[Federal Register Volume 75, Number 221 (Wednesday, November 17, 2010)]
[Rules and Regulations]
[Pages 70372-70486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27778]



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Part II





Department of Health and Human Services





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Center for Medicare & Medicaid Services



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42 CFR Parts 409, 418, 424 et al.



Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2011; Changes in Certification Requirements for Home 
Health Agencies and Hospices; Final Rule

  Federal Register / Vol. 75 , No. 221 / Wednesday, November 17, 2010 / 
Rules and Regulations  

[[Page 70372]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 418, 424, 484, and 489

[CMS-1510-F]
RIN 0938-AP88


Medicare Program; Home Health Prospective Payment System Rate 
Update for Calendar Year 2011; Changes in Certification Requirements 
for Home Health Agencies and Hospices

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, including: the national 
standardized 60-day episode rates, the national per-visit rates, the 
nonroutine medical supply (NRS) conversion factors, and the low 
utilization payment amount (LUPA) add-on payment amounts, under the 
Medicare prospective payment system for HHAs effective January 1, 2011. 
This rule also updates the wage index used under the HH PPS and, in 
accordance with the Patient Protection and Affordable Care Act of 2010 
(Affordable Care Act), updates the HH PPS outlier policy. In addition, 
this rule revises the home health agency (HHA) capitalization 
requirements. This rule further adds clarifying language to the 
``skilled services'' section. The rule finalizes a 3.79 percent 
reduction to rates for CY 2011 to account for changes in case-mix, 
which are unrelated to real changes in patient acuity. Finally, this 
rule incorporates new legislative requirements regarding face-to-face 
encounters with providers related to home health and hospice care.

DATES: Effective Date: These regulations are effective on January 1, 
2011.

FOR FURTHER INFORMATION CONTACT:

Frank Whelan, (410) 786-1302, for information related to payment 
safeguards.
Elizabeth Goldstein, (410) 786-6665, for CAHPS issues.
Mary Pratt, (410) 786-6867, for quality issues.
Randy Throndset, (410) 786-0131, for overall HH PPS issues.
Kathleen Walch, (410) 786-7970, for skilled services requirements and 
clinical issues.

Table of Contents

I. Background
    A. Statutory Background
    B. System for Payment of Home Health Services
    C. Updates to the HH PPS
    D. Comments Received
II. Provisions of the Proposed Rule and Response to Comments
    A. Case-Mix Measurement
    B. Therapy Clarifications
    C. Outlier Policy
    1. Background
    2. Regulatory Update
    3. Statutory Update
    4. Outlier Cap
    5. Loss Sharing Ratio and Fixed Dollar Ratio (FDL)
    6. Imputed Costs
    D. CY 2011 Rate Update
    1. Home Health Market Basket Update
    2. Home Health Care Quality Improvement
    a. OASIS
    b. Home Health Care CAHPS Survey (HHCAHPS)
    3. Home Health Wage Index
    4. CY 2011 Annual Payment Update
    a. National Standardized 60-Day Episode Rate
    b. Updated CY 2011 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. Nonroutine Medical Supply Conversion Factor Update
    5. Rural Add-on
    E. Enrollment Provisions for HHAs
    1. HHA Capitalization
    2. HHA Changes of Ownership
    F. Home Health Face-to-Face Encounter
    G. Future Plans to Group HH PPS Claims Centrally During Claims 
Processing
    H. New Requirements Affecting Hospice Certifications and 
Recertifications
III. Collection of Information Requirements
IV. Regulatory Impact Analysis

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory Background

    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 (HH) services. Section 4603 of the BBA mandated 
the development of the home health prospective payment system (HH PPS). 
Until the implementation of an HH PPS on October 1, 2000, home health 
agencies (HHAs) received payment under a retrospective reimbursement 
system.
    Section 4603(a) of the BBA mandated the development of an HH PPS 
for all Medicare-covered HH 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 an HH PPS for all costs of HH services paid 
under Medicare.
    Section 1895(b)(3)(A) of the Act requires the following: (1) The 
computation of a standard prospective payment amount includes all costs 
for HH services covered and paid for on a reasonable cost basis and 
that such amounts be initially based on the most recent audited cost 
report data available to the Secretary; and (2) the standardized 
prospective payment amount be adjusted to account for the effects of 
case-mix and wage level differences among HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the HH 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 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 HH services 
furnished in a geographic area compared to the applicable national 
average level. Under section 1895(b)(4)(C) of the Act, 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, as amended by section 3131 of the 
Patient Protection and Affordable Care Act of 2010 (The Affordable Care 
Act) (Pub. L. 111-148, enacted on March 23, 2010) 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. Section 3131(b) of the 
Affordable Care Act revised section 1895(b)(5) of the Act so that the 
standard payment amount is reduced by 5 percent and the total outlier 
payments in a given fiscal year (FY) or year may not exceed 2.5 percent 
of total payments projected or estimated. The provision also makes 
permanent a 10 percent agency level outlier payment cap.
    In accordance with the statute, as amended by the BBA, we published 
a final rule in the July 3, 2000 Federal Register (65 FR 41128) to 
implement the

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1997 HH PPS legislation. The July 2000 final rule established 
requirements for the new HH PPS for HH services as required by section 
4603 of the BBA, as 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 an HH PPS for HH 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 HH 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).
    Section 5201(c) of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171, enacted February 8, 2006) added new section 1895(b)(3)(B)(v) 
to the Act, requiring HHAs to submit data for purposes of measuring 
health care quality, and links the quality data submission to the 
annual applicable percentage increase. This data submission requirement 
is applicable for CY 2007 and each subsequent year. If an HHA does not 
submit quality data, the HH market basket percentage increase is 
reduced 2 percentage points. In the November 9, 2006 Federal Register 
(71 FR 65884, 65935), we published a final rule to implement the pay-
for-reporting requirement of the DRA, which was codified at Sec.  
484.225(h) and (i) in accordance with the statute.
    The Affordable Care Act made additional changes to the HH PPS. One 
of the changes in section 3131 of the Affordable Care Act is the 
amendment to section 421(a) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173, 
enacted on December 8, 2003) as amended by section 5201(b) of the DRA. 
The amended section 421(a) of the MMA now requires, for HH services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act) with respect to episodes and visits ending on or after April 1, 
2010, and before January 1, 2016, that the Secretary increase by 3 
percent the payment amount otherwise made under section 1895 of the 
Act.

B. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS based on 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 HH disciplines (skilled nursing, HH 
aide, physical therapy, speech-language pathology, occupational 
therapy, and medical social services). Payment for nonroutine 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. of this final rule). Payment for durable medical equipment 
covered under the HH benefit is made 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 based on 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.

C. 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. 
The August 29, 2007 final rule with comment period set forth an update 
to the 60-day national episode rates and the national per-visit rates 
under the Medicare prospective payment system for HHAs for CY 2008.
    That rule included an analysis performed on CY 2005 HH claims data, 
which indicated a 12.78 percent increase in the observed case-mix since 
2000. The case-mix represented the variations in conditions of the 
patient population served by the HHAs. Subsequently, a more detailed 
analysis was performed on the 12.78 percent increase in case-mix to 
evaluate if any portion of the increase was associated with a change in 
the actual clinical condition of HH patients. We examined data on 
demographics, family severity, and non-HH Part A Medicare expenditure 
data to predict the average case-mix weight for 2005. As a result of 
the subsequent detailed analysis, we recognized that an 11.75 percent 
increase in case-mix was due to changes in coding practices and 
documentation, and not to treatment of more resource-intensive 
patients.
    To account for the changes in case-mix that were not related to an 
underlying change in patient health status, CMS implemented a reduction 
over 4 years in the national standardized 60-day episode payment rates 
and the NRS conversion factor. That reduction was to be 2.75 percent 
per year for 3 years beginning in CY 2008 and 2.71 percent for the 
fourth year in CY 2011. We indicated that we would continue to monitor 
for any further increase in case-mix that was not related to a change 
in patient status, and would adjust the percentage reductions and/or 
implement further case-mix change adjustments in the future.
    For CY 2010, we published a final rule in the November 10, 2009 
Federal Register (74 FR 58077) (hereinafter referred to as the CY 2010 
HH PPS final rule) that sets forth the update to the 60-day national 
episode rates and the national per-visit rates under the Medicare 
prospective payment system for HH services.

D. Comments Received

    In response to the publication of the CY 2011 HH PPS proposed rule, 
we received approximately 500 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.
General (Miscellaneous)
    Comment: A commenter stated that multiple policy changes and 
payment reductions have led to the industry's inability to apply 
``cause-and-effect'' analysis when HH care access becomes critical. The 
commenter recommends applying changes one at a time and phasing them in 
to allow time to determine the impact of those individual changes. 
Another commenter stated that as an HHA owner, she is

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willing to accept cuts to the Medicare HH benefit but that the cuts 
need to be incremental so agencies have the time and the resources to 
implement adjustments in response to payment changes. In addition, 
there is the growing concern of the ``unknown'' costs associated with 
implementation of the Affordable Care Act. Another commenter stated 
that the health insurance costs for their employees have skyrocketed 
over the past 3 years, and that in conjunction with these cuts, it 
hinders their ability to hire staff.
    Response: We have, in fact, been phasing in the reductions to the 
HH PPS rates for the increase in nominal case-mix. As a result of the 
CY 2008 final rule, we have reduced HH PPS rates by 2.75 percent for 
2008, 2009, and 2010 to account for the increase in nominal case-mix, 
that is an increase in case-mix not due to actual changes in patient 
characteristics. However, there still exists significant nominal case-
mix increase in the payment system that has not yet been addressed. 
Consequently, we believe that the case-mix adjustments continue to be 
necessary in order to address the residual increase in the nominal 
change in case-mix that has not yet been accounted for in the payment 
system. As such, we are moving forward with phasing in our case-mix 
reductions and will be applying a 3.79 percent reduction to the HH PPS 
rates in CY 2011 (as discussed in the July 23, 2010 proposed rule). In 
response to comments that we received on our case-mix model and its 
measurement of real case-mix, we will further study the concerns raised 
and are not finalizing the proposed 3.79 percent reduction to the HH 
PPS rates for CY 2012 at this time. Therefore, in addition to our 
continuous monitoring of nominal case-mix increase, we plan to perform 
a review of our case-mix and NRS models, and address any reductions to 
the CY 2012 HH PPS payments in next year's rulemaking. The other policy 
changes and reductions addressed in this rule (that is, outlier 
provisions and reductions to the market basket update) were mandated by 
the Affordable Care Act. We are uncertain of the meaning of ``unknown'' 
costs as referenced by the commenter and therefore are unable to 
address the particular concern.
    Comment: A commenter stated that he receives calls from providers 
who are confused with the language that is used by CMS in determining 
billing requirements. He believes the proposed changes are a step in 
the right direction.
    Response: We appreciate the comment and will continue to work 
towards providing the industry/public with clear policies, 
instructions, and guidance as they relate to our payment policies.
    Comment: With the increased use of technology and telehealth, funds 
should be made available to HHAs to include such monitoring to allow 
patients and their families to be more proactive in the management of 
their illnesses and to reduce ER visits, primary care physician 
appointments and hospital stays. Home Health is the area to fund, not 
to cut, and that medical spending in other areas should be reduced.
    Response: We are not opposed to improvements in technology, or the 
use of telehealth in the HH setting and certainly do not discourage the 
use of these advances in medicine. However, under section 1895(e) of 
the Act, telehealth services cannot substitute for in-person HH 
services ordered as part of a plan of care. However, telehealth can be 
used to supplement traditional HH services.
    Section 1895(b)(3)(B) of the Act dictates how HH PPS rates are to 
be updated annually, and section 3131(a) of the Affordable Care Act, 
amending this provision, requires the Secretary to rebase HH payments 
beginning in 2014. At that time, more up-to-date costs will be used to 
rebase payments to HHAs.
    Comment: A commenter stated that the impact analysis in the 
proposed rule is useless in that the analysis simply quantifies the 
percentage cut in rates on a geographic basis. Further, the impact 
analysis offers little substantive understanding of the individual cost 
impact of such proposed provisions as the physician face-to-face 
encounter requirement, the revisions to therapy assessment, coverage 
and documentation standards, coding change proposals, and CAHPS 
compliance. The estimated costs are vastly understated because they do 
not include the sizeable administrative expenses that HHAs will incur 
to implement any of the changes beyond the cost of some of the form 
revisions.
    A valid and useful impact analysis starts with an understanding of 
the results of the combination of rate cuts and cost increases that the 
proposed policies will bring to HHAs. The commenter further asserts 
that once these results are fairly and accurately determined, the 
impact analysis must begin with the highest of priority concerns--
impact on access to care--as that is the central purpose of Medicare. 
Second, the commenter believes that the impact analysis should continue 
with an evaluation of the effect of the proposed policies on total 
spending for the Medicare program, not just the effect on HH services 
spending.
    The commenter provided the example that if the analysis of the 
proposed policies' impact on access to care shows that thousands of 
Medicare beneficiaries would no longer have HH care available or that 
provision of HH services would be significantly delayed, Medicare 
spending would rise as a result of a shift to higher cost care such as 
skilled nursing facility services or extended inpatient stays.
    The commenter also proposed that the impact analysis should 
evaluate the impact of the proposed policies on another stakeholder--
HHAs as businesses. Such evaluation should start with the ongoing 
viability of the individual businesses and the industry as a whole. 
Among the many elements that should be reviewed is whether the business 
will be paid less than the cost of the delivery of care. Another 
element is the workforce impact--will health care workers take their 
talents to other care sectors because of reductions in compensation and 
benefits. Access to capital is also an important factor to evaluate. If 
the proposed rule changes restrict access to capital, there may be 
reduced use of efficiency-related technologies or business expansions 
to achieve economies of scale. Lack of access to capital could also 
mean an inability to meet ongoing payroll obligations because of cash 
flow problems.
    The commenter also claimed there is another flaw in the CMS impact 
analysis, which is its limited review to a single year. This is 
particularly concerning to the commenter because the proposed rule 
extends rate cuts into a second year. An impact analysis that does not 
evaluate the impact of cuts in payment rates for both of the years as 
proposed is invalid and in violation of CMS obligations under the 
Regulatory Flexibility Act.
    The commenter strongly recommends that CMS conduct a thorough and 
valid impact analysis, consistent with the concerns referenced above. 
Another commenter states that in the proposed rule CMS concluded that 
the proposed rule would not have a significant impact on a substantial 
number of small entities. Section 605 of the Regulatory Flexibility Act 
(RFA) requires that if the regulatory agency certifies that the rule 
will not have a significant impact on a substantial number of small 
businesses, it must include a statement providing the factual basis 
supporting the certification. The commenter suggests that CMS failed to 
provide an adequate factual basis for its certification that there 
would be no significant impact. In fact, there is no language in the 
RFA section of the proposed rule that

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discloses the reasons why CMS concluded that there would be no 
substantial impact on small HHAs. CMS should at a minimum have provided 
the public with information on the number of HHAs and other health care 
entities likely to be affected by the rule. Further, CMS has guidelines 
(usually based on small business revenues) in place that the agency 
uses to determine whether a rule will have a significant impact on a 
substantial number of small entities. CMS failed to discuss how the 
impacts of this rule fall within those guidelines. Such a discussion is 
vital for the purposes of transparency, as affected small entities can 
use this information to provide CMS with economic impact information on 
the rule's projected impact on their business. Based on the public 
input, the commenter asserts that CMS could determine the validity of 
their decision to certify the rule in the publication of the final 
regulation.
    The commenter is concerned that while CMS has certified that the 
rule will not have a significant impact, the affected HHAs still 
believe that the regulation will result in a significant burden on 
their businesses. The commenter believes that there is merit in 
bringing these small business concerns to the attention of CMS in the 
hope that they will add to the transparency of the RFA contained in the 
final rule.
    Response: 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 that year. As such, there 
is no requirement under the RFA to provide impacts for any year(s) 
beyond that which the rule is updating the rates. 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 
purposes of the RFA, approximately 95 percent of HHAs are considered 
small businesses according to the Small Business Administration's size 
standards, with total revenues of $13.5 million or less in any one 
year. Individuals and States are not included in the definition of a 
small entity. As such, this rule is estimated to have an overall 
negative effect upon small entities (see section IV.B. of this final 
rule, ``Anticipated Effects'', for supporting analysis).
    The last section of Table 19 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 2008 
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.
    Because our model does not have the data to account for the 
``total'' revenue of an HHA, in the proposed rule, and again in this 
final rule, we have used the number of first episodes as a proxy for 
agency size. As such, using the facility size categories (based on the 
number of first episodes), the impact table shows that the difference 
in impact between smaller and larger HHAs is small and within a 0.05 
percentage point range. In fact, smaller agencies have a smaller 
reduction and fare slightly better than larger agencies represented by 
the ``200 or more first episodes'' category.
    In an effort to better demonstrate the impact on small HHAs, as it 
relates to total revenue, we supplemented our impact analysis by 
linking to Medicare cost report data, which has total revenues for 
HHAs. Using total revenues and the $13.5 million threshold of the RFA, 
we categorized an HHA as being either small or large. To perform this 
analysis, we were able to match approximately 72 percent of the cost 
report data to our model. For the remainder of the agencies in the 
model, we proxy for large agencies as those agencies with at least 750 
first episodes. This results in approximately 95 percent of agencies 
being classified as small and 5 percent of agencies being large, which 
is reflective of what our cost report files show us. This analysis 
provides similar results to the one using first episodes as a measure 
of an agency's size in that small HHAs fare slightly better, -4.84 
percent impact, than do large HHAs, which are estimated to experience a 
-5.01 percent (see section IV.B. of this final rule, ``Anticipated 
Effects'', for supporting analysis).
    In a separate, supplemental analysis, as merely an indicator of 
possible access to care issues, we looked at estimated margins of HHAs, 
by county, and the estimated effect that the provisions of this rule 
might have on HHAs. In particular, we look to identify counties that 
might not be served by at least one HHA with a positive margin as a 
result of the finalized policies of this rule. The analysis demonstrate 
that occurrence of such counties is very infrequent; thus, we do not 
believe that access to care is an issue (see section IV.B. of this 
final rule, ``Anticipated Effects'', for supporting analysis). Given 
the profit margins of HHAs that we and MedPAC are seeing in our 
analyses, we believe that the reductions of this final rule can be 
absorbed by the majority of HHAs, and that access to care will not be 
compromised. However, we will continue to monitor the situation to 
identify any unintended consequences of our policies in this final 
rule.
Comments Regarding Access to Care
    Comment: A commenter stated that additional regulatory 
responsibilities of oversight, documentation, education, choosing 
survey vendors, etc., would result in increased costs to HHAs. There is 
an inherent risk for decreased quality of care and volume of services 
provided by HHAs. It is possible that HHAs may become more selective in 
their acceptance of medically difficult patients who are likely to 
utilize more services.
    Response: We assume that the commenter is referring to the therapy 
provisions of this rule. We believe that our clarifications to our 
therapy coverage requirements do not constitute additional 
responsibilities, but rather clarify the existing responsibilities of 
the qualified therapist and the HHA. Similarly, we are clarifying the 
existing supervision/oversight requirements of qualified therapists in 
the HH setting. We are also clarifying our coverage requirements for 
education of the patient and/or family members, and our documentation 
requirements. We do not consider any of these clarifications to be 
beyond the current responsibilities of an HHA.
    We are, as part of this final rule, requiring qualified therapists 
to perform the needed therapy service, assess patients and measure and 
document therapy effectiveness at what we consider key points of the 
episode. We believe that all HH patients who need therapy services 
would benefit from those services being delivered by a qualified 
therapist, instead of an assistant, at key points in the course of 
treatment. We will continue to monitor for unintended consequences of 
the provisions of this final rule.
    Comment: Several commenters stated that the payment reductions 
would result in decreased access to care and force HHAs out of 
business. The

[[Page 70376]]

commenters assert that patients who are moved from acute care 
facilities to their homes and have major medical problems would not be 
able to get HH services for their illnesses. These proposed changes 
would not only endanger access to care but also impede efforts to 
transition patients to the home and cripple essential community HHAs. 
Several commenters stated that HH patients would be forced into costly 
institutional care and increase Medicare spending. Another commenter 
stated that if these proposed cuts were implemented, many senior 
citizens who have paid taxes in to the Medicare system for years would 
be forced to go into assisted living facilities and nursing homes or 
simply not receive the healthcare they deserve. In addition, their 
quality of life would be compromised.
    Response: As discussed in a previous response to a comment, in a 
separate analysis in the regulatory impact section of this rule, we 
looked at margins of HHAs, by county, and the estimated effect that the 
provisions of this rule would have on HHAs. In particular, we studied 
the number of counties that would not be served by at least one HHA 
with a positive margin. Our analysis concluded that there were few 
counties in which no HHAs had positive margins; therefore, we do not 
believe that access to care will be adversely affected by these case-
mix adjustments. Given the data on profit margins that we and MedPAC 
saw in our analyses, we believe that the reimbursement rate reductions 
set forth in this final rule can be absorbed by the majority of HHAs, 
and that access to care will not be compromised.

