pre-reclassified hospital wage data as a 
basis to determine the hospice wage index values for FY 2010 because 
hospitals and hospices both compete in the same labor markets, and 
therefore, experience similar wage-related costs. We note that the use 
of raw pre-floor, pre-reclassified hospital (IPPS) wage data, used to 
derive the FY 2010 hospice wage index values, reflects the application 
of our policy to use that data to establish the hospice wage index. The 
FY 2010 hospice wage index values presented in this notice were 
computed consistent with our raw pre-floor, pre-reclassified hospital 
(IPPS) wage index policy (that is, our historical policy of not taking 
into account IPPS geographic reclassifications in determining payments 
for hospice). As implemented in the August 8, 2008 FY 2009 Hospice Wage 
Index final rule, for the FY 2009 Medicare hospice benefit, the hospice 
wage index was computed from IPPS wage data (submitted by hospitals for 
cost reporting periods beginning in FY 2004 (as was the FY 2008 IPPS 
wage index)), which allocated salaries and hours to the campuses of two 
multi-campus hospitals with campuses that are located in different 
labor areas, one in

[[Page 18916]]

Massachusetts and another in Illinois. Thus, the FY 2009 hospice wage 
index values for the following CBSAs were affected by this policy: 
Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-Falls River, RI-
MA (CBSA 39300), Chicago-Naperville-Joliet, IL (CBSA 16974), and Lake 
County-Kenosha County, IL-WI (CBSA 29404).
7. 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 hospital market basket index, minus 1 percentage 
point. However, neither the BBA nor subsequent legislation specified 
alteration to the hospital market basket adjustment to be used to 
compute hospice payment for fiscal years beyond 2002. Payment rates for 
FYs since 2002 have been updated according to section 
1814(i)(1)(C)(ii)(VII) of the Act, which states that the update to the 
payment rates for subsequent fiscal years will be the market basket 
percentage for the fiscal year. It has been longstanding practice to 
use the inpatient hospital market basket as a proxy for a hospice 
market basket.
    Historically, the rate update has been published through a separate 
administrative instruction issued annually, in the summer, to provide 
adequate time to implement system change requirements. Hospices 
determine their payments by applying the hospice wage index in this 
proposed rule to the labor portion of the published hospice rates.

II. Provisions of the Proposed Rule

A. FY 2010 Proposed Hospice Wage Index

1. Background
    The hospice final rule published in the Federal Register on 
December 16, 1983 (48 FR 56008) provided for adjustment to hospice 
payment rates to reflect differences in area wage levels. We apply the 
appropriate hospice wage index value to the labor portion of the 
hospice payment rates based on the geographic area where hospice care 
was furnished. As noted earlier, each hospice's labor market area is 
based on definitions of MSAs issued by the OMB. For this proposed rule, 
we will use the pre-floor, pre-reclassified hospital wage index, based 
solely on the CBSA designations, as the basis for determining wage 
index values for the proposed FY 2010 hospice wage index.
    As noted above, our hospice payment rules utilize the wage 
adjustment factors used by the Secretary for purposes of section 
1886(d)(3)(E) of the Act for hospital wage adjustments. We are 
proposing again to use the pre-floor and pre-reclassified hospital wage 
index data as the basis to determine the hospice wage index, which is 
then used to adjust the labor portion of the hospice payment rates 
based on the geographic area where the beneficiary receives hospice 
care. We believe the use of the pre-floor, pre-reclassified hospital 
wage index data, as a basis for the hospice wage index, results in the 
appropriate adjustment to the labor portion of the costs. For the FY 
2010 update to the hospice wage index, we propose to continue to use 
the most recent pre-floor, pre-reclassified hospital wage index 
available at the time of publication.
2. Areas Without Hospital Wage Data
    In adopting the CBSA designations, we identified some geographic 
areas where there are no hospitals, and no hospital wage data on which 
to base the calculation of the hospice wage index. These areas are 
described in section I.B.4 of this proposed rule. Beginning in FY 2006, 
we adopted a policy that, for urban labor markets without an urban 
hospital from which a pre-floor, pre-reclassified hospital wage index 
can be derived, all of the urban CBSA pre-floor, pre-reclassified 
hospital wage index values within the State would be used to calculate 
a statewide urban average pre-floor, pre-reclassified hospital wage 
index to use as a reasonable proxy for these areas. Currently, the only 
CBSA that would be affected by this policy is CBSA 25980, Hinesville, 
Georgia. We propose to continue this policy for FY 2010.
    Currently, the only rural areas where there are no hospitals from 
which to calculate a pre-floor, pre-reclassified hospital wage index 
are Massachusetts and Puerto Rico. In August 2007 (72 FR 50217) we 
adopted a methodology for imputing rural pre-floor, pre-reclassified 
hospital wage index values for areas where no hospital wage data are 
available as an acceptable proxy; that methodology is also described in 
section I.B.4 of this proposed rule. In FY 2010, Dukes and Nantucket 
Counties are the only areas in rural Massachusetts which are affected. 
We are again proposing to apply this methodology for imputing a rural 
pre-floor, pre-reclassified hospital wage index for those rural areas 
without rural hospital wage data in FY 2010.
    However, as we noted in section I.B.4 of this proposed rule, we do 
not believe that this policy is appropriate for Puerto Rico. For FY 
2010, we again propose to continue to use the most recent pre-floor, 
pre-reclassified hospital wage index value available for Puerto Rico, 
which is 0.4047. This pre-floor, pre-reclassified hospital wage index 
value will then be adjusted upward by the hospice 15 percent floor 
adjustment in the computing of the proposed FY 2010 hospice wage index.
3. FY 2010 Wage Index With 75 Percent Reduced Budget Neutrality 
Adjustment Factor (BNAF)
    The hospice wage index set forth in this proposed rule would be 
effective October 1, 2009 through September 30, 2010. 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. For this proposed 
rule, the FY 2009 hospital wage index was the most current hospital 
wage data available for calculating the FY 2010 hospice wage index 
values. We used the FY 2009 pre-floor, pre-reclassified hospital wage 
index data for this calculation.
    As noted above, for FY 2010, the hospice wage index values will be 
based solely on the adoption of the CBSA-based labor market definitions 
and the hospital wage index. We continue to use the most recent pre-
floor and pre-reclassified hospital wage index data available (based on 
FY 2005 hospital cost report wage data). A detailed description of the 
methodology used to compute the hospice wage index is contained in the 
September 4, 1996 hospice wage index proposed rule (61 FR 46579), the 
August 8, 1997 hospice wage index final rule (62 FR 42860), and the 
August 8, 2008 FY 2009 Hospice Wage Index final rule (73 FR 46464).
    The August 8, 2008 FY 2009 Hospice Wage Index final rule finalized 
a provision to phase out the BNAF over 3 years, with a 25 percent 
reduction in the BNAF in FY 2009, an additional 50 percent reduction 
for a total of a 75 percent reduction in FY 2010, and complete phase 
out in FY 2011. However, on February 17, 2009, the President signed 
ARRA (P.L. 111-5); Section 4301(a) of ARRA eliminated the BNAF phase-
out for FY 2009. Therefore, in an administrative instruction (Change 
Request 6418, Transmittal 1701, dated 3/13/2009) entitled ``Revision of 
the Hospice Wage Index and the Hospice Pricer for FY 2009,'' we 
instructed CMS contractors to use the revised FY 2009 hospice Pricer, 
which included a revised hospice wage index to reflect a full 
(unreduced) BNAF rather than the 25 percent reduced BNAF set forth in

[[Page 18917]]

