[Federal Register Volume 74, Number 216 (Tuesday, November 10, 2009)]
[Rules and Regulations]
[Pages 58078-58183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-26503]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 409, 424, and 484



Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2010; Final Rule

  Federal Register / Vol. 74, No. 216 / Tuesday, November 10, 2009 / 
Rules and Regulations  

[[Page 58078]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, and 484

[CMS-1560-F]
RIN 0938-AP55


Medicare Program; Home Health Prospective Payment System; Rate 
Update for Calendar Year 2010

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

ACTION: Final rule.

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SUMMARY: This final rule sets forth an update to the Home Health 
Prospective Payment System (HH PPS) rates; the national standardized 
60-day episode rates, the national per-visit rates, the non-routine 
medical supply (NRS) conversion factors, and the low utilization 
payment amount (LUPA) add-on payment amounts, under the Medicare 
prospective payment system for home health agencies effective January 
1, 2010. This rule also updates the wage index used under the HH PPS. 
In addition, this rule changes the HH PPS outlier policy, requires the 
submission of OASIS data as a condition for payment under the HH PPS, 
implements a revised Outcome and Assessment Information Set (OASIS-C) 
for episodes beginning on or after January 1, 2010, and implements a 
Consumer Assessment of Healthcare Providers and Systems (CAHPS) Home 
Health Care Survey (HHCAHPS) affecting payment to HHAs beginning in CY 
2012. Also, this rule makes payment safeguards that will improve our 
enrollment process, improve the quality of care that Medicare 
beneficiaries receive from HHAs, and reduce the Medicare program's 
vulnerability to fraud. This rule also adds clarifying language to the 
``skilled services'' section and Conditions of Participation (CoP) 
section of our regulations. This rule also clarifies the coverage of 
routine medical supplies under the HH PPS.

DATES: Effective Date: These regulations are effective on January 1, 
2010.

FOR FURTHER INFORMATION CONTACT:
Randy Throndset, (410) 786-0131 (overall HH PPS).
James Bossenmeyer, (410) 786-9317 (for information related to payment 
safeguards).
Doug Brown, (410) 786-0028 (for quality issues).
Kathleen Walch, (410) 786-7970 (for skilled services requirements and 
clinical issues).

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Requirements of the Balanced Budget Act of 1997 for 
Establishing the Prospective Payment System for Home Health Services
    B. Deficit Reduction Act of 2005
    C. System for Payment of Home Health Services
    D. Updates to the HH PPS
II. Summary of the Proposed Provisions and Response to Comments
    A. Outlier Policy
    B. Case-Mix Measurement Analysis
    C. CY 2010 Payment Rate Update
    1. Home Health Market Basket Update
    2. Home Health Care Quality Improvement
    3. Home Health Wage Index
    4. CY 2010 Payment Update
    a. National Standardized 60-Day Episode Rate
    b. Updated Cy 2010 National Standardized 60-Day Episode Payment 
Rate
    c. National Per-Visit Rates Used To Pay LUPAs and Compute 
Imputed Costs Used in Outlier Calculations
    d. LUPA Add-On Payment Amount Update
    e. Non-Routine Medical Supply Conversion Factor Update
    D. OASIS Issues
    1. HIPPS Code Reporting
    2. OASIS Submission as a Condition for Payment
    E. Qualifications for Coverage as They Relate to Skilled 
Services Requirements
    F. OASIS for Significant Change in Condition No Longer 
Associated With Payment
    G. Payment Safeguards for Home Health Agencies
    H. Physician Certification and Recertification of the Home 
Health Plan of Care
    I. Routine Medical Supplies
III. Provisions of the Final Rule
IV. Collection of Information Requirements
    A. ICRs Regarding the Requirements for Home Health Services
    B. ICRs Regarding Deactivation of Medicare Billing Privileges
    C. ICRs Regarding Prohibition Against Sale or Transfer of 
Billing Privileges
    D. ICRs Regarding Patient Assessment Data
V. Regulatory Impact Analysis

I. Background

A. Requirements of the Balanced Budget Act of 1997 for Establishing the 
Prospective Payment System for Home Health Services

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) enacted on 
August 5, 1997, significantly changed the way Medicare pays for 
Medicare home health services. Section 4603 of the BBA mandated the 
development of the home health prospective payment system (HH PPS). 
Until the implementation of a HH PPS on October 1, 2000, home health 
agencies (HHAs) received payment under a cost-based reimbursement 
system.
    Section 4603(a) of the BBA mandated the development of a HH PPS for 
all Medicare-covered home health services provided under a plan of care 
(POC) that were paid on a reasonable cost basis by adding section 1895 
of the Social Security Act (the Act), entitled ``Prospective Payment 
For Home Health Services''. Section 1895(b)(1) of the Act requires the 
Secretary to establish a HH PPS for all costs of home health services 
paid under Medicare.
    Section 1895(b)(3)(A) of the Act requires that: (1) The computation 
of a standard prospective payment amount include all costs for home 
health services covered and paid for on a reasonable cost basis and be 
initially based on the most recent audited cost report data available 
to the Secretary, and (2) the prospective payment amounts be 
standardized to eliminate the effects of case-mix and wage levels among 
HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the home health applicable 
percentage increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
case-mix and geographic differences in wage levels. Section 
1895(b)(4)(B) of the Act requires the establishment of an appropriate 
case-mix change adjustment factor that adjusts for significant 
variation in costs among different units of services.
    Similarly, section 1895(b)(4)(C) of the Act requires the 
establishment of wage adjustment factors that reflect the relative 
level of wages, and wage-related costs applicable to home health 
services furnished in a geographic area compared to the applicable 
national average level. Pursuant to 1895(b)(4)(c), the wage-adjustment 
factors used by the Secretary may be the factors used under section 
1886(d)(3)(E) of the Act.
    Section 1895(b)(5) of the Act gives the Secretary the option to 
make additions or adjustments to the payment amount otherwise paid in 
the case of outliers because of unusual variations in the type or 
amount of medically necessary care. Total outlier payments in a given 
fiscal year (FY) or year may not exceed 5 percent of total payments 
projected or estimated.
    In accordance with the statute, we published a final rule (65 FR 
41128) in the Federal Register on July 3, 2000, to implement the HH PPS 
legislation. The July 2000 final rule established requirements for the 
new HH PPS for home health services as required by section 4603 of the 
BBA, as

[[Page 58079]]

subsequently amended by section 5101 of the Omnibus Consolidated and 
Emergency Supplemental Appropriations Act (OCESAA) for Fiscal Year 
1999, (Pub. L. 105-277), enacted on October 21, 1998; and by sections 
302, 305, and 306 of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act (BBRA) of 1999, (Pub. L. 106-113), enacted on November 
29, 1999. The requirements include the implementation of a HH PPS for 
home health services, consolidated billing requirements, and a number 
of other related changes. The HH PPS described in that rule replaced 
the retrospective reasonable cost-based system that was used by 
Medicare for the payment of home health services under Part A and Part 
B. For a complete and full description of the HH PPS as required by the 
BBA, see the July 2000 HH PPS final rule (65 FR 41128 through 41214).

B. Deficit Reduction Act of 2005

    On February 8, 2006, the Deficit Reduction Act of 2005 (Pub. L. 
109-171) (DRA) was enacted. Section 5201 of the DRA requires HHAs to 
submit data for purposes of measuring health care quality, and links 
the quality data submission to payment. This requirement is applicable 
for CY 2007 and each subsequent year. If an HHA does not submit quality 
data, the home health market basket percentage increase will be reduced 
2 percentage points. In accordance with the statute, we published a 
final rule (71 FR 65884, 65935) in the Federal Register on November 9, 
2006 to implement the pay-for-reporting requirement of the DRA, 
codified at 42 CFR 484.225(h) and (i).

C. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS on the basis of 
a national standardized 60-day episode payment rate that is adjusted 
for the applicable case-mix and wage index. The national standardized 
60-day episode rate includes the six home health disciplines (skilled 
nursing, home health aide, physical therapy, speech-language pathology, 
occupational therapy, and medical social services). Payment for non-
routine medical supplies (NRS), is no longer part of the national 
standardized 60-day episode rate and is computed by multiplying the 
relative weight for a particular NRS severity level by the NRS 
conversion factor (See section III.C.4.e). Durable medical equipment 
covered under the home health benefit is paid for outside the HH PPS 
payment. To adjust for case-mix, the HH PPS uses a 153-category case-
mix classification to assign patients to a home health resource group 
(HHRG). Clinical needs, functional status, and service utilization are 
computed from responses to selected data elements in the OASIS 
assessment instrument.
    For episodes with four or fewer visits, Medicare pays on the basis 
of a national per-visit rate by discipline; an episode consisting of 
four or fewer visits within a 60-day period receives what is referred 
to as a low utilization payment adjustment (LUPA). Medicare also 
adjusts the national standardized 60-day episode payment rate for 
certain intervening events that are subject to a partial episode 
payment adjustment (PEP adjustment). For certain cases that exceed a 
specific cost threshold, an outlier adjustment may also be available.

D. Corrections

    We published a final rule with comment period in the Federal 
Register on August 29, 2007 (72 FR 49762) that set forth a refinement 
and rate update to the 60-day national episode rates and the national 
per-visit rates under the Medicare prospective payment system for home 
health services for CY 2008. In this final rule with comment period, in 
Table 10B (72 FR 49854), the short description for ICD-9-CM code 250.8x 
& 707.10-707.9 should read ``PRIMARY DIAGNOSIS = 250.8x AND FIRST OTHER 
DIAGNOSIS =707.10-707.9. Instead of a formal correction notice, we are 
notifying the public of this correction in this final rule.

E. Updates to the HH PPS

    As required by section 1895(b)(3)(B) of the Act, we have 
historically updated the HH PPS rates annually in the Federal Register. 
Most recently, we published a notice in the Federal Register on 
November 3, 2008 (73 FR 65351) that set forth the update to the 60-day 
national episode rates and the national per-visit rates under the 
Medicare prospective payment system for home health services for CY 
2009.

F. Requirements for Issuance of Regulations

    Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and 
requires the Secretary, in consultation with the Director of the Office 
of Management and Budget, to establish and publish timelines for the 
publication of Medicare final regulations based on the previous 
publication of a Medicare proposed or interim final regulation. Section 
902 of the MMA also states that the timelines for these regulations may 
vary but shall not exceed 3 years after publication of the preceding 
proposed or interim final regulation except under exceptional 
circumstances.
    This final rule finalizes provisions set forth in the August 13, 
2009 proposed rule (74 FR 40948). In addition, this final rule has been 
published within the 3-year time limit imposed by section 902 of the 
MMA. Therefore, we believe that the final rule is in accordance with 
the Congress' intent to ensure timely publication of final regulations.

II. Summary of the Proposed Provisions and Response to Comments

    In the, August 13, 2009 Federal Register (74 FR 40948) we published 
the proposed rule entitled, ``Medicare Program; Home Health Prospective 
Payment System Rate Update for CY 2010'' and provided for a 60-day 
comment period. In this proposed rule we proposed updates to the Home 
Health Prospective Payment System (HH PPS) rates; the national 
standardized 60-day episode rates, the national per-visit rates, the 
non-routine medical supply (NRS) conversion factor, and the low 
utilization payment amount (LUPA) add-on payment amount, under the 
Medicare prospective payment system for home health agencies effective 
January 1, 2010. As part of the CY 2010 proposed rule (74 FR 40948), we 
also proposed a change to the HH PPS outlier policy, proposed to 
require the submission of OASIS data as a condition for payment under 
the HH PPS, and proposed payment safeguards that would improve our 
enrollment process, improve the quality of care that Medicare 
beneficiaries receive from HHAs, and reduce the Medicare program's 
vulnerability to fraud. The CY 2010 proposed rule also added clarifying 
language to the ``skilled services'' section and the Conditions of 
Participation (CoPs) sections of our regulations, and also clarified 
the coverage of routine medical supplies under the HH PPS. We also 
solicited comments on: Physician/patient interaction associated with 
the home health plan of care (POC); a Consumer Assessment of Healthcare 
Providers and Systems (CAHPS) Home Health Care Survey; the Outcome and 
Assessment Information Set (OASIS), Version C, effective January 1, 
2010; proposed pay for reporting measures for use in CY 2011; and a 
number of minor payment-related issues. We also responded, in the CY 
2010 proposed rule (74 FR 40948), to comments received as a result of 
our solicitation in the CY 2008 HH

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PPS final rule with comment period (72 FR 49762).
    In response to the publication of the CY 2010 HH PPS proposed rule, 
we received approximately 73 items of correspondence from the public. 
We received numerous comments from various trade associations and major 
health-related organizations. Comments also originated from HHAs, 
hospitals, other providers, suppliers, practitioners, advocacy groups, 
consulting firms, and private citizens. The following discussion, 
arranged by subject area, includes our responses to the comments and, 
where appropriate, a brief summary as to whether or not we are 
implementing the proposed provision or some variation thereof.

A. Outlier Policy

    Section 1895(b)(5) of the Act allows for the provision of an 
addition or adjustment to the regular 60-day case-mix and wage-adjusted 
episode payment amount in the case of episodes that incur unusually 
high costs due to patient home health care needs. This section further 
stipulates that total outlier payments in a given year may not exceed 5 
percent of total projected or estimated HH PPS payments. Section 
1895(b)(3)(C) of the Act stipulates that the standard episode payment 
be reduced by such a proportion to account for the aggregate increase 
in payments resulting from outlier payments. Under the HH PPS, outlier 
payments are made for episodes for which the estimated cost exceeds a 
threshold amount. The wage adjusted fixed dollar loss (FDL) amount 
represents the amount of loss that an agency must bear before an 
episodes becomes eligible for outlier payments.
    In recent years, our analysis has revealed excessive growth in 
outlier payments, primarily the result of suspiciously high outlier 
payments in a few discrete areas of the country. In our CY 2009 payment 
update, we did not raise the FDL ratio, given the statistical outlier 
data anomalies that we identified in certain targeted areas, because 
program integrity efforts, such as payment suspensions for HHAs with 
questionable outlier billing activities, were underway to address 
excessive, suspicious outlier payments that were occurring in these 
areas. Instead, we maintained the then-current (CY 2008) FDL ratio of 
0.89 in CY 2009 while actions to remedy inappropriate outlier payments 
in these target areas of the country were effectuated.
    In our CY 2010 HH PPS proposed rule, we expanded our outlier 
analysis to assess the appropriateness of adopting a lower target 
percentage of outlier payments to total HH PPS payments. We performed 
an analysis of all providers who receive outlier payments, focusing our 
analysis on total HH PPS payments, total outlier payments, number of 
episodes, number of outlier episodes, and location of provider. 
Specifically, our analysis incorporated a 10 percent per-agency cap on 
outliers and looked at outlier payments as a percentage of total HH PPS 
payments with that 10 percent per-agency cap in place. That analysis 
revealed that with a 10 percent per-agency outlier cap in place, 
outlier dollars accounted for approximately 2.1 percent of total HH PPS 
payments. Additionally, we performed a separate analysis on CMS data 
using Medicare provider numbers of members of a major association of 
home health agencies who claim to be safety-net providers, serving 
sicker, more costly patients. The average outlier payment to these 
agencies was found to be less than 2 percent.
    In the proposed rule we recognized that although program integrity 
efforts associated with excessive outlier payments continue in targeted 
areas of the country, we continue to be at risk of exceeding the 5 
percent statutory limit on estimated outlier expenditures. Therefore, 
we focused our analysis on whether a broader policy change to our 
outlier payment policy might also be warranted, to mitigate possible 
billing vulnerabilities associated with excessive outlier payments, and 
to adhere to our statutory limit on outlier payments. Our analysis 
revealed that a 10 percent per-agency cap in outlier payments would 
mitigate potential inappropriate outlier billing vulnerabilities while 
minimizing the access to care risk for high needs patients.
    Therefore, to mitigate possible billing vulnerabilities associated 
with excessive outlier payments, and to adhere to our statutory limit 
on outlier payments, we proposed to implement an agency level outlier 
cap such that in any given calendar year, an individual HHA would 
receive no more than 10 percent of its total HH PPS payments in outlier 
payments. Additionally, we proposed to reduce the FDL ratio to 0.67 for 
CY 2010. This combination of a 10 percent agency level outlier cap, and 
reduced FDL ratio of 0.67, and allowing for future growth in outlier 
payments, resulted in a projected target outlier payment outlay of 
approximately 2.5 percent of total HH PPS payments in outlier payments.
    Currently, we reduce the national standardized 60-day episode 
payment rates, the national per-visit rates, the LUPA add-on amount, 
and the NRS conversion factor by 5 percent in order to create an 
outlier pool that accommodates estimated outlier payments of 5 percent 
of total HH PPS payments. Targeting the percentage of outlier payments 
at approximately 2.5 percent would allow us to create a smaller outlier 
pool and return the remaining 2.5 percent to the HH PPS rates. In the 
proposed rule, we proposed to retain a 2.5 percent reduction to the 
national standardized 60-day episode rates, the national per-visit 
rates, the LUPA add-on payment amount, and the NRS conversion factor to 
fund the proposed target of approximately 2.5 percent of total 
estimated HH PPS payments in outlier payments, adhering to the 
statutory requirement in section 1895(b)(3) of the Act.
    Comment: Most commenters were very supportive, and in favor of the 
overall proposed HH PPS outlier policy. Commenters stated that 
anomalous outlier trends in recent years are compelling evidence that 
abusive and possibly fraudulent practices are widespread in many areas 
of the country and that increased safeguards are necessary to curb 
inappropriate activity as it relates to the billing of outlier episodes 
under the HH PPS. Commenters further stated that the proposed changes 
were reasonable areas of focus for additional safeguards against fraud 
and abuse in the area of billing for outliers in the HH PPS. Other 
commenters stated that they strongly supported CMS in its efforts to 
curb fraud and abuse and are not opposed to the proposed implementation 
of these changes to the outlier policy. Several commenters found the 
proposed outlier policy to be fair and expect the policy to be 
effective.
    Response: We appreciate the overwhelming support from commenters 
that we received on our proposed HH PPS outlier policy. We would like 
to point out that fraudulent activity is not widespread in many areas 
of the country. These sort of fraudulent activities are occurring in a 
few discrete areas of the country. We continue to believe that an 
agency-level outlier cap is the appropriate policy, at this time, to 
mitigate possible billing vulnerabilities associated with excessive 
outlier payments and to adhere to our statutory limit on outlier 
payments. As such, in conjunction with the 10 percent agency level 
outlier policy, we proposed to target a new 2.5 percent outlier pool 
(as opposed to the existing 5 percent outlier pool), and return 2.5 
percent back into the national standardized 60-day episode rates, the 
national per-visit rates, the LUPA add-on payment amount, and the NRS 
conversion factor,

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with a 0.67 FDL ratio. For reasons outlined later in this final rule, 
we are finalizing this outlier policy for CY 2010 only.
    Comment: Several commenters supported the new, lower, outlier 
target of approximately 2.5 percent, and applauded CMS for restoring 
dollars to the HH PPS payment rates. A commenter commended CMS for 
thoughtfully considering the negative impact on patient access, should 
outlier payments be completely eliminated. A few commenters urged CMS 
to monitor outlier expenditures and further reduce the FDL if outlier 
payments drop below the new 2.5 percent target. A commenter asked CMS 
to explain the methods that would be used to monitor these outlier 
payments.
    Response: We appreciate the support of the proposed outlier target 
of approximately 2.5 percent and returning 2.5 percent back into the HH 
PPS rates. As a commenter stated, CMS did give thoughtful consideration 
to eliminating the outlier policy altogether, and although we reserve 
the right to eliminate the outlier policy in the future, should 
circumstances make that necessary, we believe that an outlier target of 
approximately 2.5 percent and returning 2.5 percent back into the HH 
PPS rates, for CY 2010, is the appropriate policy at this time. As part 
of our final outlier policy, in addition to returning 2.5 percent back 
into the HH PPS rates, because of the 10 percent cap on outlier 
payments, CMS is also lowering the FDL from 0.89 to 0.67, making it 
easier for episodes to qualify for outlier payments. Thus, in addition 
to the fact that few non-fraudulent providers are expected to be 
impacted by the 10 percent cap, all providers will benefit from the 2.5 
percent increase in the base rate and will also be helped by the 
lowering of the FDL ratio. As stated above, CMS plans to analyze 
overall national spending on outlier payments relative to the new 2.5 
percent outlier pool by geographic area and provider type. CMS also 
plans on looking at outlier payments, per HHA, relative to the 10 
percent cap on outlier payments at the agency level by geographic area 
and provider type.
    Comment: There was a commenter who was opposed to returning a 
portion of the current 5 percent pool to the HH PPS rates, stating that 
doing so would reduce resources to provide for sicker patients and 
increase funds paid for lost-cost/low-utilization patients who are 
already well provided for. Another commenter was concerned about 
reducing the outlier pool to 2.5 percent, stating that it would hurt 
providers that accept difficult and hard-to-place patients.
    Response: For the past several years, CMS has updated the FDL ratio 
in attempts to estimate outlier dollars to be no more than 5 percent. 
However, because outlier payments in certain areas of the country 
continue to increase at alarming rates, updating the FDL on an annual 
basis has proven to not be enough to keep outlier dollars at no more 
than 5 percent of total HH PPS payments. As we described in the 
proposed rule, our analyses show that when we remove from our analyses 
HHAs in areas of the country with high suspect outlier payments, as 
well as small agencies that are not representative of the types of 
agencies we suspect of suspicious billing activities, outlier payments 
for the rest of the country account for less than 2 percent of total HH 
PPS payments. As described in the proposed rule, our analyses have 
shown that in simulating payment for CY 2010, imposing an outlier cap 
of 10 percent at the agency level, we would pay approximately 2.32 
percent of total HH PPS payments in outlier payments.
    Additionally, in our separate analysis of CMS data using provider 
numbers from a major home health agency association's agencies, which 
claim to service a sicker, more costly population, only one of these 
agencies was estimated to exceed a 10 percent outlier cap. Further 
analysis shows us that approximately 70 percent of all HHAs receive 
between 0 percent and 1 percent in outlier dollars as a percentage of 
their total HH PPS payments. Consequently, we believe that a final 
outlier policy for CY 2010 that includes a 10 percent agency level 
outlier cap, a target of approximately 2.5 percent for outlier dollars 
as a percentage of total HH PPS payments, returning 2.5 percent back 
into the HH PPS rates, and a 0.67 FDL ratio is the appropriate policy, 
and that it appropriately pays for legitimate outlier episodes as well 
as all other types of episodes under the HH PPS. Because our trend 
analysis shows that outlier expenditures continue to grow, we proposed 
and are finalizing as part of our final outlier policy, an outlier 
target of approximately 2.5 percent.
    Comment: Most commenters were in support of lowering the FDL ratio 
to that of 0.67, but urged CMS to carefully monitor the effects of 
reducing the FDL ratio to gauge whether there is an increase in 
inappropriate outliers and if increasing the FDL ratio might be 
necessary in the future. A commenter asked CMS to keep the FDL ratio at 
0.89 because lowering it to 0.67 would make it easier for episodes to 
become outliers, thereby making it difficult for HHAs that are trying 
to stay under a 10 percent cap to meet the requirement and still 
deliver care. Another commenter stated that the proposal to reduce the 
FDL to 0.67, which would increase the number of episodes that qualify 
for outlier payments, is a ``futile gesture'' in the face of a 10 
percent cap.
    Response: We appreciate commenters' support of lowering the FDL 
ratio to 0.67. As stated above, CMS plans to analyze overall national 
spending on outlier payments relative to the new 2.5 percent outlier 
pool by geographic area and provider type. CMS also plans on looking at 
outlier payments per HHA relative to the 10 percent cap on outlier 
payments at the agency level by geographic area and provider type. At 
the same time, we will be looking at how the FDL ratio of 0.67 affects 
the percentage of outliers, and consider adjustments to the FDL ratio 
(up or down) if appropriate. We are decreasing the FDL ratio from 0.89 
to 0.67 because the latest data and best analysis available tell us 
that in conjunction with an outlier policy that invokes a 10 percent 
agency level outlier cap and a target outlier pool of approximately 2.5 
percent (returning 2.5 percent to the HH PPS rates), a FDL ratio of 
0.67 is appropriate. As we stated in the proposed rule and throughout 
this final rule, if we are unable to see measurable improvements with 
respect to suspected fraudulent billing practices as they relate to HHA 
outlier payments, CMS may consider eliminating the outlier policy 
entirely in future rulemaking.
    Comment: A number of commenters supported the ``rolling basis'' in 
determining whether outlier payments should be made at any given time 
during the year. However, another commenter cautioned CMS not to create 
a tracking nightmare for fiscal intermediaries and providers that is 
overly burdensome or complicated to administer. Yet another commenter 
was concerned about a delay in payments to HHAs, for services that have 
already been provided, and expenses that have already been incurred. 
That same commenter suggested that to address cash flow issues, CMS 
should delay the process of identifying and withholding outlier 
payments until the end of the first or second quarter of the calendar 
year, making it easier to HHAs to absorb early outlier cases. Another 
commenter was concerned that the ``rolling cap'' would result in 
accounting challenges, and suggested a quarterly look-back with a lump 
sum whenever outlier payments exceeded the 10 percent cap. A commenter 
stated that a rolling method could create excessive outlier

[[Page 58082]]

down-scores until the next calculation. The commenter believed that a 
retrospective adjustment would be fairer and would enable HHAs to 
reconcile revenue. Another commenter expressed concern about a 
retrospective recoupment, particularly an annual one, and the impact 
such a recoupment could have on the cash flow of smaller agencies and 
agencies with lower Medicare margins.
    Response: Implementing the cap by a post-payment recoupment 
process, either quarterly or annual, would delay impact of the cap on 
HHAs that are billing outlier episodes inappropriately. Under a lump 
sum recoupment, there could be a total disruption to an HHA's cash 
flow. That is, if the amount of outlier dollars paid in excess of the 
cap and scheduled for recoupment is greater than the amount due to the 
HHA for other claims, the HHA's payment could stop completely for a 
time while the recoupment was made. We believe this sort of payment 
disruption is undesirable.
    Under our planned implementation approach, for each home health 
provider, the claims processing system will maintain a running tally of 
the year-to-date (YTD) total home health payments. The claims 
processing system will ensure that each time an outlier claim for an 
agency is processed, actual outlier payments will never exceed 10 
percent of the agency's YTD total payments. While an agency will always 
receive its base episode payment timely, the outlier portion of the 
claim will be paid on a rolling basis, as the agency's YTD payments 
support payment of the outlier. We plan to have a periodic 
reconciliation process under which outlier payments that were withheld 
are subsequently paid if the HHA's total payments have increased to the 
point that their outlier payments can be made. This reconciliation 
process will always result in additional cash flow to HHAs, and so we 
believe it is preferable. With regard to revenue tracking, distinct 
coding will be used on the HHA's remittance advice when outlier 
payments are withheld, assisting receivables accountants to identify 
and account for the differences between expected and actual payments. 
For these reasons, we agree with the commenter that supported a rolling 
implementation of the cap and will finalize this proposal.
    Comment: A number of commenters encouraged CMS to take more 
aggressive actions through program integrity activities. One commenter 
recommended that a high rate of outliers for a particular HHA should 
trigger medical review, creating a greater/more effective deterrent to 
fraudulent behavior. In general, the commenter supported more 
aggressive enforcement. A commenter stated that reference areas with 
fraud should have much higher incidence of additional document requests 
(ADRs) and phone calls to beneficiaries from fiscal intermediaries. 
Documentation should be closely reviewed for medical necessity, 
qualifications, and homebound status.
    Response: As we stated in the proposed rule, so far as activities 
related to high levels of suspicious outlier payments, CMS is 
continuing with program integrity efforts including possible payment 
suspensions for HHAs with questionable outlier billing activities.
    Comment: Commenters asked that CMS clarify that while outlier 
payments would be capped at 10 percent, at the agency level, that the 
non-outlier portion of the payment would still be paid.
    Response: We thank the commenters for this comment, and apologize 
if we were not clear as to what portion of the HH PPS payment would be 
subject to the 10 percent cap. As stated in the proposed rule (at 74 FR 
40957),the outlier policy, finalized for CY 2010 only, will include a 
10 percent cap on outlier payments at the agency level. That is to say, 
an agency's outlier payments are to be capped at 10 percent of its 
total HH PPS payments (of which outlier payments are a part). For any 
claim with an outlier payment, if it were determined that paying the 
outlier portion of the total HH PPS payment for that claim would result 
in the HHA exceeding the 10 percent cap in outlier payments, only the 
outlier portion of the claim would not be paid at that time. However, 
the regular HH PPS payment (based on the HHRG that applies to that 
claim) is not subject to that 10 percent outlier cap, and thus would be 
paid. Any HH PPS payment adjustments other than the outlier payment 
(that is, PEP, recoding for therapy visits, etc.), would also continue 
to apply to the claim.
    Comment: CMS' analysis in the proposed rule started by first 
identifying ``all providers who receive outlier payments'' but excluded 
agencies with greater than 15 percent outlier episodes for one reason 
or another. Such exclusion skews analysis in favor of the 10 percent 
cap at the agency level, without considering that HHAs are shouldering 
the burden of serving sicker, more costly patients, represented by the 
excluded agencies with greater than 15 percent outlier episodes.
    Response: The purpose of our analyses was to show the impact of the 
outlier cap policy on agencies not likely to be receiving inappropriate 
outlier payments. It is clear that a 10 percent agency outlier cap 
would have a major effect on agencies in certain areas of the country 
involved in suspect inappropriate billing practices. As such, we did 
not want to have data from those agencies skewing the results. To 
clarify, we did not exclude agencies with either outlier payments or 
outlier episodes greater than 15 percent. We did exclude agencies from 
our analysis that received sizeable outlier payments (totaling at least 
$100,000), had high ratio of outlier payments to total HH PPS payments 
(30 percent or more), and were located in the counties in Florida, 
Texas and California where program integrity issues had been 
identified. Those agencies simultaneously satisfying all three of these 
exclusion criteria were considered highly suspect for inappropriate 
billing practices. We also excluded a small number of agencies that had 
fewer than 20 Medicare HH PPS episodes, believing that Medicare 
beneficiaries account for such a small part of their business that they 
are not representative of the types of agencies we are most concerned 
about disadvantaging with an outlier cap policy. Finally, we excluded a 
few additional agencies because they, too, were located in those same 
counties experiencing program integrity issues, and thus we did not 
want to have data from those agencies skewing the results either.
    Comment: Some commenters suggested that the proposed outlier 
policies will put small HHAs out of business, while larger HHAs will be 
impacted only slightly. A commenter suggested that small HHAs will have 
to transfer their complex patients to larger HHAs that generate enough 
income to receive outlier patients, leaving small HHAs with limited 
service offerings and more competitive disadvantages. The commenter 
further asked CMS to further research the impact that the 10 percent 
cap will have on HHAs that generate $2 million or less. Another 
commenter stated that special consideration should be given to smaller 
HHAs with fewer than 50 patients with low socioeconomic status (SES). 
The commenter also stated that CMS should take into account that there 
are cultural and racial reasons why certain areas may have more home 
health chronic patients. Another commenter stated that our proposed 
outlier policies would eliminate a safety net for HHAs that typically 
treat higher needs patients. Some commenters cautioned CMS to analyze 
carefully the effects of such an outlier policy to ensure that HHAs and

[[Page 58083]]

beneficiaries and rural and under-served areas are not adversely 
affected. A number of commenters urged CMS to ensure that HHAs that 
legitimately serve sicker/more clinically complex patients are not 
penalized or put out of business, causing access issues for 
beneficiaries. Another commenter suggested that in some areas lacking 
of other post acute settings available to beneficiaries, HHAs may have 
higher outlier costs. There was, however, a commenter who stated that 
the proposed outlier policy assumes some financial loss from outlier 
episodes, but that the commenter's analysis on freestanding HHAs 
indicates that some HHAs have lower costs than those costs assumed in 
the proposed policy. Consequently, these HHAs with lower costs may be 
able to profit from abusing the outlier policy, even with a smaller 
outlier pool and provider level cap.
    Response: Our analysis (see proposed rule at 74 FR 40956) shows 
that when the counties with program integrity problems are removed, the 
vast majority of the remaining providers have outlier dollars below 10% 
of their total home health expenditures and thus will not be affected 
by the policy. Further mitigating the effects of the outlier policy is 
that the base rates for all episodes are being increased by 2.5%. An 
alternative, as was discussed in the proposed rule, would be to 
eliminate the outlier policy altogether, an option that some providers 
might find even less appealing. While we continue to believe that our 
proposed outlier policy would not negatively impact the access to home 
health care, we believe it prudent to carefully monitor the impact that 
this new policy may have on access to home health care. Therefore, we 
are finalizing our proposed outlier policy, but for CY 2010 only. We 
will closely monitor data trends and we may make this policy, or some 
variation of this policy, permanent in future rulemaking. We believe 
that a final outlier policy for CY 2010 that includes a 10 percent 
agency level outlier cap, a target of approximately 2.5 percent for 
outlier dollars as a percentage of total HH PPS payments, returning 2.5 
percent back into the HH PPS rates, and a 0.67 FDL ratio is the 
appropriate policy at this time.
    Comment: Some commenters opposed the proposed outlier policy, 
stating that it penalized HHAs that treat insulin-dependent diabetes 
mellitus (IDDM) patients. These commenters stated that this policy 
would ultimately end up causing patients with IDDM to be denied 
treatment, and thus jeopardizing their lives. The same commenter stated 
that IDDM patients have always been the exception to the rule, ``end in 
sight''. The commenter went on to say that this policy would be life 
threatening to insulin dependent diabetics because they would have no 
one to administer their insulin. The commenter stated that they were 
one of the few HHAs that accepted these types of patients, and that if 
the 10 percent outlier cap were implemented, there would be no HHA to 
take these patients, resulting in insulin mismanagement, increased 
hospitalizations, and complications (including death). The commenter 
stated that Houston has a high population of IDDM patients, and that 
CMS should consider regions/geography as to how an outlier cap should 
appropriately be applied.
    A few commenters wanted to see exceptions for certain types of 
patients, while other commenters wanted to see exceptions for HHAs 
specializing in treating certain types of patients. One commenter 
proposed that HHAs specializing in chronic disease management 
(diabetes, congestive heart failure (CHF), wound care, etc.), with 
criteria to safeguard against fraud, should be exempt from the 10 
percent outlier cap policy. The commenter stated that criteria may 
include having specialty providers working with the HHA and that 
enhanced services (placing the patient as an outlier) are necessary. 
The commenter pointed out that, in their State, an association of 
diabetes educators was working towards being able to certify HHAs with 
a ``Diabetes Education Program'' which could also be a requirement for 
those with outlier diabetics. HHAs providing that specialty care should 
be willing to collect and report data on outcomes to assure quality 
care is being provided. A commenter stated that while a 10 percent 
outlier cap may be appropriate in most cases, episodes in which IDDM 
patients are being served should be exempt from that policy. Another 
commenter suggested that an exemption for those HHAs willing to follow 
criteria for specialty care to safeguard against fraud should be 
excluded from the cap.
    Another commenter adamantly opposed the 10 percent outlier cap, as 
they specialize in diabetic care, and such a policy would affect the 
way they do business and their cash flow. The commenter stated that 
they would be forced to transfer IDDM patients to other HHAs. The 
commenter stated that such patients should not be punished by forcing 
them to change providers due to government policy rather than choice. 
The commenter also suggested that CMS do more research on the impact of 
such a change and the effects that such a change would have on 
competitive dynamics as well as ways to ``even the playing field.'' 
Another commenter suggested that CMS allow higher cap percentages for 
counties with high IDDM populations.
    Another commenter was opposed to the 10 percent outlier cap, 
stating that it would put their patients in jeopardy. The commenter 
went on to say that they see elderly and mentally disabled adults 
through Diabetic Outreach Services (DOS). The commenter stated that 
many patients in DOS have vision disturbances, cognitive impairment, or 
dexterity issues and are on the Medicare home health benefit for 
multiple daily insulin injections. Without the HHA, or a willing/able 
caregiver, these patients would likely dose incorrectly or not at all, 
leading to hospitalization, SNF placement, or death. The commenter 
further stated that those IDDM patients receiving services from home 
health agencies have fewer hospitalizations or urgent use of the 
medical system.
    A few commenters were opposed to the proposed outlier policy, 
stating that they take the ``difficult cases'' such as the unwanted 
children with psychiatric issues, low SES, IV, wound-care, and other 
diabetic cases, many of whom do not have caregivers. Many of their 
homebound patients are also vision impaired, have dexterity issues, or 
have dementia and/or Alzheimer's disease and require someone to be 
involved in their care. Those in assisted living facilities have even 
more specialized needs. The commenter stated that assisted living 
facilities are not always able to check glucose levels, and some are 
prohibited from administering insulin. The commenter stated that many 
patients cannot administer insulin safely, and families are unable to 
do so due to work schedules. The commenter wrote that incorrectly 
administered insulin can cause frequent calls to 911 and visits to the 
emergency room, and that poorly managed diabetes can cause 
hyperglycemia, hypoglycemia, and death. The commenter stated that if 
this outlier policy were to be implemented, their patients would end up 
in the hospital, only redirecting Medicare costs to high hospital 
bills. The commenter went on to say that their agency sees patients in 
the homes and assisted living facilities for ``house call'' diabetic 
services, and that patients who are homebound and residing in assisted 
living facilities would be adversely affected by this proposal. The 
commenter stated that putting a cap on outliers will force HHAs to 
``dump'' IDDM patients, causing concern about these patients losing 
access to quality care.
    Response: Excessive billing for IDDM patients in counties with 
program

[[Page 58084]]

integrity concerns is one of the main reasons necessitating the new 
outlier policy. However, we are sensitive to the commenter's concerns 
that homebound IDDM patients receive diabetes management support; 
likewise, we are sensitive to the support and disease management needs 
of patients with chronic diseases such as other types of diabetes, CHF, 
and wound care. Under Medicare's home health benefit, agencies are 
expected to provide education and training to help IDDM (and other 
diabetic) patients self-manage their diabetes. Many homebound patients 
with diabetes require short-term management for skilled observation, 
assessment, teaching and training activities. If the patient is unable 
to learn to self-manage, including self-administer medication, the home 
health agency would be expected to provide the teaching and training to 
a care-giver or family member. There will always be a subgroup of 
patients who cannot learn self-management, do not have a willing and 
able caregiver, and/or have no community support. However, as discussed 
in the proposed rule, our analysis shows us that after excluding HHAs 
in certain areas of the country where fraudulent billing practices are 
suspected, we expect that less than 2 percent of all Medicare HHAs 
would be affected by a 10 percent cap on outlier payments, and that of 
that less than 2 percent of HHAs, almost all are located in urban areas 
where beneficiaries have other choices. We also expect that the ability 
of agencies to receive 10 percent of their total payment in outliers 
would partially compensate agencies for the care associated with this 
subgroup. The outlier policy in the HH PPS was never intended to fully 
compensate HHAs for episodes that incur unusually high costs due to 
patient home health care needs. Rather, the intent of the outlier 
policy is to mitigate the negative financial impact that unusually high 
cost patients have on HHAs. We believe that our final outlier policy 
for this rule, that includes a 10 percent per-agency cap on outlier 
payments, is consistent with that intent. Our analysis shows us that 
approximately 70 percent of HHAs receive between 0 percent and 1 
percent in outlier payments. Therefore, we believe our final outlier 
policy (which includes a 10 percent cap on outlier payments at the 
agency level) is reasonable and responsible. We also encourage home 
health agencies to take advantage of the help and support available 
from organizations such as the American Diabetes Association, the 
Indian Health Service, and the American Association of Diabetic 
Educators regarding innovative techniques associated with diabetes self 
management training (DSMT). Collaborating with these organizations may 
allow agencies to achieve greater success in enabling IDDM patients 
and/or their caregivers to better achieve self-management, and may 
provide the agencies with innovative care suggestions regarding their 
IDDM patients. CMS will closely monitor utilization trends of IDDM home 
health patients to assess the impact this policy may have on their 
access to care. Specifically, we plan to look at pre-2010 data to 
analyze trends of home health usage by IDDM patients, looking also at 
patterns of their Medicare utilization prior to the home health 
episode, and will compare those patterns with current usage.
    Comment: A commenter stated that while MedPac may have reported 
that beneficiaries have access to an adequate number of HHAs, the 
reality is that many HHAs limit acceptance of high- utilization 
patients due to lack of resources or to protect their bottom line. The 
commenter also stated that they accept referrals for patients that 
other agencies will not admit. Another commenter stated that they would 
not be able to accept these types of patients if the proposed outlier 
policy were implemented, stating that they already take a 20 percent 
loss on these patients, which they offset with the few low-utilization 
short episodes they receive. The commenter stated that their agency 
will be restricted in the number of high utilization, sicker patients 
that they will accept. The commenter stated that many HHAs will not 
gamble with reimbursement calculations, timing, and cash flow issues 
that would be associated with a 10 percent cap. Consequently, the 
commenter believed that there would be no agency for many of the 
patients to turn to, and therefore this would likely result in an 
access to care issue.
    Response: While experience varies from year to year, on average, 
the increased cost of sicker patients should generally be offset by the 
decreased cost for other patients. As stated in an earlier response to 
comments, based on our analysis (which excludes HHAs in certain areas 
of the country involved in potentially fraudulent billing practices), 
we expect that less than 2 percent of all Medicare HHAs may be affected 
by a 10 percent cap on outlier payments, and of this group of HHAs who 
may be affected by the 10 percent outlier cap, a vast majority are 
located in urban areas where beneficiaries have other choices. That 
being stated, an overwhelming majority of HHAs will not be affected by 
the 10 percent outlier cap, and thus will be in a position to accept 
patients who legitimately need home health services, and meet the 
eligibility requirements for the Medicare home health benefit.
    Comment: A few commenters generally supported the proposed outlier 
policy, but recommended modifications to the policy. Generally 
speaking, some commenters requested that an appeals process be created 
for HHAs that CMS initially determined to have exceeded the 10 percent 
cap. The concern here was that such a cap could potentially affect 
legitimate outlier cases. As such, a commenter stated that situations 
could evolve in which high needs patients receiving care at one HHA are 
forced to change agencies during a potentially critical time. This 
commenter also found it concerning that we would have a cap policy that 
could potentially not allow for reimbursement for a valid outlier case. 
Another commenter suggested that CMS target areas where the data 
indicate the overutilization of outliers, rather than applying the 
policy to all HHAs in the country. We also received the following 
recommended modifications: (1) The cap should be put in place no 
earlier than 2011 (different versions of a delay included that of a 
delay until it is clear that Congress has addressed the issue, while 
another version suggested phasing-in the 10 percent cap by starting 
with a higher cap of 15 or 20 percent); (2) CoPs should be amended to 
allow agencies to discharge outlier patients when it can be estimated 
that a HHA will exceed the cap; similarly, CoPs should be amended to 
permit a HHA to deny admission to an outlier patient when its estimated 
cap will be exceeded. CoP amendments should also address patient notice 
rights; (3) During pendency of cap discharges, allow an exception to 
the cap if a HHA can show that it took all reasonable measures to 
secure alternative care for qualified patients; (4) Establish an 
exemption if the provider exceeding cap can show that patients served 
are qualified and that no other HHA is available to admit them; (5) 
Establish a registry of HHAs that report availability to accept outlier 
patients; (6) Issue ``best-practice'' guidelines for dealing with 
outlier patients; (7) The Secretary of HHS should coordinate regulatory 
efforts with current proposals in Congress that would modify outlier 
standards. Not doing so could result in piecemeal enactment which could 
put HHAs at higher risk; (8) Clarify that the application of the cap 
calculation is based solely on outlier adjustments.