II. Provisions of the Proposed Rule and Response to Comments

A. Case-Mix Measurement

    As stated in the proposed rule published on July 23, 2010, analysis 
of HH PPS claims shows total average case-mix grew at a rate of about 1 
percent each year from 2000 to 2007, with 4 percent growth in 2008. 
Based on our analysis of the proportion of total case-mix change due to 
changes in real case-mix severity of the HH user population, the total 
amount of case-mix growth unrelated to real changes in patient severity 
(nominal case-mix) is 17.45 percent between 2000 and 2008. In each of 
the years 2008, 2009, and 2010, we reduced payment rates by 2.75 
percent as recoupment for nominal case-mix change. A payment-rate 
reduction of 7.43 percent would be needed to account for the 
outstanding amount of nominal case-mix change we intend to recoup based 
on the real case-mix change analysis updated through 2008. In the 
proposed rule, we proposed to increase the planned 2.71 percent 
reduction in CY 2011 to 3.79 percent, and to make another 3.79 percent 
reduction in CY 2012. Doing so would enable us to account for the 7.43 
percent nominal case-mix residual, while minimizing access to care 
risks. Iteratively implementing the case-mix reduction over two years 
gives HH providers more time to adjust to the intended reduction of 
7.43 percent than would be the case were we to account for the residual 
in a single year.
    For a complete description of the proposed case-mix refinements 
model and the underlying research, we refer readers to the CY 2011 HH 
PPS proposed rule (75 FR 43238 through 43244) published in the July 23, 
2010, Federal Register.
    Comment: Commenters stated that we should suspend or drop case-mix 
reductions because the proposal is based on the assumption that 
agencies intentionally gamed the system.
    Response: As we have stated in previous regulations, changes and 
improvements in coding are important in bringing about nominal coding 
change. We believe nominal coding change results mostly from changed 
coding practices, including improved understanding of the ICD-9 coding 
system, more comprehensive coding, changes in the interpretation of 
various items on the OASIS and in formal OASIS definitions, and other 
evolving measurement issues. Our view of the causes of nominal coding 
change does not emphasize the idea that HHAs in general gamed the 
system. However, since our goal is to pay increased costs associated 
with changes in patient severity, and nominal coding change does not 
necessarily demonstrate that underlying changes in patient severity 
occurred, we believe it is necessary to recoup overpayments due to 
nominal coding change.
    Comment: Commenters stated that all of the HHAs are being penalized 
for the corrupt actions of a few HHAs. Many commenters indicated that 
their agency had case-mix weights below the national average. 
Commenters stated that nominal case-mix change reductions should be 
limited to certain types of agencies (for example, those with high 
average case-mix index (CMI) or large weight increases or for-profit 
providers) or that CMS should implement different payment reductions by 
state or by geographical region, suggesting that their region has a 
lower nominal case-mix change than the national average. Other 
commenters recommended that reductions be proportional to an individual 
agency's CMI. For example, some commenters suggested that payment 
reductions be applied to those HHAs with an average case-mix above 
1.20. Commenters stated that we should not implement payment reductions 
to all HHAs merely because that policy is easier to implement.
    Response: For a variety of reasons, as we have noted in previous 
regulations, we have not proposed targeted reductions for nominal case-
mix change. We have not conducted analysis of how and whether 
individual agencies' coding practices have changed over time because 
this is not feasible. One reason is that many agencies have small 
patient populations, which would make it practically impossible to 
measure nominal case-mix change reliably. Another reason is that we 
believe changes and improvements in coding have been widespread, so 
that such targeting would likely not separate agencies clearly into 
high and low coding-change groups.
    Table 1A shows average case-mix by type of agency in 2000 and 2008. 
All types of agencies, regardless of region or profit status or size or 
affiliation, have substantial increases in their average case-mix. 
While for-profit agencies' case-mix grew approximately 19 percent, the 
case-mix average for non-profit agencies also grew considerably (16.6 
percent). Case-mix grew just over 19.5 percent for freestanding 
agencies while case-mix for facility-based agencies grew just short of 
15 percent. For rural agencies, case-mix grew almost 16 percent, while 
case-mix for urban agencies grew just under 19 percent. Rural agencies 
will receive an additional 3 percent rural add-on to their payments, 
which will help offset the case-mix reductions. It should be noted that 
the agency groups start from different base year values, but in general 
the percentage change in case-mix is roughly similar across these 
groups, with the possible exception of the Midwest, for which the 
percentage change is somewhat higher than the other changes--about 23 
percent. No group could be said to have trivial case-mix change. 
Therefore, we believe our proposal to make across the board payment 
reductions is consistent with the data, and making distinctions by type 
of agency would be inappropriate.

[[Page 70377]]



                             Table 1A--Estimates of Case-Mix Change by Provider Type
                                                   [2000-2008]
----------------------------------------------------------------------------------------------------------------
                                                          Actual case-mix                 Case-mix change
                                                 ---------------------------------------------------------------
                                                    2000  (IPS
                                                      period)          2008            Total        Percentage
----------------------------------------------------------------------------------------------------------------
                                                     Overall
----------------------------------------------------------------------------------------------------------------
All Agencies....................................          1.0959          1.3085          0.2126            19.4
----------------------------------------------------------------------------------------------------------------
                                                 Ownership Type
----------------------------------------------------------------------------------------------------------------
Non-profit......................................          1.0840          1.2641          0.1801            16.6
Government......................................          1.0672          1.2291          0.1619            15.2
For-profit......................................          1.1202          1.3332          0.2130            19.0
----------------------------------------------------------------------------------------------------------------
                                                   Agency Type
----------------------------------------------------------------------------------------------------------------
Facility-based..................................          1.0834          1.2433          0.1599            14.8
Freestanding....................................          1.1035          1.3200          0.2165            19.6
----------------------------------------------------------------------------------------------------------------
                                                     Region
----------------------------------------------------------------------------------------------------------------
North...........................................          1.0422          1.2459          0.2037            19.6
South...........................................          1.1251           1.337          0.2118            18.8
Midwest.........................................          1.0865          1.3431          0.2566            23.6
West............................................          1.0956          1.2648          0.1692            15.5
----------------------------------------------------------------------------------------------------------------
                                     Facility Size (Number of 1st Episodes)
----------------------------------------------------------------------------------------------------------------
< 99 episodes...................................          1.0898          1.2499          0.1602            14.7
100 or more.....................................          1.1057          1.3266          0.2209            20.0
----------------------------------------------------------------------------------------------------------------
                                                   Urban/Rural
----------------------------------------------------------------------------------------------------------------
Urban...........................................          1.1097          1.3184          0.2087            18.8
Rural...........................................          1.0478          1.2136          0.1657            15.8
----------------------------------------------------------------------------------------------------------------

    Although we have stated in past regulations that a targeted system 
would be administratively burdensome, the reasons we have just 
presented go beyond administrative complexity. Certain comments seem to 
assume that the level of case-mix can precisely identify those agencies 
practicing abusive coding. We do not agree with the comments, which 
seem to assume that agency-specific case-mix levels can precisely 
differentiate agencies practicing abusive coding from others. System 
wide, case-mix levels have risen over time while patient 
characteristics data indicate little change in patient severity over 
time. That is, the main problem is the amount of change in the billed 
case-mix weights not attributable to underlying changes in actual 
patient severity. Moreover, we believe that a policy of varying payment 
levels according to regional differences in nominal case-mix change 
would be perceived as inequitable by beneficiaries. That is, 
beneficiaries who might have access only to agencies subject to larger 
payment reductions might believe Medicare's policies disadvantage them 
unfairly.
    Comment: Commenters stated that we should suspend or drop case-mix 
adjustments because they will cause financial distress/bankruptcy among 
agencies, particularly ``safety-net'' agencies that take patients other 
agencies reject. Commenters further stated that the proposed payment 
reductions will cause ``safety net'' providers to have a ``negative 
operating margin'' and/or cause not-for-profit agencies to go out of 
business.
    Response: Our analysis of the potential effect of the 2011 payment 
rate reductions suggests that while negative-margin agencies may 
increase in number, almost all such agencies are located in counties 
with other agencies predicted to have positive margins. We also note 
that predicting the size of the increase in negative-margin agencies is 
difficult to do because many agencies may find ways to cut costs or 
increase revenues so that margins do not deteriorate. Identifying the 
agencies that commenters call ``safety-net'' agencies is not feasible 
with our administrative data, so we cannot provide any evidence either 
to support or refute assertions that safety-net agencies are at 
greatest risk. Our analysis of margins of not-for-profit agencies shows 
that they tend to have lower margins than for-profit agencies. However, 
we do not agree that not-for-profit agencies will necessarily be more 
likely to exit the HH business than a for-profit agency. We believe the 
business decision is a complex one with many considerations, such as 
the organization's mission, the availability of alternate sources of 
funding, and whether or not the organization is embedded in a larger 
one. These influential factors are not necessarily associated with the 
non-profit or for-profit status of an agency, and therefore, we cannot 
accurately predict the business decision of an agency based solely on 
their status.
    Comment: Commenters stated that we should suspend or drop case-mix 
adjustments because access would be reduced, particularly among hard-
to-place patients. Commenters predicted that the payment reductions 
would have a ``destabilizing effect'' on HHAs and negatively impact 
patient access to HH care.
    Response: MedPac has previously recommended to the Congress that HH 
rates be reduced by 5 percent. (MedPac, Report to Congress: Medicare 
Payment

[[Page 70378]]

Policy, March 2009). We believe HH industry margins are sufficient to 
support a rate reduction of that size. For example, MedPac projected 
2011 margins would remain high, at 13.7 percent (assuming the 
previously planned rate reduction of -2.71 percent in 2011). MedPac 
also reported that the number of agencies continues to grow, reaching 
in excess of 10,400 in 2009. This is a 50 percent increase since 2002, 
although growth in new agencies has been highly uneven geographically. 
Notably, access to care was sufficient in 2001, when the number of 
agencies nationally was much lower than it is today (Office of the 
Inspector General, Access to Home Health Care after Hospital Discharge, 
July 2001, and Office of the Inspector General, Medicare Home Health 
Care Community Beneficiaries, October 2001). Our analysis of cost 
reports submitted by the end of 2008 indicates that 99 percent of 
beneficiaries are in counties served by at least two agencies, with 
more than half of beneficiaries in counties served by at least 11 
agencies. Predictions about the number of bankruptcies and effects on 
access are highly uncertain. Furthermore, we have no indications that 
payment reductions implemented since 2008 have led to access problems 
among beneficiaries. During the succeeding period, the total number of 
agencies has continued to grow, which is indirect evidence that access 
levels have not deteriorated. We intend to request that the Office of 
the Inspector General resume investigations of the access impacts of 
payment reductions. We will continue to monitor access to care in order 
to identify any unintended consequences of our policies in this final 
rule. We emphasize that the justification for the nominal case-mix 
payment reductions is not HHA margins but rather is the increase in 
billed case-mix weights, which our analysis indicates, is unrelated to 
changes in underlying patient health characteristics.
    Comment: Commenters suggested that we provide funding to HHAs that 
admit patients that other agencies avoid.
    Response: We have received comments of this nature over the years. 
We are unable to definitively characterize such a categorization of 
HHAs using administrative data. While we welcome information as to the 
characteristics and identity of such agencies, so that we can study 
their performance, we would also need to study carefully the 
implications of making such distinctions on a permanent basis in our 
payment system. We expect many issues would arise. In future rulemaking 
we will solicit comment on the various challenges that might arise in 
administering payments differently to what some commenters called 
``full access organizations'' and potentially other categories of 
agencies that might be capable of mitigating access problems, should 
they arise.
    Comment: Some commenters suggested that CMS focus its efforts on 
the study, which will assess possible changes to the HH PPS in order to 
ensure access to care.
    Response: Section 3131(d) of the Affordable Care Act mandates that 
the Secretary conduct a study to evaluate costs related to providing 
care to low-income beneficiaries, beneficiaries in medically 
underserved areas, and beneficiaries with varying levels of severity of 
illness. The section directs the study to be focused on ensuring access 
to care for patients with characteristics associated with especially 
high costs. We are preparing to launch the mandated study in FY 2011.
    Comment: Commenters stated that CMS should suspend or drop nominal 
case-mix change reductions because those payment reductions are 
contrary to congressional intent in the Affordable Care Act, which 
implemented payment reductions on a separate basis. Furthermore, 
commenters stated that the 3.79 percent case-mix payment reduction 
should count as the ``5 percent cut mandated by the [Affordable Care 
Act]'' and the proposed payment decreases should not be implemented in 
addition to the Affordable Care Act-mandated payment reductions.
    Response: Section 3401(e) of the Affordable Care Act mandated a 
market basket reduction and future productivity adjustments. In the 
Affordable Care Act, Congress did not make any changes to the pre-
existing provision authorizing CMS to reduce payment rates in response 
to nominal case-mix change. Nor did the Congress authorize a 
substitution of the case-mix payment reduction for the Affordable Care 
Act's five percent payment reduction related to outlier payments 
(Section 3131(b) of the Affordable Care Act). Therefore, the reductions 
for nominal case-mix changes comply with current law.
    Comment: Commenters stated that CMS should suspend or drop case-mix 
reductions because CMS should give specific proposals such as therapy 
documentation and comorbidity case-mix weight changes time to work.
    Response: Our proposals are intended to recoup excess outlays that 
have already been made through 2008, outlays that were not justified by 
changes in patient severity. Going forward, beginning with 2011, we 
would expect to see a moderation of nominal case-mix growth because of 
the proposals mentioned by the commenters. Such moderation would 
decrease recoupment, if any, proposed in the future.
    Comment: A commenter stated that the need for payment reductions in 
HH care is ``consistent with the experience of coding changes in other 
payment systems.'' However, the methodology ``used to establish the 
reduction percentage'' in the inpatient system was flawed and, 
therefore, the methodology used to establish the payment reduction for 
HH is probably flawed as well.
    Response: The payment systems, institutional conditions, data 
resources, case-mix assignment procedures, and many other aspects 
differ across care settings. Therefore, methodologies must each be 
judged on their own individual merits. We have explained and justified 
the methodology in this and in previous regulations cited elsewhere in 
this preamble.
    Comment: We received a comment recommending that we focus the 
application of the case-mix change adjustment only to visits beyond the 
13th day by changing the OASIS scoring and rate calculation for the 
extended cases rather than reducing the base rate and affecting all 
visits as a result.
    Response: We are unsure of the specific change recommended in this 
comment, but we would be concerned that any approach to rate reduction 
based on the length of time in treatment within the 60-day episode 
would affect fundamental assumptions of the HH PPS system. Most 
notably, the system assumes that the amount of resources within the 60-
day period, rather than the timing of their expenditure within that 
period, is the appropriate variable use to determine payments in the 
case-mix-adjusted payment system.
    Comment: One commenter stated that a recent study that used data 
from a nationally representative survey (the Medical Expenditures Panel 
Survey--MEPS) found a change in real case-mix between 2000 and 2007.
    Response: We thank the commenter for the comments. However, we note 
that the MEPs analysis appears to be based on all Medicare 
beneficiaries, not just the subset of HH patients. Home health users 
are less than 10 percent of the fee for service enrolled Medicare 
population, so it is not certain that the MEPS study of the entire 
Medicare population is relevant to the question of worsening health 
status of HH users.
    Comment: Commenters stated that CMS should suspend or drop case-mix 
reductions because the data used to determine the reductions do not

[[Page 70379]]

recognize real increases in severity due to earlier and sicker hospital 
discharges.
    Response: While we recognize that average lengths of stay in acute 
care are in decline, our analysis shows that agencies are, in fact, 
caring for fewer, not more, post-acute patients. Since 2001, the 
average length of stay in acute care preceding HH has declined by about 
one day, from 7 days to 6 days. However, agencies are caring for fewer 
highly acute patients in their caseloads. The proportion of non-LUPA 
episodes in which the patient went from acute care directly to HH 
within 14 days of acute hospital discharge declined substantially 
between 2001 and 2008, from 32 percent to 23 percent. In addition, the 
median acute hospital length of stay for these non-LUPA episodes with a 
14-day lookback period has remained unchanged at 5 days since 2002 (see 
Table 1B, 50th percentile). Since 2005, the distribution has been 
stable, except for a 1-day shortening of lengths of stay at the 5th, 
80th, and 99th percentiles. We believe the declining prevalence of 
recent acute discharges is due in part to more patients incurring 
recertifications after admission to HH care, and due to more patients 
entering care from the community. The shortening lengths of stay at the 
right tail (high percentiles) of the distribution may reflect changing 
utilization of long-term-care hospitals during recent years. The 
conclusion we draw from these data is that while patients on average 
have shorter hospital stays, agencies are also facing a smaller 
proportion of HH episodes in which the patient has been acutely ill in 
the very recent past. Also, the detailed data on the distribution of 
stay lengths suggest that for the most part lengths of stay for such 
patients remained stable through 2008, particularly since around 2005.

                                              Table 1B--Percentiles of Acute Hospital Length of Stay (days)
                                                                       [2001-2008]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                         Year                            5th      10th     20th     30th     40th     50th     60th     70th     80th     90th     99th
--------------------------------------------------------------------------------------------------------------------------------------------------------
2001.................................................        2        2        3        4        5        6        7        8       10       14       32
2002.................................................        2        2        3        4        5        5        6        8       10       14       31
2003.................................................        2        2        3        4        4        5        6        8       10       13       30
2004.................................................        2        2        3        4        4        5        6        7        9       13       29
2005.................................................        2        2        3        3        4        5        6        7        9       12       28
2006.................................................        1        2        3        3        4        5        6        7        9       12       28
2007.................................................        1        2        3        3        4        5        6        7        9       12       27
2008.................................................        1        2        3        3        4        5        6        7        8       12       25
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Based on a 10 percent random beneficiary sample of FFS HH users; excludes LUPA episodes and includes only episodes where acute hospital discharge
  occurred within 14 days of the from-date of the 60-day episode claim and the patient's first destination post-discharge under Part A was HH care.