the August 8, 2008 FY 2009 Hospice Wage Index final rule.
    While ARRA eliminated the BNAF phase-out for FY 2009, it did not 
change the 75 percent reduction in the BNAF for FY 2010, or the 
elimination of the BNAF in FY 2011 that was previously implemented in 
the August 8, 2008 FY 2009 Hospice Wage Index final rule. The provision 
in ARRA that eliminated the FY 2009 BNAF reduction provided the hospice 
industry additional time to prepare for the FY 2010 75 percent BNAF 
reduction and the FY 2011 BNAF elimination. Therefore, in accordance 
with the August 8, 2008 FY 2009 Hospice Wage Index final rule (73 FR 
46464), the rationale presented in that final rule, and consistent with 
the section 4301(a) of ARRA, we plan to reduce the BNAF for FY 2010 by 
75 percent, and ultimately eliminate the BNAF in FY 2011. We are 
accepting comments on the BNAF reductions.
    An unreduced BNAF for FY 2010 is computed to be 0.067845 (or 6.7845 
percent). A 75 percent reduced BNAF, which is subsequently applied to 
the pre-floor, pre-reclassified hospital wage index values greater than 
or equal to 0.8, is computed to be 0.016961 (or 1.6961 percent). Pre-
floor, pre-reclassified hospital wage index values, which are less than 
0.8, are subject to the hospice floor calculation; that calculation is 
described in section I.B.1.
    The proposed hospice wage index for FY 2010 is shown in Addenda A 
and B. Specifically, Addendum A reflects the proposed FY 2010 wage 
index values for urban areas under the CBSA designations. Addendum B 
reflects the proposed FY 2010 wage index values for rural areas under 
the CBSA designations.
4. Effects of Phasing Out the BNAF
    The full (unreduced) BNAF calculated for FY 2010 is 6.7845 percent. 
As implemented in the August 8, 2008 FY 2009 Hospice Wage Index final 
rule (73 FR 46464), we are reducing the BNAF by 75 percent for FY 2010, 
and eliminating it altogether for FY 2011 and beyond.
    For FY 2010, this is mathematically equivalent to taking 25 percent 
of the full BNAF value, or multiplying 0.067845 by 0.25, which equals 
0.016961 (1.6961 percent). The BNAF of 1.6961 percent reflects a 75 
percent reduction in the BNAF. The 75 percent reduced BNAF (1.6961 
percent) would be applied to the pre-floor, pre-reclassified hospital 
wage index values of 0.8 or greater in the proposed FY 2010 hospice 
wage index.
    The hospice floor calculation would still apply to any pre-floor, 
pre-reclassified hospital wage index values less than 0.8. Currently, 
the hospice floor calculation has 4 steps. First, pre-floor, pre-
reclassified hospital wage index values that are less than 0.8 are 
multiplied by 1.15. Second, the minimum of 0.8 or the pre-floor, pre-
reclassified hospital wage index value times 1.15 is chosen as the 
preliminary hospice wage index value. Steps 1 and 2 are referred to in 
this proposed rule as the hospice 15 percent floor adjustment. Third, 
the pre-floor, pre-reclassified hospital wage index value is multiplied 
by the BNAF. Finally, the greater result of either step 2 or step 3 is 
chosen as the final hospice wage index value. The hospice floor 
calculation is unchanged by the BNAF reduction. We note that steps 3 
and 4 will become unnecessary once the BNAF is eliminated.
    We examined the effects of a 75 percent reduction in the BNAF 
versus using the full BNAF of 6.7845 percent on the proposed FY 2010 
hospice wage index. The FY 2010 BNAF reduction of 75 percent resulted 
in approximately a 4.76 to 4.77 percent reduction in most hospice wage 
index values. The elimination of the BNAF in FY 2011 would result in an 
estimated final reduction of the FY 2011 hospice wage index values of 
approximately 1.66 to 1.67 percent compared to FY 2010 hospice wage 
index values.
    Those CBSAs whose pre-floor, pre-reclassified hospital wage index 
values had the hospice 15 percent floor adjustment applied before the 
BNAF reduction would not be affected by this proposed phase out of the 
BNAF. These CBSAs, which typically include rural areas, are protected 
by the hospice 15 percent floor adjustment. We have estimated that 17 
CBSAs are already protected by the hospice 15 percent floor adjustment, 
and are therefore completely unaffected by the BNAF reduction. There 
are over 100 hospices in these 17 CBSAs.
    Additionally, some CBSAs with pre-floor, pre-reclassified wage 
index values less than 0.8 will become newly eligible for the hospice 
15 percent floor adjustment as a result of the 75 percent reduced BNAF. 
Areas where the hospice floor calculation would have yielded a wage 
index value greater than 0.8 if the full BNAF were applied, but which 
will have a final wage index value less than 0.8 after the 75 percent 
reduced BNAF is applied, will now be eligible for the hospice 15 
percent floor adjustment. These CBSAs will see a smaller reduction in 
their hospice wage index values since the hospice 15 percent floor 
adjustment will apply. We have estimated that 18 CBSAs will have their 
pre-floor, pre-reclassified hospital wage index value become newly 
protected by the hospice 15 percent floor adjustment due to the 75 
percent reduction in the BNAF. Because of the protection given by the 
hospice 15 percent floor adjustment, these CBSAs will see smaller 
percentage decreases in their hospice wage index values than those 
CBSAs that are not eligible for the hospice 15 percent floor 
adjustment. This will affect those hospices with lower hospice wage 
index values, which are typically in rural areas. There are over 300 
hospices located in these 18 CBSAs.
    Finally, the hospice wage index values only apply to the labor 
portion of the payment rates; the labor portion is described in section 
I.B.1 of this proposed rule. Therefore the projected reduction in 
payments due to the 75 percent reduction of the BNAF will be an 
estimated 3.2 percent, as described in column 4 of Table 1 in section 
VI of this proposed rule. In addition, the estimated effects of the 
phase-out of the BNAF will be mitigated by any hospital market basket 
updates in payments. We will not have the final market basket update 
for FY 2010 until the summer. However, the current estimate of the 
hospital market basket update for FY 2010 is 2.1 percent. The final 
update will be communicated through an administrative instruction. The 
combined effects of a 75 percent reduction of the BNAF and an estimated 
hospital market basket update of 2.1 percent for FY 2010 is an overall 
estimated decrease in payments to hospices in FY 2010 of 1.1 percent 
(column 5 of Table 1 in section VI of this proposed rule).

B. Proposed Change to the Physician Certification and Recertification 
Process, Sec.  418.22

    The Medicare Payment Advisory Commission (MedPAC) has noted an 
increasing proportion of hospice patients with stays exceeding 180 
days, and significant variation in hospice length of stay. MedPAC has 
questioned whether there is sufficient accountability and enforcement 
related to certification and recertification of Medicare hospice 
patients. Currently, our policy requires the hospice medical director 
or physician member of the interdisciplinary group and the patient's 
attending physician (if any) to certify the patient as having a 
terminal illness for the initial 90-day period of hospice care. 
Subsequent benefit periods only require recertification by the hospice 
medical director or by the physician member of the hospice 
interdisciplinary group. These certifications must

[[Page 18918]]

indicate that the patient's life expectancy is 6 months or less if the 
illness runs its normal course, and must be signed by the physician. 
The medical record must include documentation that supports the 
terminal prognosis.
    At their November 6, 2008 public meeting, MedPAC presented the 
findings of an expert panel of hospice providers convened in October 
2008; that panel noted that while many hospices comply with the 
Medicare eligibility criteria, some are enrolling and recertifying 
patients who are not eligible.
    The expert panel noted that there were several reasons for the 
variation in compliance. First, they noted that in some cases there was 
limited medical director engagement in the certification or 
recertification process. Physicians had delegated this responsibility 
to the staff involved with patients' day-to-day care, and simply signed 
off on the paperwork. Second, inadequate charting of the patient's 
condition or a lack of staff training had led some physicians to 
certify patients who were not truly eligible for Medicare's hospice 
benefit. Finally, some panelists cited financial incentives associated 
with long-stay patients. The panelists mentioned anecdotal reports of 
hospices using questionable marketing strategies to recruit patients 
without mentioning the terminal illness requirement, and of hospices 
failing to discharge patients who had improved or enrolling patients 
who had already been discharged or turned away from other hospices. 
Consensus emerged among the panelists that more accountability and 
oversight of certification and recertification are needed. See, http://www.medpac.gov/transcripts/20081104_Hospice_final_public.pdf and 
http://www.medpac.gov/transcripts/1106-1107MedPAC%20final.pdf.
    We believe that those physicians that are certifying a hospice 
patient's continued eligibility can reasonably be expected to 
synthesize in a few sentences the clinical aspects of the patient's 
condition that support the prognosis. We believe that such a 
requirement, as suggested by the expert panel and by MedPAC, would 
encourage greater physician engagement in the certification and 
recertification process by focusing attention on the physician's 
responsibility to set out the clinical basis for the terminal prognosis 
indicated in the patient's medical record.
    To increase accountability related to the physician certification 
and recertification process, we are proposing a change to Sec.  418.22. 
Specifically, we propose to add a new paragraph (b)(3) to Sec.  418.22 
to require that physicians that certify or recertify hospice patients 
as being terminally ill include a brief narrative explanation of the 
clinical findings that support a life expectancy of 6 months or less. 
This brief narrative should be written or typed on the certification 
form itself. We do not believe that an attachment should be permissible 
because an attachment could easily be prepared by someone other than 
the physician. We seek comments on whether this proposed requirement 
would increase physician engagement in the certification and 
recertification process.

C. Proposed Update of Covered Services, Sec.  418.202

    In Part 418, subpart F, we describe covered hospice services. In 
Sec.  418.200, Requirements for Coverage, we note that covered services 
must be reasonable and necessary for the palliation or management of 
the terminal illness as well as related conditions. We also note that 
services provided must be consistent with the plan of care. The 
language at Sec.  418.202, Covered services, describes specific types 
of hospices services that are covered. Section 418.202(f) describes the 
coverage of medical appliances and supplies, including drugs and 
biologicals. The last sentence of Sec.  418.202(f) states that covered 
``Medical supplies include those that are part of the written plan of 
care.''
    The updated CoPs, which were effective as of December 2008, require 
that hospices include all comorbidities in the plan of care, even if 
those comorbidities are not related to the terminal diagnosis. In Sec.  
418.54(c)(2) we refer to assessing the patient for complications and 
risk factors that affect care planning. Comorbidities that are 
unrelated to the terminal illness need to be addressed in the 
comprehensive assessment and should be on the plan of care, clearly 
marked as comorbidities unrelated to the terminal illness. The hospice 
is not responsible for providing care for the unrelated comorbidities. 
Because these unrelated comorbidities must be included in the plan of 
care, and the hospice is not responsible for providing the care for 
these unrelated comorbidities, we propose revising Sec.  418.202(f) to 
state that medical supplies covered by the Medicare hospice benefit 
include only those that are part of the plan of care and that are for 
the palliation or management of the terminal illness or related 
conditions.

D. Proposed Clarification of Payment Procedures for Hospice Care, Sec.  
418.302

    Section 1861(dd) of the Act limits coverage of and payment for 
inpatient days for hospice patients. There are sometimes situations 
when a hospice patient receives inpatient care but is unable to return 
home, even though the medical situation no longer warrants general 
impatient care (GIP), or even though 5 days of respite have ended. In 
computing the inpatient cap, the hospice should only count inpatient 
days in which GIP or respite care is provided and billed as GIP or 
respite days. For example, assume a patient received 5 days of respite 
care while a caregiver was out of town, but the caregiver's return was 
delayed for a day due to circumstances beyond her control. The patient 
had to remain as an inpatient for a 6th day, but was no longer eligible 
for respite care. According to Sec.  418.302(e)(5), the hospice should 
switch from billing for respite care to billing for routine home care 
on the 6th day. The hospice should only count 5 days toward the 
inpatient cap, not 6 days, since only 5 inpatient days were provided 
and billed as respite days.
    Because we have received several inquiries about how to count 
inpatient days that are provided and billed as routine home care, we 
propose to revise Sec.  418.302(f)(2) to clarify that only inpatient 
days in which GIP or respite care is provided and billed are counted as 
inpatient days when computing the inpatient cap.

E. Proposed Clarification of Intermediary Determination and Notice of 
Amount of Program Reimbursement, Sec.  405.1803

    Currently, hospices that exceed either the inpatient cap or the 
aggregate cap are sent a letter by their contractor (regional home 
health and hospice intermediary (RHHI) or fiscal intermediary (FI)), 
detailing the cap results, along with a demand for repayment. As 
described in an administrative instruction (CR 6400, Transmittal 1708, 
issued April 3, 2009) effective July 1, 2009, this letter of 
determination of program reimbursement will be sent to every hospice 
provider, regardless of whether or not the hospice has exceeded the 
cap. A demand for repayment will be included for those hospices which 
have exceeded either cap. If a hospice disagrees with the contractor's 
cap calculations, the hospice has appeal rights which are set out at 42 
CFR Sec.  418.311 and Part 405, Subpart R. The letter of determination 
of program

[[Page 18919]]

reimbursement shall include language describing the hospice's appeal 
rights. We are proposing to clarify the language at Sec.  405.1803(a) 
to note that for the purposes of hospice, the determination of program 
reimbursement letter sent by the contractors serves as the written 
notice reflecting the intermediary's determination of the total amount 
of reimbursement due the hospice, which is commonly called a Notice of 
Program Reimbursement or NPR. Additionally, we are proposing to clarify 
Sec.  405.1803(a)(1)(i) to note that in the case of hospice, the 
reporting period covered by the determination of program reimbursement 
letter is the hospice cap year and the bases for the letter are the cap 
calculations rather than reasonable cost from cost report data.