[[Page 58085]]

    Response: An appeals process would be cumbersome and difficult to 
implement for such a small percentage of situations. HHAs should be 
able to predict whether they will be affected by a 10 percent outlier 
cap policy based on past utilization and, in legitimate situations, be 
able to point the beneficiaries to alternatives. CMS is moving forward 
with implementation of the 10 percent outlier cap for CY 2010, 
effective January 1, 2010. With suspect fraudulent outlier billing 
practices continuing to increase, we believe it crucial to implement 
this policy now (CY 2010) rather than delay. Additionally, a delay, 
while maintaining the current FDL ratio of 0.89, would not be possible. 
In such a scenario (that is, a delay), CMs would have to either 
eliminate the outlier pool altogether, or raise the FDL ratio 
significantly (see CY 2009 HH PPS Update Notice at 73 FR 65357), so as 
to maintain a 5 percent outlier pool, if the 10 percent outlier cap 
were not implemented this year. However, CMS does not believe that 
eliminating the outlier policy or raising the FDL ratio is the 
appropriate policy at this time. Revisions to existing CoPs do not need 
to take place in order to implement this outlier policy. CoPs do not, 
and are not intended to, address or restrict the ability of HHAs to 
discharge patients. The HHA is required to accept patients with a 
reasonable expectation that the patient's medical, nursing, and social 
needs can be adequately met by the agency at the patient's place of 
residence (42 CFR 484.18). The CoPs already address patients' rights at 
42 CFR 484.10. Given the availability of HHAs, and the estimated 
infrequency of circumstances where legitimate cases might exist, we do 
not believe that exemptions are necessary. As noted in a previous 
response to comments, as stated in the proposed rule (at 74 FR 40957) 
and finalized in this rule for CY 2010 only, the outlier policy will 
include a 10 percent cap on outlier payments at the agency level. That 
is to say, an agency's outlier payments are to be capped at 10 percent 
of its total HH PPS payments (of which outlier payments are a 
component). For any claim with an outlier payment, if it is determined 
that paying the outlier portion of the total HH PPS payment for that 
claim would result in the HHA exceeding the 10 percent cap in outlier 
payments, the outlier portion of the claim would not be paid at that 
time. However, the regular HH PPS payment (based on the HHRG that 
applied to that claim) would not be subject to that 10 percent outlier 
cap, and thus would be paid. Any HH PPS payment adjustment (that is, 
PEP, recoding for therapy visits, etc.) other than the outlier payment, 
would also continue to apply to the claim.
    Comment: A commenter agreed with the approach, but stated that the 
overarching problem is that beneficiary needs have increased and that 
the flaw is not in the outlier policy but in low reimbursement. The 
commenter suggested that CMS develop more accurate methods to deal with 
HHAs that ``gamed'' the outlier policy, versus putting forward the 
proposed policy. The commenter asked CMS to consider something akin to 
the hospice cap, but with a modifier to allow for HHAs with sicker 
patients.
    Response: We disagree that the flaw is in the low reimbursement 
rates. The newly refined 153-HHRG case-mix model now reflects different 
resource costs for early home health episodes versus later home health 
episodes and expanded the case-mix variables included in the payment 
model. The newly refined model also replaced the previous single 10-
therapy threshold with three therapy thresholds (6, 14, and 20 therapy 
visits), with gradual payment increases between the first and third 
therapy thresholds. The newly refined model also includes six severity 
levels at which it pays for non routine medical supplies (NRS). We 
believe that the new model has addressed the areas identified by the 
industry as ``not being accounted for'' in the previous 80-HHRG case-
mix model. Sicker patients are accounted for in the more detailed 153-
HHRG case-mix model. Home health margins, even by industry standards, 
have been generous.
    Comment: Several commenters whose parents are Medicare HHA patients 
were opposed to the proposed outlier policy, stating that their parents 
are diabetic and unable to administer insulin; that the children's work 
schedules are not flexible, and consequently the adult children are not 
consistently available to assist their parents. These commenters stated 
that they rely on the HHA to administer the insulin to their parents. 
These commenters emphasized that their parents have paid into the 
Medicare program and that it should be available to them in their time 
of need. The commenters also stated that changing this would be a 
horrible burden on them, as they would have to have their parents move 
into their homes, which would be a difficult situation. Commenters 
stated that their parent's independence would be lost forever and that 
their overall health would suffer. These commenters stated that they 
may have to change jobs, which was not an option at this time; 
otherwise their parents would not get their insulin regularly. The 
commenters stated that if their parents would not move in with them, 
their parents would go into a nursing home. Commenters believed this 
was an attempt by CMS to save money while risking the lives of 
patients. These commenters urged CMS to reconsider the outlier policy. 
One commenter, an insulin patient, stated that he/she was unable to 
give himself/herself shots and did not have family to do so on a 
regular basis. The commenter went on to say that if nurses cannot come 
to their home, he/she would end up in the hospital or nursing facility. 
The commenter stated that the cost to be in a nursing facility would be 
more than the cost of a home health nurse who comes to his/her home. 
The commenter requested that CMS not change how it pays the home health 
nurse.
    Response: CMS is sympathetic to the fact that some beneficiaries 
who need help administering insulin. The new outlier policy is intended 
to address the inappropriate, potentially fraudulent billing practices 
that we are seeing. In our view, there is no reason to expect a large 
number of insulin patients unable to treat themselves would all be 
utilizing a single provider, and this is, in fact, generally the case 
in all areas of the country except those with severe program integrity 
issues. We believe that by implementing such a policy, in conjunction 
with the continued program integrity efforts, including possible 
payment suspensions for HHAs with questionable outlier billing 
activities, Medicare beneficiaries will continue to receive the 
services they need, while providers receive appropriate payment for the 
services they provide. We are committed to addressing potentially 
fraudulent activities, especially those in areas where we see 
suspicious outlier payments, and will monitor and aggressively pursue 
actions towards agencies where inappropriate billing of outlier 
payments is identified.
    Comment: One commenter urged CMS to re-examine the outlier policy 
in its entirety, as some HHRGs have more underlying cost variation than 
others. Another commenter recommended that CMS modify use of HHRG 
scores and related payment in PPS for diabetic episode and outlier 
payments, rather than limit the number of diabetic patients that an HHA 
can care for and be paid for. A commenter suggested we re-examine the 
outlier payment policy in its entirety. This commenter wrote that some 
HHRGs have significantly more underlying variation in costs than 
others. Additionally, he wrote that high therapy cases are unlikely to 
have

[[Page 58086]]

outliers because of therapy dominance. He added that agencies with a 
high proportion dual eligibles have different visit profiles due to the 
more acute needs of dual eligibles. This commenter believes that these 
issues suggest that a uniform fixed loss threshold and loss ratio 
across all HHRGs may not be appropriate policy. The commenter suggested 
that a more customized policy should be examined and may obviate the 
need for a cap altogether. Another commenter suggested that good HHAs 
may easily exceed the cap, but fraudulent HHAs may use outlier clients 
as a method of getting cross-referrals from other fraudulent HHAs for 
non-outlier patients. The commenter stated that the proposed policy 
will not eliminate fraud/abuse or save Medicare dollars because most 
outlier patients would be spread to all providers in an area. CMS would 
still be paying for just as many outlier cases, but they would be 
spread amongst more providers. The commenter suggested that a better 
approach would be to increase the FDL ratio so that estimated outlier 
dollars were close to the 5 percent allowed under statute. The 
commenter also suggested that another approach could be to cap payment 
based on the published per visit rates, multiplied by the number of 
visits billed, or the outlier payment, whichever is lower. Another 
commenter recommended grandfathering in current patients, as HHAs 
shouldn't abandon patients already receiving services. The commenter 
also recommended grandfathering in each HHA's current percentage of 
outliers and using that percentage as the cap for that HHA. A few 
commenters also suggested that in setting caps, CMS should consider the 
population of the county.
    Response: The premise of the new outlier policy is not that the 
case-mix model is not accurately capturing the cost of resources in 
providing care for these patients. Rather, the new outlier policy is 
being implemented due to the frequency of inappropriate and possibly 
fraudulent billing practices. The commenter's suggestion of increasing 
the FDL to pay 5 percent in outlier dollars is precisely what CMS had 
been doing in past years, before the highly suspect, and possibly 
fraudulent, billing activities became so prevalent. As we stated in a 
previous response to comments, our analysis shows us that minus the 
suspect fraudulent activity, we believe that 2.5 percent is a more 
appropriate target for outlier payments as a percentage of total HH PPS 
payments. As such, we do not believe that simply increasing the FDL to 
pay outlier payments at 5 percent of total HH PPS payments is the 
appropriate policy at this time. Increasing the FDL ratio would prevent 
many legitimate outlier cases from being considered as such, 
essentially hurting the larger majority of HHAs that are billing 
appropriately. The commenter's suggestion that we pay HHAs the lower of 
the published per-visit rates multiplied by the number of visits 
billed, or the current calculated outlier payment, would not be an 
acceptable alternative, as the end result would be to pay the outlier 
payments as currently calculated. Using a HHA's current outlier 
percentage as the cap for that HHA would ignore the problematic billing 
that has been occurring, and would do nothing to control the problem 
that exists today with outliers in home health.
    Comment: A commenter stated that there exist a number of negative 
effects, which are significant and should be modified/addressed, if the 
proposed outlier policy were implemented, which include: (1) Legitimate 
benefits would decrease due to lack of access resulting in a poorer 
quality of care due to the incentives to restrict care to diabetics to 
avoid outlier status; therefore, people would not receive care at home 
due to outlier status, resulting in an increase in the use of 
hospitals, nursing homes and emergency rooms; (2) Costs will increase; 
(3) Increasing number of patients will be displaced from homes, 
creating emotional and physical hardship on patients and families, yet 
patients respond best in a comfortable home environment; (4) It would 
be more cost-effective and promote better care if the HHA were to 
specialize in diabetic care, as long as such care was medically 
necessary and the patient was homebound.
    Response: As stated in an earlier response to comments, based on 
our analysis (which excludes HHAs in certain areas of the country 
involved in suspicious billing practices), we expect that less than 2 
percent of all Medicare HHAs will be affected by a 10 percent cap on 
outlier payments, and that of this group of HHAs who may be affected by 
the 10 percent outlier cap, a vast majority are located in urban areas 
where beneficiaries have other choices. Thus, an overwhelming majority 
of HHAs will not be affected by the 10 percent outlier cap, and will be 
in a position to accept patients who legitimately need these services, 
and meet the eligibility requirements for the Medicare home health 
benefit. As such, we do not believe that increased costs will occur as 
a result of increases in hospital or nursing home stays, or visits to 
emergency rooms.
    To summarize, we believe that our final outlier policy, for CY 2010 
only, that includes a 10 percent cap on outlier payments at the agency 
level, in concert with a new 2.5 percent outlier pool (as opposed to 
the existing 5 percent outlier pool), and returning 2.5 percent back 
into the national standardized 60-day episode rates, the national per-
visit rates, the LUPA add-on payment amount, and the NRS conversion 
factor, with a 0.67 FDL ratio, to be the appropriate policy at this 
time.
    We will continue to monitor the trends in outlier payments and any 
related policy effects. Specifically, we plan to analyze overall 
national spending on outlier payments relative to the new 2.5 percent 
outlier pool by geographic area and provider type. We also plan to look 
at outlier payments, per HHA, relative to the 10 percent cap on outlier 
payments at the agency level by geographic area and provider type. So 
far as activities related to high suspect outlier payments, CMS is 
continuing with program integrity efforts including possible payment 
suspensions for suspect agencies. We will re-examine this policy in 
future rulemakings, and will consider further adjustments to this 
policy for CY 2011 and future years.
    Implementation strategy for a 10 percent agency level cap on 
outlier payments.
    CMS plans on implementing the 10 percent cap policy by making 
determinations as to whether or not a given outlier payment exceeds the 
10 percent cap on a ``rolling'' basis. Under our planned implementation 
approach, for each home health provider, the claims processing system 
will maintain a running tally of the year-to-date (YTD) total home 
health payments. The claims processing system will ensure that each 
time an outlier claim for an agency is processed, actual outlier 
payments will never exceed 10 percent of the agency's YTD total 
payments. While an agency will always receive its base episode payment 
timely, the outlier portion of the claim will be paid as the agency's 
YTD payments support payment of the outlier. We plan to utilize a 
periodic reconciliation process under which outlier payments that were 
withheld are subsequently paid if the HHA's total payments have 
increased to the point that its outlier payments can be made. This 
reconciliation process will always result in additional cash flow to 
HHAs, and so we believe it is preferable. With regard to revenue 
tracking, distinct coding will be used on the HHA's remittance advice 
when outlier

[[Page 58087]]

payments are withheld, assisting receivables accountants in identifying 
and accounting for the differences between expected and actual 
payments.

B. Case-Mix Measurement Analysis

    In the CY 2008 HH PPS final rule with comment period, we stated 
that we would continue to monitor case-mix changes in the HH PPS and to 
update our analysis to measure change in case-mix, both nominal and 
real. As stated in the proposed rule, we have continued to monitor 
case-mix changes and our latest analysis supports the payment 
adjustments which we implemented in the CY 2008 HH PPS.
    The case-mix analysis used for this rule uses PPS data from 2007. 
As discussed in the proposed rule, this analysis indicates a 15.03 
percent increase in the overall observed case-mix since 2000. We next 
determined what portion of that increase was associated with a real 
change in the actual clinical condition of home health patients. As was 
done for the CY 2008 final rule, using Abt Associates' 6-phase model, 
we examined data on demographics, family support, pre-admission 
location, clinical severity, and non-home health Part A Medicare 
expenditure data to predict the average case-mix weight for 2007. Our 
best estimate is that approximately 9.77 percent of the 15.03 percent 
increase in the overall observed case-mix between the IPS baseline and 
2007 is real; that is, due to actual changes in patient 
characteristics.
    The estimate of real case-mix change continues to decrease for a 
number of reasons: First, because the nominal change in case-mix 
continues to grow, real case-mix as a percentage of the total change/
increase in case-mix becomes less. With each successive sample, 
beginning with 2005 data (in the CY 2008 final rule), the predicted 
average national case-mix weight is moving very little because the 
variables in the model used to predict case-mix are not changing much. 
At the same time, the actual average case-mix continues to grow 
steadily. Thus, the gap between the predicted case-mix value, which is 
based on information external to the OASIS, and the actual case-mix 
value, grows with each successive sample. Consequently, as a result of 
this analysis, CMS recognizes that a 13.56 percent nominal increase 
((15.03 - (15.03 x 0.0977)) in case-mix is due to changes in coding 
practices and documentation rather than to treatment of more resource-
intensive patients.
    We stated in our CY 2008 HH PPS proposed and final rules that we 
might find it necessary to adjust the offsets as new data became 
available. Given that we have adjusted the rates for two consecutive 
years by -2.75 percent in each year (2008 and 2009), based on 2007 
data, if we were to account for the remainder of the 13.56 percent 
residual increase in nominal case-mix over the next two years, we 
estimate that the percentage reduction in the rates for nominal case-
mix change for each of the remaining two calendar years (2010 and 2011) 
of the case-mix change adjustment would be 3.51 percent per year. If we 
were to account for the remaining residual increase in nominal case-mix 
in CY 2010, we estimate that the percentage reduction to the national 
standardized 60-day episode rates and the NRS conversion factor would 
be 6.89 percent. In the proposed rule, we proposed to move forward with 
our existing policy, as implemented in the August 22, 2007 CY 2008 
final rule, of imposing a 2.75 percent reduction to the national 
standardized 60-day episode rates and the NRS conversion factor for CY 
2010. We stated that we would continue to monitor any future changes in 
case-mix as more current data became available and update as 
appropriate.
    Comment: A number of commenters were opposed to further payment 
reductions based on estimates of nominal CM change. One commenter wrote 
that CMS assumes upcoding, yet 2008 HHA payments are $1 billion less 
than 1997 payments. Several commenters noted that HHAs have faced years 
of market basket update reductions during this decade, and that 
combined with annual wage index uncertainties and reform pending in 
Congress, and a case-mix adjustment on top of these other reductions, 
the survival of HHAs is threatened. The commenter stated that 
reductions may force the quality providers out of business, 
jeopardizing access, and leaving only those who ``game'' the system to 
provide care. A commenter wrote that this is contrary to the interests 
of Medicare's long term solvency or growing future care needs, and 
another wrote that reductions hurt innovation and quality. 
Additionally, a commenter suggested that the effect of the reductions 
will be to decrease dollars available for treating patients, and will 
indirectly limit access for patients with heavy care needs.
    Response: We understand that some aspects of the payment 
environment have been uncertain at times. However, the total of 1997 
payments is not comparable to the expenditures following the Balanced 
Budget Act (BBA) of 1997, which took effect in August of that year. The 
BBA led to a markedly lower use rate of home health services by 1999. 
Although the use rate has been rising since the historically low level 
brought by the BBA, the change in use rate is one reason for lower 
payments compared to the past. Analyses by the Medicare Payment 
Advisory Commission (MedPac) indicate that home health agency margins 
have been generally very healthy. Congressionally mandated updates and 
other payment changes under law have been made in the knowledge that 
agencies are generally not at risk of becoming insolvent. The 
continuing certification of new agencies and capital access for the 
industry, both of which are documented in MedPac's March 2009 annual 
report, are additional indications that Medicare payment is generally 
adequate or more than adequate. Furthermore, MedPac reported that 
freestanding agencies' cost per case grew at a relatively low annual 
average rate of 1.5 percent per year between 2002 and 2007. This low 
rate of cost growth compares favorably with annual payment updates of 
those years, notwithstanding Congressionally mandated reductions to 
some updates. Net updates for 2008 and 2009, incorporating the case-mix 
change adjustment, have been modestly positive. In terms of impacts on 
innovation, as we have noted elsewhere in our responses, some agencies 
have been able to make investments in new technology during these 
years. Home health quality measures have been generally stable or 
improving. In short, at this time, we do not believe that the survival 
of home health providers is threatened, and we have no indication that 
quality, access, and innovation are being compromised.
    Comment: One commenter agreed with MedPAC's suggestion to establish 
``profit/loss corridors'' as a financial safeguard for HHAs. Several 
commenters urged CMS to suspend further case-mix changes until a 
solution is found that ensures continuing access to home health care, 
and offered to work with CMS on the issues surrounding the case-mix 
change reductions. Several suggested that CMS meet with the industry to 
discuss the data and methodology, and find consensus. Another suggested 
that CMS refrain from additional case-mix adjustments until an 
impartial third party, the industry, and Congress review the process 
for analyzing case-mix.
    Response: We appreciate the public's continuing effort to provide 
us with comments and creative suggestions. The Secretary does not have 
authority under current law to establish profit/loss corridors. Should 
these be mandated, we welcome suggestions about how to

[[Page 58088]]

implement them. Congress specifically addressed the possibility that 
nominal coding change might occur when it authorized (in BIPA 
legislation) the Secretary to offset such changes by reducing rates 
(see Section 1895(b)(3)(B)(iv) of the Act), and we are cognizant of the 
large reduction in costs per episode that accompanied prospective 
payment. Therefore, in 2007 we proposed and finalized a phased 
reduction in coding-based payment increases that we believe were not 
reflected by changes in underlying acuity, that were incurred between 
FY2000 and CY2005. We have continued to monitor nominal case-mix change 
through CY2007, and found continuing evidence that such changes were 
occurring. We received public comments on the case-mix change 
adjustment methodology in the past, and we have enhanced the model 
consistent with comments where necessary. As we noted in the proposed 
rule, after developing more data, we intend to test additional 
enhancements pursuant to comments we received in this rulemaking. At 
this time, we do not know whether any future results incorporating 
enhancements will measure additional real case-mix change than we have 
already accounted for using the existing model and data. We continue to 
welcome suggestions on how to improve our measurement method in a 
feasible and cost-efficient manner.
    Comment: A number of commenters were opposed to the continuing 
decision to apply case-mix reductions to all agencies regardless of 
their average case-mix or rate of case-mix change. A commenter stated 
that the analysis focused on averages and does not account for States 
or regions with slower, more modest growth. A few commenters suggested 
that the Abt Associates reports showed that freestanding nonprofit 
agencies have not contributed to nominal case-mix change at a level 
comparable to for-profits, yet all agencies are suffering equal cuts. 
The commenter believes such a policy was unfair, and damaged agencies 
that CMS should be rewarding for their compliance, particularly non-
profits. Several commenters stated that the reductions 
disproportionately affected hospital-based agencies or smaller 
agencies, particularly in rural areas.
    While one commenter recognized the logistical problems if CMS were 
to excuse some agencies from further case-mix reductions, such as those 
that didn't have high average case-mix or which had not increased their 
average case-mix at a rate suggesting nominal change, the commenter 
wrote that CMS is obligated to apply policy fairly. The commenter 
suggested that we exempt agencies with low case-mix weights or which 
have not had excessive case-mix change from further across-the-board 
reductions.
    Response: We continue to believe that it is more appropriate and 
feasible to implement a nationwide approach to case-mix change 
adjustment. An individual agency approach would be administratively 
burdensome and difficult to implement. Policies to address the identity 
of agencies in light of changes to organizational structures and 
configurations would need to be developed. Furthermore, smaller 
agencies might have difficulty in providing accurate measures of real 
case-mix change because of their small caseloads. We do not foresee 
being able to administer an individualized rate reduction fairly and 
effectively. Nor do we believe it would be possible to administer a 
regional or other classification-based reduction fairly. Any sort of 
special regional payment adjustments, the most common example being a 
rural add-on payment, would need to be legislated by Congress. Contrary 
to the statement a commenter made about the conclusions of the Abt 
Associates reports, the reports documented that freestanding voluntary/
nonprofit agencies had relatively low average case-mix weights in 
FY2000. The analysis allowed changes in the ownership/affiliation 
composition of the population of agencies to contribute to real case-
mix change, but it did not identify differences in case-mix growth 
since FY2000 within any class of agencies. Further, it seems unlikely 
that some significant number of agencies has avoided nominal case-mix 
change. It is counterintuitive to believe that agencies in general have 
not advanced and updated their application of OASIS and ICD9-CM 
diagnosis coding. In accordance with continuing educational efforts on 
the part of CMS, the State OASIS coordinators help agencies understand 
and apply OASIS, and other public and private assistance services that 
have developed around the proper and accurate interpretation of OASIS 
items and selection of the correct response to each item. That process 
of advancing and updating the application of OASIS is a natural 
outgrowth of the fundamental approach to payment adopted under the HH 
PPS.
    Comment: A commenter wrote that CMS should adopt criteria to 
identify and protect ``safety net'' agencies from the impact of case-
mix payment reductions, which admit patients based on need rather than 
on profitability. This commenter is concerned that these safety net 
agencies would be pushed out of the Medicare program by negative 
margins, creating a loss of critical patient access. This commenter 
stated that CMS should pay for the reasonable cost of care so that 
safety net agencies could be viable.
    Response: Currently, the law does not provide for payment 
differentials for ``safety net'' agencies. Additionally, we believe 
that it would be extremely difficult to accurately identify safety-net 
providers, and any such process to identify and pay such providers 
differently could be inaccurate, prone to program vulnerabilities and 
costly to administer. Additionally, it would require CMS to enforce 
compliance with whatever criteria we used to identify such providers, 
to ensure that these providers continue to qualify for the payment 
differential. Rather, CMS is currently focusing on demonstrations which 
have a goal to reward providers based on the high quality of care 
provided, and savings associated with high quality, such as decreased 
hospitalizations.
    Comment: Some commenters suggested further refinements to the case-
mix adjustment model as a way of mitigating effects of the case mix 
change adjustment to the episode payment rate. The commenters mentioned 
giving credit for the absence of a caregiver, Medicaid status, 
residence in high crime areas, use of wound care and other supplies, 
use of innovative technologies, and for patients with advanced stages 
of debilitating chronic diseases.
    Response: We appreciate the commenters' concerns and point out that 
we addressed the absence of caregivers in our CY 2008 final rule. OASIS 
item M0350 asks whether there are assisting persons in the home, other 
than the home care agency staff. On average, episodes without 
caregivers might be underpaid under the current case-mix model, but our 
analysis also showed that the payment difference was not large. 
Moreover, we continue to believe this variable raises significant 
policy concerns. We restate our belief that a case-mix adjustment 
should not discourage assistance from family members, nor should it 
make patients believe that there is some financial stake in how they 
report their familial supports while they are receiving home health 
services. Adoption of this measure of case-mix risks introduction of 
negative incentives into the case-mix adjustment system; these negative 
incentives potentially could have adverse effects on home health 
Medicare beneficiaries.

[[Page 58089]]

    We also considered Medicaid status. After accounting for a broad 
range of clinical and functional factors which predict resource use, 
the presence of a Medicaid number was found to add a negligible amount 
to the predicted resource use, suggesting that having Medicaid is not a 
strong predictor of resource use. Given the administrative burdens of 
verifying the current Medicaid status of a patient, we judged that, on 
balance, adding Medicaid enrollment to the case-mix model was not 
warranted.
    We know of no data to measure residence in high crime areas 
reliably for purposes of payment operations; nor are there studies 
documenting the role of this variable in patient-by-patient cost 
differences. The idea of incorporating technology use, such as wound 
care supplies and other innovative technologies, in determining the 
payment for specific patients raises significant policy issues about 
the role of the government in driving agency decisions about the mix of 
inputs to be used in delivering care. Our approach has been to document 
and pay in accordance with the average costs incurred when treating 
patients with different characteristics, but not to pay in accordance 
with agency technology choices. To the extent that costly technology is 
reflected in NRS costs and charges routinely available in 
administrative data, and use of such technology is the standard of care 
in specific circumstances, then we welcome proposals for identifying 
these situations in current data collection processes so that we can 
study their impact on NRS costs. We believe that any proposals from the 
public should balance the burden from adding complexity to coding 
systems and data collection processes on account of a small number of 
episodes against the impact on payment accuracy. Instruments such as 
OASIS are not designed to focus on uncommon situations. Regarding 
refinements for advanced stages of debilitating chronic diseases, we 
have concerns that measurement of this aspect of case mix would not be 
reliable, and could lead to inequities and nominal case mix change. 
Nonetheless, we welcome specific suggestions in future comment periods 
for measurement items and instruments that promise to reliably capture 
this dimension of health status.
    Comment: Some commenters suggested that in the review of real vs. 
nominal case-mix change, CMS consider factors such as OASIS 
implementation, educational initiatives to teach agencies how to more 
comprehensively assess patient needs and more accurately code OASIS, 
improvements in documentation, and the quality of care.
    Response: As we have noted in responding to similar comments in 
previous regulations, improved OASIS implementation, staff education, 
and improvements in documentation are indications of coding change, not 
an actual change in patient case-mix. While they may represent a much-
desired improvement in the accuracy of data used to manage the care of 
patients, they do not represent cost increases related to the health 
status of patients. We have no basis to recognize the quality of care 
as a factor to consider in the review of nominal vs. real case-mix 
change. The legal basis for making payment reductions is nominal case-
mix increases that can result from changes in coding practices and from 
coding improvements, as well as from financial incentives in the 
payment system.
    Comment: Commenters cited an evolving home health population and 
changes in patient characteristics as factors to consider in the review 
of nominal vs. real case-mix change. A number of commenters mentioned 
that the patients entering home health are sicker, have more complex 
conditions with more co-morbidities, and require a more costly inter-
disciplinary approach. One noted that the 1997 to 2000 increase of 
13.4% in case-mix weights demonstrates the substantial effect that 
changes in patient characteristics can produce; this commenter wrote 
that if real case-mix could increase prior to HH PPS, it is 
unreasonable to assume that none of the change after that point is 
real.
    Response: In our case-mix change model, we measured demographic and 
health status factors, and utilization indicators of health status, and 
then related them to the HH PPS case-mix weight in a regression 
equation. The methodology attempts to capture the effects of an 
evolving home health population by measuring the entire set of factors 
at two points in time. Having established the relationship between 
predictors and case-mix weight using data from the first time period, 
we then use the model to predict the case-mix weight based on the 
factors during the second time period. Therefore, this approach does 
consider changes in the home health population. To the extent that 
patients entering home health are sicker, have more complex conditions, 
and more comorbidities, the variables predicting the case-mix weight in 
the case-mix change model reflect such changes to a large extent. As we 
indicated in the proposed rule, we intend to test additional variables 
to pick up possible unmeasured population changes. It is not certain 
that these attempts will identify additional real case-mix change. If 
home health practice has evolved between FY2000 and today to provide an 
inter-disciplinary approach, this is not necessarily a change in the 
real case-mix of the treated population; it could well be a change in 
treatment practices, given that evidence from the case-mix change model 
and other evidence we have presented in previous regulations point to 
little change in the health characteristics of home health users. 
Notwithstanding the question of whether any shift towards an 
interdisciplinary approach has occurred, data cited by the Medicare 
Payment Advisory Commission and our own analyses of home health margins 
indicate that home health agencies are being adequately paid under the 
HH PPS.
    Contrary to the assertion of the specific commenter that we had 
concluded that all of the change in case-mix was nominal, we identified 
nearly one-tenth of the difference between the average case-mix weight 
for FY2000 and CY2007 as real case-mix change. We allowed for that 
amount in the rate reductions. Regarding the large 13.4 percent change 
in average case-mix weight between 1997 and 2000 (that is, the last 
year of the IPS), in the 2007 proposed rule (72 FR 25393), we reviewed 
and discussed comparative OASIS data from the original Abt Associates 
case-mix study (1996-1998) and from FY 1999, as well as several studies 
of the effects of the Balanced Budget Act, and specifically, of the 
Interim Payment System (IPS).
    The literature and data identified several changes in the health 
and demographic characteristics of the home health user population. An 
important implication of those studies and data was that patients with 
intensive or lengthy needs for nursing and personal care services as 
opposed to short-term or rehabilitative needs were less likely to be 
found in the national home care caseload as a result of the IPS (72 FR 
25393). We also noted in that discussion that changes in therapy 
utilization during the final year of the IPS period, after the 
proposals for the HH PPS were issued, could have reflected an 
anticipatory response to the coming payment system. Such a behavioral 
response on the part of home health agencies would therefore have 
contributed to the 1997-2000 13.4 percent change in the average case-
mix. As we indicated in our discussion, it is very possible that a 
certain amount of nominal change occurred during 1997-2000; this would 
have been due to the

[[Page 58090]]

period October 28, 1999, through September 30, 2000, which is the 
period after the proposed rule was issued.
    Comment: Some commenters had specific criticisms of the real case-
mix change model. Some wrote that the methodology for assessing changes 
in patient characteristics relies on DRG changes, but only half of HHA 
patients are discharged directly from a hospital to an agency. In 
commenting on the case-mix change model, some commenters stated that 
data on ownership structure were not related to patient 
characteristics. They went on to write that the methodology gave no 
consideration to changes in care delivery in other health sectors (for 
example, the growth in Medicare Advantage), or in reimbursement 
methodologies that drive patients into home health care.
    Response: Far greater than half of the observation units--that is, 
episodes--in the samples had hospital discharge data. The model uses 
data from the last hospital stay the patient had before the home health 
episode. Approximately 90 percent of the random sample of episodes in 
the case-mix change model, regardless of the time period (FY2000 or 
CY2007), had a hospital stay record. Not all of these hospital stay 
records were classifiable to a specific DRG because of sample size 
considerations, but we were able to classify every hospital stay into a 
medical or a procedure group, based on information in the hospital stay 
record. For patients with multiple episodes, the last discharge did not 
necessarily lead directly to home health admission, but it would still 
reflect fairly recent health characteristics. For a small proportion of 
episodes, the hospital stay may have occurred distantly in time (but no 
more than four years earlier). In alternative models described in the 
Abt Associates Final Report (April, 2008), hospital stays for some 
conditions were not used if they did not occur relatively close in time 
to the home health episode, but the results did not change the 
essential conclusions we drew from the analysis.
    The predictions of the case-mix weight from the model were adjusted 
for the ownership/affiliation category of the agency that delivered the 
care under the episode. We made this adjustment to account for the 
historically different coding practices and apparent case-mix levels 
associated with different kinds of ownership. We did this out of an 
abundance of caution, because of a paucity of literature explaining 
these differences. It is plausible that the large decline in hospital-
based agencies that occurred after the last year of the IPS could have 
affected the national case-mix in a real sense. In any case, had we not 
made the ownership/affiliation adjustment, we would have found less 
real case-mix change from our analysis.
    We disagree with the commenter's conclusion that we have ignored 
the effects of reimbursement methodologies that drive patients into 
home health care. Variables in the model account for prior utilization 
in acute care hospitals, long-term-care hospitals, inpatient 
rehabilitation facilities and skilled nursing facilities. The model 
relates these various kinds of utilization to the case-mix weight in 
the ensuing home health episode. We used the model and the levels of 
prior utilization that occurred by CY2007 to make predictions of the 
real case-mix weight for that year. In fact, the net effect of all the 
Medicare cost and utilization variables in the model was to raise the 
predicted average case-mix weight, consistent with what appears are the 
commenter's assumptions. However, the increase was small. To the extent 
that the nature of the relationship between the specific kind of prior 
utilization and the ensuing episode's case-mix weight has changed, the 
case-mix prediction methodology may not capture the entire impact of 
reimbursement changes in other parts of Medicare. However, in its Final 
Report (April, 2008), Abt Associates conducted a test for possible 
changes in the relationship between predictor variables and case-mix, 
and this test did not support the idea that changes in the model 
variables' relationship to case-mix had occurred. Moreover, we believe 
we have captured some of the other settings' reimbursement effects by 
measuring change in utilization of prior settings. In addition, the 
model includes an array of other demographic and health-related 
variables that are expected to detect change in the health status of 
the user population, which is the real underlying issue raised by 
reimbursement changes.
    As we indicated in the proposed rule, we intend to test changes to 
the model that may represent the growth in Medicare Advantage.
    Comment: Several commenters wrote that CMS' methodology for 
estimating nominal case-mix change is imprecise and relies on limited 
sources of data. One commenter noted that the methodology was not based 
on clinical analysis but on statistical inferences in a complex model 
that is so abstract and complex that significant data errors were 
undetected. The commenter noted that it is plausible that the average 
case-mix continues to grow, since the ratio of for-profit to nonprofit 
agencies increases each year, and for-profit agencies have higher case-
mix. Several commenters wrote that nominal case-mix change estimate is 
a guesstimate, and is not sufficient or accurate. Some commenters 
suggested CMS engage additional consultants to use alternative methods 
of evaluation, and cross-compare outcomes, before the proposed 2011 
adjustment is finalized. Another commenter asked for an independent 
audit of Abt's work.
    Response: We believe that our methodology for quantifying the 
contribution of real case-mix change to total case-mix change between 
FY2000 and CY2007 is a reasonable approach, but it is only part of the 
evidence base for our conclusion that nominal case-mix change has been 
pervasive. As we noted in the proposed rule, the full evidence base was 
presented in a series of regulations, beginning with the May 4, 2007, 
proposed rule (72 FR 25393). We discussed a variety of statistical 
data, including but not limited to resource use measures in comparison 
to case-mix weight changes, shifts among severity levels of the 
clinical, functional, and service dimensions of the case-mix system, 
shifts in the share of high-therapy episodes, differential changes in 
responses among various OASIS items (payment-related items and non-
payment-related items), and a detailed analysis of the evolution of 
OASIS guidance and manual instructions and definitions that could have 
affected case-mix item responses. We presented admission rates over 
time for five specific conditions suggested by commenters, and examined 
the time to admission for those conditions. These results were updated 
in the proposed rule, and suggested that changes were insufficient to 
explain the substantial upward trend in case-mix. We also noted the 
steep learning curve faced by agencies in adapting to the new 
environment presented by OASIS, resulting in improved coding. We also 
pointed out that coding changes are not foreign to any payer system 
when payment methodology becomes more dependent on provider 
ascertainment of health status information. The evidence base is the 
best available, given the infeasibility of auditing large chart samples 
from both time periods, which may be assumed to be the type of clinical 
analysis that a commenter suggests. As we noted in the proposed rule, 
we are investigating enhancements to the model to capture more elements 
of real case-mix change that may be unmeasured. However, whether these 
enhancements will reveal any additional real case-mix change than we 
have already measured is unclear at this time.