    Furthermore, we think that acuity of patients has been increasingly 
mitigated by lengthening post-acute stays for the substantial number of 
HH patients who use residential post-acute care (PAC) prior to an 
episode. Our data show that patients who enter residential PAC before 
HH admission have experienced increasing lengths of stay in PAC since 
2001. Using a 10 percent random beneficiary sample, we computed the 
total days of stay (including both acute and PAC days) for HH episodes 
with common patterns of pre-admission utilization during the 60 days 
preceding the beginning of the episode. We included patients whose last 
stay was acute, or whose next-to-last stay was acute with a follow-on 
residential PAC stay, or whose third from last stay was acute followed 
by two PAC stays. These common patterns accounted for 55 percent of the 
initial episodes in 2001 and 42 percent in 2008. We found that total 
days of stay during the 60 days leading up to the episode averaged 12.6 
days in 2001, and rose to 12.8 days in 2008. This small change in total 
days of stay during a period when acute LOS was declining was due to 
increasing lengths of stay in residential PAC for these patients. For 
example, within the 30 days before admission, average length of stay in 
the PAC setting for episodes preceded by an acute stay that was the 
next-to-last stay, and where the PAC stay was the very last stay before 
the claim-from date, increased from 12.7 to 14.3 days. Our 
interpretation of these statistics is that patient acuity has been 
increasingly mitigated by longer post-acute stays for the substantial 
number of HH patients that use residential PAC prior to the start of a 
HH episode. Patient acuity also was mitigated by growing numbers of HH 
recertifications.
    Comment: A commenter stated the data and analysis we used to 
measure real case-mix change do not recognize that technology 
improvements in recent years enable patients with more complex 
conditions to be cared for at home.
    Response: We appreciate this comment but possess limited 
information to evaluate it. The data we do have, from OASIS, suggest 
that episodes for patients using technological treatments at home are 
not increasing. OASIS data show that the proportion of episodes 
involving enteral nutrition has declined from 2.9 percent to 1.6 
percent between 2001 and 2008; the proportion of episodes involving 
intravenous therapy or infusion therapy has stayed stable at around 2.2 
percent; and the proportion of episodes involving parenteral nutrition 
remains at 0.2 percent or less during that period. The proportion of 
episodes with none of those treatments has increased from 94.8 percent 
to 96.2 percent. These data are inconsistent with the commenter's 
assertion, but we solicit commenters to provide us in the future with 
other types of reliable data on this aspect of patient case-mix.
    Comment: Many commenters cited improvements in the accuracy of 
OASIS coding which could more precisely measure patient severity as a 
reason why we should drop its proposal to address nominal case-mix 
growth by reducing payments.
    Response: Comments referencing coding improvements, such as 
increasing accuracy, do not recognize that such improvements are an 
inappropriate basis for payment. Measurable changes in patient severity 
and patient need are an appropriate basis for changes in payment. Our 
analysis continues to find only small changes in patient severity and 
need.
    Comment: Commenters stated that the increase in case-mix is due to 
the HHA's diligence in ensuring proper coding; CMS's implementation of 
payment reductions would therefore penalize HHAs for proper coding, 
while the agencies who were not ethical or diligent in their coding 
would not be affected as much. Furthermore, a commenter suggested that 
part of the

[[Page 70380]]

``nominal'' case-mix changes were due to HHAs' past failures to code 
properly. The commenter stated that when the HH PPS system was first 
implemented in 2000, HHAs undercoded in a manner that generated 
insufficient resources to adequately care for the patient. After 
modifications were made to the HH PPS system in 2008, coding was still 
not adequate for the patient. The commenter stated that, for these 
reasons, the baseline average case-mix is much lower than the actual 
value.
    Response: We agree with the commenter's explanation of previous 
undercoding as a cause of nominal case-mix growth. Over the years, we 
have issued and revised instructions for OASIS to reinforce the 
importance of complete and accurate coding. As we have stated in 
previous regulations, however, Medicare should not inappropriately make 
greater reimbursements for a patient population whose level of severity 
has changed relatively little over the years, notwithstanding more-
comprehensive documentation of the health status of these patients.
    Comment: A commenter stated that much of the increase in case-mix 
weights is due to HHAs complying with Medicare instructions regarding 
patient coding consistent with the 2008 version of the HH PPS.
    Response: This comment is difficult to address because the 
commenter does not cite specifically which documents constitute CMS-
issued Medicare instructions ``consistent with the 2008 version of the 
HH PPS.'' Nor does the comment explain how the increase in case-mix 
weights was driven by such CMS instructions. However, we believe our 
release in late 2008 of a revision of Attachment D of the OASIS 
Instruction Manual would not have had the effect suggested by the 
comment. (Attachment D was intended to provide guidance on diagnosis 
reporting and coding in the context of the HH PPS.) First, Attachment D 
reiterated traditional CMS guidance about how to select diagnoses in 
home health. Attachment D did not deviate from the fundamental and 
longstanding instruction that reported diagnoses must be relevant to 
the treatment plan and the progress or outcome of care. Second, 
Attachment D's release late in the year suggests it would not have had 
much impact on the 2008 data.
    Comment: We received a number of comments stating that HH patients 
now have more complex conditions than previous populations of HH 
patients and that such patients previously would have been referred to 
health care facilities, but are now being cared for at home. Moreover, 
the commenters stated that other healthcare settings have developed 
stricter admission requirements, thereby increasing the number of HHA 
patients with high severity levels. One commenter cited as evidence 
diversion of patients to home care from inpatient rehabilitation 
facilities due to the CMS 60 percent rule and skilled nursing 
facilities' (SNFs') technology increases. The commenters point to such 
changes as evidence that policy incentives favor the home setting over 
institutional care, and therefore, case-mix increases are warranted.
    Response: We appreciate the comment, but we have little information 
with which to evaluate the claim regarding diversion to the home care 
setting. Possibly relevant is that the proportion of initial non-LUPA 
episodes preceded by acute care within the previous 60 days has 
declined between 2001 and 2008, from 70.0 percent to 62.7 percent. This 
indicates more patients are being admitted from non-institutional 
settings, for example, the community. However, our data do not indicate 
whether the patients coming into home care without recent care in a 
Part A setting were diverted from entering such settings in favor of 
home-based care. Post-acute institutional utilization data perhaps 
consistent with the comment suggest a decline in inpatient 
rehabilitation facilities (IRFs) as a source of HH patients, but this 
decline may have been partly offset by an increase in SNF utilization 
as a source. For example, the proportion of initial episodes preceded 
by an IRF stay that ended sometime during the 30 days before HH 
admission suddenly declined by more than a percentage point in 2005 and 
declined another 1.5 percentage points by 2008, while the percentage 
preceded by a SNF stay increased half a percentage point in 2005 and 
increased another 0.4 percentage points by 2008 (data based on a 10 
percent beneficiary sample of initial, non-LUPA episodes). Furthermore, 
the fact that acute stays, which normally precede stays in 
institutional PAC settings, are decreasing in the stay histories of HH 
patients is inconsistent with the idea that the reduction in IRF stay 
histories is a sign that more patients are coming to HH as a result of 
diversion from IRF care.
    Comment: Commenters stated that the implementation of the payment 
reductions should be delayed until the validity of data and methods 
used to calculate the payment reduction can be verified.
    Response: The real case-mix prediction model and its application 
account for changes in the HH patient population by quantifying the 
relationship between patient demographic and clinical characteristics 
and case-mix. The relationships in conjunction with updated measures of 
patient characteristics are used to quantify real case-mix change. The 
characteristics in the model include proxy measures for severity, 
including a variety of measures, namely, demographic variables, 
hospital expenditures, expenditures on other Part A services, Part A 
utilization measures, living situation, type of hospital stay, severity 
of illness during the stay, and risk of mortality during the stay. 
Measurable changes in patient severity and patient need, factors 
mentioned by commenters, are an appropriate basis for changes in 
payment. Our model of real case-mix change has attempted to capture 
such increases.
    We recognize that models are potentially limited in their ability 
to pick up more subtle changes in a patient population such as those 
alluded to by various commenters. Yet in previous regulations, we 
presented additional types of data suggestive of only minor change in 
the population admitted to HH, and very large changes in case-mix 
indices over a short period. We included among these pieces of evidence 
information about the declining proportion of HH episodes associated 
with a recent acute stay for hip fracture, congestive heart failure, 
stroke, and hip replacement, which are four situations often associated 
with high severity and high resource intensity. We found declining 
shares for these types of episodes as of 2005 (72 FR 49762, 49833 
[August 2007]). We presented information showing that resource use did 
not increase along with billed case-mix (72 FR 49833); stable resource 
use data suggest that patients were not more in need of services over 
time, notwithstanding the rising billed case-mix weights that suggested 
they would be. We also analyzed changes in OASIS item guidance that 
clarified definitions and could have led to progress in coding practice 
(72 FR 25356, 25359 [May 2007]). We reported rates of OASIS conditions 
for the year before the beginning of the HH PPS and 2003, and found 
some scattered small changes indicative of worsening severity but no 
dramatic changes commensurate with the increase in case-mix weights (72 
FR 25359). In our discussion, we cited specific instances where 
agencies' changing understanding of coding could have contributed to 
the adverse changes. However, as previously stated, Medicare payments 
should be based on patient

[[Page 70381]]

level of severity, and not on coding practices.
    In the July 2010 proposed rule, we identified a very large, sudden 
1 year change (+0.0533) in the average case-mix weight by comparing a 
2007 sample that we assigned to case-mix groups using the new 153-group 
system and a 2008 sample grouped under the same system. It is unlikely 
that the patient population suddenly worsened in severity to cause an 
increase of 0.0533 in the average case-mix weight in a single year. 
Furthermore, we concluded that the large change was not due to our use 
of the new, 153-group case-mix algorithm in 2008, because when we 
applied the previous case-mix system and the new system to a sample of 
2007 claims, the average weight differed very little (the difference 
was 0.0054). That is, the algorithms in the previous and new case-mix 
systems provided highly similar case-mix weights on the sample of 2007 
claims. We further examined the diagnosis coding on OASIS assessments 
linked to the 20 percent claims sample and found a large increase 
between 2007 and 2008 in the reporting of secondary diagnosis codes 
(see 75 FR 43242 [July 23, 2010]). The use of secondary diagnosis codes 
in the case-mix algorithm was introduced in 2008 as part of the new 
case-mix system.
    We are not delaying the CY 2011 payment reduction because we 
consider these various analyses to be strong evidence that agencies 
changed coding practice markedly when faced with the new case-mix 
system in October 2000 and when faced with the refined one in January 
2008. The conclusions we reached from the available evidence were that 
a small amount of real case-mix change has occurred; our model measures 
this amount to be 10.07 percent of the total change in the average 
weight since the 12-month period ending September 30, 2000. The 
remainder of the total change resulted from sources of nominal case-mix 
change as discussed elsewhere in this preamble. These sources include 
improvements in coding, changes in therapy prescriptions in response to 
payment incentives, and changes in such elements of the system as OASIS 
item definitions and coding guidelines. However, as stated elsewhere in 
this preamble, we are not finalizing the proposed reduction for CY 2012 
pending further study relating to the measurement of real and nominal 
case-mix change.
    Comment: Commenters stated that we should change our methodology so 
that coding and documentation, and not therapy utilization, are the 
only factors used in calculating ``nominal'' case-mix changes.
    Response: We thank the commenters for their suggestion. However, 
the model we use is intended to analyze changes in real case-mix over 
time and does not distinguish whether these changes are due to 
increases in therapy use or other factors mentioned by the commenter. 
We do not believe that it would be appropriate to include utilization-
related variables such as the number of therapy visits as variables in 
the model predicting real case-mix change. In addition, the goal of 
this analysis was to examine changes in measures of patient acuity that 
are not affected by any changes in provider coding practices.
    Comment: Commenters stated that we should eliminate the proposed 
payment reductions and rather ``conduct targeted claims review and deny 
payment for claims where the case-mix weight is not supported by the 
plan of care.''
    Response: While we appreciate the commenters' suggestion, we cannot 
act on it, because our resources are not sufficient to conduct claims 
review on a scale that would be required to counteract the broad-based 
uptrend in case-mix weights.
    Comment: Other commenters stated that CMS decrease the magnitude of 
the proposed payment reductions.
    Response: We have amended the proposal that would have implemented 
two successive years of payment reductions, with each year's reduction 
at 3.79 percent. Instead we are finalizing in this rule only the first 
year's reduction (for CY 2011) while we study additional case-mix data, 
and methods to incorporate such data, into our methodology for 
measuring real vs. nominal case-mix change. In the CY 2012 proposed 
rule, we will make proposals concerning any payment reduction for CY 
2012 based on results of those studies and based on claims samples 
updated through CY 2009. In previous rules, we have stated our 
intention to incorporate additional types of data, such as Part B data, 
into our methodology. Efforts so far have been inhibited by problems of 
data adequacy. In the coming year, we intend to draw on more resources 
and expertise than we have in the past in order to move forward in 
completing the examination of additional kinds of data for measuring 
real vs. nominal case-mix change. As we have stated elsewhere in this 
regulation, the various types of information and data pointing to the 
conclusion that nominal case-mix change has been responsible for most 
of the case-mix growth go beyond the model predicting real case-mix. 
Much of that extra information cannot be converted into a quantifiable 
measure, but it is nevertheless very significant in explaining nominal 
case-mix growth.
    Comment: Commenters stated that we should eliminate the case-mix 
reductions altogether and find other methods to prevent upcoding and 
``manipulation of therapy and co-morbid condition factors.''
    Response: We appreciate the commenter's suggestion. As stated 
elsewhere in this preamble, the payment reductions we proposed were to 
compensate for past nominal change in case-mix weights that resulted 
from changed coding practices and/or instructions and behavioral 
changes among agencies, such as changes in therapy visits prescribed. 
One approach addressing therapy factors would be to conduct medical 
necessity evaluations during episodes. An approach to limiting a change 
in comorbid-condition coding exacerbated by a change in disease 
definition would be to eliminate hypertension from the case-mix system. 
We believe these are two proposals that capture the spirit of the 
commenters' suggestion, but in both instances, we received many 
comments in opposition. However, we welcome suggestions of other 
policies that can prevent upcoding and manipulation of case-mix 
measures.
    Comment: Commenters stated that we should suspend or drop case-mix 
adjustments because adjustment should instead focus on case-mix groups 
with high weights due to therapy.
    Response: The 2008 case-mix model's four-equation structure 
incorporated a procedure that decelerated payments as therapy visits 
per episode increase. We plan to recalibrate the case-mix weights in 
the coming year, and in so doing we will examine our policy of imposing 
within the case-mix model this deceleration in payment increases. Such 
examination could lead to an approach suggested by the commenter, were 
we to more aggressively impose the deceleration. For 2011, we are 
proposing to maintain the set of case-mix weights we issued in 2008.
    Comment: Similarly, commenters stated that we should ``target 
agencies with excessive therapy usage'' instead of implementing the 
proposed payment reductions.
    Response: We have not conducted an analysis to identify agencies 
with excessive therapy usage. We believe that what constitutes 
excessive therapy must be judged in view of the patient's need during 
the episode. It is impossible to conduct an analysis that takes the 
amount of individual need into account based on the information we 
have; in fact, that is the reason we implemented therapy thresholds in 
the first place: A

[[Page 70382]]

shortage of information on the OASIS sufficient to predict the amount 
of therapy needed by the patient. What we do have is strong evidence 
that in general therapy prescriptions changed dramatically under the HH 
PPS, in response to payment incentives. These prescriptions changed 
again with the implementation of the revisions to the HH PPS case-mix 
system in 2008; notably, between 2007 and 2008, we observed a 3-
percentage point increase in the percent of episodes with 14 or more 
therapy visits. Such behavioral change was part of the nominal change 
causing expenditures that we are now recovering with the case-mix 
reductions to the rates.
    Furthermore, even if agencies with excessive therapy usage were 
identifiable in an administratively feasible manner, a separate set of 
concerns relates to the effect on beneficiaries from targeting agencies 
in the way suggested by the commenters. We are concerned that a policy 
of targeting agencies with excessive therapy usage might unfairly 
penalize certain patients. For instance, even in an agency that pads 
the therapy prescription to reach a certain threshold, there will 
likely be some patients who need all the therapy visits prescribed. A 
payment reduction limited to certain agencies is likely to unfairly 
penalize some of the agency's patients. In addition, as previously 
stated, we believe that nominal case-mix change has been widespread and 
that therefore overpayments were widespread as well.
    Comment: Commenters stated that we should suspend or drop case-mix 
reductions in favor of the approach in S.2181/H.R. 3865 (110th 
Congress), which involved working with the HH industry to develop 
criteria and evaluating a medical records sample to determine 
reductions, rather than relying on hypothetical extrapolations. Another 
commenter mentioned that the Home Health Care Access Protection Act (S. 
3315/H.R. 5803) was introduced to ``establish a more reliable and 
transparent process for CMS to follow in evaluating Medicare payments 
for home health services.'' The commenter asked if CMS would be willing 
to cosponsor this legislation.
    Response: We intend to work with representatives of the HH industry 
as we pursue a review over the coming year of the data and methods for 
measuring real case-mix change. Theoretically, a medical records sample 
might work, but as a practical matter, we strongly suspect it might not 
work. It is unlikely that we could finance the collection of samples 
large enough to produce reliable results. It is expensive to abstract 
medical records, and we would need a sizable sample of records from the 
IPS period and from a follow-up year (for example, 2009). Based on our 
experience in a context involving the retrieval of years-old records, 
it is not likely that we could find enough records to constitute a 
valid broad-based sample. The procedure would have nurses group them 
into a case-mix group, and compare the results with those from a 
similar procedure performed on recent records. Additional potential 
problems with using medical records include the strong possibility that 
records would have insufficient information to allow assignments for 
the Activities of Daily Living (ADL) items of the case-mix system, have 
insufficient information to enable independent staging of pressure 
ulcers, and other kinds of underreporting. It is possible that this 
procedure might not return the findings that the proponents suggest it 
would, because the nominal case-mix change problem partly results from 
reporting practices that have changed through time from a state of 
underreporting to a state of more complete reporting. Therefore, one 
would expect that the source records would likely reflect 
underreporting in the early years, just as the OASIS reflected 
underreporting in the early years.
    Comment: One commenter stated that detailed information about the 
method to calculate the baseline values was not released to the public. 
Commenters questioned the validity of the 2000 data used to calculate 
the baseline. Commenters stated that in 2000, there was a limited 
amount of OASIS data and the data submitted might not have been 
completely correct. One commenter expanded upon this concept by stating 
that ``a consistent, largely reliable database of information from 
submissions of the OASIS form was most likely not achieved until 
sometime during 2003''. Commenters stated that initially extensive 
education and training was needed in order to ensure reliable OASIS 
data. In addition, commenters stated that since Abt Associates was only 
able to use 313,447 episodes to calculate the base, there were not 
enough data to ensure that the base was correct, and therefore, ``the 
final period of IPS should not have been used as a ``base'' to measure 
anything.''
    Response: In our May 2007 proposed rule and our August 2007 final 
rule, we described the IPS samples and PPS samples that were used to 
calculate case-mix change. We remind the commenter that 313,447 
observations is an extremely large sample by statistical standards, and 
that agencies began collecting OASIS data in 1999, following issuance 
of a series of regulations beginning on January 25, 1999 (64 FR 3764). 
Most of the data we used for the baseline period come from the first 3 
quarters of the year 2000--months after collection was mandated to 
begin in August 1999. By 2000, the vast majority of agencies were 
complying with the reporting requirements. We question the idea that 
agencies took three more years to come up to speed with OASIS. We 
believe the commenter overstates the amount of training needed to 
complete OASIS reliably. The licensed personnel responsible for 
assessing patients do not and should not need all the extensive 
training implied by the comment, because assessment is part of the 
foundation of their training and professional skill. Indirect evidence 
that the data from the early years of the HH PPS were sufficiently 
reliable comes from model validation analysis we conducted during that 
period. Validation of the 80-group model on a large 19-month claims 
sample ending June 2002 (N = 469,010 claims linked to OASIS) showed 
that the goodness-of-fit of the model was comparable to the fit 
statistic from the original Abt Associates case-mix sample (0.33 vs. 
0.34), notwithstanding that average total resources per episode 
declined by 20 percent. That analysis also showed that all but three 
variables in the scoring system remained statistically significant.
    Comment: Commenters noted that OASIS data from Outcome Concepts 
Systems demonstrated increased patient acuity from 2006-2008 as 
measured by ADL and Instrumental Activities of Daily Living (IADL) 
assessments of decreasing functional capabilities of HH patients. OASIS 
data demonstrated a ``large increase'' in acuity as measured by changes 
in clinical conditions, the number of patients requiring IV therapy, 
parenteral nutrition, those that have urinary tract infections at the 
start of care and those with increased inability to manage oral and 
injectable medications; these commenters noted that OASIS measures were 
not likely to be ``upcoded'' to secure higher reimbursement as none had 
a direct or indirect impact on the level of payment under HH PPS. 
Further, the decrease in functional capabilities could have been easily 
correlated with increase in the use of therapy services as both 
physical and occupational therapists directly address the ADL 
incapacities that are the focus of these OASIS findings. The commenter 
referred to reports on the July 23, 2010, Proposed Rule