F. Proposed Technical and Clarifying Changes

    In addition to the proposals and solicitation of comments discussed 
above, we are proposing to make the following technical changes to 
clarify existing regulations text, correct errors that we have 
identified in the regulations, remove obsolete cross references, or to 
ensure consistent use of terminology in our regulations.
1. Proposed Clarification of the Statutory Basis for Hospice 
Regulation, Sec.  418.1
    Currently, the statutory basis for the hospice regulations is 
described at Sec.  418.1, and notes that Part 418 implements section 
1861(dd) of the Act. The regulation describes section 1861(dd) of the 
Act as specifying covered hospice services and the conditions that a 
hospice program must meet to participate in the Medicare program. While 
that is correct, section 1861(dd) of the Act also specifies some 
limitations on coverage and payment for inpatient hospice care. We 
propose to clarify Sec.  418.1 by adding a sentence noting that section 
1861(dd) of the Act limits coverage and payment for inpatient hospice 
care.
2. Proposed Update of the Scope of Part, Sec.  418.2
    The current regulations at Sec.  418.2 (``Scope of part.'') 
describe each of the subparts in Part 418. Some of these subparts have 
been revised or removed with the update of the hospice conditions of 
participation (CoPs) in 2008. Specifically, subpart B specifies the 
eligibility and election requirements, along with the duration of 
benefits. Subparts C and D specify the Conditions of Participation, 
with subpart C now entitled ``Patient Care'' rather than ``General 
Provisions and Administration'', and subpart D now entitled 
``Organizational Environment'' rather than ``Core Services''. Subpart 
E, which is currently described as specifying reimbursement methods and 
procedures, was removed and reserved with the update of the CoPs. 
Subparts F and G relate to payment policy, including covered services 
and hospice payment; currently subpart F is described in Sec.  418.2 as 
specifying coinsurance amounts. Finally, subpart H specifies 
coinsurance amounts applicable to hospice care, rather than subpart F 
as the regulation currently reads. Accordingly, we propose to update 
section Sec.  418.2 to reflect the current organization and scope of 
Part 418.
3. Proposed Revision of Hospice Aide and Homemaker Services, Sec.  
418.76
    We are proposing a technical correction at Sec.  418.76(f)(1) to 
clarify that home health agencies that have been found out of 
compliance with paragraphs (a) or (b) of Sec.  484.36, regarding home 
health aide qualifications, are prohibited from providing hospice aide 
training. The word ``out'' was inadvertently omitted from the 
regulation text in the June 5, 2008 hospice final rule.
4. Proposed Clarification of Hospice Multiple Location, Sec.  418.100
    For the sake of clarity, we propose to delete the word ``that'' 
from Sec.  418.100(f)(1)(iii), regarding multiple locations. The 
revised element would require that the lines of authority and 
professional and administrative control must be clearly delineated in 
the hospice's organizational structure and in practice, and must be 
traced to the location issued the certification number.
5. Proposed Revision to Short Term Inpatient Care, Sec.  418.108
    We propose to correct in Sec.  418.108(b)(1)(ii) an erroneous 
reference to Sec.  418.110(f), Patient rooms. This section, which 
addresses facilities that are considered acceptable for the provision 
of respite care to hospice patients, was intended to reference the 
standard at Sec.  418.110(e), Patient areas. The published reference to 
standard (f) was a typographic error, and we propose to correct it by 
changing the reference to standard (e).
6. Proposed Clarification of the Requirements for Coverage, Sec.  
418.200
    Section 418.200 describes the requirements for coverage for 
Medicare hospice services, and references Sec.  418.58 (``Conditions of 
Participation plan of care''). This cross reference is no longer 
accurate as Sec.  418.58 was updated with the publication of the new 
CoPs in 2008. We propose to detail the requirements for coverage 
related to the plan of care rather than cross refer to the CoPs 
regulations. This revision would avoid the need to make updates to this 
section each time the CoPs are changed.
    The statute specifies requirements for hospice coverage in section 
1814(a)(7)(A) through (C) of the Act. The Act requires that the hospice 
medical director and the patient's attending physician certify the 
terminal illness for the initial period of hospice care and that the 
medical director recertify the terminal illness for each subsequent 
benefit period. Additionally, the Act requires that a plan of care 
exist before care is provided; that the plan of care be reviewed 
periodically by the attending physician, the medical director, and the 
interdisciplinary group; and that care be provided in accordance with 
the plan of care. We propose to clarify Sec.  418.200 to incorporate 
these requirements for coverage, rather than cross reference CoP 
requirements in CoP regulations.
7. Proposed Incorporation of the Term ``Hospice Aide,'' Sec.  418.202, 
Sec.  418.204, and Sec.  418.302
    Over the last several years, we have worked with the industry to 
update the hospice CoPs. These efforts culminated in publication of a 
final rule in 2008, which was effective December 2, 2008. The revised 
CoPs redesignated the ``home health aide'' who works in hospice as a 
``hospice aide''. We propose to revise Sec.  418.202(g), Sec.  
418.204(a), and Sec.  418.302 to include the new terminology.
8. Proposed Clarification of Administrative Appeals, Sec.  418.311
    A hospice that does not believe its payments have been properly 
determined may request a review from the intermediary or from the 
Provider Reimbursement Review Board (PRRB), depending on the amount in 
controversy. Section 418.311 details the procedures for appealing a 
payment decision and also refers to Part 405, Subpart R.
    We propose to clarify the last sentence of this section, which 
currently notes that ``the methods and standards for the calculation of 
the payment rates by CMS are not subject to appeal.'' The payment rates 
referred to are the national rates which are set by statute, and 
updated according to the statute using the hospital market basket 
(unless Congress has instructed us to update the rates differently). To 
ensure better understanding of what is not subject to

[[Page 18920]]

appeal, we propose to revise Sec.  418.311 to provide that methods and 
standards for the calculation of the statutorily defined payment rates 
by CMS are not subject to appeal.

III. Request for Comments on Other Policy Issues

A. Recertification Visits, Sec.  418.22

    As noted earlier, MedPAC convened an expert panel from the hospice 
industry in late 2008. That panel noted that some hospices are 
enrolling and recertifying patients who are not eligible for hospice 
care under the Medicare benefit, and consensus emerged that greater 
accountability and oversight are needed in the certification and 
recertification process. To further increase accountability in the 
recertification process, several of the panelists suggested to MedPAC 
that an additional policy change be made to the recertification 
process. Several panelists supported a requirement that a hospice 
physician or advanced practice nurse visit the patient at the time of 
the 180-day recertification to assess continued eligibility, and at 
every certification thereafter. MedPAC recommended that the physician 
or advanced practice nurse be required to attest that the visit took 
place. See, http://www.medpac.gov/transcripts/20081104_Hospice_final_public.pdf and http://www.medpac.gov/transcripts/1106-1107MedPAC%20final.pdf.
    At this time, we are not proposing any policy change requiring 
visits by physicians or advanced practice nurses in order to recertify 
patients. We note that the statute requires a physician to certify and 
recertify terminal illness for hospice patients, and specifically 
precludes nurse practitioners from doing so at 1814(a)(7)(A) of the 
Act. A recertification visit to a hospice patient by a nurse 
practitioner would not relieve the physician of his or her legal 
responsibility to recertify the terminal illness of such hospice 
patient. The physician is ultimately responsible for the 
recertification determination. However, the visit, if performed by a 
nurse practitioner, could potentially serve as an additional, objective 
source of information for the physician in the recertification of 
terminal illness decision. We are also considering other options 
related to a nurse practitioner making recertification visits. For 
example, a nurse practitioner who is involved in a patient's day-to-day 
care may not be as objective in assessing eligibility for 
recertification as a nurse practitioner who is not caring for that 
patient regularly. One option to better ensure that a nurse 
practitioner visit results in additional, objective clinical assessment 
of the patient's condition might be to require that such nurse 
practitioner not be involved in the hospice patient's day-to-day care. 
Also, there are different possible approaches regarding the timeframe 
for making visits. Visits by a physician or nurse practitioner could be 
made within a timeframe close to the recertification deadline, such as 
the 2-week period centered around the recertification date, thereby 
allowing a window of time surrounding the recertification timeframe for 
a visit to occur.
    While we are not proposing a policy change regarding 
recertification visits at this time, we are soliciting comments on the 
suggestion to require physician or nurse practitioner visits for 
hospice recertifications at or around 180 days and for every benefit 
period thereafter. We are seeking comments on all aspects of this 
suggestion, including practical issues of implementation. We will 
analyze and consider the comments received in possible future policy 
development.

B. Hospice Aggregate Cap Calculation

    As described in section 1814(i)(2)(A) through (C) of the Act, when 
the Medicare hospice benefit was implemented, the Congress included an 
aggregate cap on hospice payments. The hospice aggregate cap limits the 
total aggregate payment any individual hospice can receive in a year. 
The Congress stipulated that a ``cap amount'' be computed each year. 
The cap amount was set at $6,500 per beneficiary when first enacted in 
1983 and is adjusted annually by the change in the medical care 
expenditure category of the consumer price index for urban consumers 
from March 1984 to March of the cap year. The cap year is defined as 
the period from November 1st to October 31st, and was set in place in 
the December 16, 1983 hospice final rule (48 FR 56022). This timeframe 
was chosen as the cap year since the Medicare hospice program began on 
November 1, 1983 (48 FR 56022). For the 2008 cap year, the cap amount 
was $22,386.15 per beneficiary. This cap amount is multiplied by the 
number of Medicare beneficiaries who received hospice care in a 
particular hospice during the year, resulting in its hospice aggregate 
cap, which is the allowable amount of total Medicare payments that 
hospice can receive for that cap year. A hospice's total reimbursement 
for the cap year cannot exceed the hospice aggregate cap. If its 
hospice aggregate cap is exceeded, then the hospice must repay the 
excess back to Medicare.
    Using the most recent (2008) payment rates before wage adjustment, 
the 2008 cap amount ($22,386.15) is roughly equal to the cost of 
providing routine home care for 166 days. Because the hospice aggregate 
cap is computed in the aggregate for the entire hospice, rather than on 
a per beneficiary basis, hospices that admit a mix of short-stay and 
long stay Medicare beneficiaries will rarely exceed the cap. On 
average, lower expenditures made on behalf of Medicare beneficiaries 
with shorter hospice stays offset the expenditures made on behalf of 
Medicare beneficiaries with longer stays such that in the aggregate, 
the majority of hospices do not exceed the calculated aggregate cap.
    Until recently, hospices rarely exceeded the aggregate cap. The 
Government Accountability Office (GAO) found that between 1999 and 
2002, less than 2 percent of hospices exceeded the aggregate cap 
[United States Government Accountability Office, ``Medicare Hospice 
Care. Modifications to Payment Methodology May Be Warranted''. October 
2004, Washington, DC. p. 18]. MedPAC reported that the number of 
hospices that exceeded the aggregate cap has grown steadily between 
2002 and 2005, but remains just under 8 percent as of 2005 [Medicare 
Payment Advisory Commission, ``Report to the Congress: Reforming the 
Delivery System''. June 2008. Washington, DC. p. 212.]. We do not 
believe that hospices are exceeding the aggregate cap due to our 
intermediaries' method of calculating the aggregate cap. Rather, 
MedPAC's analyses suggest that certain hospices exceed the aggregate 
cap due to ``significantly longer lengths of stay'' than hospices that 
do not exceed the cap [MedPAC, p. 214-15]. MedPAC suggests that longer 
average lengths of stay at certain hospices could be due, in part, to a 
change in their patient case-mix that has brought in more patients with 
less predictable disease trajectories [MedPAC, p. 213-14]. However, 
patient case mix was not found to account for all of the discrepancy in 
length of stay [MedPAC, p. 214-15]. MedPAC also found that for-profit 
ownership, smaller patient loads, and being a freestanding facility 
were correlated with longer lengths of stay and the consequent 
likelihood of exceeding the aggregate cap [MedPAC, p. 212-215].
    As stated above, in our current hospice aggregate cap calculation 
methodology, the intermediary calculates each hospice's aggregate cap 
amount by multiplying the per-beneficiary cap amount by the number of 
Medicare beneficiaries counted in