[[Page 58091]]

    From the point of view of statistical methodology, the model is a 
basic linear model and not complex; although it includes several 
variables. Our application of the model relies on large, representative 
samples. The preparation of the data has been subject to some technical 
corrections, but the basic approach has remained the same and is not 
subject to significant error. Furthermore, insofar as there have been 
data errors, they have not been so significant as to alter by large 
amounts the size of the payment reductions we made based on the model 
findings. As we have noted elsewhere in our responses, the model does 
allow for the contribution of for-profit agencies to real case-mix 
change.
    We have no plans for undertaking alternative methods of evaluation. 
An independent audit is not necessary because the model and results of 
the application of the model have been presented in detail in the Abt 
Associates reports. However, we do intend to test enhancements to the 
model (described in the proposed rule) and welcome suggestions from the 
public for modifications to the statistical approach and additions to 
the data that are cost-efficient to make.
    Finally, as a point of clarification, the 2.71 percent reduction 
for CY 2011 is not a proposed adjustment. In the CY 2008 final rule (at 
72 FR 49843) we promulgated our policy of a 2.75 percent reduction for 
3 years (CY 2008, CY 2009, and CY 2010) and a 2.71 percent reduction 
for CY 2011. Nothing in this final rule changes what was finalized in 
the above rule, with regards to payment reductions to address the 
increase in nominal case-mix.
    Comment: Some commenters believed that the increased therapy needs 
or increased involvement of physical therapists in assessing patients 
have contributed to appropriate growth in HHRGs. They wrote that the 
change in focus from disease management to restorative therapy has 
increased HHRGs and benefited patients. A few suggested that the 
process for evaluating case-mix change related to therapy utilization 
must include in-depth review of the merits of individual claims, as the 
limited use of proxies is unreliable. Several commenters believed that 
the analysis failed to adequately evaluate whether changes in case-mix 
are due to abusive over-utilization of therapy, fraudulent or abusive 
coding, erroneous coding, revised coding instructions, or improved 
quality coding. Where changes are due to abusive or fraudulent 
practices, several commenters suggested that CMS address those abuses 
with the specific providers, rather than applying a punitive adjustment 
to all agencies. Alternatively, commenters suggested CMS use 
enforcement to conduct targeted claims review and deny payment where 
case-mix weights are not supported by the plan of care.
    Response: We agree that there has been a shift toward 
rehabilitative services, but we believe commenters are confusing a 
change in the home health ``product'' with actual change in the health 
status of the treated population. As MedPAC has noted for years, with 
the implementation of the HH PPS, the service payment unit underwent 
changes: the unit of payment changed from visits to 60-day episodes, 
and the content of the home health product changed from that of the 
1997-2000 period--consisting of fewer visits, shorter stays, and more 
therapy with less aide care (MedPAC, March 2004, ``Report to Congress: 
Medicare Payment Policy'', Section 3D, ``Home Health Services''). In 
any future enhancement of the real case-mix change model, we may 
investigate allowing for the possible increased use of physical 
therapists as the assessing clinician. We would do this on the 
assumption that increased use of therapists to make assessments is a 
change that is not a consequence of the agencies' learning curve in the 
HH PPS environment or of new financial incentives that began in October 
2000. We would do this despite the fact that it could be stated that 
differing assessment results arising from the use of nurses vs. 
therapists as assessing clinicians do not signify differences in the 
health status of the treated patient. In any case, we expect that such 
a change to the model would have a very small impact on our 
conclusions.
    To the extent that abusive over-utilization of therapy and 
fraudulent or abusive coding are responsible for case-mix growth 
between FY2000 and CY2007, it would be preferable to remove agencies 
engaging in these activities from the data analysis. However, it is 
difficult for us to identify these agencies on a large scale, so we 
find the commenter's suggestion impractical. Furthermore, we believe 
that the overwhelming majority of providers are not committing fraud, 
which would mean that eliminating the fraudulent providers would not 
have a large impact on our results. If commenters know of fraud being 
committed in their areas, we urge them to inform the Office of the 
Inspector General and the CMS Regional Office. As stated earlier, CMS 
is committed to addressing suspect fraudulent activities, especially 
those in areas where we see suspicious outlier payments, and will 
monitor and aggressively pursue actions towards agencies where 
inappropriate billing of outlier payments is identified.
    Comment: Several commenters suggested we conduct an impact analysis 
of the proposed rule relative to case-mix, include an evaluation of 
access in each year of any adjustment, and consider all factors related 
to access. These commenters felt that the impacts in the proposed rule 
were factually and legally inadequate and therefore violated the 
Regulatory Flexibility Act.
    Response: We appreciate the commenter's suggestion; however, our 
current approach to impact analysis does include the effect of the rate 
reduction related to nominal case-mix change. Our impact analysis is 
subject to OMB review and meets legal requirements. We will consider 
how to increase our monitoring of access going forward. We would 
appreciate any specific suggestions from commenters on ways to do this.
    Comment: A few commenters questioned the assumptions surrounding 
LUPA episodes which were used in the case-mix change analysis. One 
wrote that nearly all ``creep'' may have been offset if CMS had 
modified its actuarial assumption of 5 percent LUPA incidence to actual 
occurrence once PPS was in place. The commenter asked that we disclose 
the LUPA incidence for 2001 through 2006. The commenter felt that using 
a 5 percent LUPA incidence, rather than the higher, actual LUPA 
incidence, has led to agencies being underpaid. This commenter added 
that instead of lowering rates using a ``creep'' theory of 
justification, CMS should have raised the base rate calculation 
methodology with the refinement process, at a minimum for the LUPA mis-
application and also for the real need severity CMS determined exists. 
This commenter wrote that the combination of LUPA incidence, an outlier 
rate below 5 percent, changing the single therapy threshold to multiple 
therapy thresholds, and the increased incidence of high therapy cases 
constitutes more than 100 percent of the observed increased in the 
average case-mix weight.
    Response: Based on a 10 percent random beneficiary sample, our data 
show the LUPA incidence rates from 2001 to 2007 were the following: 
15.06 percent, 14.11 percent, 13.35 percent, 12.53 percent, 12.12 
percent, 11.16 percent, 10.54 percent. We note that LUPA incidence 
rates, while higher than the forecasted 5 percent, continue to decline. 
LUPA episodes were not used in the measurement of case-mix

[[Page 58092]]

change in either our analysis or in the Abt Associates model of real 
case-mix change. We have no evidence that LUPA episode assumptions 
caused agencies to be underpaid; in fact, margin analysis shows PPS 
payments have been adequate. It should be recognized that we proposed 
to adjust the episode national standardized payment amount to be 
consistent with an outlier expenditure proportion of less than 5 
percent of total outlays. This upward adjustment is a continuation of 
the methodology we have used since the beginning of PPS; the upward 
adjustment is simply to provide for a lower rate of outlier 
expenditures than the 5 percent assumption we have traditionally used. 
We made this proposal in conjunction with the proposal to cap outlier 
payments at 10 percent on an per-agency basis. We have no basis to 
change payment rates on account of the refinement of the therapy 
thresholds. Even if agencies return to more clinically based therapy 
treatment plans, resulting in a new distribution of therapy visits per 
episode and reduced total expenditures, we would not make any payment 
rate changes in isolation from other issues, such as the change in the 
mix of visits since the original PPS final rule, and change in the 
total number of visits in a 60-day episode. Similarly, we do not 
believe it is appropriate to adjust payment rates for the deviation of 
LUPA episodes from the forecasted 5 percent, in isolation from other 
issues, such as addressing the issue of lower visits per episode 
existing today, as compared to the number of visits per episode on 
which the HH PPS rates were originally based. We believe that the 
appropriate time and place to deal with any re-estimates, in these 
multiple areas, is if and when a rebasing for the rates were to take 
place.
    Comment: A commenter wrote that the elimination of the single 
therapy threshold was an attempt by CMS to align payment incentives 
with patient care needs. This commenter felt the case-mix change 
primarily reflects growth in therapy utilization. A different commenter 
asked CMS to clarify how going from single to multiple therapy levels 
did not constitute a ``double dip'' penalty. This commenter wrote that 
the multi-level therapy equation model HHRG modifications may have 
lowered the relative value for all higher therapy cases, but the 
commenter couldn't confirm this since CMS did not release the data. The 
commenter stated that ``re-jiggering'' of service factors was likely 
directed toward lowering reimbursement rates and having therapy 
services delivered in a more clinically driven manner. The commenter 
added that the relative loss of aggregate case-mix weight under the 4-
Equation model equals measured case-mix weight change, which is 
tantamount to a ``double dip''. Another commenter wrote that the data 
he analyzed showed that 95 percent of case-mix growth was a direct 
result of higher levels of service domain in care delivery under PPS. 
He added that when PPS was originally proposed, and again in 2007, CMS 
acknowledged that it did not have good data to measure or apply case-
mix based on patients' service needs, yet CMS stated that it believed 
that the multi-level therapy thresholds was an improvement over the 
single threshold approach.
    Response: The following table illustrates the change in the 
distribution of therapy visits per episode since FY2000:

                       Percent of Total Episodes by Number of Therapy Visits per 60-Day Episode: Interim Payment System and HH PPS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Time period
            Number of therapy visits             -------------------------------------------------------------------------------------------------------
                                                     FY2000        2001         2002         2003         2004         2005         2006         2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
None............................................         60.0         54.5         52.3         51.2         49.9         49.6         49.6         49.8
1 to 3..........................................          9.7          9.1          9.4          9.6          9.7          9.6          9.3          9.1
4 to 6..........................................          7.4          8.0          8.3          8.3          8.4          8.3          8.1          7.9
7 to 9..........................................          6.2          6.4          6.4          6.2          6.1          6.1          5.9          6.0
10 to 12........................................          4.8          8.3          9.2         10.4         11.3         11.8         12.3         12.6
13 to 15........................................          3.4          4.8          5.3          5.6          5.9          6.0          6.2          6.3
16 to 18........................................          2.5          3.3          3.5          3.5          3.7          3.8          3.8          3.8
19 to 20........................................          1.2          1.4          1.5          1.4          1.4          1.4          1.3          1.3
21+.............................................          4.7          4.2          4.1          3.8          3.7          3.5          3.5          3.2
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
    Total.......................................        100.0        100.0        100.0        100.0        100.0        100.0        100.0        100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: FY2000 data from 100% sample of claims from Oct. 1, 1999, through Sept. 30, 2000.
Data presented for 2001 through 2007 are Calendar Year data.
Claims were grouped into 60-day episodes.
PPS data based on a 10% random beneficiary sample of PPS episode claims beginning with 1/1/2001.

    We agree that growth in therapy utilization of ten visits or more 
was a significant factor in case-mix change, because the ten-visit 
therapy threshold produced a large increase in an episode's case-mix 
weight. The table above shows that episodes of ten to eighteen therapy 
visits grew steadily as a proportion of total episodes under HH PPS. 
Ten to twelve therapy visits, a range that would generally be most 
profitable to agencies, grew the most, and by 2007 such episodes 
accounted for about one quarter of all the episodes that had a therapy 
visit. These episodes, of course, also were among those with the 
highest case-mix weights and had a minimum case-mix weight of 1.4847.
    One goal of the case-mix refinements was to better match payments 
with agency cost experience under PPS; thus we used 2005 data for 
estimating the final case-mix model that was used for the 153-group 
system. Changing to multiple therapy thresholds with a gradual increase 
in payment better aligns costs and payments and avoids incentives for 
providers to distort patterns of good care that would occur at each 
proposed therapy threshold. As a disincentive for agencies to provide 
more care than is appropriate, we proposed that any per-visit increase 
incorporate a declining, rather than constant, amount per added therapy 
visit. It should be understood that the refined case-mix methodology 
redistributed the resource costs expended in 2005 to the new set of 153 
groups we defined from the severity levels developed from the four-
equation model generating OASIS item scores.

[[Page 58093]]

Instead of a single high therapy range, one based on average resource 
costs for all episodes with 10 or more therapy visits (including those 
with the very highest number of therapy visits), the refined system had 
multiple therapy ranges, with the payment addition for therapy being 
based on all episodes with therapy visits in the stated range. 
Therefore, the right tail of the distribution (that is, cases with the 
highest therapy visits and thus the highest resource costs for therapy) 
is not figuring into the payment increment until the 20+ therapy visit 
level is reached. Thus, it was our intention to have lower payments for 
episodes with 10 to 12 therapy visits, so as to better align costs and 
payments.
    The redistribution of resource costs among the new 153 groups 
resulted in some lowering of case-mix weights, as just described, but 
all the resource costs expended in 2005 were accounted for in the 
payment system. The final case-mix change adjustment addresses nominal 
case-mix change and is applied across all case-mix groups in a similar 
manner. Therefore, the final case-mix adjustment is completely separate 
from the realignment of payments to the 153 groups, and thus there was 
no double-dipping. In sum, the multiple therapy thresholds and the 
case-mix change adjustment are unrelated and do not doubly adjust the 
rate as each adjustment is clearly warranted by the data.
    We do not have enough information to verify the commenter's finding 
that 95 percent of case-mix growth was a direct result of higher levels 
of service domain in care delivery under PPS.
    Comment: Several commenters wrote with suggestions or alternatives 
to the case-mix analysis. One commenter wrote that CMS should continue 
to work on developing post-acute care national assessment tool for use 
across all settings, which would allow CMS to better determine what 
settings were appropriate for patients based on acuity. It would also 
allow CMS to understand how changes in home health case-mix are 
affected by the type of patient admitted to home health. Some wrote 
that CMS should allow implementation of OASIS-C before any further 
case-mix reductions are made. A commenter suggested that we fully 
analyze and compare information within OASIS-C with the development and 
testing of the Continuity Assessment Record and Evaluation (CARE) 
instrument. Another commenter felt that the data from OASIS-C would be 
helpful to CMS in determining real changes in case-mix rather than 
those stemming from coding or documentation improvements.
    A number of commenters felt that the proposed 2011 adjustment was 
too steep, particularly given low or negative profit margins, and 
recommended a minimum 4-year phase-in; another suggestions that we 
consider the impact on low-margin agencies before finalizing the rule. 
Some commenters suggested that the complexities of the case-mix 
methodology warranted making relevant CMS staff and contractors 
available to respond to questions regarding the assessment methods 
prior to expiration of the comment period. Additionally, these 
commenters suggested that CMS make all data used in the analyses 
available, and provide a 120-day comment period to allow time for 
expert analysis to evaluate the methodology and findings. A different 
commenter was strongly opposed to reductions for 2011 until more 
analysis of medical necessity of the care provided was complete. This 
commenter encouraged us to reduce or eliminate the creep attributed to 
the shift to provision of higher therapy services unless clear evidence 
existed that the therapy services were not medically necessary. This 
commenter suggested we make a distinction in the application of creep 
between therapy and non-therapy HHRGs, and recommended that physical 
and occupational therapists be added to MAC review departments with 
mandatory education and experience as qualifications for medical 
review.
    Response: We thank the commenters for these thoughtful comments and 
suggestions. We assure the commenter that we are continuing our work 
associated with the post-acute care demonstration. We are currently in 
the early stages of data analysis of the assessment data and resource 
data which has been collected to date. We will finish data collection 
by the end of calendar year 2009. We remind the commenter that the 
analysis of these data is a multi-year project, and that the analysis 
will consider the data collected via the CARE instrument, the validity 
and reliability of those data, and the strength of the items as payment 
predictors. CMS plans to present the analysis of the data collected 
during the demonstration and associated recommendations to Congress in 
the summer of 2011. Regarding the commenters' suggestions that we wait 
to make further case-mix reductions until we assess the OASIS-C data, 
we remind the commenter that the OASIS-C revisions did not 
significantly change payment items. We believe that the commenter may 
be suggesting that CMS analyze OASIC-C non-payment items to assess 
whether these new items would enable CMS to better identify the health 
status of the patient, and whether these new items might be more 
reliable in assessing real patient acuity change versus that which is 
unrelated to real changes in acuity (nominal). It is important to note 
that because we are just beginning to collect these items in CY 2011, 
that sort of comparative analysis would only be possible after several 
years of OASIS-C data collection. We may consider the suggestion that 
we account for increases in nominal case-mix over a longer period of 
time, in future rulemaking. In this final rule, we are not accounting 
for additional changes in nominal case-mix which we identified from 
current data analysis. Rather, we are maintaining the policy, finalized 
in CY 2008, to reduce CY 2010 base episode payments by 2.75 percent. 
With regards to the suggestion for a 120-day comment period, we are 
unfortunately unable to adopt such a comment period given our 
rulemaking timeframes, but we will continue to make every attempt 
possible to share our analyses with the public in as timely as 
possible. Regarding the commenter's suggestion that CMS should assess 
the medical necessity of therapy visits before applying up-coding 
reductions, as we described in an earlier comment, we find this 
suggestion impracticable. With finite resources, it would be 
challenging to perform a medical review on every claim which includes 
therapy.
    Again, as a point of clarification, the 2.71 percent reduction for 
CY 2011 is not a proposed adjustment. That percentage reduction was 
promulgated in the CY 2008 final rule (72 FR 49843).
    Comment: A commenter stated that while he did not assess changes in 
home health case-mix, an increase in case-mix unrelated to severity in 
2007 confirms the need for continuing review of annual case-mix change. 
The commenter noted that nominal changes in case-mix had been found 
when major revisions were implemented in other payment systems, 
suggesting particular scrutiny of the 2008 changes in case-mix was 
warranted. The commenter wrote that if additional nominal case-mix 
change was indicated, CMS should adjust payments as appropriate. The 
commenter further recommended that we combine the planned reductions 
for 2010 and 2011, and reduce payments in 2010 by 5.5 percent, and that 
payments should be rebased to a level equal to average costs in 2011.
    Response: We thank the writer for these comments. We agree with the 
commenter that we need to continue to analyze current data as they 
become available to us and update our

[[Page 58094]]

identification of nominal case-mix using these more current data. We 
are currently analyzing 2008 data to assess the impact of our CY 2008 
refinements, and determine the effect these refinements may have had on 
nominal case-mix growth and will address the need for additional 
reductions to the HH PPS rates in future rulemaking.
    Comment: Another commenter wrote that CMS uses MedPAC's reports of 
strong profit margins and high levels of new entrants to bolster the 
view that access will be unaffected after the full creep cutbacks are 
implemented. This commenter wrote that an industry association 
disagrees with MedPAC's methodology, and concluded that one-third to 
one-half of HHAs would lose money when creep reductions are fully 
implemented. The commenter questioned MedPAC's use of a sample of HHA 
cost reports representing less than 60 percent of HHA visits. This 
commenter asked that the full information from MedPAC be released and 
subject to review since CMS is supporting its case-mix reduction using 
that report.
    Response: We would like to assure the commenter that the analysis 
and associated methodology CMS used to differentiate between real and 
nominal case-mix growth involved extensive analysis, which is fully 
documented in the Abt report, publicly available via the HH PPS Web 
site at http://www.cms.hhs.gov/Reports/downloads/Coleman_final_April_2008.pdf.
    We understand that the commenters are concerned about whether we 
are taking into consideration the financial conditions of hospital-
based home health agencies. As MedPAC noted in its March 2009 report, 
financial margin estimates using hospital-based providers are impacted 
by the allocation of overhead costs from the hospital. We agree with 
this assessment and believe that using this information would not 
provide an accurate view of the overall industry margin or the impact 
of the proposed change to the payment system.
    Comment: A commenter disagreed with our choice of data used for the 
creep analysis, saying that he was not convinced that data from the 
final year of IPS could serve as a base period from which to measure 
nominal growth in case-mix. The commenter questioned whether these data 
were representative of post-PPS, and noted that there was a learning 
curve with OASIS. The commenter wrote that until we made the ``derived 
base period'' information available to the public, we should defer 
further creep adjustments and roll back the first two stages. He also 
questioned Abt's use of just 313,447 IPS OASIS assessments, and was 
concerned that 18 percent of the episodes could not be evaluated since 
the OASIS could not be reliably linked to claims. He also noted that 
much has been made of improvements in OASIS coding over time, which 
suggests that the OASIS was not properly coded at the time of IPS. He 
questions the validity of this sample since many HHAs were not filing 
OASIS at the time, and concluded that it was illogical to assume the 
IPS data could be reliable bases for measuring creep. He also suggested 
we make public the data showing actual use of S2 and S3, and the IPS 
data used as a proxy for S2 and S3 cases. He noted that there was no 
M0825 data in OASIS for the final IPS period; therefore one could argue 
that the final IPS data understates case-mix.
    Response: We disagree that OASIS data collected during the last 
year of IPS were so poor as to be unusable to measure the case mix 
during that period. Agencies were not supposed to be unfamiliar with 
OASIS in the fall of 1999. Medicare first proposed making OASIS 
mandatory in March 1997. The development of OASIS had been supported 
and publicized by a large industry group over the years (transcript of 
June 24, 1997, meeting of National Committee on Vital and Health 
Statistics, accessed at http://www.ncvhs.hhs.gov/970624b1.htm#oasis). 
OASIS was discussed in professional and research journals (for example, 
see Home Healthcare Nurse, May 1997, Vol. 15/5: 340-342). OASIS version 
B-1 was released in October 1998, one year before our observation 
period for the IPS baseline began. After first publishing a final 
regulation in January 1999 whose effective date was delayed on April 
27, 1999, Medicare re-finalized the OASIS regulations in June 1999. 
Agencies were instructed to begin OASIS data collection for Medicare, 
Medicaid, and all other skilled services patients by July 19, 1999. 
This was 2.5 months before the beginning of our IPS baseline 
observation period, though they did not have to transmit data (other 
than for testing purposes) until August 25, 1999. The Health Care 
Financing Administration (HCFA), CMS's predecessor agency, issued a 
comprehensive OASIS Implementation manual in July 1999 containing item-
by-item instructions about how to complete the OASIS assessment. It was 
for the use of HHA agency staff who would be implementing OASIS as a 
uniform core data set. HCFA conducted a national meeting of State OASIS 
coordinators in mid-September 1999 to train them in responding to 
agency requests for information. Four million assessments were 
submitted by HHAs to State agencies from July 1999 to January 2000 
(CMS-3006-F, Dec. 23, 2005). This is an indication that agencies were 
actively working with OASIS from the start of the OASIS effective date. 
Our inability to match all simulated episodes to an OASIS stems mainly 
from the fact that time points of data collection for OASIS before HH 
PPS did not necessarily match the starting points of simulated 
episodes. During that period, OASIS was collected for outcomes 
purposes, not payment purposes.
    The learning curve with OASIS is an important reason why nominal 
case-mix growth should be expected. However, we based our case-mix 
change adjustment on the evidence that patient health status did not 
change substantially, notwithstanding that improved understanding of 
and application of OASIS occurred. Contrary to the commenter's 
implication that the IPS sample was small, our sample size of hundreds 
of thousands is extremely large. Scientifically, sample size adequacy 
does not hinge on the ratio of the sample to the total population, but 
does depend on the actual absolute numbers of observations. Regarding 
the 18 percent of IPS episodes without a matched OASIS, we appreciate 
the commenter's concern, but we have good reason to believe that the 
sample we used is representative. Based on our understanding of the 
main cause of the OASIS shortfall (described above), we do not have 
reason to infer a bias in the assessments that we do have. We also note 
that the sample's average is consistent with an average from an initial 
episode sample. Initial episodes are more likely to have a matched 
OASIS (89 percent for initial episodes vs. 75 percent for subsequent 
episodes) so using data based on initial episodes should reduce 
concerns about sample representativeness. The estimate of average case-
mix weight that we get from the sample combining initial and subsequent 
episodes differs from the estimate we get from the initial episodes 
sample in the direction we expect (1.096 vs. 1.125). That is, the 
estimate from total (initial and subsequent) episodes is lower because 
health conditions measured in OASIS and used in the case-mix system 
tend to be more severe around the time of admission. Furthermore--and 
most important in terms of the basis for our policy decision to adjust 
payment to compensate for nominal case-mix change--using an initial 
episode sample would produce the same percentage

[[Page 58095]]

growth in case-mix as using a combined initial and subsequent episode 
sample. As we stated in the CY 2008 final rule (72 FR 49833): ``We used 
all episodes rather than just initial episodes. This change in our 
sample selection approach does not materially change the estimate of 
case-mix change, whether comparing the baseline to HH PPS 2003 or HH 
PPS 2005.'' Finally, modeling case-mix on an IPS sample that could 
possibly deviate in some respects from a fully representative sample 
would not necessarily produce distortions in the relationships found by 
the modeling procedure. Our conclusions about real case-mix change 
depend upon those relationships.
    As we have noted elsewhere in our responses to comments, we believe 
we have made available highly detailed information about our data and 
methodology in the Abt Associates reports (April 2008 and August 2009) 
and in our regulations. For years, claims and OASIS data have been 
routinely available for purchase from CMS for researchers who wish to 
analyze it and can guarantee the security of the data. We published 
data on the rates of use of S2 and S3 under the IPS baseline period and 
2003 in Tables 8 and 9 in the May 4, 2007 proposed rule (72 FR 25396-
25399). The table in this section, in a response to a comment, provides 
detailed annual therapy visit distributions and thereby reflects S2 and 
S3 rates year by year. We did not use M0825 in determining S2 and S3; 
instead, we used the therapy visits reported by providers on the 
matched paid claims.
    Comment: A commenter asked that we re-examine the case-mix weights 
for congestive heart failure (CHF), chronic obstructive pulmonary 
disease (COPD), and similar chronic conditions. She wrote that we claim 
HHAs are seeing fewer of such patients, and that she believes this is 
either due to coding practices or to agencies not accepting these 
patients. The commenter believes that the current method for accounting 
for patients with these conditions results in a very low case-mix 
weight. This low case-mix weight, coupled with high nursing needs, 
causes these patients to exceed available reimbursement, leading to a 
loss for the agency. The commenter asked that we increase points for 
these diagnoses, refine how shortness of breath is assessed and points 
calculated, and consider the speed at which such patients can perform 
Activities of Daily Living (ADLs), and not just whether the patient can 
do the ADL independently.
    Response: The case-mix model we finalized in the CY 2008 final rule 
recognizes more diagnoses than the original (FY2000) HH PPS model, and 
it includes the specific diagnoses mentioned by the commenter, CHF and 
COPD. Also, the CY 2008 case-mix model recognizes resource-intensive 
interactions (that is, combinations of conditions within the same 
episode). The model specifically recognizes the interaction of 
pulmonary conditions and ambulation: the cost of serving pulmonary 
patients with a limitation in ambulation is more during an initial 
episode, and this combination increases the case-mix score. We believe 
this interaction case-mix item does capture the burden of COPD on ADLs. 
Shortness of breath, as measured by OASIS item M0490, provides 
additional points for initial episodes. Providers receive points for 
these and other conditions identified from statistical modeling of the 
relationship between diagnoses and OASIS measures on the one hand, and 
resource costs on the other. Agencies also receive points for secondary 
diagnoses, thereby accounting for multiple co-morbidities.
    Furthermore, we implemented a case-mix adjusted payment for non-
routine supplies, such as those related to ulcers or wounds. All of the 
point values in the case-mix model represent the average addition to 
the resource cost of the 60-day episode when a patient has the 
condition associated with the points. The fact that agencies may 
encounter some cases more costly than the case-mix-adjusted payment is 
a result of the variability in patient needs inherent in the 
population. We believe that, on average, this model aligns payment and 
agency costs with acceptable accuracy. As shown in Table 1 of the CY 
2010 proposed rule (74 FR 40958), the proportion of episodes (initial 
episodes and all subsequent episodes) where the patient was discharged 
from the hospital prior to entering home health and had a hospital 
principal diagnosis of CHF has decreased by more than one-third since 
FY 2000. We did not publish a similar statistic for COPD. The 
statistics in Table 1 do not reflect coding practices in home health 
agencies; the conditions in Table 1 come from the hospital principal 
diagnosis preceding the episode (where the discharge occurred within 
the 14 days before the first day of the episode). As for refining the 
dyspnea and ADL measures in OASIS, we have reviewed all items in the 
course of developing OASIS-C. We made changes to selected items where a 
need for improvement was apparent. This review did not result in 
significant changes along the lines suggested by the commenter. 
Furthermore, it is unclear how the speed of ADL performance affects the 
resource costs for nursing care, beyond the added costs already 
accounted for in the point-bearing items mentioned earlier in this 
response. Finally, all changes to the OASIS instrument have to be 
balanced against the added burden imposed on the agency to measure 
performance reliably and accurately.
    To summarize, we are moving forward with our existing policy, as 
implemented in the August 22, 2007 CY 2008 final rule with comment, of 
imposing a 2.75 percent reduction to the national standardized 60-day 
episode rates and the NRS conversion factor for CY 2010. We will 
continue to monitor any future changes in case-mix as more current data 
become available. We will also continue to look at ways to enhance the 
Abt model, and depending on the availability of newer and additional 
data, look to take into account factors that might yet be unmeasured in 
the current model. Given the continued growth in nominal case-mix, we 
expect to revise upward the 2.71 percent reduction to the national 
standardized 60-day episode rates and the NRS conversion factor for CY 
2011 in next year's rule. Analysis in next year's rule will update the 
measure of the nominal increase in case-mix and compute the appropriate 
percent reduction to the national standardized 60-day episode rates and 
the NRS conversion factor to account for that increase.

C. Proposed CY 2010 Rate Update

1. The Home Health Market Basket Update
    We proposed a HH market basket update of 2.2 percent for CY 2010. 
This update was based on IHS Global Insight Inc.'s first quarter 2009 
forecast, utilizing historical data through the fourth quarter 2008. 
Since publication of the proposed rule, we have a revised market basket 
update based on IHS Global Insight Inc.'s third quarter 2009 forecast, 
utilizing historical data through the second quarter of 2009. The final 
HH market basket update for CY 2010 is 2.0 percent. A detailed 
description of how we derive the HHA market basket is available in the 
CY 2008 Home Health PPS proposed rule (72 FR 25356, 25435).
    Comment: One commenter stated the market basket increase of 2.2 
percent would not be sufficient to cover the increased costs of 
implementing OASIS-C, CAHPS, as well as increases in staffing costs. 
The ongoing phase-in of the case-mix ``creep'' adjustment would add to 
the financial burden of receiving a market basket increase

[[Page 58096]]

which is lower than the previous year's 2.9 percent. According to 
MedPAC, 25 percent of HHAs have negative profit margins. The increase 
in costs of operation will have a negative impact on the financial 
viability of these agencies.
    The commenter noted that not-for-profit HHAs are investing more of 
their revenue in attracting and retaining qualified HH staff. The 
shortages of nursing and physical therapy personnel are a major 
challenge. HHAs compete with other providers to attract these 
professionals.
    Response: We disagree with the commenter that the 2010 market 
basket update is not sufficient. The home health (HH) market basket is 
not designed to account for changes in total costs (such as those 
associated with the implementation of OASIS-C or other initiatives), 
but rather it is intended to measure the input price pressures that the 
average home health provider is expected to face in the coming year. 
The composition of the market basket itself is made up of a set of 
mutually exclusive and exhaustive cost categories that reflect the cost 
structure of the industry (in a given base year). The HH index's cost 
shares (or weights) are based on data reported on the Medicare cost 
report forms and are specific to home health agencies. Each cost 
category is assigned an appropriate price proxy whose projected 
movements are weighted by their respective cost shares resulting in the 
actual market basket update.
    We recognize that HH providers compete with the rest of the health 
care industry for nurses, physical therapists, and other health care 
personnel. To the extent that the cost structure of the HH industry 
changes over time, such as a greater share of expenses being devoted to 
wages and salaries, for example, that change in share is picked up 
during the rebasing process of a market basket. It has been our 
experience that the cost structure of the HH industry does not vary 
substantively from year to year. As a matter of practice, however, CMS 
periodically rebases its market baskets to reflect updated cost 
structures. The current HH market basket is based on Medicare cost 
report data from 2003 and, we believe, reflects the appropriate cost 
composition of the industry. We will continue to closely monitor the 
cost structure of the HH industry and will propose to rebase the market 
basket, as appropriate. Notably, the final update contained in this 
rule does reflect the expected competitive wage pressures associated 
with hiring health care personnel in the coming year.
    Comment: One commenter stated support for our proposal to provide 
the full market basket update of 2.2 percent in CY 2010. The commenter 
stated that this measure provides relief to HHAs that have been subject 
to market basket cuts for several years including a 0.8 percent 
reduction in the market basket for 2004 (July to December) and 2005, 
and a full 3.6 percent market basket reduction in 2006 (per provisions 
of section 5201 of the DRA of 2005).
    Response: We appreciate the commenter's support. We will 
incorporate the final market basket update of 2.0 percent into the CY 
2010 HH PPS rates.
2. Home Health Care Quality Improvement
    As part of the CY 2010 proposed rule, we proposed to consider OASIS 
assessments submitted by HHAs to CMS in compliance with HHA conditions 
of participation for episodes beginning on or after July 1, 2008 and 
before July 1, 2009 as fulfilling the quality reporting requirement for 
CY 2010. We proposed to reconcile the OASIS submissions with claims 
data in order to verify full compliance with the quality reporting 
requirements in CY 2010 and each year thereafter on an annual cycle 
July 1 through June 30 as described above. HHAs that meet the reporting 
requirements would be eligible for the full home health market basket 
percentage increase. HHAs that do not meet the reporting requirements 
would be subject to a 2 percent reduction to the home health market 
basket increase.
    In the proposed rule we described the impending transition from 
OASIS-B1 to OASIS-C. This revision to the current OASIS version B-1 has 
undergone additional testing, and has been distributed for public 
comment and other technical expert recommendations over the past few 
years. CMS received OMB approval to modify the OASIS data set and will 
require that this new version of OASIS (OMB  0938-0760) be 
collected on episodes of care beginning on or after January 1, 2010.
    In the proposed rule we also noted that as a result of implementing 
OASIS-C, we will update Home Health Compare to reflect the addition of 
the following 13 new process of care measures:
    [cir] Timely initiation of care,
    [cir] Influenza immunization received for current flu season,
    [cir] Pneumococcal polysaccharide vaccine ever received,
    [cir] Heart failure symptoms addressed during short-term episodes,
    [cir] Diabetic foot care and patient education implemented during 
short-term episodes of care,
    [cir] Pain assessment conducted,
    [cir] Pain interventions implemented during short-term episodes,
    [cir] Depression assessment conducted,
    [cir] Drug education on all medications provided to patient/
caregiver during short-term episodes,
    [cir] Falls risk assessment for patients 65 and older,
    [cir] Pressure ulcer prevention plans implemented,
    [cir] Pressure ulcer risk assessment conducted, and
    [cir] Pressure ulcer prevention included in the plan of care.
    Also under consideration are three additional process of care 
measures that may be added to home Health Compare based on results of 
consumer testing. Those additional process measures are:
    [cir] Drug education on high risk medications provided to patient/
caregiver at start of episode,
    [cir] Potential medication issues identified and timely physician 
contact at start of episode,
    [cir] Potential medication issues identified and timely physician 
contact during episode.
    Comment: One commenter stated that he believes a six to twelve-
month delay in implementation of OASIS-C would be necessary to 
accommodate a reasonable phase-in of such a significant change in 
OASIS. The commenter stated that the vendor community reports that it 
is not yet ready for OASIS-C. As a result, agencies can neither test 
the software changes needed nor can they begin training their clinical 
and information systems staff on the changes. As of mid-September 2009, 
CMS had not released the final interpretive guidelines for OASIS-C. 
There is simply not enough time to do all the planning, testing and 
training needed to successfully implement OASIS-C on January 1. The 
commenter believed outcome measurement is far too important to be 
implemented without adequate training and testing, and wrote that 
changes in OASIS implementation of this magnitude deserve a proper 
implementation process. He felt that the home health community has 
waited for many years for some of these changes, so waiting a few more 
months to do it right would be prudent.
    Another commenter stated that our proposal to require home health 
agencies to transition patient assessment data collection from OASIS B1 
to OASIS-C on January 1, 2010 was considered to be an appropriate 
timeline when proposed. However, he felt that in