[[Page 70383]]

commissioned by the Home Health Advocacy Coalition and the National 
Association for Home Health and Hospice, saying both documents indicate 
``non-case-mix related OASIS items, such as grooming and light meal 
preparation have shown increasing functional limitations among home 
health patients.''
    Response: We believe the commenter is in error in stating that 
intravenous therapy and parenteral nutrition are not used in the case-
mix system. Another inaccuracy in this comment pertains to the cited 
changes in the frequency of these technological treatments at home, 
which in fact are not increasing. A large, random sample of OASIS data 
linked to claims shows that the proportion of episodes involving 
intravenous therapy or infusion therapy has remained stable at around 
2.2 percent and the proportion of episodes involving parenteral 
nutrition remains at 0.2 percent or less during that period. We are 
reluctant to use OASIS data to analyze changes in real case-mix because 
OASIS measures reflect changes in coding practices and payment 
incentives including quality measurement incentives, all of which are 
not related to real changes in patients' acuity. We are also concerned 
that incentives could lead to reports of patient function--whether or 
not particular function-related items are used in the case-mix 
assignment--that are consistent with the therapy visits planned. 
Unfortunately, this problem potentially limits the usefulness of non-
case-mix items. We believe that independent measures are the best way 
to ensure the reliability of our real case-mix methodology. We plan to 
try to identify independent measures, beyond the independent measures 
we are currently using in our methodology, as we go forward.
    Comment: A commenter stated the case-mix change analysis is flawed 
in that it relies on hospital DRG data, whereas more than half of 
Medicare HH patients are admitted to care from a setting other than a 
hospital, and if they were in a hospital, the HH admission followed 
much later.
    Response: We disagree that the utility of the hospital information 
in the case-mix change analysis is so limited. Regardless of whether 
the patient came directly from a non-hospital-setting (for example, 
home or a post-acute institutional stay), information from a hospital 
stay preceding HH is typically relevant to the type of patient being 
seen by the HHA, and thus can provide information about the PPS case-
mix measure for the HH episode. A recent hospitalization, whether or 
not there is an intervening period spent in some other setting before 
HH admission, is common before admission to home health. Data from a 10 
percent random beneficiary sample of HH users indicate that a 
hospitalization history for new admissions is far more common than the 
comment may suggest. In 2008, 45.3 percent of patients admitted to home 
care for a non-LUPA episode had an acute stay within the previous 14 
days; 56.1 percent had an acute stay within the previous 30 days; 60.3 
percent had an acute stay within the previous 45 days; and 62.7 percent 
had an acute stay within the previous 60 days. We could have restricted 
the real case-mix change analysis to new admissions to home health, but 
because we received many questions about the completeness of the 
information to be obtained from such an approach, we decided to use all 
60-day episodes in the analysis. We believe using all 60-day episodes 
in the analysis is reasonable, since a majority of new admissions to HH 
complete their stay in HH within a 60-day episode. Furthermore, non-
initial episodes, though they are less than half of episodes in our 
analysis, are not devoid of recent hospital information. When we look 
at all new HH admissions, we find that about 15 percent are 
hospitalized within 30 days of admission (that is, within the first 30 
days of the first episode), with the risk of hospitalization rising 
beyond the 30th day. Many of these hospitalized patients return to HH 
after discharge, making data for returnees available for our analysis 
of the acute stay history. While we do not have information 
specifically about the hospitalization risk of the new admissions who 
go on to recertification episodes, it seems reasonable to infer that 
they have risks similar to the overall average 30 day hospitalization 
rate of 15 percent. The Abt Associates case-mix change report 
(``Analysis of 2000-2008 Case-mix Change,'' July 2010, link at http://www.cms.gov/center/hha.asp) indicates that about 90 percent of the 
episodes have a hospitalization history in the data (p. 6), looking 
back a maximum of 4 years. However, from the information we show here 
about the likelihood of a hospital stay before and after home health, 
relatively few of the hospital stays contributing information are as 
old as 4 years. We also note that the remaining 10 percent of episodes 
are not dropped from the analysis; these episodes contribute 
information for the model, specifically, demographic information and 
various proxy measures derived from Part A utilization and expenditure 
data.
    Comment: Commenters suggested that CMS should also recognize that 
HH patients are often treated for conditions other than the primary 
reason for their hospitalization. Furthermore, commenters stated that 
the primary reason for HH care may be different from the primary reason 
why a person was admitted into the hospital. Therefore, commenters 
stated that the DRGs used in the real case-mix prediction model may not 
be relevant to the patient's condition in the HH setting.
    Response: We thank the commenters for their input. However, we 
would like to remind commenters that the real case-mix prediction model 
is not limited to diagnoses from inpatient claims. The model also takes 
into account demographic factors, as well as utilization indicators of 
health status. Moreover, the model measures the relationship between 
these factors and case-mix.
    Comment: Some commenters stated that payment rate reductions due to 
case-mix weight changes are not warranted because Medicare expenditures 
on HH are well within budgeted levels, thereby demonstrating that 
aggregate spending has not increased enough to permit CMS to exercise 
its authority to adjust payment rates. Commenters cited budget 
projections of the Congressional Budget Office (CBO). Another commenter 
stated while therapy services for HH patients have increased in volume 
since the start of the HH PPS in 2000, patient outcomes have improved 
and Medicare spending per patient and in the aggregate overall has 
stayed well below projections by the CBO. Some commenters stated that 
payment reductions in HH will lead to more institutional care, for 
example, by leading to increases in hospital readmissions of post-acute 
patients.
    Response: A CBO projection table shown in one of these comments 
indicated that, based on projections of March 2004, spending has 
exceeded projections in 3 of the 5 succeeding years. We have no 
statutory authority to consider the relationship of CBO projections to 
HH outlays when setting the HH PPS payment rates. The Secretary's 
authority to respond to nominal coding change is set out at section 
1895(b)(3)(B)(iv) of the Act. There is no evidence that improvement in 
HH patient outcomes is related to the level of payments achieved 
through nominal case-mix change. Effects of payment reductions on 
access and patient outcomes are worthy of study, using carefully 
designed research. We are aware of the challenges of

[[Page 70384]]

conducting conclusive research in this area, in part because other 
policy changes affecting the study question may co-occur. We have noted 
elsewhere in this preamble that we intend to request that the Office of 
the Inspector General resume investigations of the access impacts of 
payment reductions.
    Comment: A commenter stated that a typical case-mix weight change 
adjustment in other sectors may bring a reduction in profit margins 
only, whereas in home health the adjustment occurs where the higher 
payments from increased case-mix weights are offset by increased costs.
    Response: Analysis of profit margins indicates that they remain 
high among HHAs. For example, Medicare margins were 17.4 percent in 
2008. This situation suggests that higher payments are not necessarily 
being offset by increased costs. In March 2010, MedPac estimated that 
Medicare margins will be 13.7 percent in 2011, taking into account the 
then-expected payment reduction of 2.71 percent to account for nominal 
case-mix change (MedPac, Report to the Congress: Medicare Payment 
Policy, March 2010). Our estimates suggest aggregate Medicare profit 
margins in HH will remain in double digits in 2011 under the payment 
policies proposed in the July 23, 2010, proposed rule.
    Comment: Commenters stated that therapy utilization is a coding 
adjustment that accompanies not only an increase in reimbursement but 
also an increase in provider costs, implying that a rate reduction 
related to increased costs is inappropriate.
    Response: We believe that the goal of the Medicare program is to 
ensure that beneficiaries receive the right care at the right time. The 
evolution of patterns of therapy utilization since the PPS began leaves 
doubt that appropriate care has been provided. In the CY 2008 proposed 
regulation (72 FR 25356) we described a shift in the distribution of 
therapy visits per episode under the HH PPS that caused two peaks: One 
below the therapy threshold of 10 therapy visits and the other in the 
10 to 13-visit range. Before the HH PPS, the distribution had one peak, 
at 5 to 7 therapy visits, well below the 10-visit therapy threshold in 
use prior to the 2008 refinements to the HH PPS. Table 2 shows the 
distribution of episodes (LUPA and non-LUPA) changed again with the 
implementation of the 153-group case-mix system and its revised set of 
thresholds and therapy steps. At the new 7-visit step (7 to 9 visits) 
there was a sudden 50 percent increase in the proportion of episodes, 
and at the new 14-visit therapy threshold, there was a 25 percent 
increase in the proportion of episodes. One commenter, in writing about 
the questionable prescription of therapy treatment, stated that certain 
agencies have habitually provided therapy to patients whose natural 
course of recuperation would have been the same regardless of receipt 
of therapy. We also note that we implemented a declining payment with 
each added therapy visit with the 2008 refined case-mix system, with 
the intent to deter inappropriate padding of therapy prescriptions to 
higher and higher numbers of visits, as we added new thresholds above 
10 visits. However, the pliability of therapy prescriptions, the 
continued growth in the proportion of episodes utilizing therapy, and 
the 25 percent increase in the proportion of episodes with high numbers 
of therapy visits (14 or more) may be evidence that increased costs are 
more than offset by the increased payment associated with therapy. 
Therefore, it is not certain that a rate reduction related to increased 
costs is inappropriate.

               Table 2--Distribution of Home Health Episodes According to Number of Therapy Visits
                                                   [2002-2008]
----------------------------------------------------------------------------------------------------------------
                                            2001     2002     2003     2004     2005     2006     2007     2008
        Number of therapy visits            (%)      (%)      (%)      (%)      (%)      (%)      (%)      (%)
----------------------------------------------------------------------------------------------------------------
None....................................       54       52       51       50       50       50       50       49
1 to 5..................................       14       15       15       15       15       15       14       14
6.......................................        3        3        3        3        3        3        3        3
7 to 9..................................        6        6        6        6        6        6        6        9
10 to 13................................       10       11       13       14       14       15       15       10
14+.....................................       12       12       12       12       12       12       12       15
----------------------------------------------------------------------------------------------------------------

    Comment: A commenter stated that the increase in case-mix due to 
increased therapy services should count towards the ``real'' case-mix 
changes, not towards the ``nominal'' case-mix changes. The commenter 
thought that as long as the agency provides therapy, the changes in 
case-mix due to increased therapy services should be considered 
``real.''
    Response: We based our nominal change estimate on beneficiary 
characteristics information, which when applied to the prediction model 
for real case-mix, to account for whatever changes in patient severity 
that have occurred since the IPS baseline. The remainder of the change 
in the national average case-mix weight is classified as nominal. We 
have not netted out from our estimate of nominal case-mix change any 
increases in the weights due to additional therapy utilization, because 
utilization is an aspect of the case-mix system that is under the 
control of providers, and therefore, is not necessarily a reflection of 
changes in patient severity, especially in view of the fact that our 
use of the real case-mix change model accounts for changes in patient 
severity. Furthermore, the evolution of therapy utilization under the 
HH PPS suggests that some of the therapy provision under the HH PPS has 
been subject to financially driven decision-making and as such, it is 
akin to nominal case-mix change, so we have classified it with nominal 
change.
    Comment: A commenter stated the real case-mix change analysis omits 
consideration of increased therapy needs in the population. Other 
commenters stated that therapy use changes were not explained in the 
model and that CMS admitted that it could not explain the correct 
amount of therapy expected for patients. The commenter stated CMS 
should use alternative variables that would be more indicative of the 
changes in therapy use.
    Response: The models were intended to analyze changes in case-mix 
over time and do not distinguish whether these changes are due to 
increases in therapy use or other factors. We do not believe that it 
would be appropriate to include utilization-related variables, such as 
the number of therapy visits, as predictors in the model, as such, 
variables are provider-determined. In addition, the goal of these 
analyses was not to develop refinements to the payment system but 
rather to examine changes in measures of patient acuity that are not 
affected by any changes in provider coding practices. CMS has

[[Page 70385]]

access to the claims histories and other administrative data for 
patients in our samples, and we welcome suggestions about how to better 
use these resources in finding alternative variables more indicative of 
the need for therapy. Such proposals must recognize that the 
desirability of any proposed alternative data depends on whether the 
data generation process involves HH providers.
    Comment: A commenter stated that fewer therapy services are being 
provided in other care settings and therefore, the increases in therapy 
usage are due to patients' increased need for therapy services in the 
HH setting.
    Response: We have no information suggesting that fewer therapy 
services are being provided in other care settings. In the SNF setting, 
more therapy is being provided to SNF patients than used to be the 
case. This is indicated by the increased share of SNF days for therapy 
RUG-III groups; the share grew from 75 percent to 85 percent between 
2000 and 2006. MedPac has documented increases in rehabilitation 
intensity in SNFs since 2002 (MedPac, Report to the Congress, Medicare 
Payment Policy, March 2010). For patients who go on to HH from Part A 
institutional settings, we have no evidence of less therapy utilization 
in prior settings. We have evidence to the contrary. For example, total 
billed charges for therapy from all previous Part A settings within the 
14 days before HH admission nearly tripled, from an average of $1,154 
(2001) per person with any Part A discharge to $2,952 (2008). Total 
billed charges for therapy increased from $2,068 in 2001 to $3,680 in 
2008 per person with any prior Part A stay involving therapy.
    Comment: A commenter suggested that CMS ``analyze case-mix weight 
changes based on data beginning in 2005'' and ``analyze case-mix weight 
changes for 2008 to current to see how much increase occurred in more 
recent years.'' Furthermore, the commenter recommended that CMS ``use 
national benchmarking companies for data if CMS does not have data yet 
available.''
    Response: We will be turning to analysis of 2009 data later this 
year. Unfortunately, the time it takes for a complete year of data to 
arrive and the added time of cleaning, processing, summarizing, and 
linking the data currently preclude using the data for the analysis in 
this final rule. We have concerns that data from benchmarking services 
would not be nationally representative. Therefore, we intend to use 
random samples drawn from our own administrative data.
    Comment: A commenter believes that the model fails to account for 
any changes in HHA behavior related to patient populations served. 
These changes would include a marketing effort targeted to increase the 
proportion of patients who are high users of therapy. The commenter 
also stated that the post-acute care industry has changed dramatically 
since the Abt regressions were first designed. The current use of 
administrative claims data by Abt and CMS is inadequate, and perhaps 
even counterproductive. This practice sends the wrong signals as to how 
HH and facility-based care should be related as the Medicare program 
moves toward an era of ``bundled payments'' and other initiatives to 
coordinate care across settings.
    Response: We disagree with this comment. The predictive model for 
real case-mix was designed in 2007 and includes a comprehensive set of 
variables. The model looks at case-mix change across a large sample of 
providers, rather than considering individual provider behavior. If the 
characteristics of patients have changed due to marketing efforts, this 
should show up as changes in the mean values of patient characteristics 
over time. For example, the increase in knee replacement patients since 
the baseline year causes an increase in the predicted case-mix weight. 
We will continue to research ways to modify our models and data for 
analyzing real case-mix change over time. A challenge with using OASIS 
items is that, for the most part, OASIS items associated with case-mix 
are already used in the grouper and thus are not appropriate to use in 
the case-mix change analyses (since changes in case-mix over time may 
be due to coding changes rather than changes in severity).
    Comment: Commenters stated that the model is based on 
administrative data rather than clinical data.
    Response: The model only includes a few variables that are derived 
from OASIS assessments (measures of patient living arrangement) because 
the OASIS items can be affected by changes in coding practices. It is 
not practical to consider other types of HH clinical data (for example, 
from medical charts) in the model.
    Comment: A commenter wrote that the model relies too heavily on 
assumptions and beliefs rather than empirical evidence.
    Response: We disagree with the commenter. The prediction model for 
real case-mix is an empirical model, the findings of which are based 
entirely on empirical evidence.
    Comment: A commenter stated CMS should suspend nominal case-mix-
related payment reductions until it develops an accurate and reliable 
model to evaluate changes in case-mix weights consistent with the whole 
nature of patients served in HH care, not just those discharged 
directly from hospitals.
    Response: The commenter does not recognize that many variables in 
our model are applicable to patients who have not used hospitals 
recently. Variables relating to demographic status and PAC utilization 
are among the model's variables. Another set of the model's variables, 
used to describe the nature of any previous hospital stay, applies to 
many patients nonetheless, because we searched the claims history to 
find the last hospital stay that occurred before the episode. We 
believe that the model includes a rich set of patient measures. Efforts 
will continue to deploy more information in evaluating changes in HH 
patients' health characteristics. It is important to note that the 
omission of any particular variable is not enough to change estimates 
of unpredicted case-mix change. Variables must have different 
prevalence rates in the initial and later periods. If prevalence rates 
for such variables were the same in both periods, the effects would net 
out; in other words, there would be no systematic difference in the 
predicted case-mix over time.
    Comment: One commenter stated that the ``2008 additional case-mix 
ICD-9 codes and therapy four-equation model logically results in 
increased case-mix and contributes to the faulty foundation of 
comparison with IPS and early PPS data.''
    Response: We disagree with the commenter. We performed our research 
leading to the four-equation model using an extremely large sample of 
claims linked to OASIS assessments. Using visit times by discipline 
reported on the sample of claims, we studied the relationship of the 
total of wage-weighted visit times per 60-day claim to patient 
characteristics as reported by agencies on the assessments. The wage-
weighted minutes are the best measure available of the cost burden of 
caring for the patient, given his or her clinical characteristics. This 
method essentially replicated the original method we used to develop 
the 80-group case-mix system during the period before OASIS was 
implemented and before per visit line billing was required. A prototype 
of OASIS was used at that time. The 2005 coding and reporting 
practices, as well as the resource use patterns, were the foundation of 
the 2008 refinements,

[[Page 70386]]

along with our replication of the basic analytic approach. We know of 
few other methods comparable in their ability to yield a fair and 
representative case-mix model for national application. Given the 
essential continuity in approach, we fail to see how the 2008 refined 
model specifically is a reason not to make comparisons with pre-PPS and 
early PPS data. Our comparisons of population and utilization 
characteristics, which are the basis for our prediction model of real 
case-mix, do not involve use of the HH PPS case-mix payment variables 
or the ICD-9 codes reported by agencies.
    Comment: Commenters stated that the Abt report on the real case-mix 
change analysis (``Analysis of 2000-2008 Case-mix Change'', July 2010, 
link at http://www.cms.gov/center/hha.asp) does not discuss what signs 
are consistent with known relationships and, hence, is not in a 
position to judge the signs of the coefficients. In addition, 
commenters stated that while Abt included variables related to 
inpatient stays, the estimated coefficients are not consistent with 
expectations that ``the coefficient for any stay would be positive and 
the coefficient for the number of days would be negative.'' The 
coefficient has an opposite sign than what is expected.
    Response: We thank the commenters for their comments. However, our 
purpose is to predict case-mix weights using all available and relevant 
administrative data, rather than to isolate the impact of individual 
variables. We have noted elsewhere that many coefficients have signs as 
we expect (Abt Associates 2008; CMS 1541-FC, FR August 29, 2007). 
Contrary to what the commenter states, it is not clear that a 
hospitalization would be associated with higher case-mix; it may be 
that community patients are more clinically complex and have a higher 
case-mix than those who are discharged from a hospital to home health. 
This result is consistent with the impact of pre-admission location 
variables (from OASIS item M0175) in the 80-group case-mix model.
    Comment: Abt does not perform any multicollinearity diagnostic 
statistics or consider the remedy of combining some of the variables. 
The model uses a large number of variables that do not have much 
variation. The close interaction among the variables ``is likely to 
pose problems with the prediction of the dependent variables.''
    Response: Given the objectives of the analysis, we are not 
particularly concerned about redundancy among variables. It is also 
important to note that such redundancy, often called multicollinearity, 
does not actually bias results and may only cause large standard errors 
of the coefficients for variables that are related to one another. 
Standard errors are not used in our case-mix change calculations. The 
Abt Associates report described improvement in the predictive power of 
the model as each set of variables (for example, APR-DRG variables) was 
added beyond demographic variables alone. The addition of Part A 
expenditure variables, the last variable set added to the model, led to 
little improvement in predictive power, and for that reason might be 
considered redundant; however, their addition did not change the 
essential results of the analysis (Abt Associates, 2008), which were 
that only a small proportion of the case-mix growth could be attributed 
to changes in patients' characteristics.
    Comment: Commenters stated that the Abt models are unreliable 
because 40 percent of the top variables differ from one model year to 
the next (original IPS model and the model rebased to 2008 data), and 
20 percent of the variables change signs. Commenters also stated that 
the model CMS uses to assess case-mix weight changes should be at least 
as accurate and reliable as the case-mix adjustment model that it is 
assessing. The current PPS case-mix model reportedly originally had an 
R-squared explanatory power of over 40 percent while the case-mix 
weight change assessment model falls far short of that benchmark. 
Commenters stated that the explanatory power of the models falls 46 
percent from the original model to the rebased model. The regression 
model R-square dropped from 19 percent to 10 percent in the 2008 
analysis. The R-square of the 80-group HHRG model was at 0.21--much 
lower than the R-square for the 153-group HHRG model at 0.44. The 
commenter stated this high R-square of the current PPS case-mix model 
suggests that the case-mix weight change regression model analysis for 
2008 should have had a higher R-square. The decrease in the R-square is 
``unclear and unexplored.''
    Response: We thank commenters for their comments. However, we 
disagree that the difference in R-squares for the two models indicates 
that the prediction model for real case-mix is unreliable. The nine top 
drivers of case-mix are the same in both models, as are 15 of the top 
20. Most of the predicted case-mix change results from the major 
``drivers'' in the model, and, of the top 50 drivers of case-mix change 
(which account for more than 60 percent of the total predicted change 
in the model), 37 have the same sign in both models and the correlation 
between the coefficients from the two regression models is 0.56. Of the 
variables that changed signs, most were not statistically significant. 
We would expect some change over time in the variables that are among 
the top drivers of case-mix change, given the large number of variables 
in the model and the differing dependent variables (the 80 case-mix 
weights for the first model and the 153 case-mix weights for the second 
model). With regards to the 40 percent R-squared explanatory power 
benchmark, given that the goal of the case-mix change analyses is to 
determine the extent to which case-mix changes observed over time are 
due to changes in patient acuity or other factors (such as coding 
changes) that are not observed in the model, we do not believe that 
this is an appropriate statistical performance benchmark for the model.
    The explanatory power of the current HH PPS case-mix model is as 
high as it is in large part because of the therapy-related variables in 
the model (where a direct measure of resource use is included on the 
right-hand side of the regression model). We do not believe that it is 
appropriate to include these types of variables in the case-mix change 
model because they are provider determined.
    Comparing the statistical performance of the two prediction models 
for real case-mix is not really appropriate to compare strictly the 
statistical performance of the two models, given that we had to drop 
the living arrangement variable from the second model and that the 
dependent variable for each model is a different set of case-mix 
weights. We also note that a possible contributor to the lower R-square 
for the second model is the large amount of nominal case-mix change 
that occurred between 2000 and 2008. Changes in coding practice and 
resulting assignment of case-mix weights could have led to a situation 
where the predictor variables in the prediction model for real case-mix 
collectively have less ability to predict the weights than when the 
variables were first used with the data from the last year of IPS 
(2000) to predict the original PPS case-mix weights.
    Comment: A commenter stated that no explanation was provided on 
segmented choice of periods of evaluation. This commenter wrote that it 
is unclear why Abt subdivided the 2000-08 period into 2000-2007 and 
2007-2008. To minimize the possibility for shifts in the relationship 
between resource requirements and explanatory variables, Abt could have 
subdivided the 8-year period in half or at least