[[Page 18921]]

each cap year. Patients who receive hospice care in more than one cap 
year are counted so that, in the aggregate, the ``number of Medicare 
beneficiaries'' for each year is reduced to reflect the proportion of 
time patients receive in other years. Hospices are currently required 
to submit a report of their Medicare beneficiary unduplicated census to 
their intermediary within 30 days of the end of the cap year. Our 
current methodology also apportions the beneficiary across multiple 
hospices if the beneficiary receives care from more than one hospice 
during the cap year, with the proportional shares summing to 1. The 
intermediary reduces each hospice's Medicare beneficiary count by that 
fraction which represents proportional days of care the beneficiary 
received in another hospice during the year, with all the proportional 
shares summing to 1.
    In counting the Medicare beneficiaries for the unduplicated census 
report, we instruct hospices to use a slightly different timeframe from 
the cap year used to count payments. When determining a hospice's 
expenditures during a cap year, the intermediary sums all claims 
submitted by the hospice for services performed during the cap year, 
which begins on November 1st of each year and ends on the October 31st 
of the following year. However, we instruct hospices to include those 
beneficiaries who elect the benefit between September 28th of each year 
and September 27th of the following year, rather than following the 
November 1st to October 31st cap year. CMS (then HCFA) used mean length 
of stay from demonstration project data to determine the point at which 
to include a beneficiary in calculating the hospice cap. Using half of 
the mean length of stay, or 70 days/2 = 35 days, CMS implemented a 
timeframe for counting beneficiaries that began less than 35 days from 
the end of the cap year. Therefore, the timeframe for counting 
beneficiaries was set as September 28th through September 27th (48 FR 
56022). This method of reducing the number of Medicare beneficiaries 
counted in a cap year to reflect time spent in other years was 
implemented because it allows for counting the beneficiary in the 
reporting period where he or she used most of the days of covered 
hospice care (48 FR 38158). We believe that the regulation complies 
with the statutory requirements without being unduly burdensome. This 
approach has the major advantage of allowing each hospice to estimate 
its aggregate cap calculation within a short period of time after the 
close of a cap year. While we believe that the current hospice 
aggregate cap methodology equitably meets the statutory requirements 
for calculating the hospice aggregate cap set out at section 1814(i)(2) 
of the Act, the availability of more sophisticated databases and data 
systems provides us with an opportunity to incorporate efficiencies in 
the cap calculation process. The lack of sophisticated data systems in 
place in the 1980's limited our options for how to efficiently compute 
the hospice aggregate cap. In the 1980's access to claims data was very 
slow, and searchable claims databases were virtually non-existent. 
While the current system still has limitations, the advancement of 
technology has brought with it provider access to benefit period 
information in the Common Working File (CWF), which was created in the 
1990's, and faster processing speeds, which allow contractors and 
hospices easier access to claims information for hospice aggregate cap 
calculation purposes. Therefore, we are now able to consider more 
efficient approaches to calculating the aggregate cap.
    The time required for intermediaries to compute each hospice's 
aggregate cap and send demand letters when overpayments exist delays 
our recovery of those overpayments and may also contribute to some 
hospices exceeding the cap in subsequent years. Hospices have described 
receiving demands for cap overpayments more than a year after the end 
of the cap year, and have expressed concern that they are not timely 
notified about their cap overpayments. Hospices which don't closely 
monitor compliance with their aggregate cap may not have anticipated an 
overpayment, and the lag in notification may contribute to the risk of 
a hospice exceeding its aggregate cap in the subsequent year. More 
timely notification of overpayments would enable hospices to more 
quickly review their admissions practices, and make necessary changes 
to ensure that all their patients meet the eligibility requirements for 
hospice care.
    We are exploring a number of different hospice aggregate cap 
implementation methodology changes to address these issues, and to take 
advantage of the technological efficiencies available. Specifically, we 
are exploring enhancements to our current methodology which will 
improve the timeliness of hospices' notification of cap overpayments, 
will enable such overpayments to be collected more quickly, and which 
will encourage hospices to be more proactively involved in managing 
their admissions practices such that they do not exceed their hospice 
aggregate cap. We are considering several changes to the annual hospice 
aggregate cap calculation implementation methodology which could help 
hospices avoid exceeding the aggregate cap.
    If a beneficiary receives hospice care for an extended period of 
time, or elects hospice toward the end of a cap year, he or she is more 
likely to cross into more than 1 cap year, or to receive care from more 
than 1 hospice. If we made a mathematically precise determination of 
the proportion of time each patient spent in each cap year at each 
hospice from which they received care, in order for a given cap year 
report to be final, adjustments to that cap year report would have to 
continue until the beneficiary actually died. Only then could a final 
determination of the aggregate cap be made for a given year for each 
hospice that had treated the beneficiary. Such an approach could be 
viewed as particularly burdensome to the hospice as a hospice's 
financial system would likely need to be able to continually react to 
subsequent hospice aggregate cap calculations, readjusting payments to 
Medicare to account for an overpayment amount that is ever-changing, 
that is, until the beneficiary dies.
    A variation of this approach would allow apportioning of 
beneficiaries who receive care in more than 1 cap period over 2 
consecutive years. This approach would minimize, but not completely 
eliminate, the adjustments required to prior year cap calculations. 
This method still has the effect of delaying the final cap 
determination. However, it raises questions about scenarios where a 
beneficiary received hospice care in his first and second cap year, 
either revoked or was discharged from the benefit, and returned to a 
different hospice at a much later date, such as in the third cap year. 
We would like public input from hospices, patient groups, other 
provider types, academics, and members of the general public on how to 
best handle this or similar scenarios.
    Besides considering different approaches to counting beneficiaries, 
another option is to require hospices to compute their own hospice 
aggregate cap and submit a certified cap report to their contractors, 
along with any overpayment, 7 months after the end of the cap year. The 
information used for the hospice aggregate cap calculation originates 
with hospices, and is available to them through the CWF or through 
their own accounting records. Requiring hospices to compute and report 
their own hospice aggregate cap would result in hospices being 
proactive in managing their cap calculations. In

[[Page 18922]]

this approach, contractors would still verify the reported cap.
    We are soliciting comments on these and other policy options in an 
effort to gather more information on this issue, and any other possible 
underlying issues that may exist.

C. Hospice Payment Reform

    Since the inception of the hospice benefit in 1983, the amount that 
the Medicare program has spent on this benefit has grown considerably. 
The number of unduplicated hospice Medicare beneficiaries has increased 
from 401,140 in FY 1998 to 986,435 in FY 2007, which represents a 146 
percent increase. Additionally, at the inception of the benefit, most 
hospice patients elected hospice care due to terminal cancer. The 
profile of the hospice patient has changed in recent years such that 
hospices now provide care to beneficiaries with a wide range of 
terminal conditions. In calendar year (CY) 1998, 54 percent of hospice 
patients had terminal cancer diagnoses. In CY 2007, only 28 percent of 
hospice patients had terminal cancer diagnoses. With the diversity of 
diagnoses, hospice stays began to increase. The national average length 
of stay for patients in hospice has risen from 48 days per patient in 
CY 1998 to 73 days per patient in CY 2006. Additionally, long hospice 
stays have grown even longer by about 50 percent. Between 2000 and 
2005, hospices in the 90th percentile for average length of stay 
increased their average length of stay from 144 to 212 days.
    MedPAC has performed extensive analysis of the hospice benefit over 
the past few years, and has recommended that CMS reform the hospice 
payment structure to ensure greater accountability in the hospice 
benefit. MedPAC believes that the current hospice payment system 
contains incentives that make long hospice stays more profitable, which 
may result in misuse of the benefit.
    Medicare spending for hospice is rapidly growing, more than 
tripling between 2000 and 2007. In fiscal year (FY) 1998, expenditures 
for the Medicare hospice benefit were $2.2 billion, while in FY 2007, 
expenditures for the Medicare hospice benefit were $10.6 billion, more 
than the Medicare program spends on inpatient rehabilitation hospitals, 
critical access hospitals, long term care hospitals, or psychiatric 
hospitals. Medicare hospice spending is expected to more than double in 
the next 10 years and will account for roughly 2.3 percent of overall 
Medicare spending in FY 2009.
    The number of hospice agencies has also grown by over 70 percent 
since 1997. The growth is overwhelmingly in the for-profit category. In 
1997, there were 1,834 hospices, about 20 percent of which were for-
profit and 80 percent were non-profit. In 2008, there were over 3,200 
hospices, and 51 percent of these are for-profit entities. Since 2000, 
nearly all hospices newly participating in Medicare are for-profit 
entities. MedPAC reports that the newly participating hospices have 
margins five to six times higher than more established hospices. MedPAC 
estimates that, on average, hospice Medicare margins were approximately 
3.4 percent in 2005. However, the for-profit hospices are estimated to 
have margins ranging from 15.9 percent in 2003 to 11.8 percent in 2005.
    In their analyses of the hospice benefit in their June 2008 
``Report to the Congress,'' MedPAC found that hospice care is more 
costly at the beginning and end of an episode of hospice care, because 
of the intensity of services provided during those times. Hospices 
provide more visits to a patient right after a patient elects hospice 
and in the time shortly before death, than they provide during the 
middle of the episode. In its November 6, 2008 public meeting, MedPAC 
suggested that payments to hospices should decline as the beneficiary's 
length of stay increases, thus better reflecting intensity and 
frequency of the hospice services provided over the course of 
treatment. MedPAC also suggested that payment to hospices should 
increase during the period just prior to the patient's death to reflect 
the higher resource usage during this time [see, http://www.medpac.gov/transcripts/20081104_Hospice_final_public.pdf and http://www.medpac.gov/transcripts/1106-1107MedPAC%20final.pdf.]. MedPAC 
believes this payment structure would better reflect hospice patient 
resource usage and hospice costs, and would encourage hospices to admit 
patients at the time in their illness which provides the most benefit 
to the patient.
    We are soliciting comments regarding MedPAC's suggestions on 
reforming the hospice payment system, as well as broader comments and 
suggestions regarding hospice payment reform. We note that MedPAC's 
suggested payment reforms would require Congressional action to change 
the statute.