[[Page 58097]]

light of the recently issued version OASIS-C (August 2009) and the fact 
that guidance and Q&As have not yet been made available, this would no 
longer be an appropriate target timeline. The commenter wrote that this 
timeline would not give software vendors and home health agencies 
sufficient time to complete programming, testing and education of 
clinicians. The commenter appreciated that CMS is undertaking several 
venues for educating providers on OASIS-C to ensure that all home 
health agencies have access to free training, but stated that there are 
too many unresolved issues to meet a January 1, 2010 implementation 
date. The commenter requested that CMS delay implementation of OASIS-C 
implementation until April 1, 2010.
    Response: We appreciate the magnitude of the effort required to 
transition to OASIS-C, but we believe that it will offer substantial 
benefits, in terms of improved support for agency quality improvement 
efforts and provision of enhanced quality information for providers and 
beneficiaries. The new data set also incorporates process of care items 
that measure agencies' use of evidence-based practices that have been 
shown to prevent exacerbation of serious conditions, can improve care 
received by individual patients, and can provide guidance to agencies 
on how to improve care and avoid adverse events. Making these 
improvements is a high priority for CMS, which is why we have proceeded 
on a well-considered course of data set development and field testing, 
solicitation of public comment, and revision of the data set, on a 
deliberate schedule over the past 4 years. Our experience in field 
testing showed that agency staff could be trained on the new and 
modified items in a relatively short period of time, and welcomed the 
improvements to the data set. We released the post-testing version of 
the data set in March 2009, and the initial OASIS Data Specifications 
on July 1, 2009, so that vendors could begin to develop the needed 
system changes. CMS has not received feedback from the vendor community 
to date, relating to lack of readiness for OASIS-C. We believe that 
software vendors who took timely advantage of the resources made 
available will be prepared for the OASIS-C transition. In addition, the 
State systems are being configured to accept OASIS-C as of January 1, 
2010, as is the updated home health PPS grouper software. While such a 
major change will never be easy, we believe that the benefits to be 
realized and the burdens of delaying the process at this point, and 
argue for proceeding with this transition as scheduled. The immediate 
need of HHAs related to the OASIS-C instrument is to understand what 
the new, changed and deleted items are. This information has been 
available since August. Agencies will not be introduced to new quality 
measures until September 2010 and additional resources related to these 
will be made available. We will shortly be posting the final OASIS-C 
User Guidance Manual, and we will be offering free training 
teleconferences through the Medicare Learning Network. We urge all 
providers or vendors who have questions about OASIS-C or the transition 
to take advantage of all of the resources that CMS has provided, which 
can be accessed through the CMS Web site, the Quality Improvement 
Evaluation System (QIES) Technical Support Office (QTSO) Web site, and 
our State OASIS Education Coordinators.
    Comment: One commenter stated that it is his understanding that the 
current number of quality measures available through Outcome-Based 
Quality Improvement (OBQI) is 41, rather than 54, with plans by CMS to 
expand to 54 once process measure data are available from OASIS-C data 
collection. The commenter recognized the value of adding process 
measures to Home Health Compare as additional consideration by the 
public in search for home health services. However, the commenter 
believed that 13 process measures, in addition to the 12 quality 
measures already publicly reported, will only serve to overwhelm 
beneficiaries. He wrote that the important considerations related to 
processes are assessment of need and implementation of interventions.
    The commenter recommended that measures related to ``plan of care'' 
not be publicly reported since this is information not essential to the 
agency selection process. He added that current regulations require 
that all services, regardless of professional practice requirements, be 
included in the plan of care.
    Response: We agree that assessment of need and implementation of 
interventions are important considerations related to processes, but we 
also believe that proactive planning for appropriate interventions is 
an indicator of quality care. HHA clinicians play a key role in the 
formulation of the plan of care and when interventions such as diabetic 
foot care or falls prevention are stated clearly in the plan of care, 
they are available for reference by all staff who provide care for the 
patient, thereby ensuring that efforts are coordinated effectively. The 
seven process measures related to the plan of care are National Quality 
Forum (NQF) endorsed measures of accountability for HHAs. They assess 
adherence to recommendations for best clinical practice which we 
believe is an essential piece of the agency selection process.
    Comment: One commenter suggested that CMS use caution when 
selecting indicators which may focus solely on processes that may not 
have been tested to be predictors of quality.
    Response: The new process measures are NQF-endorsed, in addition to 
extensive testing and evaluation of CMS based on criteria that include, 
but are not limited to: Addressing a national health goal or priority 
area, consistency with clinical practice guidelines and action-ability 
of the measures (that is, the measures' susceptibility to experiencing 
improved outcomes through intervention). CMS will continue to provide 
meaningful, relevant, timely, and consensus-based measures.
    Comment: CMS received several comments supporting the value of 
adding the new process measures.
    Response: We appreciate the industry's willingness and 
encouragement regarding adopting these new methods of reflecting the 
quality of care provided to Medicare beneficiaries.
    Comment: One commenter urged CMS to provide guidance to Home Health 
Agencies on the use and role of physical therapists.
    Response: Though we recognize the valuable role of physical therapy 
in the documentation and reporting of the new process measures as well 
as the provision of home health care to multiple patient populations 
including those with wounds, heart failure, and those in need of 
medication management, we hesitate to make recommendations on issues 
relating to staff use. Each HHA must review the needs of its patient 
population and evaluate the best way to achieve the appropriate level 
of care based on the competency of its staff.
    Comment: Several commenters noted that their memberships believe 
that the OASIS-C instrument is an improvement over the existing OASIS-
B1, but that many HHAs still have questions regarding the new tool and 
request information regarding training on its use.
    Response: CMS believes that HHA's questions have been answered with 
the release of the OASIS-C Guidance Manual on October 9, 2009, the 
content of the OASIS-C presentation at the NAHC annual conference on 
October

[[Page 58098]]

10, 2009, and within the National Provider Calls that started on 
October 22, 2009.
    Comment: Two commenters requested a delay in the public reporting 
of process measures. One requested delay until January 2012 to allow 
time for implementation, development of and risk adjustment models and 
staff education.
    Response: Process measures are derived directly from OASIS-C data 
and by nature do not require risk adjustment. We began providing 
education on OASIS-C starting in October 2009.
    Comment: One commenter requested a delay in the public reporting of 
process measures until June 1 (no year was included in the request).
    Response: CMS plans that the process measures will be reported on 
Home Health Compare no earlier than October 2010.
    Comment: Several commenters expressed concern with specifics 
related to the addition of the 13 new process measures. One commenter 
mentioned the lack of a timeframe for these measures and the perception 
that some measures (pneumococcal vaccine ever received and depression 
assessment conducted and influenza immunization received) are above and 
beyond what an agency is expected to do. One commenter recommended that 
questions related to ``potential medication issues identified'' and 
``timely physician contact'' should not be included in public reporting 
since the outcome of those measures is largely determined by physician 
response.
    Response: We believe strongly that the addition of process measures 
will enhance the HHAs' ability to improve the quality of care provided 
to beneficiaries. Process measures assess adherence to recommendations 
for clinical practice based on evidence or consensus. Measures based on 
data items that align with those used across other provider settings 
(such as pneumonia vaccine received) will promote systematic use of 
evidence-based practices with the aim of improving population health. 
To a greater extent than outcome measures, process measures can 
identify specific areas of care that may require improvement and give 
credit for good care provision. Data related to the process measures 
will be collected in the OASIS-C instrument beginning January 1, 2010 
and the first reports on process measures are projected to be available 
to agencies in September 2010.
    Comment: One commenter requested definitions of various terms used 
within the process measure descriptions.
    Response: The OASIS-C Guidance Manual contains detailed information 
for the clinician in order to be able to respond to these items 
accurately.
     ``Short-term episode of care'': Implementation process 
measures report whether a care process was ``implemented since the last 
OASIS assessment''. These measures will be calculated separately for 
short-term episodes and long-term episodes. Short-term episodes are 
those in which the time frame from Start of care (SOC)/Resumption of 
Care (ROC) to Transfer (TRF)/Discharge (DC) is less than or equal to 60 
days (and DO NOT contain a 60-day follow-up assessment). Long-term 
episodes are those in which the time frame from SOC/ROC to TRF/DC is 
longer than 60 days (and DO contain a 60-day follow-up assessment). In 
response to industry and NQF concerns that measures might not 
accurately reflect care for longer stay patients, episodes that exceed 
60 days will not be included in publicly reported measures on 
implementation of evidence based practices.
     The phrase ``at start of episode'' does not refer to 
payment episodes and does not mean that this information will be 
collected and reported for each 60-day episode. The phrase means that 
the measure reports on best care practices that occur when a patient is 
admitted to home care. It is used to distinguish this measure from 
others that report on best practices that are implemented over the 
course of the home health stay (rather than at the time of home health 
admission) and are collected at transfer or discharge.
     ``Timely physician contact'' is defined as communication 
to the physician within one calendar day of the assessment by 
telephone, voicemail, electronic means, fax, or any other means that 
appropriately conveys the message of patient status.
     ``High risk medications'' are defined as those identified 
by quality organizations (Institute for Safe Medication Practices, 
Joint Commission, etc.) as having considerable potential for causing 
significant patient harm when they are used erroneously.
     In the OASIS-C Guidance Manual, clinically significant 
medication issues are defined as those that, in the care provider's 
clinical judgment, pose an actual or potential threat to patient health 
and safety, such as drug reactions, ineffective drug therapy, side 
effects, drug interactions, duplicate therapy, medication omissions, 
dosage errors, or non-adherence to prescribed medication regimen. 
Potential clinically significant medication issues include adverse 
reactions to medications (for example, rash), ineffective drug therapy 
(for example, analgesic that does not reduce pain), side effects (for 
example, potential bleeding from an anticoagulant), drug interactions 
(for example, serious drug-drug, drug-food and drug-disease 
interactions), duplicate therapy (for example, generic name and brand 
name drugs that are equivalent both prescribed), omissions (missing 
drugs from an ordered regimen), dosage errors (for example, either too 
high or too low), noncompliance (for example, regardless of whether the 
noncompliance is purposeful or accidental) or impairment or decline in 
an individual's mental or physical condition or functional or 
psychosocial status.
    Comment: One commenter expressed concern with our proposal (set out 
at 74 FR 40960) regarding home health care quality improvement. We 
proposed to ``reconcile the OASIS submissions with claims data in order 
to verify full compliance with the quality reporting requirements.'' 
The commenter thought this process was new and requested that it be 
defined in more detail.
    Response: This proposal is not new. Identical language was proposed 
in our May 4, 2007, CY 2008 HH PPS proposed rule (72 FR 25450) and in 
our CY 2009 HH PPS update notice (73 FR 65356). These proposals were 
subsequently implemented. Details regarding the process are available 
in the Medicare Claims Processing Manual, Chapter 10, section 120.
    Comment: One commenter was concerned that pay for performance does 
not differentiate between traditional Medicare patients and those 
participating in waiver programs. Waiver patients have long-term 
chronic needs, unlikely to be shown in discharge data, or to improve in 
the same manner as traditional patients with short-term needs and 
expectations for recovery.
    Response: We thank the commenter for the comment on this topic, and 
will consider his concerns related to differences in outcomes for 
dually eligible waiver patients as plans for pay for performance are 
developed.
Reporting of Home Health Care Quality Data Through CAHPS Survey
    In the Home Health Prospective Payment System Rate Update for 
Calendar Year 2010 (August 13, 2009), we proposed to expand the home 
health quality measures reporting requirements to include the 
CAHPS[supreg] Home Health Care (HHCAHPS) Survey, as initially discussed 
in the May 4, 2007 proposed rule (72 FR 25356, 25452) and in the 
November 3, 2008 Notice (73 FR 65357,

[[Page 58099]]

65358). As part of the U.S. Department of Health and Human Services 
(DHHS) Transparency Initiative, we proposed to implement a process to 
measure and publicly report patient experiences with home health care 
using a survey developed by the Agency for Healthcare Research and 
Quality's (AHRQ's) Consumer Assessment of Healthcare Providers and 
Systems (CAHPS[supreg]) program. The HHCAHPS survey is part of a family 
of CAHPS[supreg] surveys that asks patients to report on and rate their 
experiences with health care. The HHCAHPS survey presents home health 
patients with a set of standardized questions about their home health 
care providers and about the quality of their home health care. Prior 
to this survey, there was no national standard for collecting 
information about patient experiences that would enable valid 
comparisons across all home health agencies (HHAs).
    In this Final Rule, we intend to move forward with the 
implementation of the HHCAHPS. However, we intend to link the survey to 
the CY 2012 payment update rather than to the CY 2011 payment update. 
We still intend to implement the survey on a voluntary basis beginning 
in October 2009.
Background and Description of the HHCAHPS
    AHRQ, in collaboration with its CAHPS grantees, developed the 
CAHPS[supreg] Home Health Care Survey with the assistance of many 
entities (for example, government agencies, professional stakeholders, 
consumer groups and other key individuals and organizations involved in 
home health care). The HHCAHPS survey was designed to measure and 
assess the experiences of those persons receiving home health care with 
the following three goals in mind:
     To produce comparable data on patients' perspectives of 
care that allow objective and meaningful comparisons between home 
health agencies on domains that are important to consumers;
     To create incentives for agencies to improve their quality 
of care through public reporting of survey results; and
     To hold health care providers accountable by informing the 
public about the providers' quality of care.
    The development process for the survey began in 2006 and included a 
public call for measures, review of the existing literature, consumer 
input, stakeholder input, public response to Federal Register notices, 
and a field test conducted by AHRQ. AHRQ conducted this field test to 
validate the length and content of the CAHPS[supreg] Home Health Care 
Survey. We submitted the survey to the National Quality Forum (NQF) for 
consideration and endorsement via their consensus process. NQF 
endorsement represents the consensus opinion of many healthcare 
providers, consumer groups, professional organizations, health care 
purchasers, Federal agencies and research and quality organizations. 
The survey received NQF endorsement on March 31, 2009.
    The HHCAHPS survey includes 34 questions covering topics such as 
specific types of care provided by home health providers, communication 
with providers, interactions with the home health agency, and global 
ratings of the agency. For public reporting purposes, we will utilize 
composite measures and global ratings of care. Each composite measure 
consists of four or more questions regarding one of the following 
related topics:
    1. Patient care;
    2. Communications between providers and patients; or
    3. Specific care issues (medications, home safety and pain). There 
are also two global ratings; the first rating asks the patient to 
assess the care given by the HHA's care providers, and the second asks 
the patient about his/her willingness to recommend the HHA to family 
and friends.
    There are two options for administering the HHCAHPS survey. The 
agency can choose to administer the existing HHCAHPS survey, or the HHA 
can integrate additional questions within the HHCAHPS survey. If an 
agency chooses to implement an integrated survey, the core questions 
from the HHCAHPS survey (questions 1 through 25) must be placed before 
any specific/supplemental questions that the home health agency wishes 
to add to the survey. Questions 26 through 34 (the ``About You'' survey 
questions) must be administered as a unit--although they may be placed 
either before or after any supplemental questions that the HHA wishes 
to add to the HHCAHPS survey. If no HHA-specific questions are to be 
added to the HHCAHPS survey, the ``About You'' questions should follow 
the core questions (numbered 1 through 25) on the HHCAHPS survey. In 
addition, there are nine optional supplemental HHCAHPS questions that 
are available for HHAs to use (in addition to the 34-item HHCAHPS 
survey). These optional supplemental HHCAHPS questions will not be 
publicly reported and are not required. The supplemental questions are 
listed in the Protocols and Guidelines Manual available at https://www.homehealthcahps.org.
    The survey is currently available in both English and Spanish 
translations. We proposed that HHAs and their survey vendors will not 
be permitted to translate the HHCAHPS survey into any other languages 
on their own. However, it was proposed that CMS will provide additional 
translations of the survey over time. The Web site https://www.homehealthcahps.org will provide information about the subsequent 
availability of additional translations. In the proposed rule, we asked 
for suggestions for any additional language translations. Such 
suggestions should be submitted online to the HHCAHPS Survey 
Coordination Team, at [email protected].
    Home health agencies interested in learning about the survey are 
encouraged to view the HHCAHPS survey Web site, at https://www.homehealthcahps.org. Agencies can also call toll-free (1-866-354-
0985), or send an e-mail to the HHCAHPS Survey Coordination Team at 
[email protected] for more information.
    The following types of home health care patients were proposed as 
eligible to participate in the HHCAHPS survey:
    [rtarr8] Current or discharged patients who had at least one 
skilled care home health visit at any time during the sample month;
    [rtarr8] Patients who were at least 18 years of age at any time 
during the sample period, and are believed to be alive;
    [rtarr8] Patients who received at least two skilled care visits 
from HHA personnel during a 60-day look-back period. (Note that the 60-
day look-back period is defined as the 60-day period prior to and 
including the last day in the sample month);
    [rtarr8] Patients who have not been selected for the monthly sample 
during any month in the current quarter or during the 5 months 
immediately prior to the sample month;
    [rtarr8] Patients who are not currently receiving hospice care;
    [rtarr8] Patients who do not have ``maternity'' as the primary 
reason for receiving home health care; and
    Patients who have not requested ``no publicity status.''
    To collect and submit HHCAHPS data to CMS, Medicare-certified 
agencies will need to contract with an approved HHCAHPS survey vendor. 
Beginning in summer 2009, interested vendors applied to become approved 
HHCAHPS vendors. The application process was (and still is) delineated 
online at https://www.homehealthcahps.org. Vendors are required to 
attend training conducted by CMS and the HHCAHPS Survey Coordination 
Team, and to pass a post-training certification test.

[[Page 58100]]

    Home health agencies that are interested in participating in the 
HHCAHPS survey may do so on a voluntary basis beginning in October 
2009. Such agencies must select a vendor from the list of HHCAHPS 
approved survey vendors. This listing was made available on the Web 
site https://www.homehealthcahps.org on September 14, 2009. The listing 
will be updated on an ongoing basis to reflect the current approved 
list of survey vendors.
Participation Requirements for CY 2011: The Consumer Assessment of 
Healthcare Providers and Systems (CAHPS[supreg]) Home Health Care 
Survey
    In the proposed rule, we proposed that beginning in the first 
quarter of CY 2010, all Medicare-certified home health agencies would 
begin to collect the CAHPS[supreg] Home Health Care (HHCAHPS) survey 
data in accordance with the Protocols and Guidelines Manual located on 
the HHCAHPS Web site https://www.homehealthcahps.org. Home health 
agencies would contract with approved HHCAHPS survey vendors (posted on 
https://www.homehealthcahps.org) that are to conduct the survey. We 
proposed that participating home health agencies would conduct a dry 
run of the survey for at least one month in the first quarter of 2010 
(January, and/or February, and/or March 2010), and submit the dry run 
data to the Home Health CAHPS[supreg] Data Center by 11:59 p.m. EST on 
June 23, 2010. The dry run data would not be publicly reported on the 
CMS Home Health Compare Web site. This dry run would provide an 
opportunity for vendors and HHAs to acquire first-hand experience with 
data collection, including sampling and data submission to the Home 
Health CAHPS[supreg] Data Center, with no public reporting of the 
results. We proposed that all Medicare-certified home health agencies 
continuously collect HHCAHPS survey data every quarter beginning in the 
second quarter (April, May and June) of 2010, and submit these data for 
the second quarter of 2010 to the Home Health CAHPS[supreg] Data Center 
by 11:59 p.m. EST on September 22, 2010. We proposed that these data 
submission deadlines be firm (that is, there would be no late 
submissions allowed).
    Medicare-certified HHAs would need to provide their respective 
survey vendors with information about their survey-eligible patients 
(either current or discharged) every month in accordance with the 
Protocols and Guidelines Manual posted on https://www.homehealthcahps.org. Details about selecting the HHA sample are 
also delineated in the Protocols and Guidelines Manual.
    In the proposed rule, we proposed that the HHCAHPS survey data be 
submitted and analyzed quarterly, and that the sample selection and 
data collection occur on a monthly basis. HHAs would target 300 HHCAHPS 
survey completes annually. Smaller agencies that were unable to reach 
300 survey completes by sampling would survey all HHCAHPS eligible 
patients. We proposed that survey vendors initiate the survey for each 
monthly sample within 3 weeks after the end of the sample month. We 
proposed that all data collection for each monthly sample be completed 
within 6 weeks (42 days) after data collection began. We have approved 
three modes of the survey to be used: mail only, telephone only, and 
mail with telephone follow-up (the ``mixed mode''). We proposed that 
for mail-only and mixed-mode surveys, data collection for a monthly 
sample would end 6 weeks after the first questionnaire was mailed. We 
proposed that for telephone-only surveys, data collection would end 6 
weeks following the first telephone attempt.
    In the proposed rule we wrote that we were aware that there was a 
wide variation in the size of Medicare-certified home health agencies. 
We proposed that the requirement to collect HHCAHPS survey data be 
waived for agencies that served fewer than 60 HHCAHPS eligible patients 
annually. The HHCAHPS eligible, unduplicated patient counts for the 
period of October 1 through September 30 for a given year would be used 
to determine if the HHA had to participate in the HHCAHPS survey in the 
next calendar year.
    We also proposed that newly Medicare-certified home health agencies 
(that is, those certified on or after January 1, 2010 for payments to 
be made in CY 2011) be excluded from the HHCAHPS reporting requirement 
for the first year, as data submission and analysis would not be 
possible for an agency this late in the reporting period.
    In the proposed rule, we strongly recommended that home health 
agencies participating in the HHCAHPS survey promptly review the 
required Data Submission Summary Reports that are described in the 
Protocols and Guidelines Manual posted on https://www.homehealthcahps.org. These reports will enable the home health 
agency to ensure that its survey vendor has submitted their data on 
time, and that the data have been accepted/received by the Home Health 
CAHPS[reg] Data Center. We received no comments on this proposal, and 
are finalizing it as proposed.
Oversight Activities: The Consumer Assessment of Healthcare Providers 
and Systems (CAHPS[supreg]) Home Health Care Survey
    We proposed that vendors and HHAs be required to participate in 
HHCAHPS oversight activities to ensure compliance with HHCAHPS 
protocols, guidelines and survey requirements. The purpose of the 
oversight activities is to ensure that HHAs and approved survey vendors 
follow the Protocols and Guidelines Manual. It was proposed that all 
approved survey vendors develop a Quality Assurance Plan (QAP) for 
survey administration in accordance with the Protocols and Guidelines 
Manual. The QAP would include the following:
     Organizational chart;
     Work plan for survey implementation;
     Description of survey procedures and quality controls;
     Quality assurance oversight of on-site work and of all 
subcontractors work; and
     Confidentiality/Privacy and Security procedures in 
accordance with the Health Insurance Portability and Accountability Act 
(HIPAA).
    As part of the oversight activities the HHCAHPS Survey Coordination 
Team would conduct on-site visits and/or conference calls. The HHCAHPS 
Survey Coordination Team would review the survey vendor's survey 
systems, and would assess administration protocols based on the 
Protocols and Guidelines Manual posted on https://www.homehealthcahps.org. We proposed that all materials relevant to 
survey administration would be subject to review. The proposed systems 
and program review would include but not be limited to: (a) Survey 
management and data systems; (b) printing and mailing materials and 
facilities; (c) data receipt, entry and storage facilities; and (d) 
written documentation of survey processes. Organizations would be given 
a defined time period in which to correct any problems and provide 
follow-up documentation of corrections for review. Survey vendors would 
be subject to follow-up site visits as needed.
    We did not receive any comments regarding the proposed oversight 
activities and therefore, the proposed recommendations are considered 
to be final for this rule.
For Further Information on the HHCAHPS Survey
    It is strongly recommended that all home health care agencies 
participating in the HHCAHPS survey regularly check

[[Page 58101]]

the Web site, https://www.homehealthcahps.org for program updates and 
information.
    We proposed that all HHAs, unless covered by specific exclusions, 
meet the quality reporting requirements or be subject to a 2 percent 
reduction in the home health market basket percentage increase in 
accordance with section 1895(b)(3)(B)(v)(I) of the Act. A 
reconsideration and appeals process is being developed for HHAs who 
fail to meet the HHCAHPS reporting requirements. We proposed that these 
procedures would be detailed in the proposed CY 2012 home health 
payment rule, the period for which HHCAHPS will be linked to the home 
health market basket percentage increase.
    Comment: We received a comment endorsing the proposed addition of 
the HHCAHPS patient perspectives of care survey, stating that it would 
be a useful supplement to existing performance measures.
    Response: We appreciate this comment in support of adding the Home 
Health Care CAHPS (HHCAHPS) measures to the quality reporting program 
of the agency.
    Comment: We received comments that HHCAHPS needs to be field-tested 
and the survey results need to be statistically reliable before such 
results are incorporated into quality reports, published on Home Health 
Compare, or counted in the consideration of the annual payment update 
for home health agencies.
    Response: The Home Health Care CAHPS has been field-tested by AHRQ 
and the CAHPS grantees and the final survey is currently being used in 
a national, randomized mode experiment. A rigorous, scientific process 
was used in the development of the survey, including: a public call for 
measures; literature reviews; focus groups with home health patients; 
cognitive interviews with home health patients; stakeholder input; 
public response to Federal Register notices; and a field test.
    Comment: We received feedback from commenters asking how HHCAHPS 
would be adjusted to account for variation in quality scores which is 
unrelated to agency behavior. One commenter noted that this would 
require matching of demographic and insurance data into a risk 
adjustment methodology. The commenter asked CMS to articulate how this 
adjustment will be achieved to prevent the release of spurious quality 
measures.
    Response: We appreciate this feedback and would like to emphasize 
that from the very beginning of the planning for HHCAHPS, the 
prevention of spurious variables on the data was viewed as essential in 
the implementation of HHCAHPS. To further achieve this goal, we have 
additionally revised our protocols for the HHCAHPS based on comments 
that were sent to us. We are now including only Medicare and/or 
Medicaid patients in the HHCAHPS survey. For public reporting of the 
data, the data will be adjusted for mode of survey administration. The 
HHCAHPS measures will also be adjusted for patient mix. Patient-mix 
adjustments are made when certain patient characteristics that are 
beyond home health agencies' control impact how a patient responds to 
the survey. The patient-mix characteristics that have been identified 
for possible inclusion cover variables such as overall health status, 
diagnosis information, age, education, managed care indicator, whether 
the patient lives alone, and insurance coverage. Although the patient-
mix adjusters included in the model are constant over time, the exact 
values of patient-mix adjustment coefficients are re-estimated each 
reporting period based on the empirical relationship observed between 
the patient-mix adjustment variables and HHCAHPS outcomes in that 
period.
    Comment: We received comments that the HHCAHPS survey is too long. 
These commenters mentioned that the rates of completion of consumer 
satisfaction surveys are typically low, particularly when the 
instrument is long.
    Response: The version of the HHCAHPS that was used in the AHRQ 
field test had 58 items, and the length of that survey did not appear 
to influence the completion of the survey. However, as a result of 
intensive data analysis and input from the stakeholders and the 
Technical Expert Panel, over 20 questionnaire items were eliminated 
from the field test survey. The current 34-item questionnaire (that 
ultimately received NQF endorsement) was the outcome of this 
development process. We believe that the length of the survey 
represents an effective compromise and achieves the goal of providing 
key quality measures of the patient perspectives of care while at the 
same time keeping the survey as short as possible. CMS is not 
shortening the survey in this Final Rule.
    Comment: We received feedback from a commenter concerned that many 
HHA patients were not sufficiently educated to interpret the HHCAHPS 
correctly.
    Response: We appreciate the sensitivity to the home health patients 
by asking about the readability of the HHCAHPS survey. The Flesch-
Kincaid reading test showed that the HHCAHPS survey is at less than a 
seventh grade level. More importantly though, if patients are unable to 
answer the survey due to decreased capacities, a family or friend may 
assist the patient and answer the questions on behalf of the selected 
home health patient in the HHCAHPS home health agency sample.
    Comment: We received comments asking how the HHCAHPS survey would 
be administered to patients suffering from dementia or psychiatric 
disorders.
    Response: We appreciate comments sensitive to concerns about how 
HHCAHPS would be administered to patients suffering from dementia, or 
other disorders that might present challenges to respondents. Early on, 
we recognized the importance of allowing proxy respondents for this 
population even though proxy respondents are not always used in other 
CAHPS surveys. Proxy respondents answer the HHCAHPS survey on behalf of 
the patient respondent. We analyzed the field test data and found that 
proxy respondents do not respond differently from home health patients; 
thus, proxy respondents (that is, family members) are allowed. However, 
home health agency staff cannot serve as proxy respondents for 
patients.
    Comment: We received feedback from one commenter that the existing 
survey timelines could result in patients being surveyed more than 60 
days after their home health services ended, resulting in an inability 
to recall or evaluate services accurately.
    Response: We appreciate this comment concerning surveying patients 
too long after they received services. We received comments from the 
home health agencies in our mode experiment that the earliest that they 
can deliver a patient list from the end of the month is about two weeks 
after the close of the month. Therefore, we have emphasized to the HHAs 
to send their patient lists to their respective vendors in time to 
begin data collection within 21 days after the close of any month. In 
most data collection scenarios, we believe that patients will be 
surveyed within 60 days from the time that they last received services 
from the home health agency. In certain circumstances, it may be that 
patients will be surveyed later than 60 days if they were seen the very 
beginning of the sample month and do not respond to the initial mail or 
telephone attempts. Overall, the goal of the data collection process is 
to survey the patients as soon as possible.
    Comment: We received comments that there is a need for additional

[[Page 58102]]

language translations of the HHCAHPS besides English and Spanish. 
Several commenters mentioned the difficulties in implementing HHCAHPS 
because their agencies have few patients who speak either English or 
Spanish.
    Response: We appreciate these concerns regarding the need for 
additional language translations and strongly encourage that these 
suggestions and specific requests be submitted as soon as possible to 
the HHCAHPS Survey Coordination Team at [email protected]. Currently, CMS 
is creating a Chinese translation of the questionnaire and will produce 
additional translations in the coming year. CMS is not allowing vendors 
or individual HHAs to independently translate the survey into other 
languages on their own because of the need to assure comparable (if not 
identical) wording in every language, and thus ensure comparability of 
the survey data on a national basis.
    Comment: We received several comments about how we chose the 
particular criteria on who is eligible/ineligible to participate in the 
survey.
    Response: Based on input received through stakeholder meetings, 
AHRQ and CMS agreed that patients 18 and older needed to have 2 or more 
skilled visits in order to evaluate an agency's care. Additionally, 
maternity and hospice patients were excluded due to (1) the unique 
circumstances surrounding maternity care; and (2) the sensitivity 
associated with surveying hospice patients.
    Comment: We received several comments concerning the inclusion of 
all patients, rather than limiting the survey to Medicare and/or 
Medicaid patients only. Commenters were concerned about the burden and 
validity of including non-Medicare or non-Medicaid patients as 
respondents.
    Response: In this Final Rule we are recommending that the 
submission of HHCAHPS data be initially applied to Medicare and 
Medicaid patients only. Only Medicare and/or Medicaid patients are 
included in the HHCAHPS survey. All other eligibility criteria are 
being implemented as proposed.
    Comment: We received comments asking why Home Health Agencies 
cannot conduct the HHCAHPS survey themselves (that is, self-administer 
the survey).
    Response: Agencies are not allowed to conduct the survey on their 
own. Since many patients have a continuing relationship with their home 
health agency, we believe that an independent third party will be 
better able to solicit an unbiased response. Since they receive care in 
their homes, this population is particularly vulnerable and dependent 
upon their home health agency caregivers.
    Comment: We received a comment asking CMS to clarify what oversight 
would occur regarding how agencies compile their patient lists and 
submit them to vendors.
    Response: We thank the commenter for this inquiry and respond that 
we will be conducting oversight activities for the HHCAHPS vendors. As 
part of the oversight activities, we will monitor information about the 
number of patients eligible per month and may ask the vendor to provide 
sampling frame counts for a sample of agencies. If we are seeing 
unusual numbers of eligible patients counts compared against OASIS 
counts, we may work with the vendor and agency to determine if there 
are any systematic issues.
    Comment: We received comments concerning the costs involved in 
contracting with an approved Home Health Care CAHPS vendor to collect 
and submit data. These costs represent an additional expenditure for 
agencies without additional compensation from CMS. These commenters 
stated vendor cost estimates have been provided, ranging anywhere from 
$5 per completed survey, up to $9,000 a year.
    Response: We recognize that vendors will charge different amounts 
for the survey, and highly recommend that home health agencies ``shop 
around'' for the best value for their agency. The vendor list is 
available on www.homehealthcahps.org. Currently, 34 vendors have been 
approved to conduct the survey and additional vendors will be approved 
in the coming months. Therefore, for the final rule, only HHCAHPS-
approved vendors may be used to conduct the HHCAHPS survey for 
participating home health agencies.
    Comment: We received multiple comments about cost to the HHAs, and 
burden to the HHAs. We received feedback from one commenter who wrote 
that the HHCAHPS implementation process has not been well explained or 
thought through in terms of impacts on agencies; a number of commenters 
were concerned about the financial burden, particularly when 
reimbursements are decreasing. Another felt that software reprogramming 
costs and fees were not accurate in the burden estimates. Another 
commenter asked that CMS clarify whether CMS or HHAs will be paying 
vendors for their services. A number of commenters wrote that a policy 
which imposes a mandatory requirement but makes non-compliance subject 
to a penalty should be funded by CMS. Another commenter asked that we 
cap the amount that vendors would charge HHAs and allow HHAs to claim 
the cost as allowable on their cost reports.
    Response: We are fully appreciative of the comments concerning cost 
burdens to the HHAs with the implementation of HHCAHPS. We believe that 
home health agencies should ``shop around'' for the best value by 
researching as many vendors as possible that are listed on the vendor 
list on http://www.homehealthcahps.org. We are confident that there are 
reasonable choices for the HHAs with the current list of vendors. We 
have limited the initial data collection to Medicare and/or Medicaid 
patients to reduce the burden of providing administrative data on 
private pay patients. We will also accept V codes instead of ICD-9 
codes if the agency does not have ICD-9 codes for particular patients. 
All of the administrative variables should be available on OASIS and 
should require minimal reprogramming for the HHAs to provide patient 
information to their survey vendors. HHAs will be paying vendors for 
data collection and processing services and we will be paying for 
training, technical assistance, oversight of vendors, and data analysis 
of the HHCAHPS data. In response to the comment that this is a 
mandatory requirement that makes non-compliance subject to a penalty, 
we respond that the expanded requirements concerning the collection of 
quality data were stated in the CY 2008 Home Health Payment Rule and in 
the CY 2009 Home Health Notice of October 31, 2008. The expanded 
requirements concerning quality data for home health agencies were also 
stated in the Deficit Reduction Act. The collection of quality data for 
similar CAHPS surveys, such as the Hospital CAHPS survey, follow the 
same model wherein the health care providers pay the approved survey 
vendors for the data collection costs and we pay for the training, 
technical assistance, oversight of vendors, and data analysis costs. 
HHAs are strongly encouraged to report their respective HHCAHPS cost on 
their cost reports but should note that these costs are not 
reimbursable under the HH PPS.
    Comment: We received comments asking whether HHCAHPS participation 
is really a voluntary program.
    Response: The first year of the HHCAHPS is entirely voluntary. Once 
data collection is tied to the annual payment update for CY 2012 
(voluntary data collection begins October 2010), agencies may choose to 
participate. Moreover, agencies may still choose not to participate in 
the survey if they believe that the costs of participating

[[Page 58103]]

will exceed the two percent reduction of the full annual payment update 
they would otherwise receive.
    Comment: While commenters were generally supportive of the survey, 
and of quality improvement measures in home health, many requested a 
delay in the implementation of the survey. Commenters were concerned 
about implementing this new requirement at the same time as the rollout 
for OASIS-C. They wanted home health agencies to have additional time 
to select a vendor to conduct the survey for them. Commenters were 
concerned about not accounting for this expense in their 2010 budgets, 
and wanted additional time to evaluate and pilot the survey on their 
own.
    Response: CMS has carefully considered the comments it received, 
and is delaying the linkage of HHCAHPS data to the quality reporting 
requirements for the annual payment update by 6 months. This will allow 
home health agencies to first fully implement OASIS-C before being 
required to implement the HHCAHPS survey for payment considerations. As 
such, agencies will be required to do a dry run for at least one month 
in third quarter CY 2010, and to begin data collection on an ongoing 
basis in October 2010. With this change, HHAs will be required to 
submit dry run data from the third quarter of CY 2010 to the Home 
Health CAHPS Data Center by 11:59 p.m. EST on January 21, 2011. 
Similarly, HHAs will be required to submit data for the fourth quarter 
of CY 2010 to the Home Health CAHPS Data Center by 11:59 p.m. on April 
21, 2011. With this delay, HHCAHPS will be a requirement for agencies 
to receive their full 2012 annual payment update.
    As a result of this rule's final provision to tie the HHCAHPS to 
the CY 2012 annual payment update (rather than to the CY 2011 annual 
payment update), home health agencies certified on or after April 1, 
2011 will be excluded from the HHCAHPS reporting requirement for CY 
2012 as data submission and analysis will not be possible for an agency 
this late in the CY 2012 reporting period. Agencies should begin 
HHCAHPS data collection as soon as possible to meet HHCAPS reporting 
requirements for future years. Additionally, by June 16, 2010, HHAs 
need to provide CMS with patient counts for the period of April 1, 2009 
through March 31, 2010. CMS will post a form that the HHAs will use to 
submit their patient counts via the Web site, http://www.homehealthcahps.org. This requirement pertains only to Medicare-
certified HHAs with fewer than 60 eligible, unduplicated patients for 
that time period. Such agencies would be exempt from conducting the 
HHCAHPS survey for the annual payment update in CY 2012. Agencies that 
have fewer than 60 eligible, unduplicated patients would be exempt from 
data collection from third quarter CY 2010 through second quarter CY 
2011.
    Comment: We received comments about the HHCAHPS data submission 
requirements for reporting ICD-9 codes for patient diagnosis. It was 
proposed in the Protocols and Guidelines Manual and also in CMS 
training that ICD-9 codes be used in patient mix adjustment to ensure 
the HHCAHPS results are comparable across agencies. However, commenters 
wrote that over 40 percent of home health agencies use V-codes to 
indicate a patient's primary diagnosis. Home health agencies however, 
are in agreement that V codes do not accurately reflect the medical 
conditions of their patient population.
    Response: Based on feedback from the proposed rule, we have 
modified the specifications to allow for the submission of V codes if 
those are the only available data. However, we strongly encourage the 
submission of ICD-9 codes if feasible. The reason for collecting 
diagnosis codes that are not V codes is to distinguish patients who, 
because of their underlying condition, may have very different 
attitudes about the health care they receive and who also may respond 
very differently to the questions on the HHCAHPS. Prior research has 
shown that patients rate the care they receive differently based on 
their characteristics. For example, older patients tend to rate more 
favorably than younger patients, but sicker patients tend to rate less 
favorably than relatively healthier patients. Consider the case in 
which two patients are coded with one of the V57 rehabilitation codes; 
however, one has had knee surgery and the other has had a stroke. These 
two patients will potentially have different perspectives and opinions 
about the home health care they receive, and these perspectives will 
affect how they respond to the HHCAHPS survey items. The V code in this 
example does not indicate the severity of the illness/condition. For 
this reason, we urge survey vendors to provide ICD-9 codes whenever 
possible, so that survey results can be statistically adjusted to 
account for any differences in responses based on patient 
characteristics. Therefore, for the final rule, we will allow V codes 
if those are the only available data.
    Comment: We received feedback from a commenter that the 
requirements for HHCAHPS include reporting ADL scores from OASIS, but 
OASIS is not required for non-Medicare, non-Medicaid patients. HHAs 
that do perform an OASIS assessment on these patients do not enter the 
information into their electronic files since HHAs are prohibited from 
reporting these data to the State repository.
    Response: We are appreciative of this comment and for the final 
rule have limited data collection to Medicare and/or Medicaid patients. 
In addition, we are also allowing V codes if ICD-9 data are unavailable 
for the HHCAHPS patients.
    Comment: We received a comment suggesting that we reevaluate 
patient data submission requirements, and streamline the amount of 
information essential to the accurate reporting of patient experiences.
    Response: We appreciate this comment concerning a reevaluation of 
the patient data submission requirements for HHCAHPS. Accordingly, we 
have revised the data submission requirements with two significant 
changes in this final rule. The first change is that only Medicare and/
or Medicaid patients are in the HHCAHPS. The second change is that HHAs 
may submit V codes if ICD-9 codes are unavailable.
    Comment: We received several comments concerning the survey modes 
and the need for 300 completed surveys a year. We received several 
comments that HHCAHPS should only be administered by mail mode to 
ensure comparability. Similarly, we received requests that HHCAHPS be 
only available in the telephone mode for comparability. Finally, we 
received comments that only one survey mode should be accepted for use 
for HHCAHPS, no matter what the mode choice was, for comparability 
across all agencies nationally.
    Response: We appreciate these comments because they are all related 
to the same goal to ensure comparability of the survey results for all 
participating HHAs. HHCAHPS, as a part of the CAHPS program, is always 
striving to ensure comparability in all steps of the survey 
implementation and analysis of results. We realized that to limit the 
survey mode to only one type (for example, telephone only) could be 
limiting the HHAs in choosing survey vendors.
    We dealt with a similar issue with the Hospital CAHPS survey, for 
which several modes of administration were ultimately permitted. While 
patient responses did vary based on the survey mode employed, it was 
possible to adjust for these differences statistically. We are 
therefore conducting a randomized mode experiment to test the