[[Page 70387]]

performed some sensitivity analysis to choose the time periods.
    Response: The procedure of identifying nominal case-mix change 
relies on subtracting an average of predicted weights from the average 
of actual, billed weights. The case-mix group system changed from one 
of 80 groups to 153 groups in 2008, causing a change in the set of 
weights that could be billed to Medicare. Up until 2008, this was not 
an issue as the same set of weights was used throughout the entire 
history of the PPS up until that year. To be able to bridge the periods 
before and after the 153-group model, we rebased the prediction model 
to the 2008 data, the first year that the 153-group model was used for 
paying HH providers. We combined the results from the original IPS-
period equation with the results from the rebased 2008 equation for 
this year's analyses. Our application this year of the IPS-period 
equation was unchanged (except for certain technical changes in the 
APR-DRG grouper) from our application of it for last year's rule.
    Comment: A commenter stated hospital discharge data demonstrate 
that HH patients are admitted from hospital stays with a higher degree 
of acuity than in the past. ``The acute care (inpatient prospective 
payment system (IPPS)) CMI for cases discharged to HHAs reflects the 
patient severity of the patients discharged to home health agencies. As 
one of the measures for patient severity is prior hospitalization, it 
is believed to be unaffected by the HH CMI. The CMI for the prior 
hospitalization can be assumed to be a proxy measure of the ``real'' 
case-mix index. Based on our analyses of the 2007 and 2008 MedPAR data 
(Medicare discharges from short term acute care hospitals), we found 
that the CMI (MS DRG-based CMI) of cases discharged to HHAs increased 
by 2.5 percent from 1.588 in 2007 to 1.63 in 2008. Furthermore, we also 
found that among the acute care cases discharged to HHAs, the 
proportion of cases categorized as Medicare Severity Adjusted Diagnosis 
Related Groups (MS DRGs) with complications and comorbidities increased 
by 3 percentage points from 25 percent in 2007 to 28 percent in 2008. 
This implies that the real case-mix index due to comorbidities most 
likely increased for the cases discharged to home health agencies.''
    Response: The MedPAR data analyzed in this comment cover the period 
when the MS-DRG system was implemented. We analyzed MS-DRG coding and 
found evidence of changes in coding and documentation practices that 
led to increases in billed acute care case-mix weights. CMS actuaries 
estimated that a 2.5 percent increase in case-mix in the hospital IP 
PPS was due to coding and documentation changes occurring in FY 2008 
(75 FR 50355). The results cited by the commenter may have reflected 
the weight-increasing hospital coding behaviors addressed by the CMS 
regulatory analysis. Therefore, we have reason to believe that this 
measure alone is not good evidence for assessing real case-mix change. 
We must also point out that our analyses employing the APR-DRG system 
indicated that the proportion of episodes with a Mortality Risk Level 3 
(Major) diagnosis increased over time while the proportion with 
Mortality Risk Level 2 (Moderate) decreased. However, our regression 
coefficients (for both the IPS and 2008 model) showed a negative 
relationship between being in the moderate or major risk of severity 
groups and case-mix. Thus, the increase in the proportion of patients 
in the highest mortality risk category led to an estimate of lower 
predicted case-mix. Given these types of findings, it is not clear the 
extent to which the CMI changes that the commenter notes, even if they 
represented an accurate measure, would lead to a prediction of higher 
case-mix.
    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 (RFA). A commenter stated we should include 
an evaluation of the effect of the proposed rule on Medicare spending 
``in a whole sense,'' not just the effect on HH services spending.
    Response: We have provided a complete and comprehensive analysis 
for the upcoming calendar year. As in past years, we will address 
options for regulatory relief for the succeeding calendar year in the 
year before the rate update becomes effective. There is no language in 
the RFA that requires an analysis of ``out-year'' expenditures. The 
state of the art is not adequate for forecasting effects on all 
Medicare spending.
    Comment: Commenters suggested that CMS remove the case-mix 
adjustment for medical supplies unless CMS can develop a method to 
accurately determine what percentage of the case-mix change is ``real'' 
and what percentage is ``nominal.''
    Response: We believe that coding practice changes have affected the 
case-mix assignment for the nonroutine medical supplies (NRS) payment 
level. The OASIS items used in making the case-mix assignment are 
potentially vulnerable to the same types of forces that affect coding 
for the episode case-mix group, that is, improvements in coding and 
more complete coding, more specific definitions, increased reporting of 
secondary diagnoses, and other causes of coding practice change. 
However, since the nominal case-mix change measure was designed to 
apply to the episode case-mix system, the nominal case-mix change 
measure may not directly apply to the NRS case-mix model. Therefore, we 
will defer the application of the payment reduction to the NRS 
conversion factor for CY 2011 until a review of the nominal case-mix 
change measure can be performed.
    Comment: Commenters stated that it appears that the CMS case-mix 
weight change analysis never specifically evaluated any evidentiary 
basis for its determination that the hypertension diagnostic coding was 
a nominal change in case-mix. Instead, we assume that the increased 
coding of hypertension is upcoding.
    Response: We proposed to delete ICD-9-CM code 401.9, Unspecified 
Essential Hypertension, and ICD-9-CM code 401.1, Benign Essential 
Hypertension, from the HH PPS case-mix model's hypertension group, in 
order to correlate with the goals of our HH PPS case-mix system.
    We continue to be concerned that the increase in reporting of 
unspecified hypertension and benign hypertension signals that continued 
inclusion of these codes in our case-mix system threatens to move the 
HH PPS case-mix model away from a foundation of reliable and meaningful 
diagnosis codes. As we described in our proposed rule, the data 
indicate a jump of approximately 12 percentage points in the reporting 
of unspecified hypertension when the refined HH PPS added hypertension 
as a case-mix code in 2008. The proposed rule also described that the 
data suggested no HH added resource requirements are associated with 
hypertension, unspecified, which is by far the most commonly reported 
hypertension code.
    In our proposed rule, we also described that the classification of 
blood pressure (BP) was revised in 2003 by the National Heart, Lung and 
Blood Institute (NHLBI) in their ``Seventh Report of the Joint National 
Committee on Prevention, Detection, Evaluation, and Treatment of High 
Blood Pressure'' (the JNC 7 report) and published in the May 21, 2003, 
Journal of the American Medical Association. These revisions

[[Page 70388]]

provided specific clinical guidelines for prevention, detection, and 
treatment of high blood pressure. A key aspect of the guidelines 
includes the introduction of a ``pre-hypertension'' level for 
individuals with a systolic blood pressure of 120-139 mm Hg or a 
diastolic blood pressure of 80-89 mm Hg. This recognition represented a 
change from traditional medical views on the implications of blood 
pressures slightly above 120/80. If an individual is designated as pre-
hypertensive, the guidelines stipulate that this individual will 
generally require health promoting lifestyle modifications to prevent 
cardiovascular disease. We described our concerns surrounding the new 
guidelines for hypertension which we suspected might have led to an 
increased prevalence of codes 401.1 and 401.9 in 2008 HH claims, along 
with some evidence that HH patients with either unspecified or benign 
hypertension no longer require extra resources. We described that these 
results appear possibly consistent with a phenomenon in which agencies 
increased their reporting of hypertension in situations that did not 
meet the HH diagnosis reporting criteria; the results are suggestive of 
changed coding practice in which less-severe episodes are being 
reported with hypertension in 2008 than used to be the case. As such, 
we described that we believe including codes 401.1 and 409.9 in the HH 
PPS case-mix model reduces the model's accuracy, and that we do not 
believe we should be including these diagnoses in our case-mix system. 
We received many comments opposed to the removal of these codes.
    Comment: Commenters stated that currently CMS is penalizing HHAs 
twice for the nominal case-mix changes due to hypertension coding by 
proposing to remove the hypertension codes and by including the case-
mix changes due to hypertension coding in the calculations for payment 
reductions.
    Response: We disagree with the commenters who believe that, by 
removing these codes while also reducing HH base episode payment rates 
due to coding change, we are in effect double-counting for growth in 
case-mix unrelated to real changes in patient health status twice. We 
proposed to remove these codes from the case-mix system beginning in CY 
2011. Our updated analysis, which measures changes in case-mix, both 
nominal and real, used data from the inception of HH PPS through 2008. 
As such, by removing these hypertension codes we would expect a slower 
growth of hypertension-related nominal case-mix beginning in CY 2011. 
However, as explained in response to a different comment (below), we 
are not finalizing our proposal to remove hypertension codes 401.1 and 
401.9. We assure commenters that if we were to remove these codes from 
our case-mix system we would do so in such as way that we would 
recalibrate our case-mix weights to ensure that the removal of the 
codes would result in the same projected aggregate expenditures.
    Comment: A commenter stated that the 2008 HH PPS methodology is 
based upon a determination that a hypertension diagnosis indicates a 
higher degree of resource need and utilization by patients with that 
diagnosis. Nothing in the CMS analysis indicates that anything other 
than this original finding is supportable. As such, concluding that an 
increase in patients with a hypertension diagnosis is anything other 
than a change in patient characteristics is illogical and in error.
    Response: If the underlying proportion of patients with 
hypertension has not changed, then the increase in the observed 
prevalence of hypertension is an indication of a change in coding 
practices, even if it reflects more accurate coding. As such, the 
increased prevalence is not real case-mix change, as it does not 
represent cost increases related to the health status of patients.
    Comment: Commenters stated that CMS opines that the 2003 changes in 
diagnostic coding guidance led to the increase in incidence of 
hypertension coding rather than changes in patient characteristics. 
However, the 2003 changes were fully operational at the time in 2007 
when CMS proposed and finalized the 2008 HH PPS version that includes 
hypertension as a factor in the patient classification system.
    Response: We believe that the 2003 NHLBI guidance (``Seventh Report 
of the Joint National Committee on Prevention, Detection, Evaluation, 
and Treatment of High Blood Pressure'', Journal of the American Medical 
Association, May 21, 2003) may have led to changes in coding 
hypertension, but that diffusion of the new information probably 
occurred over several years. The case-mix model of the Final Rule 
referenced by the commenter was based on 2005 data.
    Comment: One commenter stated that diagnosis codes 401.1 and 401.9 
should be retained in the case-mix system, because very often 
clinically complex patients such as hypertensive heart disease patients 
will be diagnosed with the code 401.9 while waiting for proper 
documentation that is required by ICD-9-CM in order to report a more 
specific diagnosis code. Another commenter urged CMS to perform 
additional analysis to assess the severity of individuals with 
hypertension codes 401.1 and 401.9 in order to determine whether these 
codes should be eliminated. The commenter suggested that CMS look at 
the resource use and the change in the number of visits for patients 
with codes 401.1 and 401.9 from 2005 to 2008 and compare them to data 
on individuals with other hypertensive diagnosis codes, while 
controlling for differences in patient characteristics.
    Response: We find these comments compelling. HHAs are expected to 
adhere to ICD-9-CM coding guidance. The commenter states that ICD-9-CM 
coding guidance requires specific documentation be obtained prior to 
coding certain complex hypertensive diseases such as hypertensive heart 
disease, and such documentation may take time to obtain. The commenter 
states that agencies may have no choice other than to code such 
patients using code 401.9 pending receipt of such documentation. 
Therefore, for such patients, deletion of these codes may delay access 
to needed home care. We agree with the commenter who urged CMS to 
expand our resource use analysis for hypertension codes 401.1 and 401.9 
to control for patient characteristic differences, and also compare the 
resource usage of patients with these codes to the resource usage of 
patients with other hypertension diagnosis codes. We agree that this 
suggested comprehensive analysis will enable us to identify whether 
there are sub-categories of patients currently assigned codes 401.9 or 
401.1 who are more resource intensive, such as the hypertensive heart 
disease patient, enabling us to revise our case-mix system to account 
only for those resource intensive patients. As such, we are deferring 
removal of the hypertension codes from our case-mix model pending 
completion of the suggested analysis.
    In the interim, we are committed to slowing the growth of nominal 
case-mix by addressing the inappropriate reporting of these codes. We 
plan to target providers for review who have substantive growth in the 
reporting of these codes, or higher than expected instances of 
reporting them. We also reiterate the need for providers to follow the 
OASIS Attachment D coding guidance, found at http://www.cms.gov/HomeHealthQualityInits/14_HHQIOASISUserManual.asp, where we explain 
that providers must only code a diagnosis if it is addressed in the HH 
plan of care and affects the patient's responsiveness to treatment and 
rehabilitative prognosis.

[[Page 70389]]

    Finally, we would like to clarify that page 12 of the 2003 
statement by the National Heart, Lung and Blood Institute (NHLBI) 
``Seventh Report of the Joint National Committee on Prevention, 
Detection, Evaluation, and Treatment of High Blood Pressure'' (the JNC 
7 report), published in the May 21, 2003, Journal of the American 
Medical Association explicitly states that prehypertension is not a 
disease category, which indicates that the coding of 401.1 or 401.9 for 
pre-hypertensive patients would not be appropriate. This is consistent 
with pre-existing ICD-9-CM guidance, which describes essential 
hypertension as SBP of 140 and above.
    Comment: A commenter stated that the proposed 3.79 percent 
adjustment for nominal case-mix change appears to be based primarily on 
the inclusion of hypertension as a patient diagnosis and modified 
provision of therapy services consistent with the HH PPS model revision 
in 2008.
    Response: As previously stated, the proposed adjustments for CY 
2011 and CY 2012 took into account all of the nominal case-mix growth 
we measured between the IPS baseline and CY 2008, and netted out 
nominal case-mix growth that was already accounted for in previous rate 
reductions. As of last year's rate update regulation, we anticipated a 
need to compensate for a total nominal growth of 13.56 percent. This 
year's analysis showed that reductions previously planned to be 
implemented were not adequate to compensate for the full total of 
nominal growth (17.45 percent) that has occurred through 2008. Our 
method for deriving the real and nominal case-mix change percentages 
did not isolate any specific sources of nominal growth (such as 
hypertension coding) upon which to base the reduction. However, the 
proposed rule for CY 2011 described statistics showing a large 1-year 
increase in hypertension reporting between 2007 and 2008, and it noted 
that the observed growth in the numbers of episodes with high numbers 
of therapy visits was unexpected. The proposed rule also discussed 
evidence beyond hypertension and therapy, such as increased reporting 
of secondary diagnoses in general.
    In summary, in this final rule, we are implementing the proposed 
3.79 percent reduction to the national standardized episode rate for CY 
2011. We will defer finalizing a payment reduction for CY 2012 until 
further study of the case-mix change data and/or methodology is 
completed. In addition, in this rule, we are withdrawing the proposal 
to apply the case-mix change reduction to the NRS conversion factor. As 
part of our review of the nominal case-mix change methodology, we will 
study its applicability to the NRS model. The NRS conversion factor 
will be updated in CY 2011 by the market basket update of 1.1 percent 
and will also be adjusted for outlier payments in accordance with 
section 3131(b) of the Affordable Care Act. We are also withdrawing our 
proposal to eliminate ICD9-CM diagnosis codes 401.1, Benign Essential 
Hypertension, and 401.9, Unspecified Essential Hypertension, from the 
HH PPS case-mix model's hypertension group, pending the results of a 
more comprehensive analysis of the resource use of patients with these 
conditions.

B. Therapy Clarifications

    In the CY 2011 HH PPS proposed rule, we discussed analyses that 
suggested that therapy under the Medicare HH benefit, in many cases, 
was being over-utilized. Analysis of HH utilization under the original 
single 10-visit therapy threshold suggests that the threshold offered a 
strong financial incentive to provide therapy visits when a lower 
amount of therapy was more clinically appropriate. Essentially, the 
data suggested that financial incentives to provide 10 therapy visits 
overpowered clinical considerations in therapy prescriptions. For the 
CY 2008 final rule, we established a system of three thresholds (6, 14, 
and 20 therapy visits) with graduated steps in between to meet our 
objectives of retaining the prospective nature of the payment system, 
reducing the strong incentive resulting from the single 10 therapy 
threshold, restoring clinical considerations in therapy provision, and 
paying more accurately for therapy utilization below the 10-visit 
therapy threshold.
    In the proposed rule, we described that analysis of CY 2008 data 
continues to suggest that some HHAs may be providing unnecessary 
therapy. MedPAC states in its March 2010 report that 2008 data also 
reveal a 26 percent increase of episodes with 14 or more therapy visits 
(MedPAC, Report to Congress: Medicare Payment Policy, Section B, 
Chapter 3, March 2010, p. 203). While this analysis suggested that 
therapy payment policies are vulnerable to fraud and abuse, the swift, 
across-the-board therapy utilization changes also suggest another more 
fundamental concern. MedPAC wrote in the March 2010 report (MedPAC, 
2010, p. 206) that payment incentives continue to influence treatment 
patterns, and that payment policy is such a significant factor in 
treatment patterns because the criteria for receipt of the HH benefit 
are ill-defined. MedPAC also reported that better guidelines would 
facilitate more appropriate use of the benefit.
    As such, in the CY 2011 HH PPS proposed rule, we proposed to 
clarify our policies regarding coverage of therapy services at Sec.  
409.44(c) in order to assist HHAs and to curb misuse of the benefit. 
Specifically, we proposed the following:
     Require that measurable treatment goals be described in 
the plan of care and that the patient's clinical record would 
demonstrate that the method used to assess a patient's function would 
include objective measurement and successive comparison of 
measurements, thus enabling objective measurement of progress toward 
goals and/or therapy effectiveness.
     Require that a qualified therapist (instead of an 
assistant) perform the needed therapy service, assess the patient, 
measure progress, and document progress toward goals at least once 
least every 30 days during a therapy patient's course of treatment. For 
those patients needing 13 or 19 therapy visits, we proposed to require 
that a qualified therapist (instead of an assistant) perform the 
therapy service required at the 13th or 19th visit, assess the patient, 
and measure and document effectiveness of the therapy. We would cease 
coverage of therapy services if progress towards plan of care goals 
cannot be measured, unless the documentation supports the expectation 
that progress can be expected in a reasonable and predictable 
timeframe. An exception to this would be when the criteria for needing 
maintenance therapy are met.
     Clarify when the establishment and performance of a 
maintenance program is covered therapy.
    Comment: A number of commenters were in strong support of our 
efforts to rein in abuse and overuse of therapy through sound 
documentation, objective measurement, and appropriate involvement of 
qualified therapists. Commenters expressed support for proposed 
additional requirements of documentation of the patient's clinical 
record, including therapy treatment goals to be described in the plan 
of care and objective measurement obtained during the functional 
assessment. One commenter stated that the elements of documentation 
added in our proposed regulations are reflective of professional 
standards for the practice of speech-language pathology. Another 
commenter expressed general support of our therapy coverage and 
documentation requirements, including those for patient assessment, 
physician collaboration, plan of care, goal establishment, evaluation 
of progress