IV. Update on Additional Hospice Data Collection

    Over the past several years MedPAC, the GAO, and the Office of the 
Inspector General have all recommended that CMS collect more 
comprehensive data in order to better evaluate trends in utilization of 
the Medicare hospice benefit. We have been phasing in this process to 
collect more comprehensive data on hospice claims. We also began 
collecting additional data on hospice claims beginning in January 2007 
through an administrative instruction (CR 5245, Transmittal 1011, 
issued July 28, 2006), when we started required reporting of a HCPCS 
code on the claim to describe the location where services were provided 
(Phase 1). In addition, we issued an administrative instruction (CR 
5567, Transmittal 1494, issued April 29, 2008) requiring Medicare 
hospices to provide detail on their claims about the number of 
physician, nurse, aide, and social worker visits provided to 
beneficiaries. The start date of this mandatory CR 5567 reporting 
requirement was July 2008 (Phase 2).
    On several occasions, industry representatives have communicated to 
CMS that the newly required claims information was not comprehensive 
enough to accurately reflect hospice care. A major concern was that CMS 
was not requiring reporting of the visit intensity. As a result of 
these concerns, we committed to working with the industry to expand the 
data collection requirements. In October 2008, we solicited comments 
via a posting on CMS' hospice center Web site (http://www.cms.hhs.gov/center/hospice.asp) on an approach to collecting additional data about 
hospice resource use. We asked about data collection using hospice 
claims, along with data collection using hospice cost reports. This 
proposed rule provides an update on the additional data collection 
which is in process.
    Based on the feedback received from our October 2008 web posting, 
we have revised our plans for Phase 3 of the claims data collection. 
Those plans are currently being developed and will be implemented 
through an administrative instruction.
    Phase 3 will involve collecting new data on hospice claims. In 
addition to the existing visit reporting requirement, we anticipate 
requiring visit time reporting in 15 minute increments for nurses, 
social workers, and aides. We anticipate requiring visit and visit time 
reporting in 15 minute increments from physical therapists, 
occupational therapists, and speech language therapists. We also 
anticipate requiring reporting of some social worker phone calls and 
their associated time, within certain limits. Specifically, we 
anticipate requiring the reporting of social worker calls that are 
necessary for the palliation and management of the

[[Page 18923]]

terminal illness and related conditions as described in the patient's 
plan of care (for example, counseling, speaking with a patient's 
family, or arranging for a placement). Furthermore, we anticipate that 
only social worker phone calls related to providing and/or coordinating 
care to the patient and family, and documented as such in the clinical 
records, would be reported. We anticipate that visit and time data 
collection for respite and general inpatient care provided by non-
hospice staff in contract facilities would be exempt from the reporting 
requirement. Finally, we anticipate that travel time, documentation 
time, and interdisciplinary group time would not be included in the 
time reporting. These changes would necessitate line-item billing on 
hospice claims.
    While other Medicare provider types (for example, home health 
agencies) have had to provide similar information on their claims, 
hospices have historically not had been required to provide this 
information. This additional data collection would bring the 
requirements for hospice claims more in line with the claim 
requirements of other Medicare benefits, and provide valuable 
information about services provided to Medicare beneficiaries.
    We also note that this additional data collection uses existing 
revenue codes and existing UB-04 and 837I claim forms. Those claims 
forms were previously approved by the OMB under control number 
0938-0997.
    As stated above, these changes will be forthcoming through an 
administrative instruction, and are not to be considered as proposals 
in this rule; that instruction will be issued some time this spring or 
summer.
    Additionally, we are developing plans to revise the hospice cost 
reports to include additional sources of revenue, and to gather more 
detailed data on services provided by volunteers, by chaplains, by 
counselors, and by pharmacists. We will continue to work with the 
industry to seek out the best approach to these and any other changes 
we may make in order to collect useful information on hospice services.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on the issue for the following 
section of this document that contains information collection 
requirements.
    Section 418.22 Certification of terminal illness.
    Section 418.22 requires the physician to include on or with the 
certification a brief narrative explanation of the clinical findings 
that support a life expectancy of 6 months or less.
    The burden associated with this requirement is the time and effort 
put forth by the physician to include a brief narrative explanation of 
the clinical findings that support a life expectancy of 6 months or 
less. We estimate it would take a physician 5 minutes to meet this 
requirement. We also estimate that a narrative would be provided on 
1,534,388 certifications or recertifications annually. Therefore, the 
total annual burden associated with this requirement is 127,866 hours. 
The current requirements for Sec.  418.22 are approved under 
OMB 0938-0302 with an expiration date of 8/31/2009. We will 
revise the currently approved PRA package to reflect any changes in 
burden.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer,
    Fax: (202) 395-7245; or
    E-mail: [email protected].

VI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this 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 Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). We 
estimated the impact on hospices, as a result of the changes to the 
proposed FY 2010 hospice wage index and of reducing the BNAF by 75 
percent.
    As discussed previously, the methodology for computing the hospice 
wage index was determined through a negotiated rulemaking committee and 
implemented in the August 8, 1997 hospice wage index final rule (62 FR 
42860). The BNAF, which was implemented in the August 8, 1997 rule, is 
being phased out. This rule proposes updates to the hospice wage index 
in accordance with the August 8, 2008 FY 2009 Hospice Wage Index final 
rule (73 FR 46464), which originally implemented a 75 percent reduced 
BNAF for FY 2010 as the second year of a 3-year phase-out of the BNAF.
    Executive Order 12866 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 proposed rule is an economically significant rule under this 
Executive Order.
    Column 4 of Table 1 shows the combined effects of the 75 percent 
reduction in the BNAF and of the updated wage data, comparing estimated 
payments for FY 2010 to estimated payments for FY 2009. In keeping with 
the American Recovery and Reinvestment Act (ARRA) mentioned earlier in 
this proposed rule, the FY 2009 payments used for comparison have a 
full (unreduced) BNAF applied. We estimate that the total hospice 
payments for FY 2010 will decrease by $340 million as a result of the 
application of the 75 percent reduction in the BNAF and the updated 
wage data. This estimate does not take into account any hospital market 
basket update, which is currently estimated to be about 2.1 percent for 
FY 2010. The final hospital market basket update will not be available 
until sometime later this year and will be communicated through an 
administrative instruction. The effect of an estimated 2.1 percent 
hospital market basket update on payments to hospices is approximately

[[Page 18924]]

$240 million. Taking into account an estimated 2.1 percent hospital 
market basket update, in addition to the 75 percent reduction in the 
BNAF and the updated wage data, it is estimated that hospice payments 
would decrease by $100 million in FY 2010 ($340 million - $240 million 
= $100 million). The percent change in payments to hospices due to the 
combined effects of the 75 percent reduction in the BNAF, the updated 
wage data, and the estimated hospital market basket update of 2.1 
percent is reflected in column 5 of the impact table (Table 1).
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. The majority of hospices and most other 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of less than $7 million to $34.5 million in any 1 
year (for details, see http://www.sba.gov/contractingopportunities/officials/size/index.html). While the Small Business Administration 
(SBA) does not define a size threshold in terms of annual revenues for 
hospices, they do define one for home health agencies ($13.5 million; 
see http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf). For the purposes of this proposed rule, because 
the hospice benefit is a home-based benefit, we are applying the SBA 
definition of ``small'' for home health agencies to hospices; we will 
use this definition of ``small'' in determining if this proposed rule 
has a significant impact on a substantial number of small entities (for 
example, hospices). Using 2007 claims data, we estimate that 96 percent 
of hospices have revenues below $13.5 million.
    As indicated in Table 1 below, there are 3,206 hospices as of 
January 29, 2009. Approximately 49.8 percent of Medicare certified 
hospices are identified as voluntary or government agencies and, 
therefore, are considered small entities. Most of these and most of the 
remainder are also small hospice entities because, as noted above, 
their revenues fall below the SBA size thresholds.
    We note that the hospice wage index methodology was previously 
guided 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 after notice 
and comment, it was adopted into regulation in the August 8, 1997 final 
rule. In developing the process for updating the hospice wage index in 
the 1997 final rule, we considered the impact of this methodology on 
small hospice entities and attempted to mitigate any potential negative 
effects. Small hospice entities are more likely to be in rural areas, 
which are less affected by the BNAF reduction than entities in urban 
areas. Generally, hospices in rural areas are protected by the hospice 
floor adjustment, which mitigates the effect of the BNAF reduction.
    The effects of this rule on hospices are shown in Table 1. Overall, 
Medicare payments to all hospices will decrease by an estimated 3.2 
percent, reflecting the combined effects of the 75 percent reduction in 
the BNAF and the updated wage data. However, when we consider the 
combined effects of the 75 percent reduction to the BNAF and the 
updated wage data on small or medium sized hospices, as defined by 
routine home care days rather than by the SBA definition, the effect is 
-2.9 percent. Furthermore, when including the estimated hospital market 
basket update of 2.1 percent into these estimates, the combined effects 
on Medicare payment to all hospices would result in an estimated 
decrease of approximately 1.1 percent. For small to medium hospices (as 
defined by routine home care days), the effects on revenue when 
accounting for the updated wage data, the 75 percent BNAF reduction, 
and the estimated hospital market basket update are -0.8 percent and -
0.9 percent, respectively. Overall average hospice revenue effects will 
be slightly less than these estimates since according the National 
Hospice and Palliative Care Organization, about 16 percent of hospice 
patients are non-Medicare. HHS practice in interpreting the RFA is to 
consider effects economically ``significant'' only if they reach a 
threshold of 3 to 5 percent or more of total revenue or total costs. As 
noted above, the combined effect of only the updated wage data and the 
75 percent reduced BNAF for all hospices (large and small) is 3.2 
percent. Since, by SBA's definition of ``small'' (when applied to 
hospices), nearly all hospices are considered to be small entities, the 
combined effect of only the updated wage data and the 75 percent 
reduced BNAF (3.2 percent) exceeds HHS' 3.0 percent minimum threshold. 
However, HHS' practice in determining ``significant economic impact'' 
has considered either total revenue or total costs. Total hospice 
revenues include the effect of the market basket update. When we 
consider the combined effect of the updated wage data, the 75 percent 
BNAF reduction, and the estimated 2.1 percent 2009 market basket 
update, the overall impact is a decrease in hospice payments of 1.1 
percent for FY 2010. Therefore, the Secretary has determined that this 
proposed rule does not create a significant economic impact on a 
substantial number of small entities.
    In the August 8, 2008 FY 2009 Hospice Wage Index final rule, we 
implemented a 3-year phase-out of the BNAF. The BNAF was to be reduced 
by 25 percent in FY 2009, by an additional 50 percent for a total of 75 
percent in FY 2010, and by a final 25 percent, for complete elimination 
in FY 2011. This phased approach to eliminating the BNAF was estimated 
to reduce payments by 1.1 percent in FY 2009, an additional 2 percent 
in FY 2010, and an additional 1 percent in FY 2011. As originally 
implemented, the phase out of the BNAF would not have a significant 
economic impact on small entities because in any of the 3 fiscal years, 
the estimated reduction in payments was less than 3 percent. However, 
on February 17, 2009, ARRA eliminated the phase-out for FY 2009, but 
left intact the BNAF reductions implemented in the August 8, 2008 FY 
2009 Hospice Wage Index final rule for FY 2010 and FY 2011. While we 
are still using a phased approach to eliminating the BNAF, the phase-
out is now occurring over 2 years rather than over 3 years. There is a 
greater impact on hospices in FY 2010 since hospices move from having a 
full (unreduced) BNAF in FY 2009 to a 75 percent reduced BNAF in FY 
2010.
    The hospice floor calculation gives some relief to hospices with 
pre-floor, pre-reclassified wage index values less than 0.8. Hospices 
which are eligible for the hospice floor calculation will either be 
totally unaffected by the BNAF phase-out, or will be less affected by 
the phase-out. As noted in section II.A.4 of this proposed rule, there 
are just over 100 hospices that will be totally unaffected by the BNAF 
phase-out and just over 300 hospices which will be less affected by the 
BNAF phase-out, due to the hospice floor calculation.
    Hospices do not need to take any action for the BNAF phase-out to 
be effective. The FY 2010 wage index includes the 75 percent reduced 
BNAF, and that wage index is applied to hospice payments automatically 
by the claims processing contractors, thereby relieving hospices of the 
responsibility of having to implement the change.
    We are taking a number of actions to provide information to 
hospices to help them prepare for the BNAF phase-out. First, this 
phase-out was originally