[[Page 58104]]

effect of using three data collection modes: mail only, telephone only, 
and mixed mode (mail with telephone follow-up of non-respondents). If 
the mode experiment suggests that the method of data collection has a 
significant impact on the survey responses, then we will use the 
results from the mode experiment to make appropriate adjustments in the 
reporting of the survey responses. When the mode experiment is 
concluded and all results, conclusions and recommendations are 
available, the results as well as the adjustments will be posted on 
http://www.homehealthcahps.org, the official Web site of the Home 
Health Care CAHPS survey. In the meantime, for the final rule, the 
HHCAHPS will allow three survey modes as proposed.
    Comment: We received comments that questioned the advisability of 
requiring a total of 300 completed surveys since this number will have 
varying statistical validity for small versus large agencies. Further, 
HHAs serving populations that tend to be poor respondents will be 
unable to meet this total number, particularly if the agencies 
themselves are small in size. In addition, commenters were concerned 
about the validity of data comparing small agencies (that may need to 
survey 100 percent of the patients in order to meet the required 
target) with large agencies (which may be able to survey as few as 1 
percent of their patients and reach the target).
    Response: We understand concerns about the sample size. In the 
practice of statistics however, it is established that the sample size 
in absolute numbers is more important than the proportion of the 
population surveyed. Surveying a sample of 300 will produce the same 
level of precision whether the sample is 10 percent, 1 percent or even 
0.01 percent of the total population. We understand that 300 may be 
higher than achievable for some small agencies. However, the larger the 
sample (even if less than 300), the less the variability in an agency's 
ratings over time. Therefore, in the final rule we are moving forward 
with the sample sizes for HHCAHPS as proposed.
    Comment: We received feedback from a commenter that suggested that 
CMS base compliance with the requirement on whether HHAs submitted 
appropriate numbers of patient files for their size, rather than on the 
number of patients that responded to surveys.
    Response: We appreciate this question clarifying whether agencies 
must submit 300 completed surveys on an annual basis. In the proposed 
rule and in this final rule, we emphasized that HHAs should target 300 
completes annually which averages about 25 completes a month. However, 
we equally emphasized that smaller agencies that are unable to reach 
300 survey completes by sampling should survey all HHCAHPS eligible 
patients. We will accept less than 300 survey completes annually if an 
agency is unable to achieve that number. Compliance is based on whether 
the agency did the survey and followed the protocols. It is not based 
on the number of patients that responded to the survey.
Summary of Final Rule Changes for HHCAHPS
    For this final rule, we are adopting three changes to the 
previously proposed provisions for HHCAHPS. The first change is the 
delay in the HHCAHPS linkage to the annual payment update, from CY 2011 
to CY 2012. This delay means that home health agencies will need to 
conduct a dry run for at least one month in the third quarter 2010, and 
continuously collect survey data beginning in the fourth quarter 2010 
and moving forward. HHAs are urged to note the revised dates in this 
Final Rule and to routinely check the Web site http://www.homehealthcahps.org for the key dates. The second change concerns 
the patients eligible for the survey: only Medicare and/or Medicaid 
patients will be eligible to take the HHCAHPS survey. The third change 
is that V codes may be submitted if ICD-9 codes are unavailable. Home 
Health Compare will be updated to reflect the addition of HHCAHPS to 
the quality reporting requirements.
3. Home Health Wage Index
    Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require that we 
adjust the HH PPS payment rates to account for differences in area wage 
levels, using a wage index that we find appropriate. Since the 
inception of the HH PPS, we have used hospital wage data in developing 
a wage index to be applied to HHAs.
    In the CY 2010 proposed rule, we proposed to continue that 
practice, as we continue to believe that using the pre-floor, pre-
reclassified hospital inpatient wage index is appropriate and 
reasonable for the HH PPS. As explained in the update notice for CY 
2009 (73 FR 65359), the HH PPS does not use the hospital area wage 
index's occupational mix adjustment, as this adjustment serves 
specifically to define the occupational categories more clearly in a 
hospital setting.
    We apply the appropriate wage index value to the labor portion 
(77.082 percent) of the HH PPS rates based on the site of service for 
the beneficiary (defined by section 1861(m) of the Act as the 
beneficiary's place of residence).
    In the HH PPS final rule for CY 2006 (70 FR 68138, November 9, 
2005), we adopted the changes discussed in the Office of Management and 
Budget (OMB) Bulletin No. 03-04 (June 6, 2003), available online at 
http://www.whitehouse.gov/omb/bulletins/b03-04.html, which announced 
revised definitions for Metropolitan Statistical Areas (MSAs), and the 
creation of Micropolitan Statistical Areas and Combined Statistical 
Areas. In addition, OMB published subsequent bulletins regarding CBSA 
changes, including changes in CBSA numbers and titles.
    In adopting the OMB Core-Based Statistical Area (CBSA) geographic 
designations, we provided for a 1-year transition with a blended wage 
index for all providers. For CY 2006, the wage index for each provider 
consisted of a blend of 50 percent of the CY 2006 MSA-based wage index 
and 50 percent of the CY 2006 CBSA-based wage index (both using FY 2002 
hospital data). We referred to the blended wage index as the CY 2006 HH 
PPS transition wage index. As discussed in the HH PPS final rule for CY 
2006 (70 FR 68138, November 9, 2005), subsequent to the expiration of 
the 1-year transition on December 31, 2006, we use the full CBSA-based 
wage index values.
    We continue to use the methodology discussed in the CY 2007 final 
rule (71 FR 65884, November 9, 2006) to address those geographic areas 
in which there are no hospitals and, thus, no hospital wage data on 
which to base the calculation of the HH PPS wage index. For those 
areas, we use the average wage index from all contiguous CBSAs as a 
reasonable proxy. This methodology is used to calculate the wage index 
for rural Massachusetts. However, we do not apply this methodology to 
rural Puerto Rico due to the distinct economic circumstances that exist 
there, but instead continue using the most recent wage index previously 
available for that area (from CY 2005). For urban areas without 
specific hospital wage data, we use the average wage indexes of all 
urban areas within the State to serve as a reasonable proxy for the 
wage index of that that urban CBSA. The only urban area without wage 
data is Hinesville-Fort Stewart, Georgia (CBSA 25980).
    On November 20, 2008, OMB issued Bulletin No. 09-01 located at Web 
address http://www.whitehouse.gov/omb/bulletins/fy2009/09-01.pdf. This 
bulletin highlights three geographic areas that were previously 
classified as Micropolitan Statistical Areas but now

[[Page 58105]]

qualify as Metropolitan Statistical Areas. The three areas are: (1) 
CBSA 16020, Cape Girardeau-Jackson, MO-IL (this includes Alexander 
County in Illinois and Bollinger and Cape Girardeau Counties in 
Missouri); (2) CBSA 31740, Manhattan, KS (this includes Geary, 
Pottawatomie, and Riley Counties in Kansas); and (3) CBSA 31860, 
Mankato-North Mankato, MN (this includes Blue Earth and Nicollet 
Counties in Minnesota).
    The comments that we received on the wage index adjustment to the 
HH PPS rates, and our responses to those comments, appear below.
    Comment: A commenter requested that CMS develop an industry 
specific (HH specific) wage index.
    Response: Our previous attempts at either proposing or developing a 
home health specific wage index were not well received by commenters or 
the industry. Generally, the volatility of the home health wage data 
and the resources needed to audit and verify those data make it 
difficult to ensure that such a wage index accurately reflects the 
wages and wage-related costs applicable to the furnishing of services. 
We believe it is important that a HH specific wage index be more 
reflective of the wages and salaries paid in a specific area, be based 
upon stable data sources, and significantly improve our ability to 
determine HH payments without being overly burdensome.
    Comment: As an alternative to the rural floor, one commenter 
suggested we adjust for population density during calculation of the 
labor portion of payments to account for the increased costs of 
providing services in rural areas.
    Response: The proposal of utilizing a population density adjustment 
is suggestive of a rural add-on. The HH PPS has utilized rural add-ons 
during various time periods since its inception. However, rural add-ons 
must be legislated. The last rural add-on, which was mandated by 
section 5201(b) of the Deficit Reduction Act (DRA), expired in early CY 
2007.
    Comment: A commenter wrote that it was unfair for HHAs to be tied 
to erroneous hospital data with no recourse.
    Response: CMS utilizes efficient means to ensure and review the 
accuracy of the hospital cost report data and resulting wage index. The 
home health wage index is derived from the pre-floor, pre-reclassified 
hospital wage index which is calculated based on cost report data from 
hospitals paid under the hospital inpatient prospective payment system 
(IPPS). All IPPS hospitals must complete the wage index survey 
(Worksheet S-3, Parts II and III) as part of their Medicare cost 
reports. Cost reports will be rejected if Worksheet S-3 is not 
completed. In addition, our intermediaries perform desk reviews on all 
hospitals' Worksheet S-3 wage data, and we run edits on the wage data 
to further ensure the accuracy and validity of the wage data. 
Furthermore, HHAs have the opportunity to submit comments on the 
hospital wage index data during the annual IPPS rulemaking period. 
Therefore, we believe our review processes result in an accurate 
reflection of the applicable wages for the areas given.
    Comment: A few commenters objected to our using CBSA area, which 
they stated creates arbitrary payment differences along CBSA borders, 
and exacerbate instability in the wage index.
    Response: We believe that adjusting payments based on the CBSA 
areas is the best available method of compensating for differences in 
labor markets.
    Comment: A few commenters suggested we establish limits on 
allowable annual changes in wage index values from one year to the 
next. One suggested spreading any wage index value changes greater than 
2 percent over at least 2 years.
    Response: Updating the wage index must be done in a budget neutral 
manner. Establishing limits on how much a particular wage index could 
increase or decrease from one year to another would not be consistent 
with budget neutrality. Consequently, we implement updated versions of 
the wage index, in their entirety.
    Comment: Several commenters asked CMS to allow HHAs to apply for 
the type of geographic reclassification that IPPS hospitals are 
provided. In addition, several commenters recommended establishing a 
rural floor.
    Response: The commenters are referring to rural floor and 
geographic reclassification provisions in the IPPS which are only 
applicable to hospital payments. The rural floor provision is provided 
at section 4410 of Public Law 105-33 and is specific to hospitals. The 
reclassification provision provided at section 1886(d)(10) of the Act 
is also specific to hospitals. In its June 2007 report titled, ``Report 
to Congress: Promoting Greater Efficiency in Medicare'', MedPAC 
recommends that Congress ``repeal the existing hospital wage index 
statute, including reclassification and exceptions, and give the 
Secretary authority to establish new wage index systems.'' We believe 
that adopting the IPPS wage index policies (such as reclassification or 
floor) would not be prudent at this time, because MedPAC suggests that 
the reclassification and exception policies in the IPPS wage index 
alter the wage index values for one-third of IPPS hospitals. In 
addition, MedPAC found that the exceptions may lead to anomalies in the 
wage index. By adopting the IPPS reclassification and exceptions at 
this time, the HH PPS wage index could become vulnerable to problems 
similar to those that MedPAC identified in their June 2007 Report to 
Congress. However, we will continue to review and consider MedPAC's 
recommendations on a refined alternative wage index methodology for the 
HH PPS in the future.
    Comment: Several commenters recommended MedPAC's approach to the HH 
wage index outlined in its June 2007 report. This approach would use 
Bureau of Labor Statistics (BLS) data to provide more consistent values 
among neighboring markets and less year-to-year volatility in values. 
Additionally, the MedPAC methodology would utilize data that are 
available for all labor areas, eliminating the need to impute a wage 
index in areas with no hospital.
    Response: In February 2008, CMS awarded a Task Order under its 
Expedited Research and Demonstration Contract, to Acumen, LLC. Acumen, 
LLC conducted a study of both the current methodology used to construct 
the Medicare wage index and the recommendations in MedPAC's 2007 report 
to Congress. Part One of Acumen's final report, which analyzes the 
strengths and weaknesses of the data sources used to construct the CMS 
and MedPAC indexes, is available online at http://www.acumenllc.com/reports/cms. We will continue monitoring wage index reform efforts and 
their potential influence on the HH PPS wage index.
    Moreover, in light of all of the pending research and review of 
wage index issues in general, it would be premature at this time to 
initiate revisiting the use of CBSA labor market areas and review of a 
HH specific wage index.
    Therefore, in this final rule, we will continue to use hospital 
wage data to calculate the HH PPS wage index adjustment, and are 
finalizing the wage index policies as discussed in the CY 2010 proposed 
rule (74 FR 40948-40982, August 13, 2009). Refer to Addenda A and B of 
this final rule for the wage index applicable to CY 2010 HH PPS 
payments.

[[Page 58106]]

4. CY 2010 Payment Update
a. National Standardized 60-Day Episode Rate
    The CY 2010 HH PPS rates use the same case-mix methodology and 
application of the wage index adjustment to the labor portion of the HH 
PPS rates as set forth in the CY 2008 HH PPS final rule with comment 
period. We multiply the national 60-day episode rate by the patient's 
applicable case-mix weight. We divide the case-mix adjusted amount into 
a labor and non-labor portion. We multiply the labor portion by the 
applicable wage index based on the site of service of the beneficiary. 
We add the wage-adjusted portion to the non-labor portion yielding the 
case-mix and wage adjusted 60-day episode rate subject to any 
additional applicable adjustments.
    For CY 2010, we base the wage index adjustment to the labor portion 
of the HH PPS rates on the most recent pre-floor and pre-reclassified 
hospital wage index. As discussed in the July 3, 2000 HH PPS final 
rule, for episodes with four or fewer visits, Medicare pays the 
national per-visit amount by discipline, referred to as a LUPA. We 
update the national per-visit rates by discipline annually by the 
applicable home health market basket percentage. We adjust the national 
per-visit rate by the appropriate wage index based on the site of 
service for the beneficiary, as set forth in Sec.  484.230. We will 
adjust the labor portion of the updated national per-visit rates used 
to calculate LUPAs by the most recent pre-floor and pre-reclassified 
hospital wage index, as discussed in the CY 2008 HH PPS final rule with 
comment period. We update the LUPA add-on payment amount and the NRS 
conversion factor by the applicable home health market basket update of 
2.0 percent for CY 2010.
    Medicare pays the 60-day case-mix and wage-adjusted episode payment 
on a split percentage payment approach. The split percentage payment 
approach includes an initial percentage payment and a final percentage 
payment as set forth in Sec.  484.205(b)(1) and Sec.  484.205(b)(2). We 
may base the initial percentage payment on the submission of a request 
for anticipated payment (RAP) and the final percentage payment on the 
submission of the claim for the episode, as discussed in Sec.  409.43. 
The claim for the episode that the HHA submits for the final percentage 
payment determines the total payment amount for the episode and whether 
we make an applicable adjustment to the 60-day case-mix and wage-
adjusted episode payment. The end date of the 60-day episode as 
reported on the claim determines which calendar year rates Medicare 
would use to pay the claim.
    We may also adjust the 60-day case-mix and wage-adjusted episode 
payment based on the information submitted on the claim to reflect the 
following:
     A low utilization payment provided on a per-visit basis as 
set forth in Sec.  484.205(c) and Sec.  484.230.
     A partial episode payment adjustment as set forth in Sec.  
484.205(d) and Sec.  484.235.
     An outlier payment as set forth in Sec.  484.205(e) and 
Sec.  484.240.
b. Updated CY 2010 National Standardized 60-Day Episode Payment Rate
    In calculating the annual update for the CY 2010 national 
standardized 60-day episode payment rates, we first look at the CY 2009 
rates as a starting point. The CY 2009 national standardized 60-day 
episode payment rate is $2,271.92.
    As discussed in section II.B., ``Outlier Policy'', of the CY 2010 
proposed rule, and finalized in section II.A. of this final rule, in 
our final policy of targeting outlier payments to be approximately 2.5 
percent of total HH PPS payments in CY 2010, we are returning 2.5 
percent back into the HH PPS rates, to include the national 
standardized 60-day episode payment rate. As such, to calculate the CY 
2010 national standardized 60-day episode payment rate, we first 
increase the CY 2009 national standardized 60-day episode payment rate 
($2,271.92) to adjust for the 5 percent originally set aside for 
outlier payments. We then reduce that adjusted payment amount by 2.5 
percent, the final target percentage of outlier payments as a 
percentage of total HH PPS payment. Next, we update by the final CY 
2010 home health market basket update percentage of 2.0 percent.
    As previously discussed in section II.C., ``Case-Mix Measurement 
Analysis'', of the proposed rule, our updated analysis of the change in 
case-mix not due to an underlying change in patient health status 
reveals additional increase in nominal case-mix. As discussed, we are 
moving forward with our existing policy to reduce rates by 2.75 percent 
in CY 2010. Consequently, to calculate the CY 2010 national 
standardized 60-day episode payment rate, we then reduce the rate by 
2.75 percent, for a final updated CY 2010 national standardized 60-day 
episode payment rate of $2,312.94. The final updated CY 2010 national 
standardized 60-day episode payment rate for an HHA that submits the 
required quality data is shown in Table 1. The final updated CY 2010 
national standardized 60-day episode payment rate for an HHA that does 
not submit the required quality data (home health market basket update 
of 2.0 percent is reduced by 2 percent) is shown in Table 2.

 Table 1--National Standardized 60-day Episode Payment Rate Updated by the Home Health Market Basket Update for
    CY 2010, Before Case-Mix Adjustment and Wage Adjustment Based on the Site of Service for the Beneficiary
----------------------------------------------------------------------------------------------------------------
                                             Adjusted to
                                             return the                  Multiply by
                                               outlier     Adjusted to    the home      Reduce by      CY 2010
                                             funds, that   account for     health     2.75 percent    National
   CY 2009 National standardized 60-day     paid for the  the proposed     market      for nominal  standardized
           episode payment rate              original 5%  2.5% outlier     basket       change in      60-day
                                             target for      policy      update (2.0    case-mix       episode
                                               outlier                  percent) \1\                payment rate
                                              payments
----------------------------------------------------------------------------------------------------------------
$2,271.92.................................       / 0.95       x 0.975       x 1.020      x 0.9725     $2,312.94
----------------------------------------------------------------------------------------------------------------
\1\ The estimated home health market basket update of 2.0 percent for CY 2010 is based on IHS Global Insight
  Inc., 3rd Qtr 2009 forecast with historical data through 2nd Qtr 2009.


[[Page 58107]]


  Table 2--For HHAs That Do Not Submit the Required Quality Data; National Standardized 60-Day Episode Payment
Rate Updated by the Home Health Market Basket Update for CY 2010, Before Case-Mix Adjustment and Wage Adjustment
                                Based on the Site of Service for the Beneficiary
----------------------------------------------------------------------------------------------------------------
                                                                         Multiply by
                                                                          the home                     CY 2010
                                             Adjusted to                   health                     National
                                             return the                    market                   standardized
                                               outlier     Adjusted to     basket       Reduce by      60-day
Total CY 2009 National standardized 60-day   funds, that   account for   update (2.0  2.75 percent     episode
           episode payment rate             paid for the    the 2.5%    percent) \1\   for nominal  payment rate
                                             original 5%     outlier       minus 2      change in     for HHAs
                                             target for      policy      percent for    case-mix     that do not
                                              outliers                      a 0.0                      submit
                                                                           percent                    required
                                                                           update                   quality data
----------------------------------------------------------------------------------------------------------------
$2,271.92.................................       / 0.95       x 0.975        x 1.00      x 0.9725     $2,267.59
----------------------------------------------------------------------------------------------------------------
\1\ The estimated home health market basket update of 2.0 percent for CY 2010 is based on IHS Global Insight
  Inc., 3rd Qtr 2009 forecast with historical data through 2nd Qtr 2009.

c. National Per-Visit Rates Used To Pay LUPAs and Compute Imputed Costs 
Used in Outlier Calculations
    In calculating the CY 2010 national per-visit rates used to 
calculate payments for LUPA episodes and to compute the imputed costs 
in outlier calculations, we start with the CY 2009 national per-visit 
rates. We first adjust the CY 2009 national per-visit rates to adjust 
for the 5 percent originally set aside for outlier payments. We then 
reduce those national per-visit rates by 2.5 percent, the final target 
percentage of outlier payments as a percentage of total HH PPS payment. 
Next we update by the current CY 2010 home health market basket update 
percentage of 2.0 percent. National per-visit rates are not subjected 
to the 2.75 percent reduction related to the nominal increase in case-
mix because they are per-visit rates and hence not case-mix adjusted. 
The final updated CY 2010 national per-visit rates per discipline are 
shown in Table 3.

 Table 3--National Per-Visit Rates for LUPAs (Not including the LUPA Add-On Payment Amount for a Beneficiary's Only Episode or the Initial Episode in a
      Sequence of Adjacent Episodes) and Outlier Calculations Updated by the CY 2010 Home Health Market Basket Update, Before Wage Index Adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       For HHAs that DO submit    For HHAs that DO NOT
                                                                                                        the required quality       submit the required
                                                                                                                data                  quality data
                                                                            Adjusted to              ---------------------------------------------------
                                                                             return the                                         Multiply by
                                                               CY 2009 Per-   outlier                              CY 2010 per-   the home   CY 2010 per-
                                                                  visit      funds that  Adjusted to  Multiply by     visit        health       visit
                                                               amounts per    paid for   account for    the home     payment       market      payment
                 Home health discipline type                      60-day        the        the 2.5%      health     amount for     basket     amount for
                                                               episode for  original 5%    outlier       market     HHAs that   update (2.0   HHAs that
                                                                  LUPAs      target for     policy       basket     DO submit     percent)      DO NOT
                                                                              outlier                 update (2.0      the      \1\ minus 2   submit the
                                                                              payments                  percent)     required     percent,     required
                                                                                                          \1\        quality      for a 0      quality
                                                                                                                       data       percent        data
                                                                                                                                   update
--------------------------------------------------------------------------------------------------------------------------------------------------------
Home Health Aide.............................................       $48.89       / 0.95      x 0.975       x 1.02       $51.18       x 1.00       $50.18
Medical Social Services......................................       173.05       / 0.95      x 0.975       x 1.02       181.16       x 1.00       177.60
Occupational Therapy.........................................       118.83       / 0.95      x 0.975       x 1.02       124.40       x 1.00       121.96
Physical Therapy.............................................       118.04       / 0.95      x 0.975       x 1.02       123.57       x 1.00       121.15
Skilled Nursing..............................................       107.95       / 0.95      x 0.975       x 1.02       113.01       x 1.00       110.79
Speech-Language Pathology....................................       128.26       / 0.95      x 0.975       x 1.02       134.27       x 1.00       131.64
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The proposed estimated home health market basket update of 2.0 percent for CY 2010 is based on IHS Global Insight Inc., 3rd Qtr 2009 forecast with
  historical data through 2nd Qtr 2009.

d. LUPA Add-on Payment Amount Update
    Beginning in CY 2008, LUPA episodes that occur as the only episode 
or initial episode in a sequence of adjacent episodes were adjusted by 
adding an additional amount to the LUPA payment before adjusting for 
area wage differences. As previously discussed, we are returning 2.5 
percent back into the HH PPS rates, to include the LUPA add-on payment 
amount, as a result of our final policy to target outlier payments to 
be approximately 2.5 percent of total HH PPS payments in CY 2010. As 
such, we first adjust the CY 2009 LUPA add-on payment amount to adjust 
for the 5 percent originally set aside for outlier payments. We then 
reduce that amount by 2.5 percent, the final target percentage of 
outlier payments as a percentage of total HH PPS payment. Next we 
updated by the current CY 2010 home health market basket update 
percentage of 2.0 percent. The LUPA add-on payment amount was not 
subject to the 2.75 percent reduction related to the nominal increase 
in case-mix because it is an add-on to the per-visit rates which are 
not case-mix adjusted.
    The final updated CY 2010 LUPA add-on payment amount is shown in 
Table 4 below. Just as the standardized 60-day episode rate and the 
per-visit rates paid to HHAs that do not submit the required quality 
are reduced by 2 percent, the additional LUPA payment should be reduced 
by 2 percent also. In neither the CY 2008 nor the CY 2009

[[Page 58108]]

HH PPS rulemaking did we include such an adjustment to the LUPA add-on 
payment amount. For CY 2010, the add-on to the LUPA payment to HHAs 
that submit the required quality data will be updated by the full home 
health market basket update. The add-on to the LUPA payment to HHAs 
that do not submit the required quality data will be updated by the 
home health market basket update minus two percent.

                                                      Table 4--CY 2010 LUPA Add-On Payment Amounts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     For HHAs that DO submit the required      For HHAs that DO NOT submit the  required
-----------------------------------------------------------------                quality data                                quality data
                                                                 ---------------------------------------------------------------------------------------
                       Adjusted to return                                                                     Multiply by the home
                       the outlier funds,    Adjusted to account  Multiply by the home   CY 2010 LUPA Add-on  health market basket   CY 2010 LUPA Add-on
 CY 2009 LUPA Add-on    that paid for the     for the proposed    health market basket   payment amount for   update (2.0 percent)   payment amount for
   payment amount      original 5% target    2.5% outlier policy  update (2.0 percent)   HHAs that DO submit  \1\ minus 2 percent,    HHAs that DO NOT
                          for outliers                                     \1\            required quality      for a 0.0 percent      submit required
                                                                                                data                 update             quality data
--------------------------------------------------------------------------------------------------------------------------------------------------------
            $90.48                / 0.95               x 0.975                x 1.02                $94.72                x 1.00                $92.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The proposed estimated home health market basket update of 2.0 percent for CY 2010 is based on IHS Global Insight Inc., 3rd Qtr 2009 forecast with
  historical data through 2nd Qtr 2009.

e. Non-Routine Medical Supply Conversion Factor Update
    Payments for non-routine medical supplies (NRS) are computed by 
multiplying the relative weight for a particular severity level by the 
NRS conversion factor. We first adjust the CY 2009 NRS conversion 
factor ($52.39) to adjust for the 5 percent originally set aside for 
outlier payments. We then reduce that amount by 2.5 percent, the final 
target percentage of outlier payments as a percentage of total HH PPS 
payment.
    Next we update by the current proposed CY 2010 home health market 
basket update percentage of 2.0 percent. Finally, we then reduce that 
adjusted payment amount by 2.75, to account for the increase in nominal 
case-mix. The final updated CY 2010 NRS conversion factor is shown in 
Table 5a below. The NRS conversion factor for CY 2009 was $52.39. For 
CY 2010, the NRS conversion factor is $53.34.

                                                                        Table 5a
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Adjusted to return the
                          outlier funds, that paid                              Multiply by the home     Reduce by 2.75 percent  CY 2010 NRS  conversion
 CY 2009 NRS  conversion     for the original 5%     Adjusted to account for    health market basket     for nominal change in   factor for HHAs that DO
         factor              target for outlier      the 2.5% outlier policy    update (2.0 percent)            case-mix           submit the required
                                  payments                                                                                             quality data
--------------------------------------------------------------------------------------------------------------------------------------------------------
              $52.39                    / 0.95                   x 0.975                    x 1.02                  x 0.9725                   $53.34
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The payment amounts, using the above computed CY 2010 NRS 
conversion factor ($53.34), for the various severity levels based on 
the updated conversion factor are calculated in Table 5b.

                            Table 5b--Relative Weights for the 6-Severity NRS System
----------------------------------------------------------------------------------------------------------------
                                                                      Points         Relative       NRS payment
                         Severity level                              (scoring)        weight          amount
----------------------------------------------------------------------------------------------------------------
1...............................................................               0          0.2698          $14.39
2...............................................................         1 to 14          0.9742           51.96
3...............................................................        15 to 27          2.6712          142.48
4...............................................................        28 to 48          3.9686          211.69
5...............................................................        49 to 98          6.1198          326.43
6...............................................................             99+         10.5254          561.42
----------------------------------------------------------------------------------------------------------------

    For HHAs that do not submit the required quality data, we again 
begin with the CY 2009 NRS conversion factor. We first adjust the CY 
2009 NRS conversion factor ($52.39) to adjust for the 5 percent 
originally set aside for outlier payments. We then reduce that amount 
by 2.5 percent, the final target percentage of outlier payments as a 
percentage of total HH PPS payment. Next we update by the current CY 
2010 home health market basket update percentage of 2.0 percent minus 2 
percent) for a 0.00 percent update. Finally, we then reduce that 
adjusted payment amount by 2.75, to account for the increase in nominal 
case-mix. The final updated CY 2010 NRS conversion factor for HHAs that 
do not submit quality data is shown in Table 6A below.

[[Page 58109]]



                              Table 6a--CY 2010 NRS Conversion Factor for HHAs That Do Not Submit the Required Quality Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Multiply by the proposed
                           Adjusted to return the                                home health market                              CY 2010 NRS  conversion
 CY 2009 NRS  Conversion  outlier funds, that paid   Adjusted to account for     basket update (2.0     Reduce by 2.75  percent  factor for HHAs that DO
         Factor              for the original 5%        the proposed 2.5%     percent) minus 2 percent   for nominal change in   NOT submit the required
                             target for outlier          outlier policy          for a  0.0 percent             case-mix               quality data
                                  payments                                             update
--------------------------------------------------------------------------------------------------------------------------------------------------------
              $52.39                    / 0.95                   x 0.975                    x 1.00                  x 0.9725                   $52.29
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The payment amounts for the various severity levels based on the 
updated conversions factor, for HHAs that do not submit quality data, 
are calculated in Table 6B, below.

             Table 6b--Relative Weights for the 6-Severity for HHAs That Do Not Submit Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                                     Relative      Proposed NRS
               Severity level                          Points  (scoring)              weight      payment amount
----------------------------------------------------------------------------------------------------------------
1...........................................  0.................................          0.2698          $14.11
2...........................................  1 to 14...........................          0.9742           50.94
3...........................................  15 to 27..........................          2.6712          139.68
4...........................................  28 to 48..........................          3.9686          207.52
5...........................................  49 to 98..........................          6.1198          320.00
6...........................................  99+...............................         10.5254          550.37
----------------------------------------------------------------------------------------------------------------

D. OASIS Issues

1. HIPPS Code Reporting
    In the proposed rule we clarified our policy regarding the 
submission of the Health Insurance Prospective Payment System (HIPPS) 
codes to CMS via OASIS. Sec.  484.250 requires HHAs to submit to CMS 
the OASIS data described in Sec.  484.55(b)(1) and Sec.  484.55(d)(1) 
in order for CMS to administer the payment rate methodologies. Also, as 
described in Sec.  484.20, HHAs must electronically report all OASIS 
data collected in accordance with Sec.  484.55 as a condition of 
participation, and HHAs must encode and electronically transmit the 
completed OASIS assessment to CMS in the standard data format as 
described in Sec.  484.20(d). For those OASIS assessments required for 
payment, the standard format which is electronically transmitted by the 
HHA to CMS includes a HIPPS code, generated by grouper software at the 
HHA. When an HHA electronically transmits OASIS assessments to CMS (via 
the State agency), the CMS OASIS submission system performs a 
validation check of the transmitted OASIS items, including the 
submitted HIPPS code. If the CMS OASIS submission system validation 
determines that the submitted HIPPS code is in error, it informs HHAs 
of that error via the Final Validation Report which is returned to HHA. 
The Final Validation Report will include the valid, CMS OASIS 
submission system calculated HIPPS code. We have become aware of a 
proliferation of incidents where the HIPPS code submitted to CMS on the 
OASIS does not match the HIPPS code, which is calculated by the CMS 
OASIS submission system. The HH PPS Grouper Software, which is used by 
the CMS OASIS submission system in its validation, is the official 
grouping software of the HH PPS, and thus the HIPPS code produced by 
the CMS OASIS submission system is the HIPPS code that should 
ultimately be billed on the claim. Consequently, in the interest of 
accurate coding and billing, we proposed that the HHA be required to 
ensure that the HIPPS code billed on the claim is consistent with that 
which CMS' OASIS submission system calculated. In the case where the 
Final Validation Report returns to the HHA a HIPPS code which is 
different than the HIPPS code submitted to CMS by the HHA on the OASIS, 
the HHA must ensure that the HIPPS code from the Final Validation 
report is the HIPPS code reported on the bill.
    Comment: Commenters were supportive of our proposal to require that 
the OASIS HIPPS code match that on the claim. However, one commenter 
noted that some software cannot identify claims that need to have the 
HIPPS codes reconciled, and suggested we allow time for vendors to 
accommodate, and time for providers to develop internal procedures. 
This commenter also asked that we clarify in greater detail what is 
meant by non-compliance. If the proposal is finalized, and enforced on 
an individual claim basis, this commenter suggested that after a delay 
for systems changes, we allow for testing of individual claim edits by 
generating warning messages. The commenter suggested this occur during 
a trial period to give providers time to test out procedures and 
software.
    Other commenters wrote that if we move toward requiring claim-by-
claim verification of the HIPPS codes against the OASIS data 
repository, the system should be constructed to avoid delays in 
payment. One commenter stated that the proposed rule wasn't clear about 
when the trend toward incorrect HIPPS coding began. This commenter 
wrote that if it began with the 2008 refinement, did we consider 
factors outside of HHA control, such as the effect of item M0110, which 
impacts the HIPPS code. HHAs may not have enough information to answer 
M0110 at the start of the episode, but the FI may automatically change 
the HIPPS code due to more current information related to M0110 in CWF 
which was not available to the HHA at start of care. The commenter asks 
how we will ensure that the HIPPS codes match in this scenario, and how 
agency oversight would occur. Another commenter asked what the 
consequences would be if a few claims had minor discrepancies, and 
would like us to provide additional information on the implications and 
consequences of policy statements regarding the differences in HIPPS 
generated by OASIS and HIPPS on the claim.

[[Page 58110]]

    Some commenters expressed concern that some vendor billing software 
used by HHAs is not currently able to identify situations where the 
HIPPS code submitted on claims needs to be reconciled to the HIPPS code 
calculated by State OASIS systems. The commenter requested that CMS 
allow additional time for vendors and HHAs to make changes to their 
software and that CMS systems generate warning messages during a trial 
period.
    Response: HHAs do not necessarily need to change their software 
initially in order to comply with this requirement. If HIPPS codes 
generated by the HHA's software do not match the code calculated by 
State OASIS systems, the HHA currently receives a warning message 
alerting them to this problem. HHAs should use these warning messages 
as a trigger to correct any HIPPS code submitted for payment by either 
canceling and resubmitting any paid Request for Anticipated Payment 
(RAP) or adjusting any paid claim. Since canceling or adjusting claims 
are routine billing processes, we do not believe additional time is 
necessary to allow HHAs to prepare for them.
    In the future, enforcement of this requirement may be implemented 
on a pre-payment basis. HHAs should seek to improve their compliance 
and their internal processes now in order to prepare for any future 
pre-payment requirement. Specific information about future enforcement 
mechanisms will be provided by Medicare program instructions with 
sufficient time for HHAs to prepare for them.
    The information that highlighted the errors in HIPPS code reporting 
reflected all 2008 claims. However, the information compared the HIPPS 
codes the HHA initially submitted on claims with the HIPPS codes 
calculated by the State OASIS system for the same episode. Both the HHA 
and the State system were using the same M0110 information in their 
calculations, so subsequent changes in that information could not 
affect the results. CMS will consider the effect of M0110 information 
in any future enforcement mechanism.
    As such, in the interest of accurate coding and billing, we are 
implementing the provision that the HHA be required to ensure that the 
HIPPS code billed on the claim is consistent with that which CMS' OASIS 
submission system calculated. In the case where the Final Validation 
Report returns to the HHA a HIPPS code which is different than the 
HIPPS code submitted to CMS by the HHA on the OASIS, the HHA must 
ensure that the HIPPS code from the Final Validation report is the 
HIPPS code reported on the bill.
2. OASIS Submission as a ``Condition of Payment''
    Section 484.20 requires that HHAs must electronically report to CMS 
(via the State agency or OASIS contractor) all OASIS data collected in 
accordance with Sec.  484.55 as a condition of participation. 
Additionally, Sec.  484.250 requires that HHAs must submit to CMS the 
OASIS data described at Sec.  484.55(b)(1) and (d)(1) in order for CMS 
to administer the payment rate methodologies. Building on the above 
clarification for HHAs to ensure the HIPPS code reported on the bill is 
consistent with that which CMS' OASIS submission system calculated, and 
in order to be consistent with Sec.  484.250, in the proposed rule, we 
proposed to require the electronic reporting of OASIS to CMS as a 
condition of payment in Sec.  484.210. Currently, as a requirement for 
pay for reporting, HHAs are required to submit quality data (that being 
OASIS data) in order to receive the full home health market basket 
update to the rates. The burden associated with the requirement for the 
HHA to submit the OASIS is currently accounted for under OMB 
0938-0761. Making OASIS submission a condition for payment is 
consistent with both OASIS submissions being a condition of 
participation and a requirement to receive full market basket updates 
under pay for reporting.
    Comment: Several commenters supported our proposal to require OASIS 
reporting as a condition of payment, calling it an appropriate step 
toward ensuring agreement between the HHRG on OASIS and that reported 
on the claim. However, these commenters were confused because they 
wrote that the proposed regulatory language and the language in the 
current regulation are the same. They also requested that we clarify 
how the proposed change would affect current procedures for RAPs and 
claims submissions, saying that currently HHAs are required to have 
OASIS data ready for transmission before submitting a RAP, but are not 
required to have submitted OASIS.
    Additionally, these commenters noted that compliance with 42 CFR 
455.55(b)(1) and (d)(1) specifies that OASIS data submitted requires 
completion of the comprehensive assessment with OASIS within 5 days 
after the start of care and during the last 5 days of a prior episode 
for recertification. The commenter was concerned that the impact of the 
proposed change could preclude HHAs from receiving Medicare payment in 
all cases where OASIS was not completed within the 5-day timeframe. The 
commenters noted some exceptions to the 5-day timeframe, and that in 
the early years of HH PPS, CMS used Q&As and letters to express its 
intention to refrain from penalizing HHAs that failed to submit OASIS 
during the 5-day timeframe under certain circumstances. In these cases, 
the commenters wrote that CMS allowed HHAs to either conduct a 
comprehensive assessment as soon as possible in the 60 day episode, or 
to determine appropriate OASIS responses required for payment from the 
clinical record when Medicare is the payer. Also, when payment-only 
items are collected, HHAs are not to submit these data to CMS. The 
commenters recommended that we amend any enforcement to consider that 
100 percent compliance with the 5-day timeframe is not always 
achievable.
    A different commenter was opposed to the proposal to require OASIS 
reporting as a condition for payment, noting the exceptions to the 5-
day timeframe because of issues outside of the provider's control. This 
commenter wrote that we should not include timeframes in any submission 
requirement related to payment and also asked that we change 
enforcement to recognize that 100 percent compliance with the 5-day 
timeframe is not always achievable.
    Several commenters were concerned about the potential for 
reinstitution of collection of all OASIS items for one-visit-only 
cases; currently HHAs limit the OASIS collection to payment-only items 
for one-visit patients.
    One commenter wrote that the current OASIS requirements are 
included only in the home health CoPs, and is concerned that the 
proposal would lead to the use of OASIS requirements by Regional Home 
Health Intermediaries (RHHIs), Payment Safeguard Contractors (PSCs), 
and Recovery Audit Contractors (RACs) to deny or adjust claims payment. 
The commenter wrote that HHAs are already inundated with State and 
Federal audits, and that this proposal would only exacerbate the 
problem. Another asked us to provide additional information in the 
implications and consequences of policy statements regarding OASIS 
being a condition of payment, and asked what actions would result if an 
agency failed to meet the requirement.
    Response: We thank the writers for their comments. We assure 
commenters that we have no intention that this proposed requirement 
would have an effect on long-standing direction associated with 
submitting RAPS, OASIS completion timeframes, and

[[Page 58111]]

instructions associated with one-visit episodes. Rather, we intend that 
in finalizing this policy, providers will ensure that prior to 
submitting a final HH PPS episode claim, a provider will have submitted 
an OASIS, and the HIPPS code on the final HH PPS episode claim will be 
consistent with the HIPPS on the OASIS validation report.
    As such, we are implementing the provision to require the 
submission of OASIS, for final claims, as a condition of payment, and 
revising Sec.  484.210 ``Data used for the calculation of the national 
prospective 60-day episode payment'' to reflect this requirement.