[[Page 70390]]

toward goals through objective measures, and documentation, indicating 
they are all reflective of professional standards of practice for 
therapy services, such as those established by named major therapy 
associations. Another commenter expressed support for the proposed 
therapy coverage requirements regarding functional assessments, 
treatment plan revisions, and accurate documentation, indicating that 
these requirements align with professional standards of clinical 
practice.
    Response: We thank the commenters for their support.
    Comment: Numerous commenters expressed concern regarding the 
provision of the proposed rule requiring that a qualified therapist, 
instead of an assistant, perform the needed therapy service at the 13th 
and 19th therapy visits. These commenters stated that therapy visits by 
a qualified therapist beyond those already conducted on the 1st, 30th, 
and 60th days would be prohibitively expensive to HHAs and an 
unnecessary intrusion for patients. A number of commenters suggested 
that requiring a qualified therapist, instead of an assistant, to 
perform the needed therapy service every 30 days should be sufficient, 
stating that requiring a qualified therapist to perform the therapy 
service on the 13th and 19th visits was excessive. A commenter 
suggested that because only 15 percent of episodes contained more than 
13 therapy visits and only 5 percent of episodes contained more than 19 
therapy visits, CMS should consider the increased costs of its proposed 
required therapy changes versus the actual need for the new 
requirement. Commenters quoted recent findings of a health care 
consulting company's survey of HH providers regarding the proposed 
therapy clarifications, stating that most providers believe the 
proposed therapy changes would lead to scheduling difficulties for 
therapy visits and would cause difficulties in employing/contracting 
qualified therapists. A few commenters asked CMS to delay the 
implementation date of this provision by one quarter to allow more 
transition time for providers. Several commenters suggested, as an 
alternative to the requirement that a qualified therapist perform the 
needed therapy service at the 13th and 19th visit, that adopting ranges 
would be more acceptable--for example, allowing the qualified therapist 
visit to occur between the 11th and 13th visits and again between the 
17th and 19th visits. Another commenter proposed that CMS should 
instead defer to State law requirements, asserting that most States 
require more frequent qualified therapist supervision of assistants 
than those in the proposed rule, and the proposal's timeframes would be 
redundant to State laws. The commenter further stated that the proposed 
defined timeframes are in conflict with Sec.  409.44(a) as they fail to 
reflect attention to the patient's individual needs. Further, the 
commenter suggested that CMS abandon the 13th and 19th qualified 
therapist visit requirement and instead base the reassessment timeframe 
on individual care needs and changes in patient status. That same 
commenter added that assistants utilize their clinical reasoning skills 
every time they treat a patient and advise the supervising therapist 
regarding the patient's need for continued skill intervention and 
grading of treatment and, therefore, the requirement for qualified 
therapist visits at defined timeframes is not reasonable. A commenter 
classified all our proposed therapy visit rules as arbitrary at best, 
as well as calling these latest rules regarding the 13th and 19th 
assessments capricious. One commenter stated that a requirement to re-
evaluate patients at the 13th and 19th visits may not be effective in 
curbing agencies from inappropriately using the benefit in the long-
run, suggesting that some agencies will soon learn how to work the 
revised system to their benefit. A commenter stated that, while overall 
therapy utilization has increased, it has led to better outcomes for 
Medicare beneficiaries and overall spending per Medicare patient has 
remained well below Congressional Budget Office (CBO) projections. 
Referring to the aforementioned survey results, the commenter described 
the surveyed HHAs' concern that the proposed clarifications would 
result in limited improvements in patient care. Several commenters 
believed that the proposed changes would have an adverse effect on 
access to care and timeliness of services provided and that these 
requirements would result in less direct patient care time. Many 
commenters stated that the documentation requirements were burdensome 
and costly. Several commenters feared that these requirements would 
impede access to care in rural areas where there are shortages of 
qualified therapists.
    Response: We thank the commenters for their suggestions. We 
continue to believe that to ensure Medicare HH patients receive 
effective, high-quality therapy services, the frequency that a 
qualified therapist must assess the effectiveness of services performed 
by assistants must be more clearly defined in Medicare home health 
coverage regulations. Longstanding Medicare Conditions of Participation 
(CoPs) regulations at Sec.  484.32(a) require that HH therapy services 
be administered by a qualified therapist or a qualified assistant under 
the therapist's supervision, thus requiring a qualified therapist to 
supervise therapy services to ensure their effectiveness. We believe 
that in order to adhere to these regulations, a qualified therapist 
must periodically perform the patient's needed therapy service during 
the course of treatment to ensure that the therapy being provided by 
assistants is effective and/or that the patient is progressing toward 
treatment goals. These visits ensure that the qualified therapist has 
first-hand knowledge of the patient in order to identify needed changes 
to the care plan. Additionally, these visits enable a qualified 
therapist to determine if treatment goals have been achieved or if 
therapy has ceased to be effective. We note that some States preclude 
assistants by scope of practice from making determinations such as 
whether goals are met. As such, we believe that by requiring a 
qualified therapist, instead of an assistant, to perform the needed 
therapy service, assess the patient, and measure and document progress 
toward goals and/or effectiveness of therapy at defined points in the 
course of treatment, we would lessen the risk that patients continue to 
receive therapy after the treatment goals have been reached and/or 
after therapy is no longer effective.
    In response to the commenter who stated that while overall therapy 
utilization has increased, such increased utilization has led to better 
outcomes for Medicare beneficiaries, we disagree with the conclusion. 
In their March 2010 report, MedPAC described that functional measure 
scores for HH patients continue to improve, but also expressed concerns 
that the measures may not appropriately depict the quality of therapy 
provided by HHAs. MedPAC reports that there are no measures, which 
reflect functional improvement for only those patients that receive 
therapy services. Instead, the measures reflect functional improvement 
for all patients. Therefore, we believe that the data do not support 
the commenter's conclusion that higher volumes of therapy have led to 
better outcomes. The same commenter, pointing to results of the survey 
described above, stated that the HHAs believe these proposed therapy 
coverage clarifications would result in limited improvements in patient 
care. Again, we disagree with these opinions. We refer the commenter to 
research studies conducted by Linda

[[Page 70391]]

Resnick (of Brown University) et al., entitled ``Predictors of Physical 
Therapy Clinic Performance in the Treatment of Patients with Low Back 
Pain Syndromes'' (2008, funded by a grant from the National Institute 
of Child Health) and ``State Regulation and the Delivery of Physical 
Therapy Services'' (2006, funded in part through a grant from the 
Agency for Healthcare Research and Quality). Both studies concluded 
that more therapy time spent with a qualified physical therapist, and 
less time with a physical therapist assistant, is more efficient and 
leads to better patient outcomes. In these studies, the lower 
percentage of time seen by a qualified therapist and the greater 
percentage of time seen by an assistant or aide, the more likely a 
patient would have more visits per treatment per episode. The studies 
also concluded that, although delegation of care to therapy support 
personnel such as assistants may extend the productivity of the 
qualified physical therapist, it appears to result in less efficient 
and effective services. We believe that by requiring regular visits by 
a qualified therapist during a course of treatment we will achieve more 
appropriate and efficient provision of therapy services while also 
achieving better therapy outcomes. Regarding the comment that HH 
expenditures are below CBO projections, we are unclear on the 
commenter's suggestion. We believe that the commenter may have been 
suggesting that the growth in HH expenditures does not warrant our 
attempts to facilitate more appropriate and effective therapy 
utilization. If so, we disagree with the commenter. We continue to 
believe that these improved guidelines, as suggested by MedPAC, are an 
important step in addressing program vulnerabilities while also 
improving the quality of services provided. We also disagree with the 
commenters who believe that a qualified therapist visit every 30 days 
is sufficient, and that the required 13th and 19th visits are excessive 
and redundant to many state practice supervision requirements, and that 
the 13th and 19th visit requirement timeframes fail to reflect the 
patient's individual needs. As we have noted in this and previous 
rules, at the inception of the HH PPS we analyzed the amount of therapy 
a HH rehabilitation patient would typically require during a course of 
treatment. We used clinical judgment to determine that the typical 
rehabilitation patient in a HH setting would require about 8 hours of 
therapy, or 10 therapy visits during a course of treatment. We believe 
that when the unique condition of an individual patient requires more 
therapy than a typical Medicare HH rehabilitation patient, such a 
patient should be more closely monitored by a qualified therapist to 
ensure that high-quality, effective services are being provided and/or 
acceptable progress toward goals is being achieved. We also continue to 
believe that to ensure that this monitoring occurs for all high-therapy 
needs Medicare patients, we cannot depend on individual state 
supervision requirements. Instead, Medicare coverage clarifications 
will ensure that all Medicare HH patients benefit from this oversight. 
We also disagree with commenters that these policies will lead to an 
intrusion for patients. To the contrary, research suggests that more 
qualified therapist involvement would further enhance patient care for 
those patients needing these levels of therapy. We also note that these 
policies will not result in additional visits or therapy services 
provided to the patient. The visit by a qualified therapist would not 
be in addition to the visit that would otherwise occur, as described in 
the patient's treatment plan. Instead, the qualified therapist, perhaps 
instead of an assistant, would perform the therapy service at defined 
points in the course of treatment. In response to the commenter who 
questioned whether a comprehensive assessment of the patient would need 
to occur during these qualified therapist visits, we refer the 
commenter to the regulation text changes at Sec.  409.44(c)(1)(iv) 
which describes that the qualified therapist must assess a patient's 
function using objective measurement of function. In other words, the 
assessment of function would not be a comprehensive assessment of the 
patient's clinical condition.
    In response to the commenters who expressed cost and access to care 
concerns associated with these policies we note that current CoPs at 
Sec.  484.12 already require that the HHA and its staff comply with 
accepted professional standards and principles that apply to 
professionals furnishing services by a HHA. Those accepted professional 
standards include complete and effective documentation, such as that 
which we described in our proposal. (Section 484.55 of the CoPs already 
requires that HHAs provide a comprehensive assessment that ``accurately 
reflects the patient's current health status and includes information 
that may be used to demonstrate progress toward achievement of desired 
outcomes.'') In addition, Sec.  484.2 requires that a clinical note be 
a notation of contact with a patient that is written and dated by a 
member of the health team, and that describes signs and symptoms, 
treatment and drugs administered and the patient's reaction, and any 
changes in physical or emotional condition, which becomes part of the 
medical record. Further, Sec.  484.48, our longstanding regulation for 
CoPs and clinical records, requires that a clinical record containing 
pertinent past and current findings in accordance with accepted 
professional standards be maintained for every patient receiving HH 
services. In addition to the plan of care, the record must include 
treatment plans and activity orders, signed, and dated clinical and 
progress notes, and copies of summary reports sent to the attending 
physician. Because these proposed clarifications to our therapy 
coverage requirements are consistent with long-standing CoP 
requirements and accepted professional standards of clinical practice, 
we would expect that many providers have already adopted these 
practices.
    Also, because CoPs at Sec.  484.32 allow therapy services offered 
by the HHA to be provided by a qualified therapist or a qualified 
assistant under the supervision of qualified therapist and in 
accordance with the plan of care, it is our expectation that HHAs are 
already utilizing qualified therapists regularly to perform the needed 
therapy services in order to perform the required supervision of 
assistants.
    We agree with the commenter that most HH therapy patients do not 
receive 13 and/or 19 visits in their course of treatment. In response 
to the comments which stated the relatively small numbers do not 
warrant the 13 and 19 qualified therapist visit and documentation 
requirements, suggesting instead that we target providers with suspect 
therapy practices for review, we reiterate that we believe these 
requirements benefit all patients. We believe that these requirements 
may also deter inappropriate provision of high levels of therapy, and 
therefore lessen the risk of the associated inappropriate higher HH PPS 
payments. In summary, by requiring qualified therapist visits when the 
amount of therapy reaches those high levels, which also correspond to 
high payment levels, we believe we can simultaneously achieve better 
patient outcomes, more efficient provision of therapy, and more 
accurate reimbursement.
    We find compelling the commenters' concerns regarding scheduling 
difficulties. We believe the commenters' concerns regarding scheduling 
warrant more flexibility in the timing of the 13th and 19th visit 
requirements. Therefore,

[[Page 70392]]

we have decided to allow for some flexibility associated with the 13th 
and 19th therapy visit rule for patients. Specifically, for 
beneficiaries in rural areas, the qualified therapist may perform the 
needed therapy service, reassessment and measurement at any time after 
the 10th therapy visit but no later than the 13th therapy visit, and 
after the 16th therapy visit but no later than the 19th therapy visit. 
And, if extenuating circumstances outside the control of the therapist 
preclude the therapy service visit, reassessment and measurement at the 
13th and 19th timeframes, the qualified therapist may perform the 
therapy service visit, reassessment and measurement at any time after 
the 10th therapy visit but no later than the 13th therapy visit, and 
after the 16th therapy visit but no later than the 19th therapy visit.
    Regarding the access to care concerns, we believe that these 
requirements will ultimately result in more access to effective therapy 
services. MedPAC reports broad access to HH care for Medicare 
beneficiaries. As such, we do not expect that these coverage 
clarifications will result in access to care issues, but we will 
monitor for unanticipated effects.
    We note, however, because of the volume of comments we received on 
this issue, we believe that many agencies have not been in compliance 
with the documentation practices and qualified therapist oversight we 
would expect. Therefore, we have decided to delay the effective date of 
these requirements until April 1, 2011, to allow agencies that do not 
currently have such practices in place additional time to transition.
    Comment: A number of commenters expressed support for our efforts 
to require reassessments, but had questions as to how assessment visit 
requirements at the 13th and 19th visit would work when multiple 
therapy disciplines are providing care. Specifically, commenters stated 
that because HH therapy can consist of any combination of three therapy 
disciplines, it would be difficult for therapists to track the 13th and 
19th visits if more than one therapy discipline was serving the 
patient. Commenters asked how it would be determined which therapist 
would do the 13th and 19th assessments. Additionally, commenters were 
concerned that CMS might be expecting a therapist of one discipline to 
do the assessment for the therapist of another discipline. Commenters 
stated that it would be unrealistic and cumbersome to track the 13th 
and 19th visits, especially when there are multiple therapy disciplines 
involved. In a related comment, a commenter recommended further 
clarification of the proposed regulations by requesting that CMS 
further specify that professional standards should be those pertaining 
to the individual professions. The commenter also stated that, because 
existing Medicare regulations require compliance with Federal, State, 
and local laws, requiring the proposed qualified therapist visits at 
defined points in the course of treatment could contradict State 
licensure and scope of practice laws.
    Response: We concur with the commenters that we need to clarify our 
expectation when more than one therapy discipline is providing services 
to the patient. We will clarify the regulation text to state that the 
policy applies to each discipline separately. The patient's function 
must be initially assessed and periodically reassessed by a qualified 
therapist of the corresponding discipline for the type of therapy being 
provided (that is, PT, OT, and/or SLP). When more than one therapy 
discipline is being provided, the corresponding qualified therapist 
would perform the reassessment during the regularly scheduled visit 
associated with that discipline which was scheduled to occur as near as 
possible to the 13th and 19th visit, but no later than the 13th and 
19th visit.
    We also note that a small percentage of patients which receive 13 
and 19 therapy visits receive more than 1 therapy discipline. In 
addition, HHAs must coordinate their patients' care per longstanding 
conditions of participation at Sec.  484.14(g). As such, we would 
expect such coordination to already be occurring. Given the low volume 
of such patients and the added flexibility as described above, we do 
not believe that the coordination associated with multi-therapy 
discipline patients will be overly burdensome. However, we will monitor 
the effects of this provision to identify unintended consequences.
    Comment: Several commenters suggested that instead of putting 
additional requirements on all HHAs in response to a smaller number of 
HHAs who are abusing the system, CMS should target those agencies that 
are providing unnecessary therapy. A few commenters urged CMS to 
consider how the therapy provisions of this rule would affect HHAs, 
especially in rural areas, where there is a shortage of therapists. A 
commenter also stated that the notion that HH expenditures were high 
due to unnecessary therapy visits is inaccurate and provided statistics 
that he believes prove therapy overutilization is not a problem.
    Response: As we have described in previous comment responses, we 
believe that these proposed requirements will strengthen the integrity 
of the benefit while also resulting in better patient outcomes. We 
believe all HHAs, not just suspect agencies, should adhere to these 
best practices in order to provide high-quality and effective therapy 
services, consistent with existing CoPs.
    Comment: A few commenters expressed concern regarding therapy 
services possibly not being covered after a hospitalization, as a 
result of these assessment visit requirements. Specifically, the 
commenters were concerned that we were imposing new limits on 
maintenance therapy. Commenters expressed fear that the result of not 
covering such therapy services might be that many high fall risk 
patients would be sent home without therapy care, which would lead to 
increased falls/hospitalizations/fractures that would increase Medicare 
spending in the end. Another commenter stated that physical therapy and 
occupational therapy were utilized more for safety evaluations and fall 
prevention measures, especially for patients on medication, which 
places them at a higher risk for falls. This commenter added that fall 
prevention best practice interventions provided in patients' homes save 
Medicare money. Similarly, a commenter asked CMS to clarify therapy 
coverage for pain.
    Response: We agree with the commenter that fall prevention 
practices and/or pain management are essential for many HH patients in 
order to provide the patient with quality care. We remind the commenter 
that a longstanding coverage requirement for HH therapy services under 
Medicare is that the services which the patient needs must require the 
performance by or supervision of a qualified therapist. Whether or not 
fall prevention services and pain management services are covered 
therapy depends on the unique clinical condition of the patient and the 
complexity of the needed therapy services. Many fall prevention 
services would not require the skills of a therapist. Longstanding 
regulations allow therapy coverage when, for safety and effectiveness 
reasons, the unique medical complexities of the patient require a 
qualified therapist's skills in the establishment or performance of a 
therapy maintenance program. As such, should the unique clinical 
condition of a patient require that the specialized skills, knowledge, 
and judgment of a qualified therapist are needed to design and 
establish a safe and effective maintenance program in connection