[[Page 18925]]

implemented in the August 8, 2008 FY 2009 Hospice Wage Index final 
rule. With the passage of ARRA, hospices have been given additional 
time to prepare for the FY 2010 BNAF reduction, and the ultimate 
elimination of the BNAF in FY 2011. Second, we continue to publicize 
information about the BNAF phase-out on our hospice Web site. The 
hospice center page at http://www.cms.hhs.gov/center/hospice.asp 
provides information about the BNAF phase-out and links to related 
documents. Third, we are publicizing the information about the BNAF 
phase-out through other avenues (for example, through Open Door 
Forums). All of these efforts should provide information to hospices to 
help them prepare for the BNAF phase-out.
    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 metropolitan 
statistical area and has fewer than 100 beds. Therefore, the Secretary 
has determined that this proposed rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of about 
$100 million or more in 1995 dollars, updated for inflation. That 
threshold is currently approximately $133 million in 2009. This 
proposed rule is not anticipated to have an effect on State, local, or 
tribal governments or on the private sector of $133 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 proposed rule under the threshold 
criteria of Executive Order 13132, Federalism, and have determined that 
it will not have an impact on the rights, roles, and responsibilities 
of State, local, or tribal governments.

B. Anticipated Effects

    This section discusses the impact of the projected effects of the 
proposed hospice wage index, including the effects of an estimated 2.1 
percent hospital market basket update that will be communicated 
separately through an administrative instruction. The proposed 
provisions include continuing to use the CBSA-based pre-floor, pre-
reclassified hospital wage index as a basis for the hospice wage index 
and continuing to use the same policies for treatment of areas (rural 
and urban) without hospital wage data. In FY 2010, we are continuing 
with the 75 percent reduction of the BNAF which, in the August 8, 2008 
FY 2009 Hospice Wage Index final rule (73 FR 46464), was originally 
implemented as the second year of a 3-year phase-out of the BNAF. The 
proposed FY 2010 hospice wage index is based upon the 2009 pre-floor, 
pre-reclassified hospital wage index and the most complete claims data 
available (FY 2007) with a 75 percent reduction in the BNAF.
    For the purposes of our impacts, our baseline is estimated FY 2009 
payments (without any BNAF reduction) using the 2008 pre-floor, pre-
reclassified hospital wage index. Our first comparison (column 3, Table 
1) compares our baseline to estimated FY 2010 payments (holding payment 
rates constant) using the updated wage data (2009 pre-floor, pre-
reclassified hospital wage index). Consequently, the estimated effects 
illustrated in column 3 of Table 1 show the distributional effects of 
the updated wage data only. The effects of using the updated pre-floor, 
pre-reclassified hospital wage index data combined with the 75 percent 
reduction in the BNAF are illustrated in column 4 of Table 1.
    We have included a comparison of the combined effects of the 75 
percent BNAF reduction, the updated pre-floor, pre-reclassified 
hospital wage index, and an estimated 2.1 percent hospital market 
basket increase for FY 2010 (Table 1, column 5). Presenting these data 
gives the hospice industry a more complete picture of the effects on 
their total revenue of the proposed hospice wage index discussed in 
this rule, the BNAF phase-out, and the estimated FY 2010 hospital 
market basket update. Certain events may limit the scope or accuracy of 
our impact analysis, because such an analysis is 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.

  Table 1--Anticipated Impact on Medicare Hospice Payments of Updating the Pre-Floor, Pre-Reclassified Hospital
  Wage Index Data, Reducing the BNAF by 75 Percent and Applying an Estimated 2.1 Percent Hospital Market Basket
   Update for the FY 2010 Proposed Hospice Wage Index, Compared to the FY 2009 Hospice Wage Index With No BNAF
                                                    Reduction
----------------------------------------------------------------------------------------------------------------
                                                                                                       Percent
                                                                                                      change in
                                                                                          Percent      hospice
                                                                             Percent     change in     payments
                                                                            change in     hospice    due to wage
                                                               Number of     hospice      payments      index
                                                  Number of     routine      payments   due to wage  change, 75%
                                                  hospices *   home care    due to FY      index      reduction
                                                                days in     2010 wage    change and  in BNAF and
                                                               thousands      index         75%       estimated
                                                                              change     reduction     hospital
                                                                                          in BNAF       market
                                                                                                        basket
                                                                                                        update
                                                         (1)          (2)          (3)          (4)          (5)
----------------------------------------------------------------------------------------------------------------
ALL HOSPICES...................................        3,206       67,763        (0.0)        (3.2)        (1.1)
    URBAN HOSPICES.............................        2,184       58,428        (0.1)        (3.3)        (1.2)
    RURAL HOSPICES.............................        1,022        9,336          0.1        (2.3)        (0.3)
BY REGION--URBAN:

[[Page 18926]]

 
    NEW ENGLAND................................          121        2,092          0.0        (3.4)        (1.4)
    MIDDLE ATLANTIC............................          209        5,971        (0.1)        (3.4)        (1.4)
    SOUTH ATLANTIC.............................          314       12,988        (0.8)        (4.0)        (1.9)
    EAST NORTH CENTRAL.........................          307        8,318        (0.5)        (3.7)        (1.7)
    EAST SOUTH CENTRAL.........................          171        4,512        (0.0)        (2.9)        (0.9)
    WEST NORTH CENTRAL.........................          169        3,860          0.4        (2.9)        (0.8)
    WEST SOUTH CENTRAL.........................          410        7,949          0.0        (3.1)        (1.1)
    MOUNTAIN...................................          203        5,065          0.1        (3.2)        (1.2)
    PACIFIC....................................          245        6,702          1.6        (2.0)          0.1
    OUTLYING **................................           35          972        (1.2)        (1.2)          0.9
BY REGION--RURAL:
    NEW ENGLAND................................           26          175          0.6        (2.7)        (0.7)
    MIDDLE ATLANTIC............................           44          462        (0.4)        (3.5)        (1.5)
    SOUTH ATLANTIC.............................          128        1,915        (0.1)        (2.7)        (0.7)
    EAST NORTH CENTRAL.........................          145        1,354        (0.6)        (3.8)        (1.8)
    EAST SOUTH CENTRAL.........................          152        2,051        (0.1)        (1.3)          0.8
    WEST NORTH CENTRAL.........................          192          965          0.7        (2.4)        (0.4)
    WEST SOUTH CENTRAL.........................          176        1,406          0.9        (0.9)          1.2
    MOUNTAIN...................................          106          601        (0.4)        (3.2)        (1.2)
    PACIFIC....................................           52          397          1.7        (1.7)          0.3
    OUTLYING...................................            1            9          0.0          0.0          2.1
ROUTINE HOME CARE DAYS:
    0-3499 DAYS (small)........................          663        1,103          0.1        (2.9)        (0.8)
    3500-19,999 DAYS (medium)..................        1,537       15,311          0.1        (2.9)        (0.9)
    20,000+ DAYS (large).......................        1,006       51,350        (0.1)        (3.2)        (1.2)
TYPE OF OWNERSHIP: [dagger]
    VOLUNTARY (Non-Profit).....................        1,187       29,043        (0.1)        (3.3)        (1.3)
    PROPRIETARY (For Profit)...................        1,608       33,275          0.1        (3.0)        (1.0)
    GOVERNMENT.................................          411        5,446        (0.1)        (3.3)        (1.3)
HOSPICE BASE:
    FREESTANDING...............................        2,028       51,413        (0.1)        (3.2)        (1.2)
    HOME HEALTH AGENCY.........................          601        9,509          0.2        (3.1)        (1.1)
    HOSPITAL...................................          561        6,627          0.2        (3.0)        (0.9)
    SKILLED NURSING FACILITY...................           16          214        (0.1)        (3.5)        (1.5)
----------------------------------------------------------------------------------------------------------------
BNAF = Budget Neutrality Adjustment Factor.
* As of January 29, 2009; Source: OSCAR database.
** Guam, Puerto Rico, Virgin Islands.
[dagger] In previous years, there was also a category labeled ``Other''; these were Other Government hospices,
  and have been combined with the ``Government'' category.
Note: Comparison is to FY 2009 estimated payments from the August 8, 2008 FY 2009 Hospice Wage Index final rule
  (73 FR 46464), but with no BNAF reduction.