E. Qualifications for Coverage as They Relate to Skilled Services 
Requirements

    In the proposed rule, for CY 2010, we proposed to clarify what 
constitutes skilled services in the home health setting with the 
following revisions to Sec.  409.42. We proposed to add a qualifying 
instruction to Sec.  409.42(c)(1) to explain that intermittent skilled 
nursing services meeting the criteria for skilled services and the need 
for skilled services found in Sec.  409.32 (with examples in Sec.  
409.33 (a) and (b)) are subject to certain limitations in the home 
health setting.
Proposed New Paragraph Sec.  409.42(c)(1)(i)
    We proposed to describe the limitations in two new paragraphs, 
Sec.  409.42(c)(1)(i) and Sec.  409.42(c)(1)(ii). In Sec.  
409.42(c)(1)(i) we proposed that in the home health setting, management 
and evaluation of a patient care plan is considered a reasonable and 
necessary skilled service only when underlying conditions or 
complications are such that only a registered nurse can ensure that 
essential non-skilled care is achieving its purpose.
    Further, in Sec.  409.42(c)(1)(i) we also proposed to clarify that 
to be considered a skilled service, the complexity of the necessary 
unskilled services that are a necessary part of the medical treatment 
must require the involvement of licensed nurses to promote the 
patient's recovery and medical safety in view of the overall condition. 
Where nursing visits are not needed to observe and assess the effects 
of the nonskilled services being provided to treat the illness or 
injury, skilled nursing care would not be considered reasonable and 
necessary, and the management and evaluation of the care plan would not 
be considered a skilled service.
    Additionally, we proposed to further clarify in Sec.  
409.42(c)(1)(i) that in some cases, the condition of the patient may 
require that a service that would normally be considered unskilled be 
classified as a skilled nursing service given a patient's unique 
circumstances. This would occur when the patient's underlying condition 
or complication required that only a registered nurse could ensure that 
essential non-skilled care was achieving its purpose. However, any 
individual service would not be deemed a skilled nursing service merely 
because it was performed by or under the supervision of a licensed 
nurse. Where a service could be safely and effectively performed (or 
self administered) by the average non-medical person without the direct 
supervision of a nurse, the service could not be regarded as a skilled 
service, although a nurse may have actually provided the service.
Proposed New Paragraph Sec.  409.42(c)(1)(ii)
    Additionally, we also proposed a new Sec.  409.42(c)(1)(ii), which 
would clarify when patient education services as described in Sec.  
409.33(a)(3) constituted skilled services in the home health setting. 
Currently Sec.  409.32(a)(3) states that patient education services are 
skilled services if the use of technical or professional personnel is 
necessary to teach patient self-maintenance. However, to address the 
concerns and lack of clarity surrounding when educational services are 
skilled services as described above, we proposed to add a new 
paragraph, Sec.  409.42(c)(1)(ii). In the home health setting, skilled 
education services would be deemed to no longer be needed when it 
became apparent, after a reasonable period of time, that the patient, 
family, or caregiver could not or would not be trained. Further 
teaching and training would cease to be reasonable and necessary in 
this case, and would cease to be considered a skilled service. 
Notwithstanding that the teaching or training was unsuccessful, the 
services for teaching and training would be considered to be reasonable 
and necessary prior to the point that it became apparent that the 
teaching or training was unsuccessful, as long as such services were 
appropriate to the patient's illness, functional loss, or injury.
Proposed Change to Sec.  409.44(b)
    We proposed to revise the introductory material at Sec.  
409.44(b)(1), to refer to the newly proposed limitations of skilled 
services in the home health benefit at Sec.  409.42(c)(1)(i) and 
409.42(c)(1)(ii). The clauses under the revised paragraphs (i) through 
(iv) would remain unchanged.
Proposed Revision to Sec.  424.22(a)(1)(i) and Sec.  424.22(b)(2)
    We also proposed to revise Sec.  424.22(a)(1)(i) and Sec.  
424.22(b)(2) to require a written narrative of clinical justification 
on the physician certification and recertification for the targeted 
condition where the patient's overall condition supported a finding 
that recovery and safety could be ensured only if the care was planned, 
managed, and evaluated by a registered nurse. To clarify for home 
health agencies what specific circumstances would necessitate the 
involvement of a registered nurse in the development, management, and 
evaluation of a patient's care plan when only unskilled services were 
being provided, we proposed additions to the home health certification 
content requirements as described at Sec.  424.22(a)(i) and 
recertification content requirements at Sec.  424.22(b)(2). 
Specifically, when a patient's underlying condition or complication 
required exclusively that a registered nurse ensure that essential non-
skilled care is achieving its purpose, and necessitated that a 
registered nurse be involved in the development, management, and 
evaluation of a patient's care plan, we proposed to require the 
physician include a written narrative on the certification and 
recertification describing the physician's clinical justification of 
this need.
    Comment: Many commenters appreciated CMS' clarification of skilled 
services. However, many opposed CMS' proposal that a physician include 
a clinical justification on the certification of need for Medicare's 
home health services, in the scenario where a patient's need for 
skilled services is met solely because skilled oversight of unskilled 
services is required. Commenters urged CMS to reconsider this 
requirement, stating that such a requirement would be too burdensome 
for physicians to include on the certification, would be too burdensome 
for agencies to administer, and would result in fewer patients being 
referred to home health. Some commenters stated that the need for 
skilled oversight of unskilled services is a determination that the 
home health nurse makes at the initial eligibility assessment, and that 
this need is better understood by the nurse than it would be by the 
certifying physician. Further, commenters stated that this requirement 
would muddy issues of nursing practice by requiring more physician 
orders for established areas of nursing practice. Other commenters 
expanded on this concern, stating that by requiring the physician to

[[Page 58112]]

clinically justify the need for skilled oversight of unskilled 
services, CMS was diminishing the role and responsibility of the home 
health nurse to makes such an assessment. Some commenters recommended 
that CMS instead provide education to providers regarding when 
evaluation and management of unskilled services is appropriate. Another 
commenter suggested that we develop a national coverage determination 
(NCD) to address our concerns. Commenters described the challenges that 
home health agencies currently face in getting the physician to sign 
orders and plans of care, fearing that this additional physician 
documentation requirement could result in physicians not certifying 
patients for Medicare's home health benefit, ultimately resulting in 
access to care issues for patients. Other commenters stated that this 
requirement would have no positive effect; because so few patients meet 
the skilled requirement based solely on this need, the narrative 
requirement would not enhance program integrity efforts. Commenters 
contended that the requirement would increase HHA costs, since HHAs 
would need to track the physician's compliance. One commenter suggested 
that we instead provide the patient's certifying physician with a list 
of services provided to the patient to achieve more physician 
involvement with the home health patient. Another commenter suggested 
instead of requiring a physician narrative in this scenario, we instead 
require that the plan of care contain a clinical justification for the 
skilled oversight. Other commenters stated that a narrative requirement 
is not the way to achieve more physician involvement and another 
commenter stated that a narrative requirement would take away from the 
time a physician spends with the patient. Instead, CMS should look to 
new OASIS-C process measures which would require the home health agency 
to contact the physician more frequently. Another commenter suggested 
that we instead require a clear order from the physician for management 
and evaluation of the plan of care. Another commenter stated that this 
narrative requirement more appropriately belongs in the physician fee 
schedule rule, while another commenter stated that should CMS finalize 
this requirement, we place the burden of compliance on the physician. 
Finally, a commenter stated this requirement is especially problematic 
for dual eligible home health patients. The commenter asserted that 
Medicaid does not have a comparable narrative requirement. Therefore, 
should an agency believe that the payer source for a patient is 
Medicaid, it would not obtain the narrative from the physician. If 
later the agency determines that Medicare should be the payer for the 
services rendered to such a patient, the agency would not be able to 
satisfy this narrative requirement.
    Response: We thank the writers for their comments. However, we 
continue to believe that requiring a physician to complete a clinical 
justification on the certification in this targeted scenario addresses 
a specific program vulnerability which has been identified by our 
Medicare contractors, and is a first step in addressing vulnerabilities 
identified by the Office of Inspector General (OIG). We also believe 
that this requirement will result in a minimal burden on the physician, 
and minimal costs to the HHA, given that this requirement applies only 
to the small percentage of patients who require only skilled oversight 
of unskilled care. The brief narrative should be a simple task for the 
physician because of the physician's responsibility for the clinical 
determination of the patient's skilled need as part of the 
certification or recertification requirement.
    We remind commenters that a physician must certify that home health 
services are required because the individual patient needs skilled 
nursing care on an intermittent basis, or physical or speech therapy, 
or continued occupational therapy in order for a patient to be eligible 
for the benefit. We are concerned that many commenters state that a 
physician's involvement in this scenario is negligible; that the 
physician relies solely on the home health nurse's determination when 
certifying the need for the Medicare home health benefit. We remind 
commenters that the physician has always been responsible for 
certifying that the unique condition of the patient warrants 
eligibility for Medicare's home health benefit. A home health agency's 
recommendation alone is not sufficient for a physician to certify the 
need for the benefit. While our regulations have always required the 
physician to review the individual patient's needs and unique clinical 
condition as part of the certification and recertification requirement, 
we believe the commenters are often correct that the physician may rely 
too heavily on the home health staff for the determination of skilled 
need for Medicare's home health benefit.
    We also would like to assure nurses that this requirement is not an 
attempt by CMS to diminish in any way the essential and important role 
that skilled nurses play in the assessment of a home health patient's 
needs. While the home health nurse is responsible for initiating, 
managing and evaluating the resources needed to promote the Medicare 
home health patient's optimal level of well-being, this does not 
diminish the responsibility of the physician to ensure that the unique 
condition of the patient warrants the need for Medicare's home health 
benefit. The physician is currently responsible to carefully synthesize 
data regarding the patient's condition and assess whether this 
patient's unique condition requires Medicare's home health services. 
The physician is accountable for the accuracy of the certification of 
need for home health services. We agree with the commenter that 
providing the physician with a list of patients' home health services 
provided may be useful. Similarly, we agree with the commenter that 
inclusion of a clinical justification on the plan of care is a good 
idea, and that a clear physician order for this service should be 
present. We also agree that the OASIS process measures will more 
actively involve the physician in some aspects of patient care. 
Additional provider education associated with management and evaluation 
is something that CMS will consider providing. However, we do not 
believe that an NCD is appropriate in this scenario because skilled 
services are covered under the home health benefit, and appropriate use 
of management and evaluation management of the plan of care is a 
skilled service. Regardless, none of these suggestions would replace 
the physician's accountability associated with the certification and 
recertification of need for Medicare's home health benefit, nor would 
these suggestions address the program vulnerability associated with 
this specific category of home health patient. And, because the 
physician's certification and recertification of the need for 
Medicare's home health benefit is fundamental to eligibility, we 
disagree with the commenter that this provision would be more 
appropriately addressed in the physician fee schedule rule. Regarding 
the commenter's suggestion that we hold the physician accountable for 
complying with this requirement, we continue to believe that each 
agency is responsible for ensuring that the certification and 
recertification requirements are met, but we also reiterate the 
physician's accountability associated with the certification and 
recertification, as they are part of the medical record.

[[Page 58113]]

    Therefore, we are finalizing the following policy: When a patient's 
underlying condition or complication requires that a registered nurse 
ensures that essential non-skilled care is achieving its purpose, and 
necessitates a registered nurse be involved in the development, 
management and evaluation of a patient's care plan, we will require 
that the physician include a written narrative on the certification and 
recertification describing the physician's clinical justification of 
this need.
    Comment: Some commenters encouraged CMS to allow the narrative to 
be submitted as an attachment. These commenters believe that home 
health agencies and physicians which have electronic medical records 
should not be forced to include the narrative on the certification and 
recertification forms. Some commenters stated that CMS should provide 
examples to help home health agencies and physicians understand the 
scope of acceptable responses. Another commenter stated that the 
requirement would be meaningless since there are no specific guidelines 
for the content of the statement, and there would be no way to 
determine that the narrative is completed. Similarly, a commenter 
stated that if physicians were required to include a clinical 
justification narrative on the certification, the narrative would be 
simply a restatement of the nurse's justification, or it would be a 
prefabricated statement.
    Response: Our intent is for the physician to justify his or her 
certification of skilled need in the scenario where only unskilled 
services are being provided. We understand that many physicians would 
prefer to dictate rather than hand-write their clinical findings, and 
we agree with commenters who stated that we should take into account 
that some providers have electronic health record systems and may more 
easily produce an addendum containing the clinical justification. 
Therefore, we have decided that a typed addendum containing the 
narrative which is electronically or hand signed by the physician would 
be acceptable. We also appreciate the commenter's concern that a home 
health nurse may compose the narrative for the physician and that we 
should clarify the criteria associated with the narrative requirement. 
We expect that the narrative must be composed by the physician 
performing the certification or recertification and not by other home 
health personnel. Regarding the commenter's concern associated with 
dual eligible patients, especially given that Medicaid is the payer of 
last resort, we would encourage agencies to ensure that all Medicare 
criteria are met if the agency believes that Medicare may be the 
appropriate payer for a patient.
    We believe that these requirements regarding the certification and 
recertification are a first step in ensuring that only home-health 
eligible patients receive the benefit. We disagree with the commenter 
who suggested we include an illustrative example of narrative language, 
since the intent of the narrative is to capture the physician's 
synthesis of each patient's unique conditions.
    We are modifying our original proposal in that we will allow the 
narrative to either be part of the certification and recertification 
forms, or to be an addendum to the certification and recertification 
forms which is electronically or hand signed by the physician. If the 
narrative is part of the certification or recertification form, then 
the narrative must be located immediately prior to the physician's 
signature. If the narrative exists as an addendum to the certification 
or recertification form, in addition to the physician's signature on 
the certification or recertification form, the physician must also sign 
immediately following the narrative in the addendum. The narrative must 
reflect the patient's individual clinical circumstances.
    Comment: A commenter stated that CMS should issue specific Medicare 
coverage guidelines that clearly differentiate non-covered custodial or 
medically unnecessary care under Medicare home health from covered 
rehabilitative, acute or curative care.
    Response: We thank the commenter for the suggestion. We believe 
that the commenter is asking CMS to expand our skilled services 
clarification to better clarify CMS' definition of custodial care. We 
believe that this is outside of the scope of that which we solicited 
comments, which was to clarify CMS' regulations concerning skilled 
services in the home health setting. However, we will briefly address 
this as it is a related topic. Custodial care is not considered skilled 
care. We suggest the commenter refer to regulations at 42 CFR 409.45(b) 
and 42 CFR 409.49(d) for some clarification regarding custodial care in 
the home health setting. We suggest the commenter refer to regulations 
at 42 CFR 409.49(d) where we specifically stipulate the exclusion of 
housekeeping services from home health services, and also stipulate 
that services whose sole purpose is to enable the beneficiary to 
continue residing in his or her home (for example, cooking shopping, 
Meals on Wheels, cleaning, laundry) are excluded from home health 
coverage. We also note that personal care and some incidental services 
can be provided in the course of a covered Medicare home health visit. 
42 CFR 409.45(b) defines what constitutes a home health aide visit. 
This section explains that the reason for the aide visit must be to 
provide hands-on personal care to the beneficiary or services that are 
needed to facilitate treatment of the beneficiary's illness or injury. 
Please note 42 CFR 409.45(b)(1)(i) provides examples of covered 
personal care and 42 CFR 409.45(b)(4) permits an aide to perform 
services incidental to a covered visit. These incidental services may 
include changing bed linens, personal laundry, or preparing a light 
meal. Therefore, a home health aide may perform some incidental 
services which do not meet the definition of a home health aide service 
(light cleaning, preparation of a meal, taking out the trash, shopping, 
etc.). However, the purpose of a home health aide visit may not be to 
provide these incidental services since they are not health-related 
services, but rather are necessary household tasks that must be 
performed by anyone to maintain a home. It is important to note that to 
be considered a covered Medicare home health visit, the purpose of the 
home health visit cannot be to provide the ``incidental or custodial'' 
services.
    Comment: A few commenters supported the proposed narrative 
requirement. One commenter recommended that we require the narrative 
for ALL home health episodes, regardless of services ordered, stating 
that this would be encourage more physician involvement with the home 
health patient.
    Response: The commenter has correctly interpreted our interest in 
enhancing physician accountability and involvement with the home health 
patient. However, at this time we are proposing to require the 
narrative for only one targeted nursing service. Program vulnerability 
has been identified in this scenario, because the patient is receiving 
only unskilled services, which would normally not result in eligibility 
to Medicare's home health benefit. Therefore, we believe it is prudent 
to require the physician to provide this clinical justification of why 
a patient's condition would require skilled nursing management and 
evaluation (M&E) of the patient's care plan.
    Comment: A commenter recommended that CMS reconsider the 
restrictive interpretation of skilled oversight of the plan of care 
(POC). Providers are often compelled to

[[Page 58114]]

discharge patients from Medicare based on a very limited interpretation 
of skilled oversight when it is apparent that the patient is in 
advanced stages of chronic illness and will likely relapse once nursing 
oversight is discontinued. Such patients may become stable for several 
weeks and under the policy above would be considered non-covered and 
discharged from Medicare home health. Patient outcomes could be 
improved if such patients were offered continuing care coordination 
during periods of stability. The commenter suggested we modify coverage 
guidelines to allow home healthcare to continue for observation and 
monitoring of a plan of care through periods of relative stability if 
the patient is in advanced stages of chronic illness and likely to 
deteriorate without skilled care.
    Response: We thank the writer for this perspective. However, we are 
not excluding beneficiaries in advanced stages of chronic illness from 
qualifying for this service. When a chronically ill patient with an 
underlying condition or complication requires skilled nursing personnel 
to manage the plan of care then this service is indeed indicated until 
the treatment regimen has essentially stabilized. If the combination of 
the patient's underlying condition, age and immobility creates a high 
potential for serious complications which require that only a 
registered nurse can ensure that essential non-skilled care is 
achieving its purpose then the patient is indeed eligible for this 
service. However when the patient's treatment regimen is essentially 
stabilized and skilled nursing visits are not necessary to manage and 
supervise the home health aide the patient will not require this type 
of care and does not meet the definition of needing a skilled service 
for purposes of Medicare home health eligibility, per sections 
1814(a)(2)(C) and 1835(a)(2)(A) of the Social Security Act.
    Comment: A commenter urged CMS to undertake a similar initiative to 
set out coverage conditions for therapy services in the home health 
regulations.
    Response: In response to a commenter's request for CMS to provide 
clarification of coverage of therapy services we are referring the 
commenter to the following existing section of the Code of Federal 
Regulation, 42 CFR 409.44(c). We believe that this section adequately 
sets out the circumstances under which therapy services are covered. 
However, we thank the commenter for this opportunity to remind HHAs of 
their ongoing responsibility to evaluate the patient's need for therapy 
and provide all covered home health services (except durable medical 
equipment) either directly or under arrangement while a patient is 
under a home health plan of care.
    Comment: A commenter stated that the revisions proposed by CMS will 
make it more difficult for Medicare patients to obtain skilled nursing 
management and evaluation of the care plan. The commenter also stated 
that the requirement places an unrealistic expectation on a patient or 
caregiver to gauge effectively whether non-skilled care is achieving 
its purpose, that CMS wrongly hinges coverage on the complexity of 
unskilled services, and provides no clear guidance for how to determine 
complexity. The commenter further states that the proposed 
clarifications add confusion to the current standard.
    Response: We disagree with the commenter's statement that the 
revisions to the skilled nursing management and evaluation of the care 
plan will make it more difficult for Medicare patients to obtain this 
skilled service. We also point out that we would expect the home health 
agency rather than the patient or caregiver to gauge the effectiveness 
of the services being provided. As we stated earlier, the proposed 
regulation changes reflect long-standing manual guidance. We also 
believe that the commenter's concern about no clear guidance to assess 
the complexity of the unskilled services further reveals the need for 
the certifying physician to clearly describe what unique aspect about 
the patient's condition would require skilled management and evaluation 
of these unskilled services. However, we understand the commenter's 
concern. The proposed regulation text stated, `` * * * in the home 
health setting, management and evaluation of a patient care plan is 
considered a reasonable and necessary skilled service only when 
underlying conditions or complications are such that only a registered 
nurse can ensure that essential non-skilled care is achieving its 
purpose.'' (Emphasis added.)
    For better consistency with long standing manual guidance, we will 
remove the word ``only'' after ``reasonable and necessary skilled 
services * * *''. The modified regulation text is more consistent with 
long standing manual guidance. The finalized regulation text reads, ``* 
* * in the home health setting, management and evaluation of a patient 
care plan is considered a reasonable and necessary skilled service when 
underlying conditions or complications are such that only a registered 
nurse can ensure that essential non-skilled care is achieving its 
purpose.''
    Comment: One commenter stated that additional physician visits, 
phone calls, or paying more for oversight is unlikely to produce 
meaningful genuine physician involvement. These proposals do not 
address the fundamental problem of too little physician time to fully 
support the patient at home. Additional requirements are likely to 
produce paper or rote compliance at best and at worst will discourage 
some physicians from referring appropriate patients to homecare. 
Another commenter stated that the best approach to involving physicians 
in homecare rests in new models of chronic care management that 
integrate primary care practice that are committed to home-based care 
with HHAs into a single, consolidated chronic care service.
    Response: We are grateful for the comments. We will consider the 
suggestions regarding innovative approaches to increasing physician 
involvement in the plan of care in future rulemaking. However, we again 
remind commenters that by signing the certification and 
recertification, the physician is accountable for attesting that the 
beneficiary is in need of Medicare's home health services, and that the 
certification and recertification are part of the patient's medical 
record. And, Medicare reimburses physicians for their work associated 
with the certification, recertification and plan of care oversight.
    Comment: Some commenters expressed concerns with CMS' clarification 
which described that skilled education services would be deemed to be 
no longer needed when it became apparent, after a reasonable period of 
time, that the patient, family member or caregiver could not or would 
not be trained. Some commenters asked that CMS better clarify 
timeframes that would be appropriate for these skilled training 
services. Other commenters stated that unless CMS defines what is a 
``reasonable period of time'', the clarification isn't helpful. Other 
commenters stated that when a patient or caregiver appears incapable of 
learning, more training would be justified. Another commenter suggested 
that instead of clarifying this in regulation, we should increase the 
educational and outreach efforts of our contractors.
    Response: This regulation clarification codifies long-standing 
guidance which has been present in Medicare's Benefit Policy Manual. We 
believe it inappropriate to assign specific timeframes for patient 
education services because the length of

[[Page 58115]]

time a patient or family or caregiver needs should be determined by 
assessing each patient's individual condition and other pertinent 
factors such as the skill required to teach the activity and the unique 
abilities of the patient. It is important to know that teaching 
activities must be related to the patient's functional loss, illness, 
or injury. However, we disagree with the commenter who suggested that 
when a patient or caregiver is incapable of learning that more 
education is needed. Medicare's home health benefit is not intended to 
provide training and education to patients, families, caregivers for an 
infinite period of time.
    To summarize, we are finalizing a number of provisions as they 
relate to skilled services in the home health setting. Specifically, we 
are clarifying what constitutes skilled services in the home health 
setting with the following revisions to Sec.  409.42. We are adding a 
qualifying instruction to Sec.  409.42(c)(1) to explain that 
intermittent skilled nursing services meeting the criteria for skilled 
services and the need for skilled services found in Sec.  409.32 (with 
examples in Sec.  409.33 (a) and (b)) are subject to certain 
limitations in the home health setting.
    We are revising the introductory material at Sec.  409.44(b)(1), to 
refer to the new limitations of skilled services in the home health 
benefit at Sec.  409.42(c)(1)(i) and Sec.  409.42(c)(1)(ii). The 
clauses under the revised paragraphs (i) through (iv) will remain 
unchanged.
    We are also revising Sec.  424.22(a)(1)(i) and Sec.  424.22(b)(2) 
to require a written narrative of clinical justification on the 
physician certification and recertification for the targeted condition 
where the patient's overall condition supports a finding that recovery 
and safety could be ensured only if the care was planned, managed, and 
evaluated by a registered nurse. To clarify for home health agencies 
what specific circumstances would necessitate the involvement of a 
registered nurse in the development, management, and evaluation of a 
patient's care plan when only unskilled services are being provided, we 
are finalizing additions to the home health certification content 
requirements as described at Sec.  424.22(a)(i) and recertification 
content requirements at Sec.  424.22(b)(2).

F. OASIS for Significant Change in Condition: No Longer Associated With 
Payment

    In the CY 2010 proposed rule we proposed to remove an obsolete 
reference to ``new case-mix assignments'' as a result of significant 
changes in a patient's condition that appeared in 42 CFR part 484 
subpart E at Sec.  484.55(d)(1)(ii). The significant change in 
condition (SCIC), as it relates to new case-mix assignments affecting 
payment, was an element of the HH PPS at the time of its first 
implementation in fiscal year 2000. However, as part of the HH PPS 
payment refinements implemented in CY 2008, we eliminated the SCIC 
policy, and the assignment of subsequent case-mix assignments under the 
HH PPS. However, it should be noted that it was not the SCIC payment 
policy that required the HHA to perform the assessment, but rather the 
significant change in the patient's condition. In the proposed rule we 
did not propose to change that requirement. A HHA would still be 
required to perform an assessment in the event that a patient 
experienced a significant change in condition. The proposed 
modification is only that a new case-mix assignment is no longer 
associated with this assessment.
    In addition, we proposed to revise Sec.  484.250 to delete an 
obsolete reference to Sec.  484.237. Section 484.237 referred to the 
SCIC payment policy and was removed in the CY 2008 HH PPS final rule 
(72 FR 49879).
    Comment: A commenter wrote that since there is no additional 
payment for SCICs, there is no incentive for HHAs to do additional, 
time-consuming, and costly OASIS assessments. This commenter stated she 
disagreed with this requirement, and suggested that if we wanted this 
additional assessment, we should increase reimbursement for it.
    Response: We believe the commenter has misunderstood the text of 
the proposed rule. As noted in the proposed rule, we eliminated the 
SCIC payment policy and the assignment of subsequent case-mix 
assignments under the HH PPS in our 2007 (CY 2008) final rule. However 
it was not the SCIC payment policy that required the HHA to perform the 
assessment, but rather the significant change in the patient's 
condition. We did not propose any changes this requirement. The 
proposed modification was only that a new case-mix assignment is no 
longer associated with this assessment. Therefore there was no proposal 
for any additional assessments beyond those that have been requirements 
for some time now.
    We are finalizing the provision to remove an obsolete reference to 
``new case-mix assignments'' as a result of significant changes in a 
patient's condition that appeared in 42 CFR part 484 subpart E at Sec.  
484.55(d)(1)(ii). We are also finalizing the provision to revise Sec.  
484.250 to delete an obsolete reference to Sec.  484.237.

G. Payment Safeguards for Home Health Agencies

    In the Medicare Program; Home Health Prospective Payment System 
Rate Update for Calendar Year 2010, we also proposed several payment 
safeguard provisions designed to: (1) Improve our ability to verify 
that home health agencies (HHAs) meet minimum enrollment criteria; (2) 
ensure that HHAs that are changing ownership meet and continue to meet 
the Conditions of Participation for HHAs found in 42 CFR part 484; and 
(3) improve the quality of care that Medicare beneficiaries receive 
from HHAs.
1. Program Integrity Concerns Involving HHAs
    We stated in the proposed rule that the fraudulent business 
practices of certain HHAs continue to cost the Medicare program 
millions of dollars nationwide. This issue was discussed in a recent 
report issued by the Government Accountability Office (GAO) entitled 
``Improvements Needed to Address Improper Payments in Home Health'' 
(GAO-09-185). This report stated that, nationwide, ``spending on the 
Medicare home health benefit grew about 44 percent from 2002 through 
2006, despite an increase of just less than 17 percent in the number of 
beneficiaries using the benefit during that 5-year period.'' It also 
stated discrepancies in a number of States between the number of HHAs 
that billed Medicare and the increase in the number of Part A 
beneficiaries. For instance, between 2002 and 2006, the number of HHAs 
that billed Medicare rose in Florida by 100 percent, in Michigan by 62 
percent, in Illinois by 59 percent, in Ohio by 42 percent, in Arizona 
by 32 percent, and in the District of Columbia by 67 percent. However, 
the GAO reported, the increases in the number of Part A beneficiaries 
who used HHA services in these six jurisdictions were as follows: 
Florida--28 percent; Michigan--19 percent; Illinois--23 percent; Ohio--
14 percent; Arizona--4 percent; and the District of Columbia--2 
percent.
    The disparity in many jurisdictions between the increase in the 
number of HHAs and the rise in the number of beneficiaries is so 
overwhelming that it cannot be attributed solely to an aging populace. 
The fact that, as shown above, between 2002 and 2006, the number of 
HHAs in Arizona rose at a rate 8 times greater than the number of Part 
A beneficiaries that use HHA services and that the rate was an 
astounding 33 times greater in Washington, DC must raise

[[Page 58116]]

serious questions as to the legitimacy of some of these entities.
    As explained in the preamble to the proposed rule, the GAO report 
also outlined a number of instances of allegedly fraudulent activities 
on the part of HHAs. In a particularly glaring example in Houston, 
Texas, the GAO noted the following: ``One PSC (Program Safeguard 
Contractor) interviewed 670 Houston beneficiaries who had the most 
severe clinical rating and who were patients of HHAs identified by the 
PSC as having aberrant billing patterns. The PSC found 91 percent of 
claims for these beneficiaries to be in error. Nearly 50 percent of the 
beneficiaries were not homebound and therefore were not eligible to 
receive any Medicare home health services. The investigators also found 
that while 39 percent of the beneficiaries they interviewed were 
eligible for the benefit, their clinical severity had been exaggerated. 
The PSC concluded that only 9 percent of claims for the 670 
beneficiaries were properly coded. In addition, the PSC found that 
other home health beneficiaries it interviewed were not homebound; for 
instance, some were mowing their lawns when investigators came to 
interview them.''
    In its report, the GAO also cited a number of court cases and 
actions of the Office of Inspector General (OIG) that resulted in the 
criminal convictions of or settlements with owners of various HHAs. In 
one 2007 case, the owner of a Louisiana HHA was convicted of defrauding 
Medicare over a 5-year period and was ordered to pay more than $4.6 
million in damages. In 2004, the owner of the two largest HHAs in 
California pled guilty to defrauding the Medicare program of 
approximately $40 million and filing false tax return to conceal the 
income. In 2008, an HHA in Florida, pursuant to an OIG settlement, 
agreed to pay $178,000 to settle a case in which it was alleged that 
the provider paid kickbacks for beneficiary referrals. In another OIG 
settlement, this time in 2005, a Pennsylvania HHA agreed to pay 
$300,000 to settle a case in which it was alleged to have paid 
kickbacks under Medicare.
    In light of all this, the GAO concluded, in part, that ``In the 
absence of greater prevention, detection, and enforcement efforts, the 
Medicare home health benefit will continue to be a ready target for 
fraud and abuse.'' More specifically, it stated that ``gaps in 
screening potential and current HHAs may allow problem providers to 
enter and remain in the Medicare program.''
    The problem of fraudulent activity has been especially acute in the 
States of Texas and California. As we stated in the proposed rule, in 
Los Angeles County in California, the amount of money for which HHAs in 
that county billed Medicare between Fiscal Years 2003 and 2006 rose 
from $569 million to $921 million, an increase of 62 percent, and one 
that was not accompanied by a similar increase in the county's Medicare 
beneficiary population. There has also been an abnormal proliferation 
of HHAs in California as a whole. Between October 2002 and May 2007, 
the number of HHAs in the State rose by 25 percent--again, without a 
concomitant upswing in the number of Medicare beneficiaries in 
California, all of which suggested that there may also be an increase 
in improper billing. Moreover, we have seen instances--notably, though 
not exclusively, in South Florida and Texas--in which specific HHAs 
have changed ownership on a frequent basis. The new owners, however, 
have been mere nominal figures.
    We also stated in the proposed rule that the problems we identified 
have been seen with HHAs on a far greater scale than with any other 
type of certified provider. The dramatic rise in the number of HHAs in 
relation to the increase in Medicare beneficiaries has not been 
duplicated by any other certified provider types.
2. Provisions of the Proposed Regulation
    We proposed the following payment safeguard provisions:
     In Sec.  424.530(a)(8), we proposed to deny Medicare 
billing privileges to a prospective HHA if the HHA is determined, under 
proposed 42 CFR 489.19, to be sharing, leasing, or subleasing its 
practice location or base of operations identified in section 4 of its 
Medicare provider enrollment application with or to another Medicare-
enrolled HHA or supplier.
     In Sec.  424.535(a)(11), we proposed to revoke the 
Medicare billing privileges of an HHA that is determined, under 
proposed 42 CFR 489.19, to be sharing, leasing, or subleasing its 
practice location or base of operations identified in section 4 of its 
Medicare provider enrollment application with or to another Medicare-
enrolled HHA or supplier.
     In Sec.  424.540(b)(3), we proposed to exclude home health 
agencies from the existing language in Sec.  424.540(b)(3), which 
states that the reactivation of Medicare billing privileges does not 
require a new certification of the provider or supplier by the State 
survey agency or the establishment of a new provider agreement.
     In Sec.  424.540(b)(3)(i), we proposed to require that an 
HHA whose Medicare billing privileges are deactivated under the 
provisions found at 42 CFR 424.540(a) must obtain an initial State 
survey or accreditation by an approved accreditation organization 
before its Medicare billing privileges can be reactivated.
     In Sec.  424.550(b)(1), we proposed to require that if the 
owner of a home health agency sells (including asset sales or stock 
transfers), transfers or relinquishes ownership of the HHA within 36 
months after the effective date of the HHA's enrollment in Medicare, 
the provider agreement and Medicare billing privileges do not convey to 
the new owner.
     In Sec.  424.550(b)(1)(i), we proposed that in the 
situation described in proposed Sec.  424.550(b)(1), the prospective 
owner of the HHA must instead enroll in the Medicare program as a new 
HHA under the provisions of Sec.  424.510.
     In Sec.  424.550(b)(1)(ii), we proposed that in the 
situation described in proposed Sec.  424.550(b)(1), the prospective 
owner of the HHA must obtain a State survey or an accreditation from an 
approved accreditation organization.
     In Sec.  489.12(a)(5), we proposed that CMS deny a 
provider agreement to a prospective HHA that is determined to be 
sharing, leasing, or subleasing its practice location or base of 
operations identified in section 4 of its Medicare provider enrollment 
application with or to another Medicare enrolled HHA or supplier in 
violation of the HHA space sharing prohibition set forth in proposed 
Sec.  489.19.
     In Sec.  489.19(a), we proposed that an HHA be prohibited 
from sharing its practice location or base of operations identified in 
section 4 of its Medicare provider enrollment application with another 
Medicare-enrolled HHA or supplier.
     In Sec.  489.19(b), we proposed that an HHA be prohibited 
from leasing or subleasing its practice location or base of operations 
identified in section 4 of its Medicare provider enrollment application 
with another Medicare-enrolled HHA or supplier.
    We also solicited comments on whether there were legitimate 
business reasons for a Medicare-enrolled HHA to share space with 
another Medicare-enrolled HHA or supplier when there is common 
ownership. Likewise, we solicited comments on whether there were 
legitimate business reasons for a Medicare-enrolled HHA to be co-
located with another Medicare-enrolled HHA or supplier when there was 
no common ownership. Finally, we solicited comments on whether there 
were

[[Page 58117]]

legitimate business reasons for a Medicare-enrolled HHA to engage in 
leasing or subleasing arrangements with a Medicare-enrolled supplier 
when there was common ownership.
3. Analysis of and Responses to Public Comments
    We received approximately 20 timely public comments in response to 
the proposed payment safeguard rule. The following is a summary of the 
comments received and our responses:
a. Sharing and Leasing of Space
    Comment: Several commenters opposed the space-sharing provision in 
proposed 42 CFR 489.19(a). These commenters contend that this provision 
could preclude arrangements in which an HHA also provides unrelated 
services from a single location, for example, influenza vaccine clinics 
under a supplier number; outpatient therapy services under Medicare 
Part B; preventive nutrition services; hospice services; DME; and 
infusion supplies and services. One commenter stated that many health 
systems operate out of a single practice location in the provision of a 
broad array of items and services. Another commenter, too, stated that 
corporations often operate multiple provider and supplier types out of 
the same location; an HHA, for instance, might operate a DMEPOS 
supplier and a hospice out of the same site. Another commenter noted 
that arrangements in which an HHA, hospice and DMEPOS share a common 
location would be known to CMS via the respective providers'/suppliers' 
completion of the applicable CMS-855 application, which already enables 
CMS to monitor such arrangements closely; the commenter added that 
neither CMS nor the OIG has demonstrated a compelling basis to disrupt 
such arrangements if they are currently in compliance. Yet another 
commenter noted that a number of HHAs are commonly owned and operated 
as a result of organizational mergers and are involved in completely 
legitimate arrangements; the commenter did not understand why such 
arrangements should be disrupted.
    Response: Based on these and other comments received regarding 
proposed Sec.  489.19(a) and our concern that a broad-based prohibition 
on co-location policy may negativity impact the health care delivery 
for some services, we have decided not to include this provision in the 
final rule. However, we continue to have concerns about these 
arrangements and will consider our administrative remedies to address 
our concerns. We are especially concerned about an HHA that maintains a 
practice location in one State and furnishes services to Medicare 
beneficiaries in another State. We are also concerned about the HHAs 
that have merged or consolidated their operations into a single 
practice location, but continue to operate as distinct entities.
    As indicated in the preamble, having multiple HHAs at a single site 
makes it extremely difficult to determine which HHA is in operation at 
a given time, which HHA has actual control over certain aspects of the 
practice location, etc. If an HHA thus does not have a valid practice 
location, it is considered to be non-operational and, by extension, out 
of compliance with the HHA conditions of participation and with 42 CFR 
424.510(a)(6). If the HHA thereafter bills for services out of that 
non-operational site, it does so inappropriately.
    Comment: Several commenters stated that the ability of HHAs to 
share a practice location and centralized back office operations with 
other HHAs--or other Medicare providers and suppliers--improves 
efficiency and helps to keep down the costs associated with these 
operations by reducing rent and enabling the sharing of, for instance, 
billing staff and computer systems. One commenter added that such co-
located entities allocate costs separately to each provider and 
supplier in the same way that hospitals do for their departments. 
Several other commenters stated that to require these HHAs and 
suppliers to move to separate locations if proposed 42 CFR 489.19(a) 
were finalized, would be unduly burdensome and costly to them; it 
would, for instance, require each formerly co-located provider or 
supplier to have separate staffs and computer systems.
    Response: Based on these and other comments received regarding 
proposed Sec.  489.19(a), we have decided not to finalize this 
provision in the final rule.
    Comment: One commenter stated that having a shared practice 
location for various providers and suppliers is a normal, cost-
efficient method of health care delivery without any program integrity 
concerns. The only reason these shared practice locations have more 
than one provider or supplier number is that Medicare operates an 
enrollment system that requires separate numbers. In this same vein, 
another commenter stated that a centrally located organization has been 
forced to obtain several provider numbers in order to cover its entire 
service area. In other cases, the commenter, added, HHAs that deliver 
services across State lines (for decades, in some cases) are currently 
forced to obtain separate provider numbers because the States that they 
served have decided not to establish reciprocity agreements with 
bordering States.
    Response: As stated above, based on these and other comments 
received regarding proposed Sec.  489.19(a), we have decided not to 
finalize this provision in the final rule.
    Comment: Several commenters stated that, under proposed 42 CFR 
Sec.  489.19(a), a hospital-based HHA would not be able to share space 
with a DMEPOS supplier that is also owned and operated by the hospital. 
The commenter suggests that such arrangements pose little risk to the 
Medicare program.
    Response: As stated above, we have decided not to finalize proposed 
Sec.  489.19(a) in the final rule.
    Comment: One commenter urged CMS to identify more effective ways to 
identify the few fraudulent providers and suppliers that apply for 
multiple Medicare numbers for the same location. The commenter believed 
that CMS should establish a vetting process rather than the blanket 
denial of co-locations. By the same token, this vetting process must do 
more than allow use of the same address with separate suite numbers, as 
that would not be a sufficient deterrent to fraudulent providers.
    Response: As stated above, we have decided not to finalize proposed 
Sec.  489.19(a) in the final rule.
    Comment: Several commenters urged CMS to refine its proposed 42 CFR 
489.19(a) to allow HHAs to share a practice location with other 
licensed and certified entities to use a shared practice location as 
long as the co-location arrangement is not used or has not been used 
for fraudulent or abusive purposes.
    Response: As stated above, we have decided not to finalize proposed 
Sec.  489.19(a) in the final rule.
    Comment: One commenter urged CMS to eliminate its proposal in 42 
CFR 424.535(a)(11) to allow contractors to revoke the Medicare billing 
privileges of an HHA on the grounds that it shares a practice location 
with another entity that is a Medicare-certified HHA. The commenter 
also stated that due process procedures should be used in instances 
where an existing HHA is discovered to share a practice location with 
another HHA or supplier, and that it would be unreasonable to revoke 
the HHA's billing privileges on that ground if there is no concern 
about fraud or abuse by the organization.
    Response: As stated above, we have decided not to finalize proposed 
Sec.  489.19(a) in the final rule.