[[Page 70393]]

with a specific illness or injury, then such services would be covered 
as therapy services.
    Comment: Commenters were opposed to the requirement that a skilled 
nursing service must be needed in order to have maintenance therapy 
covered, and that a maintenance program cannot be established after 
restorative therapy has ended.
    Response: The intent of language in the proposed rule was to 
clarify that, in order for the establishment of a maintenance therapy 
program to be considered covered therapy, the specialized skills, 
knowledge, and judgment of a therapist would be required in developing 
a maintenance program. Services would be covered to design or establish 
the plan, to ensure patient safety, to train the patient, family 
members and/or unskilled personnel in carrying out the maintenance 
plan, and to make periodic reevaluations of the plan. In the proposed 
rule, we further noted scenarios in which maintenance therapy may be 
provided in the home setting.
    The language in the proposed rule was not meant to indicate that 
maintenance therapy could not be provided as the sole skilled service 
and would be covered only if ancillary to another skilled qualifying 
service. The proposed clarifications were not intended to expand or 
limit existing coverage criteria. We regret the confusion these 
scenarios may have caused. We note that therapy coverage criteria have 
always been based on the inherent complexity of the service which the 
patient needs. As such, maintenance therapy has and will continue to be 
covered in the HH setting when the unique clinical condition of the 
patient requires the complex services which can only be provided 
effectively and safely by a qualified therapist. We will revise the 
proposed regulation text to address the commenters' confusion.
    Comment: A number of commenters expressed concern regarding 
proposed regulation text changes that state therapy visits would not be 
covered for transient or easily reversible loss or reduction in 
function. Some commenters who opposed the proposed regulation text 
changes stated that these changes would disallow coverage of 
maintenance therapy, citing longstanding Medicare HH coverage policies 
previously set out in the ``Health Insurance For the Aged, Home Health 
Agency Manual,'' Pub. 11 (HIM-11) that allowed for the coverage of such 
maintenance therapy. One commenter recommended striking the language, 
``transient and reversible loss.'' A commenter also stated that these 
proposed regulation changes are in direct conflict with section 
1814(a)(2)(C) of the Act. Commenters questioned what criteria define a 
transient and reversible reduction in function, or when a patient's 
condition could be expected to improve spontaneously. One commenter 
stated that it is difficult to determine when conditions are or are not 
transient and reversible, noting that some patients who present a very 
serious condition on admission may recover quickly, while others with 
seemingly less-serious conditions can end up being far more complex as 
treatments progress. Another commenter stated we must take into account 
the patient's unique condition.
    Response: We disagree with the commenter that the proposed 
regulation text changes conflict with section 1814(a)(2)(C) of the Act. 
We believe that the commenter is inferring that by not allowing therapy 
coverage for an easily reversible reduction in function, we would be 
denying coverage to a patient who needs therapy, an eligibility 
criterion listed in section 1814(a)(2)(C) of the Act. We disagree with 
such interpretation. Consistent with statute, longstanding regulation, 
and longstanding manual guidance, therapy coverage under the HH benefit 
is based on a patient's need for skilled services. The therapy services 
must be of such a level of complexity and sophistication or the 
condition of the beneficiary must be such that the services required 
can safely and effectively be performed only by a qualified therapist 
or a qualified therapy assistant under the supervision of a qualified 
therapist. Services which do not require the performance or supervision 
of a qualified therapist are not reasonable and necessary services, 
even if they are performed by a qualified therapist.
    When a patient suffers a transient and easily reversible loss or 
reduction of function which could reasonably be expected to improve 
spontaneously as the patient gradually resumes normal activities, the 
services do not require the performance or supervision of a qualified 
therapist, and those services are not considered reasonable and 
necessary covered therapy services. We acknowledge that making a 
determination that a patient suffers a transient and easily reversible 
loss or reduction of function which could reasonably be expected to 
improve spontaneously as the patient gradually resumes normal 
activities requires clinical judgment and a consideration of the 
patient's unique condition. We believe that rehabilitation 
professionals, by virtue of their education and experience, are 
typically able to determine when a functional impairment could 
reasonably be expected to improve spontaneously as the patient 
gradually resumes normal activities. Likewise, we expect rehabilitation 
professionals to be able to recognize when their skills are appropriate 
to promote recovery. A prescriptive definition of these sorts of 
conditions, such as a listing of specific disease states that provide 
subtext for these descriptions is impractical, as each patient's 
recovery from illness is based on unique characteristics. In response 
to the commenter who believes that the therapy clarifications would 
disallow coverage of maintenance therapy, we assure the commenter that 
these clarifications do not impose new limits on the criteria for 
maintenance therapy coverage. We again note that therapy coverage 
criteria have always been based on the inherent complexity of the 
service which the patient needs. As such, maintenance therapy has and 
will continue to be covered in the HH setting when the unique clinical 
condition of the patient requires the complex services, which can only 
be provided effectively and safely by a qualified therapist. In 
addition, we note that these clarifications are consistent with 
longstanding manual guidance.
    Comment: A commenter urged CMS to address therapy coverage for 
conditions that may not directly impact functional status, such as the 
role of therapists in wound care.
    Response: We reiterate that if the services do not require the 
performance or supervision of a qualified therapist, those services are 
not considered to be reasonable and necessary covered therapy services. 
As such, if a therapist (who is qualified to do so per her or his State 
Practice Act) would perform services such as wound-care, those services 
would be covered therapy only if they required the skills of the 
qualified therapist or qualified assistant under the supervision of a 
qualified therapist. Should a qualified therapist (who is qualified to 
do so per her or his State Practice Act) perform wound care that does 
not require the specialized skills of a therapist and could be 
routinely performed by agency nursing staff, these services would not 
be covered therapy services.
    Comment: A commenter expressed concern over the proposed therapy 
coverage clarifications, stating that the proposed regulatory text 
changes are major changes to current policy and that they are in 
conflict with Medicare statute and current law. The commenter stated 
that Medicare coverage will be more difficult to obtain for 
beneficiaries

[[Page 70394]]

with chronic and debilitating conditions if the proposals are 
finalized. The commenter urged CMS to withdraw the maintenance therapy 
regulation text changes, stating that maintenance therapy is a covered 
benefit in home health and that Medicare statute does not require 
improvement for services to qualify for coverage. The commenter stated 
that the restoration potential of a patient is not the deciding factor 
in determining whether skilled services are needed, further stating 
that even if full recovery or medical improvement is not possible, a 
patient may need skilled services to prevent further deterioration or 
preserve current capabilities. The commenter stated that a prescribed 
therapy service which requires the skills of a therapist to help 
maintain function or prevent slow deterioration is medically necessary 
and should be covered under the statute. The commenter stated that 
current regulations recognize this, but the proposed changes minimize 
this point, and the commenter urged CMS to not restrict benefits in 
order to fight fraud.
    The commenter expressed concern with the proposal's use of the 
words ``improvement'' and ``progress,'' fearing an increased emphasis 
on these terms in the rules for therapy coverage will limit access to 
care for patients who require maintenance therapy. Further, the 
commenter alleged that the proposed rule would require improvement for 
therapy to be covered. The commenter suggested the word ``effective'' 
is more appropriate than ``improvement'' or ``progress.''
    The commenter believed that the proposed regulation text will 
require the therapist to use complex and sophisticated therapy 
techniques in order for maintenance therapy to be covered and will thus 
be a new coverage limitation preventing needed access to therapy, and 
that the proposed regulation text which states that maintenance therapy 
must be required in connection with a specific disease would also newly 
limit maintenance therapy coverage. Further, the commenter alleged that 
the revised regulation text does not consider the unique condition of 
the patient as it must and as does the current regulation text. The 
commenter stated that the proposal newly categorizes maintenance 
therapy as not rehabilitative, while the current regulations include 
both restorative and maintenance therapy as rehabilitative. The 
commenter stated that, should CMS require improvement as a therapy 
coverage criterion, CMS would be applying an arbitrary ``rule of 
thumb'' which does not consider the patient's individual condition, and 
such a requirement for improvement conflicts with the current 
regulation at Sec.  409.42. Further, the commenter stated that the 
proposed regulation text changes will result in denials of Medicare 
coverage for beneficiaries with long-term, progressive, or incurable 
conditions. The commenter also took issue with the proposed regulation 
text change to require the documentation of progress toward goals.
    The commenter further stated that the definition of maintenance 
therapy is too vague and restrictive. The commenter also took issue 
with the proposed regulation text, which requires that, in order for 
maintenance therapy to be covered, the skills of a therapist must be 
needed to ensure the patient's safety ``and'' the skills of a therapist 
are needed to provide a safe and effective maintenance program. The 
commenter believed that we should replace the ``and'' with an ``or''. 
The commenter also stated that the regulation does not define 
``reasonable and necessary'' in a way that clearly provides for 
coverage of maintenance therapy. As was also mentioned by other 
commenters, this commenter was concerned that the proposed regulation 
text describes coverage of the development of a maintenance program 
during the last visit(s) for rehabilitative therapy, stating that, 
often, standard practice is to establish and instruct the patient in an 
appropriate maintenance program at the outset of a course of therapy. 
The commenter also spoke to the proposed regulation text change, which 
appears to indicate that we would not cover the establishment of a 
maintenance program after a restorative therapy program has ended, or 
if a beneficiary had never met the criteria for restorative therapy. 
The commenter stated that the proposed regulation text would result in 
maintenance therapy becoming a dependent service.
    Response: The proposed regulatory text clarifications are intended 
to neither limit nor expand the coverage of therapy in the HH setting, 
but instead are intended to provide clear therapy guidelines, as 
suggested by MedPAC, to deter inappropriate provisions of therapy 
services. As we have described in earlier responses to comments, we 
also believe that these guidelines will improve patient outcomes, 
improve therapy effectiveness, and promote more consistent compliance 
with the Medicare CoPs. However, as we described in an earlier comment 
response, we agree with the commenter that the proposed regulation text 
changes may have been unclear in the descriptive scenarios surrounding 
coverage of the development of a maintenance program, and we will 
revise the final regulation text changes at Sec.  409.44(c)(2)(iii)(B) 
to remove the scenarios described in the proposed rule's Sec.  
409.44(c)(2)(iii)(B)(1) through (B)(3).
    We also agree with the commenter that there are some additional 
changes to the proposed regulation text that we should finalize for 
better clarity. We believe that these changes may alleviate some of the 
commenter's concerns that the proposed rule limits coverage associated 
with maintenance therapy, and reassure the commenter that the coverage 
criteria clarifications are consistent with statute, current 
regulations, and longstanding manual guidance. Specifically, in 
response to the commenter's concern that we would have newly 
categorized maintenance therapy as non-rehabilitation, we will delete 
the proposed regulation text at Sec.  409.44(c)(2)(iii)(A)(2) and 
(A)(3) for the final rule. We believe our attempts to clarify these 
definitions are not needed, as those definitions are well defined in 
Sec.  409.44(c)(2)(iii)(A) through (iii)(C). We will also finalize some 
technical changes to the proposed regulation text, including replacing 
several of the proposed regulatory text references to improvements in 
function with references to the effectiveness of the care plan goals, 
as suggested by the commenter.
    We agree with the commenter that that current regulations and 
longstanding manual guidance are consistent in that therapy services 
are covered in the HH setting based on the inherent complexity of the 
service which the patient needs. As such, maintenance therapy has and 
will continue to be covered in the HH setting when the unique clinical 
condition of the patient requires the complex services, which can only 
be provided effectively and safely by a qualified therapist.
    Regarding the commenter's concern that the proposed rule stated 
that skilled therapy is not reasonable and necessary unless improvement 
is documented, we disagree with the commenter's interpretation of the 
proposed rule. However, we agree that we could have been more clear in 
the regulation text which describes the documentation requirements at 
Sec.  409.44(c)(2)(i). In the final rule, we will clearly state that 
maintenance therapy as defined in Sec.  409.44(c)(2)(iii)(B) and Sec.  
409.44(c)(2)(iii)(C) would not be subject to the criteria listed in 
Sec.  409.44(c)(2)(i)(B)(4).
    Concerning the comment that the proposed regulation text, which 
requires the therapist to use complex and

[[Page 70395]]

sophisticated therapy techniques in order for maintenance therapy to be 
covered, imposes a new coverage limitation associated with maintenance 
therapy and will prevent needed access to therapy, we refer the 
commenter to longstanding manual guidance at 40.2.2 E. in chapter 7 of 
the Medicare Benefit Policy Manual, CMS Pub. 100-2. This section 
contains longstanding guidance which uses the term ``complex and 
sophisticated procedures'' when describing reasonable and necessary 
maintenance therapy. This same chapter instructs a reviewer to consider 
the inherent complexity of the service when determining if the skills 
of a therapist are required. The complexity and sophistication of the 
service are longstanding criteria used to assess whether the skills of 
a therapist are required. As such, we disagree with the commenter that 
this is a new limiting criterion. We also disagree that the proposed 
regulation text changes do not adequately consider the unique condition 
of the patient when clarifying coverage requirements. In fact, we 
believe the proposed regulation text changes at Sec.  409.44(c)(2)(iii) 
refer more comprehensively than the current regulation text to the 
patient's unique clinical condition as a criterion for determining 
whether the complex services which must be provided by a therapist are 
needed. Regarding the commenter's concern that the proposed regulation 
text changes newly require that maintenance therapy must be needed in 
connection with a specific disease, we also disagree. Current 
regulations at Sec.  409.44(c)(2)(iii) describe that establishing a 
maintenance program would be covered if the skills of a therapist are 
needed to provide a safe and effective maintenance program in 
connection with a specific disease. However, we agree that the words 
``in connection with the patient's illness or injury'' instead of ``in 
connection with a specific disease'' would be an improvement to the 
regulation text and we are making this change in this final rule. We 
disagree with the commenter that current policy allows maintenance 
therapy to be covered when the skills of a therapist are needed to 
ensure the patient's safety OR the skills of a therapist are needed in 
order to provide a safe and effective maintenance program. We have 
required in regulation and longstanding manual guidance that the skills 
of a therapist would be required to ensure both patient safety and 
effectiveness of a maintenance program for the performance of 
maintenance therapy to be covered.
    We refer the commenter to current regulations at Sec.  
409.44(c)(2)(iii) and longstanding manual guidance at 40.2.2 E. in 
chapter 7 of the Medicare Benefit Policy Manual, CMS Pub. 100-2. 
Regarding the commenter's concern that current Sec.  409.32(c) mandates 
the restoration potential of a patient is not the deciding factor in 
determining whether skilled services are needed, and even if full 
recovery or medical improvement is not possible, a patient may need 
skilled services to prevent further deterioration or preserve current 
capabilities, we reply that we believe the commenter may be 
misunderstanding the current regulation text at Sec.  409.32(c) or 
interpreting this out of its proper context. We believe it is important 
to again note that the emphasis for our therapy coverage criteria is 
not on the issue of restoration potential per se, but rather on the 
beneficiary's need for complex services which require the skills of a 
qualified therapist. Current regulations at Sec.  409.32(c) specify 
that it is the beneficiary's need for skilled services rather than his 
or her restoration potential that is the deciding factor in evaluating 
the need for skilled nursing services in the HH setting. A 
beneficiary's restoration potential has never been a factor at all in 
identifying those services that constitute skilled nursing care. Thus, 
nursing care can be considered skilled without regard to whether it 
serves to improve a beneficiary's condition or to maintain the 
beneficiary's current level of functioning. In fact, as the original 
version of this regulation's text [as initially codified at 20 CFR 
Sec.  405.127(b)(2) (40 FR 43897, September 24, 1975)] makes clear, 
this provision's example of a terminal cancer patient was intended to 
refer specifically to nursing services that can be considered skilled 
``even though no potential for rehabilitation exists'' (emphasis 
added). Longstanding current regulatory language at Sec.  409.44(c) 
sets out the criteria for skilled therapy (as opposed to the skilled 
nursing criteria described above) to be a covered service under 
Medicare's HH benefit. Current regulations specify that HH therapy 
services are covered based on the inherent complexity of the service 
which the patient needs, and whether the needed services require the 
skills of a qualified therapist. Further, current regulations state 
that HH therapy services are covered if there is an expectation that 
the patient's condition will improve in a reasonable and predictable 
timeframe based on the physician's assessment of the beneficiary's 
restoration potential and unique medical condition of the patient. 
Current regulations also allow for therapy coverage when, for safety 
and effectiveness, the unique medical complexities of the patient 
require a qualified therapist's skills in the establishment or 
performance of a therapy maintenance program.
    Regarding the commenter's concerns that, should we require 
improvement as a therapy coverage criteria, we would be applying an 
arbitrary ``rule of thumb'' which does not consider the patient's 
individual condition, and as such, the requirement conflicts with the 
current regulation at Sec.  409.44, we again assure the commenter that 
we are not expanding or limiting the coverage of HH therapy. To address 
the commenter's concerns regarding the potential for claims denials 
based on ``rules of thumb,'' we assure the commenter that such denials 
are prohibited.
    ``Rules of thumb'' in the Medicare medical review process are 
prohibited. Intermediaries must not make denial decisions solely on the 
reviewer's general inferences about beneficiaries with similar 
diagnoses or on general data related to utilization. Any ``rules of 
thumb'' that would declare a claim not covered solely on the basis of 
elements, such as, lack of restoration potential, ability to walk a 
certain number of feet, or degree of stability, is unacceptable without 
individual review of all pertinent facts to determine if coverage may 
be justified. Medical denial decisions must be based on a detailed and 
thorough analysis of the beneficiary's total condition and individual 
need for care.
    Similar instructions have appeared as far back as 1992 in the 
previous, paper-based manuals (available online at http://www.cms.gov/Manuals/PBM/list.asp), in section 3900.A of the Medicare Intermediary 
Manual, Part 3 (CMS Pub. 13-3), and in section 214.7 of the Medicare 
SNF Manual (CMS Pub. 12).
    Regarding the comment that the proposed regulation does not define 
``reasonable and necessary'' in a way that clearly provides for 
coverage of maintenance therapy, we believe the commenter took issue 
with proposed clarifications surrounding regulations at Sec.  
409.44(c)(2)(iv) which state that the amount, frequency, and duration 
of services must be reasonable. In these revisions we describe that 
therapy can be considered reasonable and necessary when the criteria 
for maintenance therapy are met. We believe the commenter suggests we 
more definitively state that therapy would be

[[Page 70396]]

covered in such a case. We concur, and we will make this change.
    Comment: One commenter noted that under a state's approved Medicaid 
State Plan Amendment, therapies may be authorized as appropriate to 
maintain function or to slow the rate of decline in function. This 
commenter therefore requested that we consider whether the proposed 
rule language should be revised to clarify a potential difference in 
benefits [under Medicaid versus Medicare] or if revised instructions 
regarding Conditions of Participation (CoPs) applicability is 
sufficient. For whatever option we choose, this commenter indicated 
that we should contemplate using the Medicare rules as the foundation 
for Medicaid HH program rules as this commenter believes that changes 
are needed to accommodate the permitted differences in benefits.
    Response: We thank the commenter but note such a suggestion is 
outside the scope of this rule, and the issue for which we solicited 
comments. We will consider this suggestion in the future as we analyze 
improvements to the HH PPS.
    Comment: Commenters stated that, while they applaud our efforts to 
better define medical necessity and document therapy services, they 
were also concerned that the new documentation requirements will be a 
difficult transition for HHAs, stating that the proposed requirement 
would require significant time and resources for HHAs to ensure that 
their therapists and other medical staff are educated and prepared to 
implement the new requirements into their everyday practices. 
Consequently, this commenter recommended we provide extensive 
educational outreach and the commenter asked that we delay 
implementation of these requirements to provide agencies time to 
retrain staff.
    This commenter also recommended that we elaborate further on 
provisions of the proposed Sec.  409.44(c)(1), including citing 
references to resources we used for the phrase ``with accepted 
standards of clinical practice,'' asking us to indicate that these 
included resources from professional associations. In addition, this 
commenter asked that we indicate that the ``therapy goals'' be 
established by the qualified therapist in conjunction with the 
physician. This commenter also requested that we further clarify what 
we mean by objective measurement of therapy progress by including 
activities of daily living such as walking, eating, bathing, etc. With 
respect to Sec.  409.44(c)(2)(i), this commenter asked that we clarify 
what are considered to be ``accepted practice'' and ``effective 
treatment.'' Similar to other commenters, this commenter requested that 
we further acknowledge multi-therapy cases and insert language that 
allows for some type of window for completing the reassessment prior to 
or after the 13th or 19th therapy visits, stating that the adjustment 
should be made to account for extenuating circumstances that are 
outside the control of the qualified therapist. Regarding assistants 
making clinical notes, this commenter suggested that we change the 
phrase ``job title'' to ``professional designation'' and clarify that 
written and electronic signatures are acceptable. Some commenters asked 
that we eliminate Sec.  409.44(c)(2)(i) altogether. Regarding Sec.  
409.44(c)(2)(iii), this commenter requested that because 
``rehabilitative'' and ``restorative'' are not interchangeable, we 
change our regulations to be consistent throughout, using only the word 
``rehabilitative.'' This commenter also asked that we add a sentence to 
clearly state that the maintenance program must be established by the 
qualified therapist. With respect to Sec.  409.44(c)(2)(iv), this 
commenter asked that we elaborate on the phrase ``with accepted 
standards of clinical practice'' and highlight the importance of 
educating caregivers to ensure patients receive the appropriate level 
of care. The commenter also requested that we delay implementation of 
these requirements until April 2011 to allow time for providers to 
transition.
    Response: We thank the commenter for the suggested clarifications 
and we have adopted the suggested clarifications with some exceptions. 
We have retained the language in our current regulatory text at Sec.  
409.44(c)(2)(iii) which presently mandates that for therapy to be 
covered, there must be an expectation that the beneficiary's condition 
will improve materially in a reasonable (and generally predictable) 
period of time based on the physician's assessment of the beneficiary's 
restoration potential and medical condition. Typically, we use the term 
``rehabilitative'' to describe services provided by therapists. In the 
regulation text, we describe the physician's assessment and therefore 
we believe the ``restorative'' terminology is appropriate. However, we 
will finalize additional changes to the proposed regulation text to 
achieve more consistency in the usage of these terms. As described in 
an earlier comment, we have adopted the commenter's request for 
flexibility associated with the 13th and 19th visit. We believe that 
clarifications regarding electronic signatures are better addressed in 
manual guidance. Finally, we will implement this provision beginning 
April 2011.
    Comment: Some commenters urged CMS to transform the HH PPS therapy 
reimbursement model to one based on clinical outcomes and skill 
improvement. A commenter urged CMS to adopt tests for clinicians, which 
assess the clinician's abilities.
    Response: We thank the commenter for these suggestions. As we 
described in earlier comment responses, section 3131(d) of the 
Affordable Care Act requires CMS to conduct a study on costs involved 
with providing HH services for patients with high severity of illness, 
including analysis of potential revisions to outlier payments to better 
reflect costs of treating Medicare beneficiaries and analyze other HH 
PPS issues determined by the Secretary. We intend to use this 
opportunity to assess a variety of HH PPS issues, including our current 
HH PPS therapy threshold reimbursement.
    Comment: A commenter suggested that CMS consider making access to 
physician-ordered medically necessary music therapy as a covered 
service.
    Response: We thank the commenter but note that Congress would need 
to enact legislation in order to cover music therapy services under 
Medicare's HH benefit, as they are not currently covered HH services as 
defined in section 1861(m) of the Act.
    Comment: Commenters provided feedback regarding our plans to revise 
G-codes to reflect greater detail in the reporting of skilled nursing 
and therapy services. Many commenters requested more time (6 months to 
a year or more) be allowed before these new and revised codes become 
effective, so as to give more time for CMS to provide direction to HHAs 
and thus provide time for agencies to train staff and modify data 
collection systems to accommodate these coding changes. Another 
commenter questioned the lead-time to establish new G-codes, stating 
that it would be impossible for all necessary program changes to be 
made to all vendor software within three months. This commenter 
requested that CMS postpone the new and revised G-codes until 2012 to 
give agencies and vendors time to reprogram the requirements. The 
commenter also suggested that the types of descriptions of the codes 
identified suggest that CMS wants to use the codes to determine 
medically reasonable and necessary care rather than doing actual 
medical review of patient clinical records. The commenter noted that 60 
to 75 percent of claims in which the appeals are taken to the 
administrative law judge level are reversed and suggested that we 
already have an issue