    Table 1 shows the results of our analysis. In column 1, we indicate 
the number of hospices included in our analysis as of January 29, 2009. 
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. Columns 3, 4, and 5 compare FY 2010 estimated 
payments with those estimated for FY 2009. The estimated FY 2009 
payments incorporate a BNAF which has not been reduced. Column 3 shows 
the percentage change in estimated Medicare payments from FY 2009 to FY 
2010 due to the effects of the updated wage data only, with estimated 
FY 2009 payments. Column 4 shows the percentage change in estimated 
hospice payments from FY 2009 to FY 2010 due to the combined effects of 
using the 2009 pre-floor, pre-reclassified hospital wage index and 
reducing the BNAF by 75 percent. Column 5 shows the percentage change 
in estimated hospice payments from FY 2009 to FY 2010 due to the 
combined effects of using updated wage data, a 75 percent BNAF

[[Page 18927]]

reduction, and a 2.1 percent estimated hospital market basket update.
    Table 1 also categorizes hospices by various geographic and hospice 
characteristics. The first row of data 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 2,184 
hospices located in urban areas and 1,022 hospices located in rural 
areas. The next two row groupings in the table indicate the number of 
hospices by census region, also broken down by urban and rural 
hospices. The next 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 2007. 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, there are 3,206 hospices. Approximately 
49.8 percent of Medicare-certified hospices are identified as voluntary 
(non-profit) or government agencies. Because the National Hospice and 
Palliative Care Organization estimates that approximately 83.6 percent 
of hospice patients in 2007 were Medicare beneficiaries, we have not 
considered other sources of revenue in this analysis.
    As stated previously, the following discussions are limited to 
demonstrating trends rather than projected dollars. We used the pre-
floor, pre-reclassified hospital wage indexes as well as the most 
complete claims data available (FY 2007) in developing the impact 
analysis. The FY 2010 payment rates will be adjusted to reflect the 
full 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 instructions rather than in a 
proposed rule. Currently the FY 2010 hospital market basket update is 
estimated to be 2.1 percent; however this figure is subject to change. 
Since the inclusion of the effect of an estimated hospital market 
basket increase provides a more complete picture of projected total 
hospice payments for FY 2010, the last column of Table 1 shows the 
combined impacts of the updated wage index, the 75 percent BNAF 
reduction, and an estimated 2.1 percent hospital market basket update 
factor.
    As discussed in the FY 2006 hospice wage index final rule (70 FR 
45129), hospice agencies may use multiple hospice wage index values to 
compute their payments based on potentially different geographic 
locations. Before January 1, 2008, the location of the beneficiary was 
used to determine the CBSA for routine and continuous home care and the 
location of the hospice agency was used to determine the CBSA for 
respite and general inpatient care. Beginning January 1, 2008, the 
hospice wage index utilized is based on the location of the site of 
service. As the location of the beneficiary's home and the location of 
the facility may vary, there will still be variability in geographic 
location for an individual hospice. We anticipate that the location of 
the various sites will usually correspond with the geographic location 
of the hospice, and thus we will continue to use the location of the 
hospice for our analyses of the impact of the proposed changes to the 
hospice wage index in this rule. 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 has 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 1,598 
designated as non-profit and 1,608 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 (RHC) days, representing about 97 percent 
of the services provided by a hospice. Therefore, the number of RHC 
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: (1) Small 
agencies having 0 to 3,499 RHC days; (2) medium agencies having 3,500 
to 19,999 RHC days; and (3) large agencies having 20,000 or more RHC 
days. The updated FY 2010 wage index values without any BNAF reduction 
are anticipated to increase payments to small and medium hospices by 
0.1 percent, and to decrease payments to large hospices by 0.1 percent 
(column 3); the FY 2010 wage index values using the updated wage data 
and the 75 percent BNAF reduction that was finalized in the FY 2009 
final rule, published August 2008 (73 FR 46464), are anticipated to 
decrease estimated payments to small and to medium hospices by 2.9 
percent each, and to large hospices by 3.2 percent (column 4); and 
finally, the FY 2010 wage index values with the updated wage data, the 
75 percent BNAF reduction which was finalized in the FY 2009 final 
rule, published in August 2008 (73 FR 46464), and the estimated 2.1 
percent hospital market basket update are projected to decrease 
estimated payments by 0.8 percent for small hospices, by 0.9 percent 
for medium hospices, and to decrease estimated payments by 1.2 percent 
for large hospices (column 5).
2. Geographic Location
    Column 3 of Table 1 shows that FY 2010 wage index values without 
the BNAF reduction would result in little change in estimated payments. 
Urban hospices are anticipated to experience a slight decrease of 0.1 
percent while rural hospices are anticipated to have a slight increase 
of 0.1 percent. For urban hospices, the greatest increase of 1.6 
percent is anticipated to be experienced by the Pacific regions, 
followed by an increase for West North Central regions of 0.4 percent, 
an increase for Mountain regions of 0.1 percent, and no change for the 
West South Central or New England regions. The remaining urban regions 
are anticipated to experience a decrease ranging from 0.1 percent in 
the Middle Atlantic region to a 1.2 percent decrease for Outlying 
regions. East South Central is anticipated to see a slight decrease 
which rounds to a 0.0 percent change.
    Column 3 shows that for rural hospices, Outlying regions are 
anticipated to experience no change. Five regions are anticipated to 
experience a decrease ranging from 0.1 percent for the South Atlantic 
and East South Central regions to 0.6 percent for the East North 
Central region. The remaining regions are anticipated to experience an 
increase ranging from 0.6 percent for the New England region to 1.7 
percent for the Pacific region.
    Column 4 shows the combined effect of the 75 percent BNAF reduction 
and the updated pre-floor, pre-reclassified hospital wage index values 
on estimated payments, as compared to the FY 2009 estimated payments 
using a BNAF with no reduction. Overall urban hospices are anticipated 
to experience a 3.3 percent decrease in payments, while

[[Page 18928]]

rural hospices expect a 2.3 percent decrease. The estimated percent 
decrease in payment for urban hospices ranged from 1.2 percent for 
Outlying hospices to 4.0 percent for South Atlantic hospices.
    The estimated percent decrease in payment for rural hospices ranged 
from 0.9 percent for West South Central hospices to 3.8 percent for 
East North Central hospices. Rural Outlying estimated payments were 
unaffected.
    Column 5 shows the combined effects of the proposed FY 2010 wage 
index values with the updated wage data, the 75 percent BNAF reduction 
which was finalized in the FY 2009 final rule, published in August 2008 
(73 FR 46464), and the estimated 2.1 percent hospital market basket 
update on estimated payments as compared to the estimated FY 2009 
payments. Note that the FY 2009 payments had no BNAF reduction applied 
to them. Overall, urban hospices are anticipated to experience a 1.2 
percent decrease in payments while rural hospices should experience a 
0.3 percent decrease in payments. Urban hospices are anticipated to 
experience a decrease in estimated payments in 8 regions, ranging from 
a 0.8 percent decrease for the West North Central region to a 1.9 
percent decrease for South Atlantic hospices. Urban hospices in 2 
regions are anticipated to see an increase in estimated payments of 0.1 
percent for the Pacific region and 0.9 percent for Outlying regions. 
Rural hospices in 6 regions are estimated to see a decrease in payments 
ranging from 0.4 percent for the West North Central region to 1.8 
percent for the East North Central region. Rural hospices in 4 regions 
are anticipated to see an increase in payments ranging from 0.3 percent 
for the Pacific region to 2.1 percent for the Outlying regions.
3. Type of Ownership
    Column 3 demonstrates the effect of the updated pre-floor, pre-
reclassified hospital wage index on FY 2010 estimated payments versus 
FY 2009 estimated payments with no BNAF reduction applied to them. We 
anticipate that using the updated pre-floor, pre-reclassified hospital 
wage index data would increase estimated payments to proprietary (for-
profit) hospices by 0.1 percent. We estimate a slight decrease in 
payments for voluntary (non-profit) and government hospices of 0.1 
percent each.
    Column 4 demonstrates the combined effects of using updated pre-
floor, pre-reclassified hospital wage index data and of incorporating a 
75 percent BNAF reduction. Estimated payments to proprietary (for-
profit) hospices are anticipated to decrease by 3.0 percent, while 
voluntary (non-profit) and government hospices are each anticipated to 
experience decreases of 3.3 percent.
    Column 5 shows the combined effects of the updated pre-floor, pre-
reclassified hospital wage index values with the updated wage data, the 
75 percent BNAF reduction, and the estimated 2.1 percent hospital 
market basket update on estimated payments, comparing FY 2010 to FY 
2009 (using a BNAF with no reduction). Estimated FY 2010 payments are 
anticipated to decrease by 1.0 percent for proprietary (for-profit) 
hospices, and by 1.3 percent for both voluntary (non-profit) and 
government hospices.
4. Hospice Base
    Column 3 demonstrates the effect of using the updated pre-floor, 
pre-reclassified hospital wage index values, comparing estimated 
payments for FY 2010 to FY 2009 (using a BNAF with no reduction). 
Estimated payments are anticipated to decrease by 0.1 percent each for 
freestanding facilities and for hospices based out of skilled nursing 
facilities. Home health and hospital based facilities are anticipated 
to experience a 0.2 percent increase in estimated payments.
    Column 4 shows the combined effects of updating the pre-floor, pre-
reclassified hospital wage index values and reducing the BNAF by 75 
percent (as finalized in the FY 2009 final rule, published August 2008, 
73 FR 46464), comparing FY 2010 to FY 2009 (using a BNAF with no 
reduction) estimated payments. Skilled nursing facility based hospices 
are estimated to see a 3.5 percent decrease, freestanding hospices are 
estimated to see a 3.2 percent decrease, home health agency based 
hospices are anticipated to experience a 3.1 percent decrease in 
payments, and hospital-based hospices are anticipated to experience a 
3.0 percent decrease in payments.
    Column 5 shows the combined effects of the updated pre-floor, pre-
reclassified hospital wage index, the 75 percent BNAF reduction which 
was finalized in FY 2009 hospice wage index final rule (73 FR 46464), 
and the estimated 2.1 percent hospital market basket update on 
estimated payments, comparing FY 2010 to FY 2009 (using a BNAF with no 
reduction). Estimated payments are anticipated to decrease by 0.9 
percent for hospital based hospices, by 1.1 percent for home health 
agency based hospices, and by 1.2 percent and by 1.5 percent for 
freestanding hospices and skilled nursing facility based hospices, 
respectively.
C. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 2 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the proposed provisions of this rule. This 
table provides our best estimate of the decrease in Medicare payments 
under the hospice benefit as a result of the changes presented in this 
proposed rule on data for 3,206 hospices in our database. All 
expenditures are classified as transfers to Medicare providers (that 
is, hospices).