[[Page 58118]]

    Comment: Several commenters stated that HHAs should be able to 
share practice locations with other HHAs and suppliers if there is 
common ownership involved.
    Response: As previously stated, we have decided not to finalize 
proposed Sec.  489.19(a) in the final rule.
    Comment: Several commenters requested that CMS clarify the specific 
situations in which an HHA may be co-located with another entity. 
Another commenter stated that the space-sharing prohibition smacked of 
too much government interference into how HHAs do business and would do 
nothing for patient care.
    Response: As stated above, we have decided not to finalize proposed 
Sec.  489.19(a) in the final rule.
    Comment: One commenter disagreed with our prohibition on leasing 
arrangements in proposed Sec.  489.19(b). The commenter contended that 
there are a variety of services that one agency may not be equipped to 
handle and must rely on relationships with other vendors to meet the 
full needs of their patients. The proposed prohibition could, 
therefore, hinder beneficiary access to required services.
    Response: Based on these and other comments received regarding 
proposed Sec.  489.19(b), we have decided not to finalize this 
provision in the final rule.
    Comment: One commenter agreed with our proposal to prohibit an HHA 
from sharing space with another HHA, stating that this practice raises 
questions as to the viability and legitimacy of the HHA and could 
confuse surveyors by rendering it difficult for them to identifying 
which HHA they are actually evaluating.
    Response: While we appreciate the commenter's support, we have 
decided not to finalize proposed Sec.  489.19(a) in the final rule.
    Comment: Another commenter supported proposed 42 CFR 489.19(a), but 
sought clarification that it would not prohibit an HHA from sharing 
space with other types of home health related organizations such as a 
long-term home health program, a managed long-term care program, and a 
licensed certified home health services agency.
    Response: While we appreciate the commenter's support, we have 
decided not to finalize proposed Sec.  489.19(a) in the final rule.
    Comment: One commenter supported our proposal to prevent HHAs from 
sharing practice locations and operations to the extent that there is 
no common ownership involved. This commenter went on to say that the 
practice of co-location makes it difficult for State surveyors and 
accreditors to clearly identify which agency is under review.
    Response: While we appreciate the commenter's support, we have 
decided not to finalize proposed Sec.  489.19(a) in the final rule.
b. Change of Ownership Provisions
    Comment: Several commenters agreed with our proposal to prohibit 
the conveyance of a provider agreement to the new owner of an HHA if 
the change of ownership takes place within 36 months of the HHA's 
enrollment in Medicare. One commenter noted that the proposal would: 
(1) Eliminate situations in which HHAs are established for the purpose 
of being sold to persons or entities that will ultimately be the 
operator, and (2) ensure that persons who will operating HHAs have an 
understanding of the business requirements before receiving a provider 
agreement.
    Response: We appreciate the support of these commenters.
    Comment: One commenter supported our proposed change of ownership 
provision, acknowledging our concerns about turn-key sales of new HHAs 
where there is no assurance that the buyer can maintain compliance with 
the conditions of participation.
    Response: We agree with this commenter.
    Comment: One commenter suggested that CMS allow transactions 
involving sales and transfers of ownership of HHAs currently enrolled 
in Medicare for less than 3 years that are in process as of January 1, 
2010 to proceed.
    Response: We disagree and believe that an HHA change of ownership 
application that is pending as of January 1, 2010 should be subject to 
the provisions of this final rule.
    Comment: Another commenter requested CMS to establish a 
``hardship'' exemption so that legitimate HHA sales can be reviewed and 
permitted to proceed. The commenter stated that some HHAs sales are 
facilitated for entirely legitimate and unavoidable reasons, such as 
when a partner in a partnership dies or leaves the business and a new 
entity is created. The requirements of 42 CFR 424.550(b)(1) could force 
such a provider to go out of business; the commenter also stated that 
the requirements of 42 CFR 424.550(b)(1) could lead to the total 
devaluation of certain HHAs, and that purchasers will be unable to bill 
for services provided for periods as long as a year after the sale. 
Another commenter stated that given the significant investment of 
capital needed to start and operate an HHA in the current regulatory 
environment, an owner--in selling its HHA for entirely legitimate 
reasons--should be able to recoup its investment.
    Response: We do not believe that a hardship exemption should be 
established, nor do we believe that the three-year period should be 
reduced. As previously stated, the purpose of this requirement is to 
ensure that HHAs that are sold remain in compliance with Medicare's 
conditions of participation. We stress that 42 CFR 424.550(b)(1) in no 
way prohibits an owner from selling its HHA. It merely requires that 
the HHA enroll as a new provider, undergo a State survey or 
accreditation, and sign a new provider agreement prior to being able to 
bill Medicare for services once again.
    Comment: Several commenters requested that CMS reduce the 3-year 
period to 12 months under 42 CFR 424.550(b)(1) so as not to unduly 
prohibit legitimate sales of HHAs. One such commenter added that 
agencies that undergo changes of ownership that occur within 1 year fit 
the CMS description of ``turn-key'' operation.
    Response: We do not believe that a change in proposed 42 CFR 
424.550(b)(1) is warranted. We continue to believe that a 3-year period 
is appropriate. We believe that this change will help to ensure that 
individuals establishing a HHA are doing so with a long-term view of 
furnishing services, rather than establishing a business for the 
purpose of selling it a short time later. In addition, we believe that 
this time-frame will allow CMS to assess whether the HHA is operating 
in compliance with the conditions of participation and other program 
requirements.
    We wish to make clear that the intent of 42 CFR 424.550(b)(1) goes 
beyond the issue of ``turn-key'' operations. If an HHA undergoes a 
change of ownership, CMS--at the current time--generally does not 
perform a State survey pursuant thereto. CMS therefore has no sure way 
of knowing whether the HHA, under its new ownership and management, is 
in compliance with the HHA conditions of participation--regardless of 
whether the ownership change occurred 12, 24, or 36 months after the 
HHA's initial enrollment. Unless CMS can make this determination, there 
is a risk that the newly-purchased HHA, without having been 
appropriately vetted via the survey process, will bill for services 
when it is out of compliance with the conditions of participation. And 
in light of the frequency of inappropriate practices, as outlined in 
the GAO report, of HHAs relative to other provider types, we believe it 
is imperative that we ensure

[[Page 58119]]

that the newly-purchased HHA be subject to an appropriate level of 
review.
c. Deactivation Provisions
    Comment: Several commenters expressed concern that the deactivation 
provision in proposed Sec.  424.540(b)(3) could disadvantageously 
affect HHAs that bill Medicare on either an infrequent basis or not at 
all. They stated that since Medicare deactivates a provider's Medicare 
billing privileges if the provider has not billed Medicare for 12 
consecutive months, HHAs that only sporadically bill Medicare not only 
may have their billing privileges deactivated frequently, but will, 
under the aforementioned proposed provision, have to undergo a State 
survey each time it seeks to reactivate these privileges. This will, 
the commenter believes, impose a very significant burden on such 
providers. One commenter also: (1) Expressed concern that a 
deactivation of its Medicare billing privileges would affect its 
ability to bill Medicaid, and (2) asked whether, if it owned an HHA and 
a hospice and both were enrolled in Medicare, a deactivation of its HHA 
billing privileges would affect its ability to continue billing for 
hospice services. Another commenter urged CMS to consult with State 
Medicaid programs prior to implementing this proposed provision. Yet 
another commenter stated that it was their understanding that the 
requirement to obtain an initial State survey under proposed Sec.  
424.540(b)(3) would be commensurate to decertification. With long 
timelines for obtaining surveys and with Medicare having categorized 
HHA surveys as Tier-4 priority, this would put HHAs out of business 
and, in turn, impact Medicaid-only businesses that require Medicare 
certification--with the end result, the commenter stated, of harming 
Medicaid patients. Similar concerns were expressed by a commenter 
regarding HHAs that only bill Medicare Advantage plans.
    Response: We recognize that proposed Sec.  424.540(b)(3) could 
delay an HHA's ability to reactivate its Medicare billing privileges, 
especially if the HHA bills only sporadically and is thus susceptible 
to frequent deactivations. However, we believe that this is outweighed 
by the strong need to verify that HHAs whose billing privileges were 
deactivated after 12 consecutive months of non-billing remain in 
compliance with Medicare's conditions of participation and other 
regulatory provisions. We also believe that this approach will help 
ensure that Medicare beneficiaries receive services from qualified HHA 
providers.
    CMS does not currently conduct a State survey when a provider seeks 
to reactivate its Medicare billing privileges. As is the case with 
ownership changes, CMS therefore has no sure way of knowing whether the 
HHA, after not billing Medicare for at least a 12-month period, is 
still in compliance with the HHA conditions of participation; indeed, 
it is possible that the period of non-billing was due to the fact that 
the HHA was not in operation at the time. Unless CMS can determine 
whether the HHA is in compliance with the conditions of participation, 
the HHA may have its billing privileges reactivated and begin billing 
for services again without having been appropriately reviewed via the 
survey process. This could lead to inappropriate billings if HHA is 
indeed out of compliance with such conditions. As with 42 CFR 
424.550(b)(1), we believe that 42 CFR 424.540(b)(3)(i) will help close 
the gap noted by the GAO in ``screening potential and current HHAs'' by 
ensuring that the new owners in an HHA ownership change are properly 
screened. With respect to the commenters' concerns related to Medicaid 
and Medicare Advantage billing under Medicare, the deactivation of a 
provider's Medicare billing privileges does not mean that the provider 
is no longer enrolled in Medicare. In fact, the Medicare provider 
agreement remains in effect. Accordingly, a deactivated HHA is still 
certified as a Medicare HHA. Deactivation simply means that the 
provider, prior to having its Medicare billing privileges reactivated, 
must: (1) Submit the information requested in Sec.  424.540(b)(1) and 
(2) undergo a State survey or obtain accreditation to ensure that it 
remains in compliance with the applicable conditions of participation. 
Indeed, as previously indicated, there have been instances where HHAs 
are sold to nominal owners when the real operators are individuals who 
were later found to be engaging in fraudulent activity. Our current 
inability to conduct a State survey for most changes of ownership 
hinders CMS's ability to fully vet and review the HHA, its new owners, 
and the new operations, and makes it more likely that such sham 
operations can continue to exist.
    With respect to situations in which a provider owns an HHA and a 
hospice and the billing privileges of the HHA are deactivated for 12 
consecutive months of non-billing, this does not affect the billing 
privileges of the hospice; the hospice's billing privileges remain 
intact, as the HHA and the hospice are separate providers, are 
separately enrolled, and have separate provider agreements.
    Finally, we do intend to notify State Medicaid agencies about the 
implementation of this provision.
    Comment: Another commenter stated that proposed Sec.  424.540(b)(3) 
would require those HHAs that primarily or even exclusively bill 
Medicaid but who are required to be enrolled in Medicare as a 
prerequisite thereto to submit at least one Medicare claim per year or 
see their Medicare billing privileges rescinded.
    Response: As we previously stated, the deactivation of a provider's 
Medicare billing privileges is not the same as the revocation of these 
privileges. A deactivated provider remains enrolled in Medicare, 
whereas a revoked provider loses its Medicare billing privileges and is 
no longer enrolled in the program.
    Comment: Several commenters suggested that for providers enrolled 
in Medicare and Medicaid, CMS not deactivate a provider's Medicare 
billing privileges for non-billing if the provider has submitted a bill 
for or been paid by Medicaid within that same 12-month period.
    Response: The regulatory provisions in 42 CFR 424.540 regarding 12 
consecutive months of Medicare non-billing do not allow for the level 
of Medicaid billings to be a consideration in the deactivation of a 
provider's Medicare billing privileges. This is because Medicare and 
Medicaid are two completely separate health programs. If we expanded 42 
CFR 424.540 to allow a provider's billing history with other health 
plans to be a factor in determining whether to deactivate a provider's 
Medicare billing privileges, a situation could arise where a provider 
has not submitted a bill to Medicare for a 10-year period but has not 
been deactivated because the HHA has billed another program each year 
within that span. This would, in our view, defeat the purpose of 42 CFR 
424.540. Besides, and as already stated, the deactivation of Medicare 
billing privileges does not mean that Medicare billing privileges have 
been revoked.
    Comment: One commenter noted that the revised 42 CFR 424.540(b)(3) 
appears to require a new certification, but the unaltered 42 CFR 
424.540(c) regarding the effective (date) of deactivation still 
provides that deactivation does not have any effect on a provider's 
participation agreement. The commenter suggested that we consider 
revising paragraph (c) to correlate with the changes to paragraph (b). 
Another commenter understood the

[[Page 58120]]

changes Sec.  424.540 to mean that we now equate the requirement to 
obtain an initial State survey with decertification. In light of the 
extremely long timelines for obtaining initial surveys from States and 
accrediting organizations, the commenter stated such a requirement 
would put many legitimate home health agencies that are part of the 
2,000 agencies that CMS estimates will be deactivated out of business.
    Response: We agree that there is a discrepancy. We have therefore 
not included our proposed revision to Sec.  424.540(b)(3) in the final 
rule. We believe that this change will eliminate the perception that 
deactivation and decertification are one in the same.
    Comment: One commenter expressed support for our proposed changes 
regarding space sharing, ownership changes, and deactivations, stating 
that the instances of fraud and abuse reported by CMS justify changes. 
The commenter suggested, however, that CMS consult with the HHS Office 
of Inspector General, the Government Accounting Office, and the U.S. 
Department of Justice for alternative perspectives on the appropriate 
length of billing inactivity that warrants a State survey or 
accreditation prior to reactivation.
    Response: We appreciate both the commenter's support for our 
proposed provisions and the suggestion regarding the consultation of 
other law enforcement bodies. We have, in fact, consulted with other 
agencies in the past regarding the 12-month deactivation policy 
outlined in Sec.  424.540(a)(1). However, we believe that they would 
support every effort on our part to ensure that HHAs remain in 
compliance with Medicare's conditions of participation before their 
Medicare billing privileges are reactivated. We further believe that 12 
consecutive months of non-billing by the provider--a lengthy period in 
and of itself--constitutes sufficient justification for CMS to attempt 
to reconfirm that the provider meets the HHA conditions of 
participation.
d. General Comments
    Comment: One commenter believed that CMS, in its proposed program 
safeguard initiatives, was attempting to use a ``broad brush'' approach 
to combating fraud, that CMS seems to view all home health providers as 
fraudulent, and that the proposed initiatives will harm honest HHAs. 
The commenter also stated that the States with the highest levels of 
HHA fraud do not have significant barriers to entry, such as a State-
mandated certificate of need (CON). The commenter stated that CMS 
should consider the correlation between CON states and the frequency of 
fraud and abuse. Finally, the commenter recommended, in lieu of the 
proposed program integrity initiatives, increased funding of survey and 
certification efforts and urged CMS to seek out the root cause of 
fraudulent behavior.
    Response: We recognize that the vast majority of HHAs participating 
in the Medicare program are honest. However, the information cited in 
the preamble to the proposed rule--as well as the conclusions drawn by 
the Health and Human Services' Office of Inspector General--provide 
reason and concern for us that HHA fraud is a prevalent problem that, 
and in our view, warrants additional review and action to address this 
issue.
    Comment: Several commenters expressed concern about the impact of 
proposed Sec.  424.540(c) and Sec.  424.550(b) on State survey agencies 
and accreditation organizations. They contended that these agencies and 
organizations have experienced--and, in some cases, are still 
experiencing--major backlogs in the number of pending HHA request for 
certification or accreditation. Some State agencies, another commenter 
stated, are not conducting new HHA surveys at all at the current time. 
Requiring a new survey/accreditation pursuant to each change of 
ownership and reactivation of Medicare billing privileges will result 
in even larger backlogs, which in turn will further delay the ability 
of HHAs to obtain a survey or accreditation in a prompt fashion. One 
commenter stated that it will be impossible for State survey agencies 
and accrediting bodies to resurvey 2,000 CHOWs that CMS reports occur 
annually.
    Response: We understand the commenters' concern regarding workload 
implications for State survey agencies and deemed accrediting 
organizations. We believe that HHAs undergoing an ownership change or 
having their billing privileges reactivated must meet the conditions of 
participation and other program requirements in order to participate in 
the Medicare program.
    Comment: One commenter recommended that CMS appropriately fund 
State agencies to handle the increased survey workload.
    Response: As stated above, we understand the workload implications 
for State agencies and deemed accrediting organizations. Moreover, we 
are aware of the potential funding issues raised by the commenter.
    Comment: One commenter stated that CMS must reevaluate its 
projections for the number of HHAs that will be impacted by the 
proposed CHOW requirements (2,000) and deactivation requirements 
(2,000). If these numbers are correct, CMS' proposals will result in 
requiring resurvey of 40% of the 9,500 home health agencies annually.
    Response: We believe that the projections contained in the proposed 
rule are accurate and that the final rule is sufficiently clear as to 
the number of surveys that would have to be performed.
    Comment: One commenter supported the proposed changes regarding 
space-sharing and changes of ownership, and added that CMS should begin 
even more active enforcement. This should include ensuring that all new 
enrollment applicants have a timely, thorough on-site review of 
clinical, operational and financial policies and processes prior to 
being granted enrolled status.
    Response: We appreciate the commenter's support and note that we 
are undertaking a number of efforts to reduce fraud and abuse.
    Comment: One commenter made a number of recommendations to CMS with 
respect to the combating of fraudulent activity in the HHA arena. These 
included: (1) Expanding educational efforts regarding compliance; (2) 
establishing a Federal requirement that administrators of home health 
are credentialed by a nationally recognized body; (3) establishing 
certification requirements for financial managers; (4) enacting a 
targeted moratorium on new HHAs; and (5) working with the industry to 
ensure that reports of fraudulent activities are acted upon promptly.
    Response: We appreciate these suggestions and will take them under 
advisement.
    Comment: One commenter suggested that CMS: (1) Enhance the Provider 
Enrollment, Chain and Ownership System (PECOS) to automatically 
identify HHAs located at the same practice location; (2) update section 
12 of the CMS-855A form to include questions regarding office space, 
similar to the questions contained on the CMS-855B application for 
physical therapy and occupational therapy groups; and (3) perform site 
visits for some new providers.
    Response: We appreciate these suggestions and will take them under 
advisement, though we note that CMS has increased the number of site 
visits it performs in certain high-risk areas for new and existing 
HHAs.
    Comment: One commenter suggested that we describe the method by 
which HHAs can consolidate under one provider number without financial

[[Page 58121]]

consequence, and that CMS allow HHAs that intend to consolidate up to 
12 months to do so.
    Response: HHAs with multiple provider agreements for agencies at 
the same location can voluntarily terminate a provider agreement and 
merge the multiple HHAs into a single organization.
    Comment: One commenter suggested that the intent of the States in 
requiring a prospective Medicaid provider to be enrolled in and 
certified by Medicare was to pass on the cost of the survey and 
certification of Medicaid-only agencies to the Federal Government and 
suggested that CMS resolve this with the States.
    Response: We believe that this comment is outside the scope of this 
final rule.
    Comment: One commenter asked for clarification on how HHAs are to 
be notified when their Medicare billing privileges are deactivated.
    Response: In the event a claim is submitted after 12 consecutive 
months of non-billing, the claims processing system will place a 
message on the remittance notice stating ``This provider was not 
certified/eligible to be paid for this procedure/service on this date 
of service.'' We do not expect that this message will be implemented 
until CY 2010.
    Based on the public comments, we are adopting the provisions of the 
proposed rule with the following revisions:
     We are not adopting Sec.  424.530(a)(8) in this final 
rule.
     We are not adopting Sec.  424.535(a)(11) in this final 
rule.
     We are not adopting Sec.  489.12(a)(5) in this final rule.
     We are not adopting Sec.  489.19(a) in this final rule.
     We are not adopting Sec.  489.19(b) in this final rule.
     We proposed to exclude HHAs from the existing language in 
Sec.  424.540(b)(3), which states that the reactivation of Medicare 
billing privileges does not require a new certification of the provider 
or supplier by the State survey agency or the establishment of a new 
provider agreement. We have decided not to include this proposed 
revision to Sec.  424.540(b)(3) in the final rule. We are also making 
it clear that under proposed Sec.  424.540(b)(3)(i), which is included 
in the final rule, an HHA undergoing a change of ownership within the 
first 36 months after its enrollment remains Medicare-certified and 
that its provider agreement has not been revoked. The deactivated HHA's 
certification, provider agreement, and status as an enrolled HHA remain 
intact. However, it must obtain a new survey or accreditation.

H. Physician Certification and Recertification of the Home Health Plan 
of Care

a. Background
    Sections 1814(a)(2)(C) and 1835(a)(2)(A) of the Act require that a 
plan for furnishing home health services be established and 
periodically reviewed by a physician in order for Medicare payments for 
those services to be made. Our regulations at Sec.  409.43(e) 
specifically state that a home health POC must be reviewed, signed, and 
dated by the physician who reviews the POC (as specified in Sec.  
409.42(b)) in consultation with agency clinical staff at least every 60 
days (or more frequently as specified in Sec.  409.43(e)(1)). 
Additionally, Sec.  424.22(b) states that a recertification is required 
at least every 60 days, preferably at the time the plan is reviewed, 
and must be signed by the physician who reviews the home health POC. 
These schedules, for the review of the POC and the recertification, 
coordinate with the 60-day episode payment unit under the HH PPS. In 
implementing the statutory requirement as well as these regulations, we 
believed that these requirements would encourage enhanced physician 
involvement in the HH POC and patient management, and would include 
more direct ``in-person'' patient encounters (as logistically 
feasible).
    Currently, physicians are paid for both the certification and 
recertification of the HH POC under HCPCS codes G0180 and G0179, 
respectively. The basis for the payment amounts of these physician 
services is the relative resources in RVUs required to furnish these 
services. We believe physician involvement is very important in 
maintaining quality of care under the HH PPS.
    In the HH PPS proposed rule published in the October 28, 1999 
Federal Register (64 FR 58196), we had proposed to require the 
physician to certify the case-mix weight/home health resource group 
(HHRG) as part of the required physician certification of the POC. This 
reflected our belief that the physician should be more involved in the 
decentralized delivery of home health services. However, in the final 
rule published in the July 3, 2000 Federal Register (65 FR 41163), we 
did not finalize that proposal and decided to focus our attention on 
physician certification and education in order to better involve the 
physician in the delivery of home health services.
b. Solicitation of Comments
    It has come to our attention that physician involvement in the 
certification and recertification of HH POC varies greatly. While some 
physicians have direct contact with their patients in the delivery of 
home health services, we believe that a significant number of 
physicians provide only a brief, albeit thorough, review of the HH POC, 
without any direct contact with the patient. We continue to believe 
that active involvement of the physician, including ``in-person'' 
contact with the patient, during the certification and recertification 
of the HH POC is essential for the delivery of high quality HH 
services.
    In the Physician Fee Schedule proposed rule published in the July 
7, 2008 Federal Register (73 FR 38578), we mentioned several options to 
enhance direct contact between the physician and the patient. First, we 
considered a review of the RVUs associated with the certification and 
recertification of the HH POC. As a result of that review, the payment 
amounts to physicians could be reduced based on a more accurate 
determination of the actual RVUs required to provide these services. We 
also considered proposing new requirements; for example, a requirement 
for ``direct'' patient contact with the physician, to ensure more 
active physician involvement in the certification and recertification 
of the HH POC. We specifically solicited comments on these policy 
options.
    In the November 19, 2008 final rule, we expressed our appreciation 
for the comments and responded that we would continue to analyze and 
consider the comments and suggestions in future rulemaking. 
Additionally, as a result of comments received on the above physician 
rule, as they relate to physician-patient contact, we are considering 
the possibility of requiring physicians to make phone calls to patients 
at various times over the course of home health treatment (prior to 
recertification), as a means to promote that physician-patient contact 
and to help ensure the delivery of high quality HH services to our 
beneficiaries.
    In the HH PPS proposed rule for CY 2010, we specifically solicited 
additional comments on this topic.
    Comment: While commenters agreed that increasing physician 
involvement in home health patient care was a positive step, they were 
not supportive of requiring a face-to-face encounter between patients 
and physicians, or of requiring telephone contact, prior to physician 
certification or recertification

[[Page 58122]]

of the plan of care. Some felt this would be burdensome to physicians 
and would create a significant barrier to patients seeking home health 
services. Several pointed out that there was no analysis to suggest 
that face-to-face or telephone encounters would improve outcomes, and 
questioned the value of such a requirement, given its cost. A few 
mentioned that the underlying problem was inadequate payment to 
physicians; some stated that without reimbursement, physicians were not 
likely to be cooperative; one wrote that this suggestion did not 
address the fundamental problem of too little physician time to support 
patients at home.
    One commenter wrote that the level and frequency of physician 
contact with patients should be determined by the physician, based on 
the patient's medical needs. A few commenters noted that such a 
requirement would interfere with the professional judgment of the 
physician, failed to recognize that nurses and therapists provide OASIS 
assessment of all patients prior to physician certification, and noted 
that homebound, infirm or disabled patients should not be forced to 
leave home for a doctor's visit. They noted that leaving home may be a 
considerable and taxing effort for homebound patients, especially in 
rural areas, when there are weather issues, or where patients have no 
caregiver or transportation. One commenter asked what would happen if 
the patient refused to go.
    Several commenters pointed out that existing laws already establish 
serious criminal and civil sanctions for physicians who knowingly and 
falsely certify that a patient is homebound and needs home health. 
Additionally, they stated that there are no reports of quality of care 
problems related to the absence of a face-to-face physician encounter.
    While a telephone contact could be more convenient, commenters felt 
that it would not accomplish much other than confirm to the physician 
that the patient exists and possibly hear the patient express things 
about his or her condition or needs. They noted that it would be 
difficult for the home health agency to validate that a call actually 
occurred if the agency were not a direct party to it. Others noted that 
physicians would have to make such calls after hours, given their busy 
schedules, and this could be disruptive to homebound patients, many of 
whom are elderly and retire early.
    A commenter mentioned that some beneficiaries don't have 
telephones, particularly in remote rural areas. Another wrote that 
patients could barely get needed prescriptions called in timely. Some 
commenters also wrote that requiring an encounter could be a serious 
claims processing issue, akin to the former M0175 component of the 
HHRGs. Commenters believed that the agency would not be in a position 
to consistently or comprehensively understand the encounters.
    Commenters suggested a number of alternatives. One commenter felt 
the best approach to involving physicians more in home care is in new 
models of chronic care management that integrate primary care practices 
committed to home-based care with home health agencies in a single, 
consolidated chronic care service. This commenter is working on pilot 
projects with Medicare Advantage patients, and welcomes the opportunity 
to develop a demonstration program.
    One commenter suggested we study the role of physicians in home 
care and determine which factors enhance the physician's ability to 
conduct oversight activities, ensure appropriateness of care, and work 
collaboratively with home health agencies without burdening 
beneficiaries. Another commenter recommended we consider ways to 
improve communication between physicians and home health agencies, 
particularly as it relates to follow-up when a patient's condition 
changes. One commenter suggested we consider the comments received upon 
solicitation in the Physician Fee Schedule rule, which encouraged a 
wider range of mechanisms to increase involvement, such as telehealth, 
photographic evidence, telephone, and use of advanced practice nurses 
(APNs) or physician assistants (PAs). Others suggested we continue the 
dialogue with physicians' groups and with home health agencies about 
this issue. Several commenters echoed the suggestion to allow APNs or 
PAs, within State practice guidelines, and noted that these 
professionals are more accessible, more open to discussion of patient 
issues than physicians, would reduce the burden on physicians, and 
improve access.
    Another commenter suggested we test proposals to require encounters 
in demonstration projects, and establish whether the outcomes improve 
enough to merit the increase in costs. This commenter also suggested we 
consider requiring a Medicare Director, similar to those in hospice 
programs. In considering alternatives, another commenter wrote that 
physician home visits are unrealistic. This commenter noted that under 
current care plan oversight (CPO), physicians can count time for 
telephone interactions, and suggested we see if this method of 
oversight is widely used. He added that CMS should review practices 
that cannot be counted toward CPO time and consider allowing these. He 
also suggested that surveyors focus more on the 60-day summary to 
physicians.
    Several commenters recommended that CMS conduct a comprehensive 
study on the impact and value of physician encounters as a qualifying 
element of Medicare home health services. These commenters suggested 
that in the interim, physician payment rules could be modified to limit 
payment for care plan recertification to those physicians who can 
document a face-to-face encounter with the patient prior to care plan 
certification.
    Response: We appreciate the comments from the public on this matter 
and will continue to address our concerns surrounding this issue, and 
analyze and consider those comments and suggestions in future 
policymaking and future rulemaking.

I. Routine Medical Supplies

    HHAs have expressed to the HHS Office of the Inspector General 
(OIG) some confusion regarding routine medical supplies and how we 
account for the cost of those supplies. Therefore, in the proposed rule 
we reiterated our policy regarding routine medical supplies and how 
they are reimbursed under the HH PPS.
    Section 1895(b)(1) states that ``all services covered and paid on a 
reasonable cost basis under the Medicare home health benefit as of the 
date of the enactment of this section, including medical supplies, 
shall be paid for on the basis of a prospective payment amount * * *''. 
The cost of routine medical supplies was included in the average cost 
per visit amounts derived from the audit sample. These average cost per 
visit amounts were used to calculate the initial HH PPS rates published 
in the July 3, 2000 HH PPS final rule (FR 65 41184). Because 
reimbursement for routine medical supplies is bundled into the HH PPS 
60-day episode rate and the per-visit rates, HHAs may not bill 
separately for routine supplies.
    As noted in Chapter 7--Home Health Services of the Medicare Benefit 
Policy Manual (Pub. 100-02), sections 50.4.1.2 and 50.4.1.3, routine 
supplies are supplies that are customarily used in small quantities 
during the course of most home care visits. They are usually included 
in the staff's supplies and not designated for a specific patient. 
Routine supplies would not include those supplies that are specifically 
ordered by the physician or are essential to HHA personnel in order to 
effectuate the plan of care. Examples of supplies

[[Page 58123]]

which are usually considered routine include, but are not limited to:
A. Dressings and Skin Care
     Swabs, alcohol preps, and skin prep pads;
     Tape removal pads;
     Cotton balls;
     Adhesive and paper tape;
     Nonsterile applicators; and
     4x4s.
B. Infection Control Protection
     Nonsterile gloves;
     Aprons;
     Masks; and
     Gowns.
C. Blood Drawing Supplies
     Specimen containers.
D. Incontinence Supplies
     Incontinence briefs and Chux covered in the normal course 
of a visit. For example, if a home health aide in the course of a 
bathing visit to a patient determines the patient requires an 
incontinence brief change, the incontinence brief in this example would 
be covered as a routine medical supply.
E. Other
     Thermometers; and
     Tongue depressors.
    There are occasions when the supplies listed in the above examples 
would be considered non-routine and thus would be considered a billable 
supply, that is, if they are required in quantity, for recurring need, 
and are included in the plan of care. Examples include, but are not 
limited to, tape, and 4x4s for major dressings.
    Comment: A commenter requested clarification in the final rule on 
some routine medical supplies that were not included in the 
clarification in section III.I, such as wound care supplies and 
colostomy supplies. Additionally, the commenter was seeks clarification 
of the statement, ``There are occasions when the supplies listed * * * 
a billable supply, that is, if they are required in quantity, for 
recurring need, and are included in the plan of care'' on page 40974 at 
the end of section III.I. The commenter asked if this represents a 
change from current practice.
    Response: The law governing the Medicare home health prospective 
payment system (HH PPS) effective October 1, 2000 requires that while 
the patient is under a home health POC, the HHA must bill and receive 
payment from Medicare for all covered home health services including 
routine and non-routine medical supplies, except DME Medical supplies, 
under the consolidated billing requirements. Routine, and non-routine 
medical supplies, are bundled into and paid for under the HH PPS rates 
and are subject to home health consolidated billing, which means that 
Medicare will not pay separately for these items for a beneficiary who 
is in an open home health care episode of care. Section 50.4 of Chapter 
7, ``Home Health Services'' of the Medicare Benefit Policy Manual (Pub. 
100-02) defines medical supplies as ``items that due to their 
therapeutic or diagnostic characteristics, are essential in enabling 
HHA personnel to conduct home visits or to carry out effectively the 
care the physician has ordered for the treatment or diagnosis of the 
patient's illness or injury''. All supplies which would have been 
covered under the cost-based reimbursement system are bundled under the 
home health PPS. There is no limit on the number of supplies that a 
patient may receive from the HHA as long as the supplies are covered, 
reasonable and necessary and documented by the physician and kept in 
the patient's record by the HHA.
Miscellaneous Comments
    Comment: A commenter wrote that most claims have Non-routine 
Supplies (NRS) level 1 or 2, and almost none have NRS level 5. This 
commenter wrote that there was no information in HH PPS to capture the 
need for expensive pleurex catheters. The commenter felt that changes 
in the NRS methodology may be needed to more accurately reflect supply 
needs.
    Another commenter was concerned that certain non-routine supplies 
were being added to the HH PPS bundle, but were not represented in the 
original cost basis for PPS supply payment without appropriate payment 
increases. He felt this was a disincentive to adopt new technology, and 
fosters the use and application of older and less efficacious 
alternative treatments and supplies. This commenter expressed specific 
concern over a Pleura-evac and sophisticated but expensive wound care 
products, and noted that the application of these technologies cost 
more than the NRS allowances. He suggested we re-evaluate the 
classification of Pleura-evacs and establish a process to adjust the 
NRS allowance to accommodate the accretion of new, more expensive, NRS.
    Response: We appreciate the comments on this topic, but we are not, 
as part of this rule, refining either the case-mix model or the NRS 
severity model for the HH PPS. We will consider the comments received 
in future rulemaking.
    Comment: In the proposed rule, CMS indicated that the 60-day 
episode rate was based on 25.5 visits. This is incorrect because it 
uses LUPAs that had 4 or fewer visits that are not paid using the full 
60-day episode rate. Rather 31.6 visits per episode is the correct 
number of visits per episode, as the initial factor used by CMS in 
computing the 60-day episode rate back in 2000. CMS should clarify how 
the 25.5 visits per episode relates to the 31.6 visits per episode that 
was the basis for the 60-day episode base rate.
    Response: The commenter is correct that 25.5, which was the 
actuarial projection for FY 2001 for all episodes as spelled out in the 
July 3, 2000 HH PPS Final Rule, was not the proper number to use for 
comparison with the current non-LUPA visits per episode; we regret the 
error. The 31.6 was for CY 1998 (the last historical year for which 
data were available for the Rule), and trends at the time indicated 
that visits per episode were declining. While the July 3, 2000 HH PPS 
Final Rule did not explicitly state the projection for FY 2001 non-LUPA 
visits per episode, it can be gleaned mathematically from other numbers 
published in that final rule, and turns out to be a few visits lower 
than 31.6.
    Comment: A few commenters wrote that LUPA rates were still less 
than an agency's cost of providing a visit, and asked that the rates be 
reviewed and increased. One commenter suggested we apply the LUPA add-
on to all LUPA episodes. Another could not find support for the 
prediction that LUPA episodes would drop from 15 percent to 5 percent, 
and noted that the most recent data for his State suggested LUPA 
episodes were running at just over 14%.
    Response: Rebasing rates is not part of this final rule. A 
description of the analysis supporting that the LUPA add-on apply only 
to first or only LUPA episodes can be found in the CY 2008 final rule 
(72 FR 49762). It can also be noted that an individual agency's cost of 
providing a visit will differ from agency to agency, however, we 
believe that the LUPA rates, on average, are sufficient. One should 
note that LUPA incidence can vary greatly from agency to agency and 
area to area. We intend to monitor the trend in incidence of LUPA 
episodes in view of the change we made to LUPA payments (the LUPA add-
on) that became effective in CY 2008. It is worth noting that, 
nationally, the percentage of LUPA episodes continues to drop, our most 
recent data indicating that LUPA episodes have dropped to around 10 
percent. As stated in a response to a previous comment, we believe that 
the appropriate time and place to deal with

[[Page 58124]]

any re-estimates, in these multiple areas, is if and when a rebasing 
for the rates were to take place.
    Comment: A commenter felt that the proposed rule fell short of 
adopting essential reform to home health payment model and regulatory 
processes as suggested by MedPAC and described in the Senate Finance 
Committee's Chairman's Mark. The commenter believes the proposed rule 
can be strengthened to be consistent with health care reform goals and 
avoid serious consequences for Medicare, its beneficiaries, and avoid 
undermining access to quality home health agencies. Various commenters 
stated that home health is an effective approach to reducing hospital 
admissions and managing the long term nature of chronic diseases such 
as heart failure, chronic respiratory diseases, and unstable diabetes, 
and that many patients, including those who are not homebound, could 
benefit from ongoing management at home. One of these commenters stated 
a concern that the proposed rule focuses on costs of home care without 
factoring in the overall cost of care to Medicare. Another commenter 
urged us to appreciate the services that HHAs provide, and how home 
health is a cost-effective, quality alternative to rising health care 
costs.
    Response: We appreciate the commenters' suggestions regarding 
broader reform associated with the home health benefit. We agree with 
the commenter that home health care may be an effective approach to 
reducing hospitalizations and overall Medicare costs. However, the 
commenters' suggestions are outside the scope of the proposed 
provisions which we solicited comments about in the CY 2010 proposed 
rule. The commenter is suggesting a broader scope of benefit than that 
which is currently statutorily mandated for Medicare's home health 
benefit.
    Comment: A commenter felt that the actions of a few agencies are 
driving policy decisions for the entire home health program. The 
commenter was concerned about the proliferation of agencies in pockets 
of the country, and the negative behavior of many of these HHAs. The 
commenter wrote that we should work directly with States to address 
appropriate growth and minimize risk to Medicare without impacting 
access. He hopes that we will be sensitive to the impact policy 
decisions aimed at managing the few have on the majority of providers. 
Finally, the commenter appreciated our continued open dialogue through 
teleconferences and open door forums.
    Response: Data so far suggest the problem of growing, suspect 
outlier payments has been associated with individual agencies and 
specific areas of the country. Our proposal for addressing the outlier 
payment problem considered the impact on agencies generally; thus, we 
have proposed an outlier cap at a level, 10 percent, that far exceeds 
the typical agency ratio with respect to outliers. We have addressed 
other parts of our proposed, and finalized, policies in other responses 
to public comments in this final regulation.
    Comment: A commenter suggested we seek new types of healthcare 
systems and promote innovation in this area. Another commenter 
suggested we implement policies and guidance to maximize utilization of 
electronic health records and other forms of health information 
technology within the home health setting. Another commenter wrote that 
because of the HIPAA law, hospitals are not providing home health 
agencies with needed discharge information; this impacts the patient's 
transition to home and leaves the agency to rely on patient recall.
    Response: CMS is aware that some home health agencies have 
implemented new technology to assist in patient services already. They 
have been able to make such investments under the current payment 
system. We urge continued investments in these technologies in the 
interests of improving care management and efficiency in the home 
health industry. CMS is committed to improving health setting 
transitions to minimize unnecessary errors and burdens on patients and 
providers. For example, under the QIO program, we will continue to work 
with the hospital industry and others to disseminate information about 
smoothing transitions.