Table 2--Accounting Statement: Classification of Estimated Expenditures,
                         From FY 2009 to FY 2010
                              [In millions]
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $-340.
From Whom to Whom.........................  Federal Government to
                                             Hospices.
------------------------------------------------------------------------


    Note: The $340 million reduction in transfers includes the 75 
percent reduction in the BNAF and the updated wage data. It does not 
include the estimated hospital market basket update, which is 
currently forecast to be about 2.1 percent.

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

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

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 
and Medicare Services propose to amend 42 CFR chapter IV as set forth 
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

    1. The authority citation for part 405 subpart R continues to read 
as follows:


[[Page 18929]]


    Authority: Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 
1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 
405, 1302, 1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 
1395oo, and 1395ww).

Subpart R--Provider Reimbursement Determinations and Appeals

    2. Section 405.1803 is amended by revising paragraph (a) 
introductory text and paragraph (a)(1) to read as follows:


Sec.  405.1803  Intermediary determination and notice of amount of 
program reimbursement.

    (a) General requirement. Upon receipt of a provider's cost report, 
or amended cost report where permitted or required, the intermediary 
must within a reasonable period of time (as described in Sec.  
405.1835(a)(3)(ii)), furnish the provider and other parties as 
appropriate (see Sec.  405.1805) a written notice reflecting the 
intermediary's determination of the total amount of reimbursement due 
the provider. For the purposes of hospice, the intermediaries' 
determination of program reimbursement letter, which provides the 
results of the inpatient and aggregate cap calculations, shall serve as 
a notice of program reimbursement. The intermediary must include the 
following information in the notice, as appropriate:
    (1) Reasonable cost. The notice must--(i) Explain the 
intermediary's determination of total program reimbursement due the 
provider on the basis of reasonable cost for the reporting period 
covered by the cost report or amended cost report, or in the case of 
hospice, on the basis of the cap calculations for the reporting period 
that is the cap year; and
    (ii) Relate this determination to the provider's claimed total 
program reimbursement due the provider for this period.
* * * * *

PART 418--HOSPICE CARE

    3. 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

    4. Section 418.1 is amended by revising the introductory text to 
read as follows:


Sec.  418.1  Statutory basis.

    This part implements section 1861(dd) of the Social Security Act 
(the Act). Section 1861(dd) of the Act specifies services covered as 
hospice care and the conditions that a hospice program must meet in 
order to participate in the Medicare program. Section 1861(dd) also 
specifies limitations on coverage of, and payment for, inpatient 
hospice care. The following sections of the Act are also pertinent:
* * * * *
    5. Section 418.2 is revised to read as follows:


Sec.  418.2  Scope of part.

    Subpart A of this part sets forth the statutory basis and scope and 
defines terms used in this Part. Subpart B specifies the eligibility 
and election requirements and the benefit periods. Subparts C and D 
specify the conditions of participation for hospices. Subpart E is 
reserved for future use. Subparts F and G specify coverage and payment 
policy. Subpart H specifies coinsurance amounts applicable to hospice 
care.

Subpart B--Eligibility, Election and Duration of Benefits

    6. Section 418.22 is amended by adding a new paragraph (b)(3) to 
read as follows:


Sec.  418.22  Certification of terminal illness.

* * * * *
    (b) * * *
    (3) The physician must include on the certification a brief 
narrative explanation of the clinical findings that supports a life 
expectancy of 6 months or less.
* * * * *

Subpart C--Conditions of Participation: Patient Care

    7. Section 418.76 is amended by revising paragraph (f)(1) to read 
as follows:


Sec.  418.76  Condition of participation: Hospice aide and homemaker 
services.

* * * * *
    (f) * * *
    (1) Had been out of compliance with the requirements of Sec.  
484.36(a) and Sec.  484.36(b) of this chapter.
* * * * *

Subpart D--Conditions of Participation: Organizational Environment

    8. Section 418.100 is amended by revising paragraph (f)(1)(iii) to 
read as follows:


Sec.  418.100  Condition of participation: Organization and 
administration of service.

* * * * *
    (f) * * *
    (1) * * *
    (iii) The lines of authority and professional and administrative 
control must be clearly delineated in the hospice's organizational 
structure and in practice, and must be traced to the location that 
issued the certification number.
* * * * *


Sec.  418.108  [Amended]

    9. In paragraph (b)(1)(ii), the cross reference to ``Sec.  
418.110(f)'' is revised to read ``Sec.  418.110(e).''

Subpart F--Covered Services

    10. Section 418.200 is revised to read as follows:


Sec.  418.200  Requirements for coverage.

    To be covered, hospice services must meet the following 
requirements. They must be reasonable and necessary for the palliation 
and management of the terminal illness as well as related conditions. 
The individual must elect hospice care in accordance with Sec.  418.24. 
A plan of care must be established and periodically reviewed by the 
attending physician, the medical director, and the interdisciplinary 
group of the hospice program. That plan of care must be established 
before hospice care is provided. The services provided must be 
consistent with the plan of care. A certification that the individual 
is terminally ill must be completed as set forth in section Sec.  
418.22.
    11. Section Sec.  418.202 is amended by revising paragraphs (f) and 
(g) to read as follows:


Sec.  418.202  Covered Services.

* * * * *
    (f) Medical appliances and supplies, including drugs and 
biologicals. Only drugs as defined in section 1861(t) of the Act and 
which are used primarily for the relief of pain and symptom control 
related to the individual's terminal illness are covered. Appliances 
may include covered durable medical equipment as described in Sec.  
410.38 of this chapter as well as other self-help and personal comfort 
items related to the palliation or management of the patient's terminal 
illness. Equipment is provided by the hospice for use in the patient's 
home while he or she is under hospice care. Medical supplies include 
those that are part of the written plan of care and that are for 
palliation and management of the terminal or related conditions.
    (g) Home health or hospice aide services furnished by qualified 
aides as designated in Sec.  418.94 and homemaker services. Home health 
aides (also known

[[Page 18930]]

as hospice aides) may provide personal care services as defined in 
Sec.  409.45(b) of this chapter. Aides may perform household services 
to maintain a safe and sanitary environment in areas of the home used 
by the patients, such as changing bed linens or light cleaning and 
laundering essential to the comfort and cleanliness of the patient. 
Aide services may include assistance in maintenance of a safe and 
healthy environment and services to enable the individual to carry out 
the treatment plan.
* * * * *
    12. Section Sec.  418.204 is amended by revising paragraph (a) to 
read as follows:


Sec.  418.204  Special coverage requirements.

    (a) Periods of crisis. Nursing care may be covered on a continuous 
basis for as much as 24 hours a day during periods of crisis as 
necessary to maintain an individual at home. Either homemaker or home 
health aide (also known as hospice aide) services or both may be 
covered on a 24-hour continuous basis during periods of crisis but care 
during these periods must be predominantly nursing care. A period of 
crisis is a period in which the individual requires continuous care to 
achieve palliation and management of acute medical symptoms.
* * * * *

Subpart G--Payment for Hospice Care

    13. Section 418.302 is amended by revising paragraphs (b)(2) and 
(f)(2) to read as follows:


Sec.  418.302  Payment procedures for hospice care.

* * * * *
    (b) * * *
    (2) Continuous home care day. A continuous home care day is a day 
on which an individual who has elected to receive hospice care is not 
in an inpatient facility and receives hospice care consisting 
predominantly of nursing care on a continuous basis at home. Home 
health aide (also known as a hospice aide) or homemaker services or 
both may also be provided on a continuous basis. Continuous home care 
is only furnished during brief periods of crisis as described in Sec.  
418.204(a) and only as necessary to maintain the terminally ill patient 
at home.
* * * * *
    (f) * * *
    (2) At the end of a cap period, the intermediary calculates a 
limitation on payment for inpatient care to ensure that Medicare 
payment is not made for days of inpatient care in excess of 20 percent 
of the total number of days of hospice care furnished to Medicare 
patients. Only inpatient days that were provided and billed as general 
inpatient or respite days are counted as inpatient days when computing 
the inpatient cap.
* * * * *
    14. Section 418.311 is revised to read as follows:


Sec.  418.311  Administrative appeals.

    A hospice that believes its payments have not been properly 
determined in accordance with these regulations may request a review 
from the intermediary or the Provider Reimbursement Review Board (PRRB) 
if the amount in controversy is at least $1,000 or $10,000, 
respectively. In such a case, the procedure in 42 CFR part 405, subpart 
R, will be followed to the extent that it is applicable. The PRRB, 
subject to review by the Secretary under Sec.  405.1874 of this 
chapter, shall have the authority to determine the issues raised. The 
methods and standards for the calculation of the statutorily defined 
payment rates by CMS are not subject to appeal.

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

    Dated: March 30, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 15, 2009.
Charles E. Johnson,
Acting Secretary.
BILLING CODE 4120-01-P

[[Page 18931]]

[GRAPHIC] [TIFF OMITTED] TP24AP09.054


[[Page 18932]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.055


[[Page 18933]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.056


[[Page 18934]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.057


[[Page 18935]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.058


[[Page 18936]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.059


[[Page 18937]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.060


[[Page 18938]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.061


[[Page 18939]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.062


[[Page 18940]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.063


[[Page 18941]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.064


[[Page 18942]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.065


[[Page 18943]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.066


[[Page 18944]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.067


[[Page 18945]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.068


[[Page 18946]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.069


[[Page 18947]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.070


[[Page 18948]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.071


[[Page 18949]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.072


[[Page 18950]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.073


[[Page 18951]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.074


[[Page 18952]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.075


[[Page 18953]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.076


[[Page 18954]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.077


[[Page 18955]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.078


[[Page 18956]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.079


[[Page 18957]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.080


[[Page 18958]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.081


[[Page 18959]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.082


[[Page 18960]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.083


[[Page 18961]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.084


[[Page 18962]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.085


[[Page 18963]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.086


[[Page 18964]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.087


[[Page 18965]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.088


[[Page 18966]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.089


[[Page 18967]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.090


[[Page 18968]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.091


[[Page 18969]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.092


[[Page 18970]]


[GRAPHIC] [TIFF OMITTED] TP24AP09.093

[FR Doc. E9-9417 Filed 4-21-09; 4:15 pm]
BILLING CODE 4120-01-C