III. Provisions of the Final Rule

    Generally, this final rule incorporates the provisions of the 
August 6, 2009 proposed rule (republished on August 13, 2009 with 
corrected wage index tables), except as noted in the specific response 
to comments in the applicable section of this rule.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information (COI) 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 solicited public comments on each of aforementioned issues for 
the information collection requirements discussed below. In this final 
rule, we are restating the discussion of the information collection 
requirements as it appeared in the HH PPS proposed rule published on 
August 13, 2009 (74 FR 40948).

A. ICRs Regarding the Requirements for Home Health Services

    In Sec.  424.22 we stated that if a patient's underlying condition 
or complication required a registered nurse to ensure that essential 
non-skilled care was achieving its purpose, and necessitated a 
registered nurse be involved in the development, management, and 
evaluation of a patient's care plan, the physician would include a 
written narrative describing the clinical justification of this need.
    The burden associated with this requirement will be the time and 
effort put forth by the physician to include the written narrative. We 
estimate it will take one physician approximately 5 minutes to meet 
this requirement. We estimate the frequency of such a situation to 
occur in about 5 percent of episodes (or about 345,600 episodes a 
year); therefore, the total annual burden associated with this 
requirement will be 28,800 hours for CY 2010.
    Comment: Two commenters wrote that the time and burden estimates 
presented in section IV. of the proposed rule were underestimated. One 
noted that these regulations would increase costs of operation. For 
section IV.A., the other wrote that the time to educate the physician 
regarding the type of documentation needed to support unlicensed care 
from a Management and Evaluation perspective would be astronomical, in 
addition to the time required trying to obtain the documentation from 
the physician. She added that the time physicians must spend collecting 
information on each client to document medical necessity was greater 
than 5 minutes.

[[Page 58125]]

    Response: We disagree that the time to educate the physician 
regarding the type of documentation that would be needed to fulfill the 
requirement for a physician's written narrative, in these rare 
instances, as astronomical. Nor do we agree that the time required to 
obtain the narrative will be excessive. The physician should already 
have considered what his/her clinical justification is for the 
certification or recertification of the beneficiary to receive 
Medicare's home health benefit, as well as the ordering and approving 
of these skilled services on the plan of care. Consequently, the 
physician should have already synthesized their clinical justification, 
and need only to record it into the certification or recertification.
    The requirements and associated information collection burden 
contained in Sec.  424.22 will be submitted to OMB for approval. As 
part of the approval process, we will seek public comments in an 
additional notice separate from this final rule.

B. ICRs Regarding Deactivation of Medicare Billing Privileges

    In Sec.  424.540(b)(3)(i), an HHA whose Medicare billing privileges 
are deactivated under the provisions found in Sec.  424.540(a) must 
obtain an initial State survey or accreditation by an approved 
accreditation organization before its Medicare billing privilege can be 
reactivated. The burden associated with this requirement will be the 
time and effort put forth by the HHA to obtain a State survey or 
accreditation. We estimate it will take the prospective provider/owner 
60 hours to obtain a State survey or accreditation. We estimate that 
there will be 2,000 such occurrences annually. (We believe that this 
figure is an extremely high-end estimate, but will utilize it for 
purposes of this final rule so as to ensure that we do not 
underestimate the potential burden on HHAs. Therefore, the total annual 
burden associated with this requirement will be 120,000 hours.
    Comment: Two commenters wrote that the time and burden estimates 
presented in section IV. of the proposed rule were underestimated. One 
noted that these regulations would increase costs of operation. For 
section IV.B, a commenter wrote that the time required to receive an 
initial survey was months from an accrediting organization since in her 
State, the State survey agency was no longer performing initial 
surveys.
    Response: With respect to the estimated survey timeframe, the 
calculation is based on the total amount of time the provider spends: 
(1) In undertaking specific activities in preparation for the survey, 
and (2) undergoing the survey itself. The calculation does not include 
the time waiting for the survey to take place.
    The requirements and associated information collection burden 
contained in Sec.  424.540(b)(3) will be submitted to OMB for approval. 
As part of the approval process, we will seek public comments in an 
additional notice separate from this final rule.

C. ICRs Regarding Prohibition Against Sale or Transfer of Billing 
Privileges

    At Sec.  424.550(b)(1) we require that an HHA undergoing an 
ownership change will have to obtain an initial State survey or 
accreditation by an approved accreditation organization if the change 
takes place within 36 months after the effective date of the HHA's 
participation in Medicare. Between April 2008 and April 2009, 
approximately 2,000 Medicare-enrolled HHAs--or 22.5 percent of the 
9,000 total number of HHAs enrolled in Medicare--underwent a change of 
ownership. Naturally, the magnitude of the ownership changes varied by 
HHA, but the fact that almost one-quarter of all Medicare-enrolled HHAs 
changed ownership in some form within the past year is, for the reasons 
outlined in the preamble to this rule, significant.
    It is also important to note that of the 2,000 ownership changes, 
approximately 20 percent occurred in Texas, another 20 percent in 
Florida, and 14 percent in California, meaning that over one-half of 
all changes in ownership occurred in three States. Though it is likely 
that, once this provision is implemented, the number of total annual 
ownership changes will decrease, we will assume for purposes of this 
final rule that the figure of 2,000 will remain constant so as to 
ensure that we do not underestimate the potential burden on HHAs.
    The burden associated with this requirement in Sec.  424.550(b)(1) 
is twofold. First, the HHA will need to complete and submit a Medicare 
enrollment application (paper or electronic) as an initial applicant. 
This can be done electronically via the Internet-Based Provider 
Enrollment, Chain and Ownership System (PECOS) or by using the paper 
CMS-855 enrollment application. The estimated burden of completing the 
entire application as a new enrollee is 3 hours. Thus, the estimated 
annual burden for the approximately 2,000 HHAs that will change 
ownership will be 6,000 hours. Second, the provider will need to 
undergo a survey (or obtain accreditation in lieu of a survey) and 
perform administrative activities associated therewith. We estimate 
that the total hourly burden to the HHA for stated activities will be 
60 hours, for an annual burden of 120,000 hours (2,000 HHAs x 60 
hours).
    Therefore, we estimate that the total annual burden of compliance 
with Sec.  424.550(b)(1) will be 126,000 hours (120,000 hours + 6,000 
hours).
    The requirements and associated information collection burden 
contained in Sec.  424.550(b)(1) will be submitted to OMB for approval. 
As part of the approval process, we will seek public comments in an 
additional notice separate from this final rule.
    Comment: Two commenters wrote that the time and burden estimates 
presented in section IV. of the proposed rule were underestimated. One 
noted that these regulations would increase costs of operation. For 
section IV.C, one of the commenters believed that the time to complete 
the enrollment form needed when a sale/transfer of ownership occurs is 
far greater than 3 hours, taking several days to complete the form and 
gather all required documentation. Additionally, if a deficiency in 
completing this complex form is noted, the time to correct it is not 
factored in.
    Response: We believe that the timeframe we have used for the 
completion of the form is both accurate and consistent with past 
estimates that CMS has used for the completion of the Medicare 
enrollment application (for example, CMS-855A).

D. ICRs Regarding Patient Assessment Data

    Section 484.210 will require an HHA to submit to CMS the OASIS data 
described at Sec.  484.55(b)(1) and (d)(1) in order for CMS to 
administer the payment rate methodologies described in Sec. Sec.  
484.215, 484.230 and 484.235.
    The burden associated with this is the time and effort put forth by 
the HHA to submit the OASIS data. This burden is currently accounted 
for under OMB 0938-0761.

[[Page 58126]]



----------------------------------------------------------------------------------------------------------------
                                                           Number of                             Total annual
            OMB No.                  Requirements         respondents        Burden hours        burden hours
----------------------------------------------------------------------------------------------------------------
0938-NEW.......................  424.22.............  345,600...........  1/12..............  28,800.
None...........................  424.540(b)(3)(i)...  2,000.............  60................  120,000.
None...........................  424.550(b)(1)......  2,000.............  63................  126,000.
0938-0761......................  484.210............  N/A...............  N/A...............  N/A.
----------------------------------------------------------------------------------------------------------------

    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 rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS-1560-F, Fax: (202) 395-6974; or E-mail: [email protected].

E. ICRs Regarding Annual Update of the Unadjusted National Prospective 
60-Day Episode Payment Rate

    Section 484.225(i) requires the submission of quality measures as 
specified by the Secretary. As part of this requirement, each HHA 
sponsoring a Home Health Care CAHPS (HHCAHPS) Survey must prepare and 
submit to its survey vendor a file containing patient data on patients 
served the preceding month that will be used by the survey vendor to 
select the sample and field the survey. This file (essentially the 
sampling frame) for most home health agencies can be generated from 
existing databases with minimal effort. For some small HHAs, 
preparation of a monthly sample frame may require more time. However, 
data elements needed on the sample frame will be kept at a minimum to 
reduce the burden on all HHAs.
    The burden associated with this requirement is the time and effort 
put forth by the HHA to prepare and submit the file containing patient 
data on patients. The survey instrument and procedures for completing 
the instrument are designed to minimize burden on all respondents. No 
significant burden is expected for small agencies beyond providing 
their contracted vendor with a monthly file of patients served.
    Initially, we estimate it will take one HHA 5 hours for the first 
month to meet this requirement. The subsequent monthly burden is 
estimated to be 30 minutes per HHA. We estimate approximately 7,000 
HHAs will be submitting this data annually. Based on that number, the 
burden associated with the first month is estimated at 35,000 hours. 
The burden will decrease to 2,100 for subsequent months. Therefore, the 
total annual burden for the first year will total 58,100.
    The burden associated with the home health patient's submission of 
the HHCAHPS survey is currently pending OMB approval (CMS-10275/
OMB 0938-NEW). Once OMB approval has been obtained, we will 
revise the package to include the burden on the HHAs as discussed 
above.
    Comment: Two commenters wrote that the time and burden estimates 
presented in section IV of the proposed rule were underestimated. One 
noted that these regulations would increase costs of operation. For 
section IV.E on the HHCAHPS, one commenter wrote that time and burden 
were severely underestimated as HHAs must implement both procedural and 
technological changes which are not included in the estimates.
    Response: In the beginning, it will take HHAs a little time to set 
up their files to retrieve the needed patient information on a monthly 
basis for their respective survey vendors. However, from several years 
of experience with Hospital CAHPS, we have observed that the 
participating hospitals are able to deliver their monthly files to 
their respective survey vendors with minimal effort. Regarding section 
IV.E of the Information Collections Requirements, CMS is adopting three 
changes to the proposed HHCAHPS implementation that may alleviate some 
of the ``burden'': (1) Delayed HHCAHPS linkage to CY 2012 payment and 
not to CY 2011 payment; (2) the eligible patient list that HHAs need to 
give to their survey vendors include only Medicare and/or Medicaid 
patients; (3) HHAs may give V Codes to their survey vendors if ICD-9 
codes are unavailable; (4) HHAs will have the opportunity to 
voluntarily implement HHCAHPS for a year (October 2009 through 
September 2010) for ``practicing'' the implementation procedures before 
data collection ``counts'' toward an annual payment update.

V. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993) the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 
96-354), section 1102(b) of the Social Security Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 
13132 on Federalism (August 4, 1999) and the Congressional Review Act 
(5 U.S.C. 804(2)).
    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 rules with economically significant 
effects ($100 million or more in any 1 year). We estimate that this 
rulemaking is ``economically significant'' as measured by the $100 
million threshold and hence also a major rule under the Congressional 
Review Act. Accordingly, we have prepared a Regulatory Impact Analysis, 
which to the best of our ability, presents the costs and benefits of 
the rulemaking.
1. HHA Provisions Regarding Ownership Changes and Reactivation of 
Billing Privileges
    For the proposed rule, we estimated that a total of 2,000 
deactivated HHAs and 2,000 HHAs undergoing a change of ownership may be 
affected annually by our proposed payment safeguard provisions. Yet we 
believe that the actual budgetary impact will be minimal, as these 
estimated figures were very high-end estimates and were used so as not 
to underestimate the potential burden on HHAs. The reality is that the 
annual number of deactivated HHAs that will seek to reactivate their 
billing privileges will very likely be substantially less than 2,000. 
This is primarily because the requirements in 42 CFR 424.540(b)(3)(i) 
will encourage some deactivated HHAs to remain in a deactivated status 
rather than undergo a State survey, especially if they plan to only 
infrequently bill Medicare after the reactivation of their Medicare 
billing privileges. It is for this same reason that we believe that the 
number of ownership changes will be less than 2,000. Some entities and 
individuals

[[Page 58127]]

may be reluctant to sell or buy a Medicare-enrolled HHA if they know 
that the HHA will first have to undergo an initial Medicare enrollment 
and survey. While it is not possible for us to place a precise figure 
on the number of HHAs that will forgo reactivation or an ownership 
change due to the survey requirement, we do believe that it will be 
significant enough to mitigate the overall budgetary impact.
    Moreover, and as previously stated, we believe that these changes 
are necessary to ensure that currently enrolled and prospective HHAs 
are billing for the services provided and are in compliance with the 
conditions of participation in 42 CFR Part 484, and all other Medicare 
requirements.
    As for the issue of beneficiary access, the number of affected HHAs 
is such that we do not believe that beneficiaries will be adversely 
impacted by these provisions. To the contrary, any reduction in the 
number of enrolled HHAs that will result from the implementation of 
these provisions will be more than offset by the assurance that those 
HHAs that cannot meet Medicare requirements and quality standards are 
no longer in the program.
    We are unable to determine the exact extent to which currently 
enrolled and prospective HHAs would be able to meet the requirements 
outlined in the provisions. In addition, as a result of a dearth of 
quantifiable data, we cannot effectively derive an estimate of the 
monetary impacts of these provisions. Accordingly, we are seeking 
public comment so that the public may provide any data available that 
provides a calculable impact or any alternative to these provisions.
2. CY 2010 Update
    The update set forth in this rule applies to Medicare payments 
under HH PPS in CY 2010. Accordingly, the following analysis describes 
the impact in CY 2010 only. We estimate that the net impact of the 
proposals in this rule, including a 2.75 percent reduction to the 
national standardized 60-day episode payment rates and the NRS 
conversion factor to account for the case-mix change adjustment, is 
approximately $140 million in CY 2010 savings. The estimated $140 
million impact reflects the distributional effects of an updated wage 
index (-$10 million) as well as the final 2.0 percent home health 
market basket increase (an additional $350 million in CY 2010 
expenditures attributable only to the CY 2010 home health market 
basket), and the 2.75 percent decrease (-$480 million for the third 
year of a 4-year phase-in) to the HH PPS national standardized 60-day 
episode rates and the NRS conversion factors to account for the case-
mix change adjustment under the HH PPS. The $140 million is reflected 
in column 5 of Table 7 as a 1.03 percent decrease in expenditures when 
comparing the current CY 2009 system to the CY 2010 system.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of $7 million to $34.5 million in any 1 year. For the purposes 
of the RFA, approximately 75 percent of HHAs are considered to small 
businesses according to the Small Business Administration's size 
standards with total revenues of $13.5 million or less in any 1 year. 
Individuals and States are not included in the definition of a small 
entity. Excluding HHAs in areas of the country where high and suspect 
outlier payments exist, this rule is estimated to have an overall 
positive effect upon small entities (see section V.B ``Anticipated 
Effects'', of this final rule, for supporting analysis).
    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 604 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 of a Metropolitan 
Statistical Area and has fewer than 100 beds. This rule applies to home 
health agencies. Therefore, the Secretary has determined that this rule 
will not have a significant economic impact on the operations of a 
substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 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 final 
rule is not anticipated to have an effect on State, local, or tribal 
governments, in the aggregate, or by the private sector, of $133 
million or more.
    Executive Order 13132 established certain requirements that an 
agency must meet when it promulgates a 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 final rule under the threshold criteria of Executive 
Order 13132, Federalism, and have determined that it will not have 
substantial direct effects on the rights, roles, and responsibilities 
of States, local, or tribal governments.

B. Anticipated Effects

    This final rule sets forth updates to the HH PPS rates contained in 
the CY 2009 notice (73 FR 65351, November 3, 2008). The impact analysis 
of this final rule presents the estimated expenditure effects of policy 
changes in this rule. We use the latest data and best analysis 
available, but we do not make adjustments for future changes in such 
variables as number of visits or case-mix.
    This analysis incorporates the latest estimates of growth in 
service use and payments under the Medicare home health benefit, based 
on Medicare claims from 2007. We note that certain events may combine 
to limit the scope or accuracy of our impact analysis, because such an 
analysis is future-oriented and, thus, susceptible to errors resulting 
from other changes in the impact time period assessed. Some examples of 
such possible events are newly-legislated general Medicare program 
funding changes made by the Congress, or changes specifically related 
to HHAs. In addition, changes to the Medicare program may continue to 
be made as a result of the BBA, the BBRA, the Medicare, Medicaid, and 
SCHIP Benefits Improvement and Protection Act of 2000, the MMA, the 
DRA, MIPPA, ARRA, or new statutory provisions. Although these changes 
may not be specific to the HH PPS, 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 HHAs.
    Table 7 represents how home health agency revenues are likely to be 
affected by the policy changes described in this rule. For this 
analysis, we used linked home health claims and OASIS assessments; the 
claims represented a 20-percent sample of 60-day episodes occurring in 
CY 2007. Column one of this table classifies HHAs according to a number 
of characteristics including provider type, geographic region, and 
urban versus rural location.
    For the purposes of analyzing impacts on payments, we performed 
three simulations and compared them to each other. Based on our 
assumption that

[[Page 58128]]

outliers, as a percentage of total HH PPS payments, will be no more 
than 5 percent in CY 2009, the 2009 baseline, for the purposes of these 
simulations, we assumed that the full 5 percent outlay for outliers 
will be paid under our policy in 2009 of a 0.89 FDL ratio. As described 
in section III.A. of this final rule, given our CY 2010 policies of a 
0.67 FDL ratio and a 10 percent cap on outlier payments, we will return 
2.5 percent back into the national standardized 60-day episode payment 
rates, the national per-visit rates, the LUPA add-on payment amount, 
and the NRS conversion factor, and then estimate outlier payments to be 
approximately 2.5 percent of total HH PPS payments in CY 2010. All 
three simulations use a CBSA-based wage index reported on the 2007 
claims to determine the appropriate wage index.
    The first simulation estimates CY 2009 payments under the current 
system (to include the 2009 wage index). The second simulation 
estimates CY 2009 payments under the current system, but with the 2010 
wage index. The second simulation produces an estimate of what total 
payments using the sample data will have been in CY 2009 without any of 
the provisions in this rule, except for that of the 2010 wage index. 
The third simulation estimates CY 2010 payments with the 2010 wage 
index, incorporating our maintaining of the 2.75 percent reduction to 
the HH PPS rates, as well as all the provisions of this rule.
    These simulations demonstrate the effects of: a new 2010 wage 
index, a 2.75 percent reduction to account for the increase in nominal 
case-mix, a 2.0 percent market basket update, a 2.5 percent increase to 
account for a new outlier target of 2.5 percent, a 0.67 FDL ratio, and 
a 10 percent cap on outlier payments. Specifically, the second column 
of Table 7 shows the percent change due to the effects of the 2010 wage 
index. The third column of Table 7 shows the percent change due to the 
combined effects of the 2010 wage index, our maintaining of a 2.75 
percent reductions to the rates to account for the increase in nominal 
case-mix, the 2.0 percent home health market basket update, the 2.5 
percent increase to the HH PPS rates to account for an approximate 2.5 
percent target for outliers as a percentage of total HH PPS payments, a 
0.67 FDL ratio, and a 10 percent outlier cap.
    The overall percentage change, for all HHAs, in estimated total 
payments from CY 2009 to CY 2010 is a decrease of approximately 1.03 
percent. Rural HHAs, however, are estimated to see an increase in 
payments from CY 2009 to CY 2010 of about 3.27 percent. On the other 
hand, urban HHAs are expected to see a decrease of approximately 1.81 
percent in payments from CY 2009 to CY 2010.
    Voluntary non-profit HHAs (3.36 percent), facility-based HHAs (3.72 
percent), and government owned HHAs (2.94 percent) are estimated to see 
an increase in the percentage change in estimated total payments from 
CY 2009 to CY 2010. Proprietary and freestanding HHAs, on the other 
hand, are estimated to see decreases of 3.32 percent and 1.90 percent, 
respectively, in estimated total payments from CY 2009 to CY 2010. 
Freestanding HHAs, broken out, show that voluntary non-profit and 
governmental HHAs are estimated to see increases of 3.47 percent and 
3.48 percent, respectively, in estimated total payments from CY 2009 to 
CY 2010.
    HHAs in the North and Midwest regions are expected to experience a 
percentage change increase in the estimated total payments from CY 2009 
to CY 2010 of 3.66 percent and 3.48 percent, respectively. HHAs in the 
South and West regions of the country are estimated to experience 
decreases in the percentage change in estimated total payments from CY 
2009 to CY 2010 of 4.19 percent and 1.70 percent. We believe that the 
major contributors to the estimated decreases in payments in these 
areas of the country are those with high and suspect outlier payments.
    Breaking this down even further, it is estimated that New England, 
Mid Atlantic, East South Central, East North Central, West North 
Central, and Mountain area HHAs are all expected to experience 
increases in their payments in CY 2010 ranging from almost 2 percent to 
almost 5 percent. Conversely, South Atlantic and Pacific HHAs are 
expected to experience decreases, 11.84 percent and 3.09 percent 
respectively, in the percentage change in estimated total payments from 
CY 2009 to CY 2010. Again, we believe that the major contributors to 
the estimated decreases in payments in these areas of the country are 
those with high and suspect outlier payments.
    The last section of Table 7 shows the percentage change in payments 
by agency size, as determined by the number of first episodes. The 
agency size categories, for this rule, are based on the number of first 
episodes in a random 20 percent beneficiary sample of CY 2007 claims 
data. Initial episodes, under the HH PPS, are defined as the first 
episode in a series of adjacent episodes (contiguous episodes that are 
separated by no more than a 60-day period between episodes) for a given 
beneficiary. Initial, or first, episodes are a good estimate of agency 
size, because this method approximates the number of admissions 
experienced by the agency based on approximately one-fifth of the total 
annual data. The size categories were set to have roughly equal numbers 
of agencies, except that the highest category has somewhat more 
agencies because added detail amongst the large size category was not 
needed. As such, the size categories for these impact analyses are: 
less than 19 first episodes, 20 to 49 first episodes, 50 to 99 first 
episodes, 100 to 199 first episodes, and 200 or more first episodes. 
Larger HHAs (those with 200 or more Medicare home health initial 
episodes per year) are estimated to experience an increase in payments 
from CY 2009 to CY 2010 of approximately 2.27 percent. Mid-size to 
small agencies are expected to see a decrease in their payments in CY 
2010, ranging from 1.95 percent to 16.08 percent. However, we believe 
that the major contributors to the estimated decreases in payments for 
mid-size to small agencies are those agencies in areas of the country 
with high and suspect outlier payments. Consequently, as we did in the 
proposed rule, we have provided a more detailed discussion, and 
analysis in Table 8 below, that demonstrates where, in the country, 
these estimated large decreases for mid-size to small agencies are 
occurring.
BILLING CODE 4120-01-P

[[Page 58129]]

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[[Page 58130]]


[GRAPHIC] [TIFF OMITTED] TR10NO09.001


[[Page 58131]]


[GRAPHIC] [TIFF OMITTED] TR10NO09.002

BILLING CODE 4120-01-C
    Given the overall large negative impact observed by smaller 
agencies, we performed more detailed analysis targeted at identifying 
where the large negative impacts were occurring. Table 8 below presents 
the results of the regional analysis for small agencies. Column 1, of 
Table 8, shows the regional and agency size classifications similar to 
those in Table 7. In column 2 we repeat the overall impacts (from Table 
7) for those classifications. In columns 3 through 7, we drill down in 
our analysis, looking at those classifications by the size of the 
agency (as defined by the number of first episodes). It is clear from 
this analysis that, for smaller agencies, the vast majority of the 
negative impact is occurring in areas of the country (such as the South 
and South Atlantic) where there exist high and suspect outlier 
payments. Specifically, in columns 3, 4, and 5 of Table 8, for the 
South Atlantic area of the country (which includes Miami-Dade, 
Florida), the negative percentage impacts in payment ranging from 
around 40 percent to just over 53 percent are evidence that it is the 
high and suspect outlier payments in areas such as this, that are 
skewing the results of the overall impact analysis. Estimated impacts 
for small agencies in the South (negative impacts ranging around 15 
percent to 22 percent) and the Pacific (negative impacts ranging from 
around 12 percent to 17 percent) areas of the country, reflect similar 
results. Conversely, small HHAs in most other parts of the country are 
estimated to see increases in payments in CY 2010, ranging from 0.20 
percent to almost 5 percent. Consequently, we believe that small HHAs 
without high and suspect outlier payments, on average, will see a 
positive impact on their payments in CY 2010. We do not believe there 
will be any significant impact on beneficiaries, as a result of the 
provisions of this rule. Areas where negative impacts have been 
estimated for HHAs, are primarily urban, and thus we believe that 
beneficiaries have a reasonable pool of HHAs from which to receive home 
health services.

[[Page 58132]]

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C. Accounting Statement and Table

    Whenever a rule is considered a significant rule under Executive 
Order 12866, we are required to develop an Accounting Statement showing 
the classification of the expenditures associated with the provisions 
of this rule.
    Table 9, below provides our best estimate of the decrease in 
Medicare payments under the HH PPS as a result of the changes presented 
in this rule based on the best available data. The expenditures are 
classified as a transfer to the Federal Government of $140 million.

Table 9--Accounting Statement: Classification of Estimated Expenditures,
   From the 2009 HH PPS Calendar Year to the 2010 HH PPS Calendar Year
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  Negative transfer--Estimated
                                          decrease in expenditures: $140
                                          million.
From Whom to Whom......................  Federal Government to HH
                                          Providers.
------------------------------------------------------------------------

D. Conclusion

    In conclusion, we estimate that the net impact of the proposals in 
this rule, including a 2.75 percent reduction to the national 
standardized 60-day episode rates and the NRS conversion factor to 
account for the case-mix change adjustment, is approximately $140 
million in CY 2010 savings. The $140 million impact reflects the 
distributional effects of an updated wage index (-$10 million) as well 
as the final 2.0 percent home health market basket increase (an 
additional $350 million in CY 2010 expenditures attributable only to 
the CY 2010 home

[[Page 58133]]

health market basket), and the 2.75 percent decrease (-$480 million for 
the third year of a 4-year phase-in) to the national standardized 60-
day episode rates and the NRS conversion factor to account for the 
case-mix change adjustment under the HH PPS. This analysis above, 
together with the remainder of this preamble, provides a Regulatory 
Impact Analysis.
    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 409

    Health facilities, Medicare.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

42 CFR Part 484

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 409--HOSPITAL INSURANCE BENEFITS

0
1. The authority citation for part 409 continues to read as follows:

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

0
2. Section 409.42 is amended by revising paragraph (c)(1) to read as 
follows:


Sec.  409.42  Beneficiary qualifications for coverage of services.

* * * * *
    (c) * * *
    (1) Intermittent skilled nursing services that meet the criteria 
for skilled services and the need for skilled services found in Sec.  
409.32. (Also see Sec.  409.33(a) and (b) for a description of examples 
of skilled nursing and rehabilitation services.) These criteria are 
subject to the following limitations in the home health setting:
    (i) In the home health setting, management and evaluation of a 
patient care plan is considered a reasonable and necessary skilled 
service when underlying conditions or complications are such that only 
a registered nurse can ensure that essential non-skilled care is 
achieving its purpose. To be considered a skilled service, the 
complexity of the necessary unskilled services that are a necessary 
part of the medical treatment must require the involvement of licensed 
nurses to promote the patient's recovery and medical safety in view of 
the overall condition. Where nursing visits are not needed to observe 
and assess the effects of the non-skilled services being provided to 
treat the illness or injury, skilled nursing care would not be 
considered reasonable and necessary, and the management and evaluation 
of the care plan would not be considered a skilled service. In some 
cases, the condition of the patient may cause a service that would 
originally be considered unskilled to be considered a skilled nursing 
service. This would occur when the patient's underlying condition or 
complication requires that only a registered nurse can ensure that 
essential non-skilled care is achieving its purpose. The registered 
nurse is ensuring that service is safely and effectively performed. 
However, a service is not considered a skilled nursing service merely 
because it is performed by or under the supervision of a licensed 
nurse. Where a service can be safely and effectively performed (or self 
administered) by non-licensed staff without the direct supervision of a 
nurse, the service cannot be regarded as a skilled service even if a 
nurse actually provides the service.
    (ii) In the home health setting, skilled education services are no 
longer needed if it becomes apparent, after a reasonable period of 
time, that the patient, family, or caregiver could not or would not be 
trained. Further teaching and training would cease to be reasonable and 
necessary in this case, and would cease to be considered a skilled 
service. Notwithstanding that the teaching or training was 
unsuccessful, the services for teaching and training would be 
considered to be reasonable and necessary prior to the point that it 
became apparent that the teaching or training was unsuccessful, as long 
as such services were appropriate to the patient's illness, functional 
loss, or injury.
* * * * *

0
3. Section 409.43 is amended by revising paragraph (e)(1)(ii) to read 
as follows:


Sec.  409.43  Plan of care requirements.

* * * * *
    (e) * * *
    (1) * * *
    (ii) Significant change in condition; or
* * * * *

0
4. Section 409.44 is amended by revising the introductory text of 
paragraph (b)(1) to read as follows:


Sec.  409.44  Skilled services requirements.

* * * * *
    (b) * * *
    (1) Skilled nursing care consists of those services that must, 
under State law, be performed by a registered nurse, or practical 
(vocational) nurse, as defined in Sec.  484.4 of this chapter, meet the 
criteria for skilled nursing services specified in Sec.  409.32, and 
meet the qualifications for coverage of skilled services specified in 
Sec.  409.42(c). See Sec.  409.33(a) and (b) for a description of 
skilled nursing services and examples of them.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
5. The authority citation for part 424 continues to read as follows:

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


0
6. Section 424.22 is amended as follows:
0
A. Revising paragraph (a)(1)(i);
0
B. Revising paragraph (b)(2).


Sec.  424.22  Requirements for home health services.

    (a) * * *
    (1) * * *
    (i) The individual needs or needed intermittent skilled nursing 
care, or physical or speech therapy, or (for the period from July 
through November 30, 1981) occupational therapy. If a patient's 
underlying condition or complication requires a registered nurse to 
ensure that essential non-skilled care is achieving its purpose, and 
necessitates a registered nurse be involved in the development, 
management, and evaluation of a patient's care plan, the physician will 
include a brief narrative describing the clinical justification of this 
need. If the narrative is part of the certification or recertification 
form, then the narrative must be located immediately prior to the 
physician's signature. If the narrative exists as an addendum to the 
certification or recertification form, in addition to the physician's 
signature on the certification or recertification form, the physician 
must sign immediately following the narrative in the addendum.
* * * * *
    (b) * * *
    (2) Content and basis of recertification. The recertification 
statement must indicate the continuing need for services and estimate 
how much longer the services will be required. Need for occupational 
therapy

[[Page 58134]]

may be the basis for continuing services that were initiated because 
the individual needed skilled nursing care or physical therapy or 
speech therapy. If a patient's underlying condition or complication 
requires a registered nurse to ensure that essential non-skilled care 
is achieving its purpose, and necessitates a registered nurse be 
involved in the development, management, and evaluation of a patient's 
care plan, the physician will include a brief narrative describing the 
clinical justification of this need. If the narrative is part of the 
certification or recertification form, then the narrative must be 
located immediately prior to the physician's signature. If the 
narrative exists as an addendum to the certification or recertification 
form, in addition to the physician's signature on the certification or 
recertification form, the physician must sign immediately following the 
narrative in the addendum.
* * * * *

0
7. Section 424.540 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  424.540  Deactivation of Medicare billing privileges.

* * * * *
    (b) * * *
    (3) Except as provided in paragraph (b)(3)(i) of this section, 
reactivation of Medicare billing privileges does not require a new 
certification of the provider or supplier by the State survey agency or 
the establishment of a new provider agreement.
    (i) An HHA whose Medicare billing privileges are deactivated under 
the provisions found at paragraph (a) of this section must obtain an 
initial State survey or accreditation by an approved accreditation 
organization before its Medicare billing privileges can be reactivated.
    (ii) [Reserved]
* * * * *

0
8. Section 424.550 is amended by adding paragraph (b)(1) and adding and 
reserving paragraph (b)(2), to read as follows:


Sec.  424.550  Prohibitions on the sale or transfer of billing 
privileges.

* * * * *
    (b) * * *
    (1) If an owner of a home health agency sells (including asset 
sales or stock transfers), transfers or relinquishes ownership of the 
HHA within 36 months after the effective date of the HHA's enrollment 
in Medicare, the provider agreement and Medicare billing privileges do 
not convey to the new owner. The prospective provider/owner of the HHA 
must instead:
    (i) Enroll in the Medicare program as a new HHA under the 
provisions of Sec.  424.510, and
    (ii) Obtain a State survey or an accreditation from an approved 
accreditation organization.
    (2) [Reserved]
* * * * *

PART 484--HOME HEALTH SERVICES

0
9. The authority citation for part 484 continues to read as follows:

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

Subpart C--Furnishing of Services

0
10. Section 484.55 is amended by revising paragraph (d)(1)(ii) to read 
as follows:


Sec.  484.55  Condition of participation: Comprehensive assessment of 
patients.

* * * * *
    (d) * * *
    (1) * * *
    (i) * * *
    (ii) Significant change in condition; or
* * * * *

Subpart E--Prospective Payment System for Home Health Agencies

0
11. Section 484.210 is amended by revising paragraph (e) to read as 
follows:


Sec.  484.210  Data used for the calculation of the national 
prospective 60-day episode payment.

* * * * *
    (e) OASIS assessment data and other data that account for the 
relative resource utilization for different HHA Medicare patient case-
mix. An HHA must submit to CMS the OASIS data described at Sec.  
484.55(b)(1) and (d)(1) in order for CMS to administer the payment rate 
methodologies described in Sec. Sec.  484.215, 484.230 and 484.235.

0
12. Revise Sec.  484.250 to read as follows:


Sec.  484.250  Patient assessment data.

    An HHA must submit to CMS the OASIS data described at Sec.  
484.55(b)(1) and (d)(1) in order for CMS to administer the payment rate 
methodologies described in Sec. Sec.  484.215, 484.230, and 484.235.

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

    Dated: October 15, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 29, 2009.
Kathleen Sebelius,
Secretary.

    Note:  The following addenda will not be published in the Code 
of Federal Regulations.


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[FR Doc. E9-26503 Filed 10-30-09; 4:15 pm]
BILLING CODE 4120-01-C