[[Page 70397]]

with our medical review and program integrity units that would be 
further exacerbated by the proposed G-codes.
    Response: It is important to note that we provided the information 
on the new G-codes to the industry as a pre-notification of our 
intention to collect additional information on the claim. The 
implementation of this provision will be issued in an administrative 
change notice. We note that in describing our plans in the proposed 
rule published on July 23, 2010, we intended to provided the industry 
with early information so that they could begin planning for this 
change at that time. We currently plan to implement this reporting 
requirement in January 2011. However, we thank the commenter, and we 
will consider this suggestion.
    Comment: Commenters expressed concern regarding G-code 6, stating 
that it has combined two dissimilar activities and should be split to 
avoid confusion, resulting in possible erroneous data. Specifically, 
commenters indicated that a G-code for services for the management and 
evaluation of the plan of care should be separate from a G-code for the 
services for the observation and assessment of a patient's condition 
while a patient's treatment is stabilized.
    Response: We concur with this suggestion and will adopt the 
separate G-codes.
    Comment: Some commenters asked that in revising and adding G-codes 
for the reporting of HH services, CMS should also consider creating 
codes to differentiate between the services provided by a registered 
nurse (RN) and a licensed practical nurse (LPN).
    Response: We thank the commenters for this suggestion and will 
consider their recommendation in future rulemaking.
    In summary, we thank the many commenters for their thoughtful and 
comprehensive suggestions. After considering these comments, we will 
finalize the proposed therapy coverage clarifications with several 
changes. We will delay the implementation of the therapy provisions 
until April 1, 2011, to allow agencies more transition time. We will 
finalize exceptions to the 13th and 19th qualified therapy visit 
requirement to provide some flexibility associated with patients in 
rural areas, patients receiving more than 1 therapy discipline, and 
documented exceptional circumstances which would preclude the therapist 
from performing the needed 13th or 19th visit. We have made regulatory 
text changes to remove confusing scenarios associated with maintenance 
therapy, which led commenters to believe that maintenance therapy was a 
dependent service. We will finalize numerous other regulation text 
changes to clarify that these changes do not impose new limitations on 
the coverage of maintenance therapy. The changes include clarifications 
that when the criteria for maintenance therapy is met, a qualified 
therapist would be assessing the effectiveness of the therapy provided, 
rather than the patient's progress. Other changes include the removal 
of definitions of rehabilitative therapy which was confusing to 
commenters, and other miscellaneous regulation text clarifications 
which were suggested and we believe improve the clarity of the 
regulation text.

C. Outlier Policy

1. Background
    Section 1895(b)(5) of the Act allows for the provision of an 
addition or adjustment to the national standardized 60-day case-mix and 
wage-adjusted episode payment amounts in the case of episodes that 
incur unusually high costs due to patient HH care needs. Prior to the 
enactment of the Affordable Care Act in March 2010, this section 
stipulated that total outlier payments could not exceed 5 percent of 
total projected or estimated HH payments in a given year. Under the HH 
PPS, outlier payments are made for episodes for which the estimated 
costs exceed a threshold amount. The wage adjusted fixed dollar loss 
(FDL) amount represents the amount of loss that an agency must absorb 
before an episode becomes eligible for outlier payments. As outlined in 
our FY 2000 HH PPS final rule (65 FR 41188 through 41190), Medicare 
provided for outlier payments not to exceed 5 percent of total payments 
and adjusted the payment rates accordingly.
2. Regulatory Update
    In our November 10, 2009 HH PPS final rule for CY 2010 (74 FR 58080 
through 58087), we explained that our analysis revealed excessive 
growth in outlier payments in discrete areas of the country. Despite 
program integrity efforts associated with excessive outlier payments in 
targeted areas of the country, we discovered that outlier expenditures 
exceeded the 5 percent statutory limit. Consequently, we assessed the 
appropriateness of taking action to curb outlier abuse.
    In order to mitigate possible billing vulnerabilities associated 
with excessive outlier payments, and to adhere to our statutory limit 
on outlier payments, we adopted an outlier policy of an agency-level 
cap on outlier payments at 10 percent of the agency's total payments, 
in concert with a reduced FDL ratio of 0.67. This policy resulted in a 
projected target outlier pool of approximately 2.5 percent (the 
previous outlier pool target was 5 percent of total HH expenditures). 
For CY 2010, we first returned 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. Then, we 
reduced the CY 2010 rates by 2.5 percent to account for the new outlier 
pool targeted to 2.5 percent. This revised outlier policy was adopted 
for CY 2010 only.
3. Statutory Update
    Section 3131(b)(1) of the Affordable Care Act amended section 
1895(b)(3)(C) of the Act, ``Adjustment for outliers,'' to state, ``The 
Secretary shall reduce the standard prospective payment amount (or 
amounts) under this paragraph applicable to HH services furnished 
during a period by such proportion as will result in an aggregate 
reduction in payments for the period equal to 5 percent of the total 
payments estimated to be made based on the prospective payment system 
under this subsection for the period.'' In addition, section 3131(b)(2) 
of the Affordable Care Act amended section 1895(b)(5) of the Act by 
redesignating the existing language as section 1895(b)(5)(A) of the 
Act, and revising it to state that the Secretary, ``may provide for an 
addition or adjustment to the payment amount otherwise made in the case 
of outliers because of unusual variations in the type or amount of 
medically necessary care. The total amount of the additional payments 
or payment adjustments made under this paragraph with respect to a 
fiscal year or year may not exceed 2.5 percent of the total payments 
projected or estimated to be made based on the prospective payment 
system under this subsection in that year.'' As such, our HH PPS 
outlier policy must reduce payment rates by 5 percent, and target up to 
2.5 percent of total estimated HH PPS payments to be paid as outlier 
payments. We will first return the 2.5 percent held for the target CY 
2010 outlier pool to the national standardized 60-day episode rates, 
the national per-visit rates, the LUPA add-on payment amount, and the 
NRS conversion factor for CY 2010. We will then reduce these rates by 5 
percent as required by section 1895(b)(3)(C) of the Act, as amended by 
section 3131(b)(1) of the Affordable Care Act. For CY 2011 and 
subsequent calendar years, the total amount of the additional payments 
or payment adjustments made may not exceed 2.5 percent of the total 
payments projected

[[Page 70398]]

or estimated to be made based on the PPS in that year as required by 
section 1895(b)(5)(A) of the Act as amended by section 3131(b)(2)(B) of 
the Affordable Care Act.
4. Outlier Cap
    As stated earlier, for CY 2010, we implemented an agency-level cap 
by limiting HH outlier payments to be a maximum of 10 percent of an 
agency's total payments (74 FR 58080 through 58087). Section 
3131(b)(2)(C) of the Affordable Care Act makes this 10 percent agency-
level cap a permanent statutory requirement, by adding a paragraph, (B) 
``Program Specific Outlier Cap'', to section 1895(b)(5) of the Act. The 
new paragraph states, ``The estimated total amount of additional 
payments or payment adjustments made * * * with respect to a HHA for a 
year (beginning with 2011) may not exceed an amount equal to 10 percent 
of the estimated total amount of payments made under this section 
(without regard to this paragraph) with respect to the HH agency for 
the year''. Therefore, the 10 percent agency-level outlier cap would 
continue in CY 2011 and subsequent calendar years as required by 
section 1895(b)(5)(B) of the Act, as added by section 3131(b)(2)(C) of 
the Affordable Care Act. In summary, section 3131(b) of the Affordable 
Care Act requires the following outlier policy: (1) Reduce the 
estimated total payments by 5 percent; (2) target to pay no more than 
2.5 percent of estimated total payments for outliers; and (3) apply a 
10 percent agency-level outlier cap.
5. Loss-Sharing Ratio and Fixed Dollar Loss (FDL) Ratio
    The July 2000 final rule (65 FR 41189) described a methodology for 
determining outlier payments. Under this system, outlier payments are 
made for episodes whose estimated cost exceeds a threshold amount. The 
payment rate for a 60-day episode is the sum of the wage-adjusted 
national per-visit rate amounts for all visits delivered during the 
episode. The outlier threshold is defined as the sum of the episode 
payment rate for that case-mix group and a FDL amount. Both components 
of the outlier threshold are wage-adjusted. The wage-adjusted FDL 
amount represents the amount of loss that an agency must experience 
before an episode becomes eligible for outlier payments. The wage-
adjusted FDL amount is computed by multiplying the national 
standardized 60-day episode payment amount by the FDL ratio, and wage-
adjusting that resulting amount. The wage-adjusted FDL amount is then 
added to the wage-adjusted 60-day episode payment rate to arrive at the 
wage-adjusted outlier threshold amount.
    The outlier payment is defined as a proportion of the wage-adjusted 
estimated costs beyond the wage-adjusted outlier threshold amount. The 
proportion of additional costs paid as outlier payments is referred to 
as the loss-sharing ratio. Prior to the passage of the Affordable Care 
Act, the FDL ratio and the loss-sharing ratio were selected so that the 
estimated total outlier payments would not exceed the 5 percent 
aggregate level. We chose a value of 0.80 for the loss-sharing ratio, 
which is relatively high, but preserves incentives for agencies to 
attempt to provide care efficiently for outlier cases. With a loss-
sharing ratio of 0.80, Medicare pays 80 percent of the additional costs 
above the wage-adjusted outlier threshold amount. A loss-sharing ratio 
of 0.80 is also consistent with the loss-sharing ratios used in other 
Medicare PPS outlier policies, such as inpatient hospital, inpatient 
rehabilitation, long-term hospital, and inpatient psychiatric payment 
systems.
    As discussed in the October 1999 proposed rule (64 FR 58169) and 
the July 2000 final rule (65 FR 41189), the percentage constraint on 
total outlier payments creates a tradeoff between the values selected 
for the FDL ratio and the loss-sharing ratio. For a given level of 
outlier payments, a higher FDL ratio sets higher FDL amounts and thus 
reduces the number of cases that receive outlier payments, but allows 
for setting a higher loss-sharing ratio and higher outlier payments per 
episode. Alternatively, a lower FDL ratio means lower FDL amounts and 
therefore allows more episodes to qualify for outlier payments but 
setting a lower loss-sharing ratio and lower outlier payments per 
episode.
    Therefore, setting these two parameters (that is, FDL ratio and 
loss-sharing ratio) involves policy choices about the number of outlier 
cases and their payments. In the CY 2010 HH PPS final rule (74 FR 
58086), in targeting total outlier payments as 2.5 percent of total HH 
PPS payments, we implemented a FDL ratio of 0.67.
    For this rule, we have updated our analysis from the CY 2010 HH PPS 
final rule and we estimate that maintaining a FDL ratio of 0.67, in 
conjunction with a 10 percent cap on outlier payments at the agency 
level, would target paid outlier payments to be no more than the 2.5 
percent of total HH PPS payments as required by section 1895(b)(5)(A) 
of the Act, as amended by section 3131(b)(2)(B) of the Affordable Care 
Act.
    The following is a summary of the comments we received regarding 
the outlier payment policy.
    Comment: A commenter supported CMS in its efforts to curb fraud and 
abuse in the Medicare program. The commenter is not opposed to the 
proposed implementation of these changes to the outlier policy. 
However, the commenter cautioned CMS to carefully analyze the effect 
this outlier policy might have on HHAs in rural and underserved areas. 
Often times, patients who are sicker and more clinically complex may be 
treated in the HH setting due to lack of access to other post-acute 
care settings. HHAs treating such patients would have higher outlier 
costs than HHAs that are located in urban and higher socioeconomic 
areas. The commenter strongly urged CMS to ensure that these HHAs were 
not unfairly audited or penalized for the treatment furnished to these 
patients. Another commenter stated that some remote rural areas have 
only one agency per county and many counties have no HHAs. In such 
rural areas, there would be no other agency to share intake of clients 
who have costly outlier episodes. State regulations for Medicaid or 
assisted living programs could force clients to be admitted to a 
nursing home because agencies in these remote rural markets might not 
be able to afford to provide care for them. The commenter further urges 
that small HHAs (that is, those with fewer than 300 patients) in remote 
rural areas should be exempt from the agency-level outlier cap or have 
a higher cap. Another commenter recommended exempting agencies with 
fewer than 60 Medicare patients per year from the outlier policy since 
even one or two outlier episodes could easily reach the cap. This 
policy could force some small HHAs to refuse care to patients who are 
most in need of care.
    Response: We will take these comments into consideration when we 
conduct our study on costs involved with providing ongoing access to HH 
services for patients with high severity of illness, as required by the 
Affordable Care Act.
    Comment: Several commenters stated that the proposed outlier policy 
is unfair because all agencies are held accountable for the 
unscrupulous behavior of a few agencies. The commenters believed that 
CMS is taking a broad stroke approach to implementing changes that 
could be detrimental to the many agencies that are operating 
appropriately and in compliance with the regulations. A commenter 
stated that the outlier policy would further reduce patient access and 
would fail to target the abusers. Several

[[Page 70399]]

commenters stated that the legislative limit placed on the outlier pool 
would punish all agencies for the outlier policy abuse of a very 
limited number of agencies. Several commenters recommended restoring 
the 2.5 percent reduction to the payment rates. Another commenter 
stated that the proposed cut of 2.5 percent to the base payment for all 
HHAs in order to ``pay'' for this policy was unfair and excessive, 
especially considering other proposed cuts. The commenter recommended 
that CMS limit any single year rate reductions including statutory 
reductions and case-mix change adjustments to no greater than an 
aggregate 2.5 percent. Another commenter noted that the Affordable Care 
Act mandated that the reduction in payments for outliers be 5 percent 
and that the outlier target be 2.5 percent of total payments. As the 
difference of 2.5 percent remains unallocated in the proposed rule, the 
commenter suggested that CMS redesignate that difference to the 
proposed 3.79 percent decrease for case-mix change, resulting in a 
case-mix adjustment of 1.29 percent decrease. Otherwise, the CY 2011 
HHA rate will be hit twice--by the 3.79 percent case-mix decrease and 
the 2.5 percent outlier pool decrease. Another commenter stated that 
HHAs have already sustained a significant cut in outlier payments, 
leaving insulin dependent and wound care patients without a nurse to 
provide injections and necessary wound care treatment. At any given 
time, an agency cannot assess whether it has the resources to accept 
these types of patients. A commenter requested that CMS exempt 
``special needs'' HHAs that serve high-cost patients with multiple 
clinical issues from the 10 percent agency-level outlier cap. The 
commenter believed a revision to a higher outlier cap is critical for 
continued provision of care by agencies serving high-need and high-cost 
beneficiaries without losing critical outlier funding.
    Response: Section 3131(b) of the Affordable Care Act does not allow 
for exceptions to the mandate of the outlier policy which reduces 
estimated aggregate HH payments by 5 percent, allows no more than an 
estimated 2.5 percent of aggregate HH payments to be outlier payments, 
and requires the 10 percent agency-level outlier cap. We do not have 
regulatory authority to restore the 2.5 percent to the estimated 
aggregate HH payments. Nonetheless, we will continue to monitor outlier 
payments in order to advise the legislators of any unintended 
consequences of this legislation, such as lack of access to care.
    Comment: A commenter stated that he interpreted Table 4 in the July 
23, 2010 proposed rule (75 FR 43257) to indicate that each year HHAs 
can expect an additional 2.5 percent reduction to the base episode rate 
starting from the prior year's base rate before the market basket 
update. This additional rolling reduction does not seem contemplated in 
the Affordable Care Act. A commenter stated that the 2.5 percent rate 
reduction combined with the standard 3 percent inflation/cost of living 
increases demanded by their employees will result in their agency being 
unable to hire staff to serve their patients. CMS does not identify 
actual outlier payment history when addressing these changes in the 
rule.
    Response: The 2.5 percent reduction is not a rolling reduction. The 
2.5 percent reduction is a one-time, but permanent, reduction to the HH 
rates, which is to be applied in CY 2011.
    Table 3 shows outlier payment history as a percentage of total HH 
PPS payments between CY 2004 and CY 2008.

                    Table 3--Outlier Payment History as a Percentage of Total HH PPS Payments
                                          [Between CY 2004 and CY 2008]
----------------------------------------------------------------------------------------------------------------
                                                                                     Total HH PPS     Percentage
                              Year                                Outlier payment       payment         change
----------------------------------------------------------------------------------------------------------------
2004...........................................................      $309,198,604   $11,500,462,624         2.69
2005...........................................................       527,096,653    12,885,434,951         4.09
2006...........................................................       701,945,386    14,041,853,560         5.00
2007...........................................................       996,316,407    15,677,329,001         6.36
2008...........................................................     1,127,162,152    17,114,906,875         6.59
----------------------------------------------------------------------------------------------------------------

    Comment: A commenter stated that the outlier policy will 
significantly decrease fraudulent behavior within the Miami-Dade, 
Florida area. The commenter further supports more open dialogue between 
the HH community and government officials to improve program integrity 
within the Medicare program.
    Response: We appreciate the comment and the commenter's support.
6. Imputed Costs
    Section 3131(d) of the Affordable Care Act requires CMS to conduct 
a study on costs involved with providing HH services for patients with 
high severity of illness, including analysis of potential revisions to 
outlier payments to better reflect costs of treating Medicare 
beneficiaries. CMS will produce a Report to the Congress containing 
this study's recommendations no later than March 1, 2014.
    To consider outlier policy improvements in the nearer term, we 
solicited comments regarding alternate policy options and methodologies 
to better account for high cost patients. In particular, we solicited 
the industry's input on alternatives in imputing costs in the 
calculation of the outlier payments.
    We have discussed and are exploring the possible use of visit 
intensity data in the imputing of costs as part of the outlier payment 
calculation and would be interested in the industry's views on such an 
alternative. In addition, we solicited feedback concerning the use of 
diagnoses codes (for example, diabetes) as a factor in the calculation 
of imputed costs associated with outlier payments. We believe that 
modifying the fixed dollar loss ratio or the loss-sharing ratio now 
would not improve the current policy. However, we welcome industry 
comments on such potential modifications.
    The following is a summary of the comments we received regarding 
imputed costs.
    Comment: Several commenters stated that visit intensity data or 
diagnoses are not the only issues impacting outliers. CMS should 
consider a comprehensive look at resource utilization which might 
include these factors. Another commenter stated that the proposed rule 
does not specify how ``visit intensity'' is to be measured, such as 
whether the length of the visit or the frequency of visits would be 
measured. Several commenters stated that in addition to intensity data 
and diagnoses, resource

[[Page 70400]]

utilization, and other factors affect costs for an outlier episode and 
should be taken into consideration.
    Another commenter suggested using actual, inflation-adjusted, 
agency-specific costs for each discipline rather than the imputed LUPA 
rates currently used to calculate the outlier payment. Calculations 
using such costs would reduce abuse by agencies that game the system by 
providing excessive numbers of visits at visit costs below the LUPA 
rate. Using actual costs versus imputed costs would better estimate the 
needs of patients who are severely impaired. Continued use of imputed 
costs to administer the outlier leaves the program vulnerable to abuse 
while simultaneously compromising the usefulness of the outlier costs 
concept for seriously ill patients of reputable agencies.
    Response: We appreciate these comments and will take them into 
consideration when we conduct a study of outlier payments required by 
the Affordable Care Act. We will produce a Report to the Congress 
containing this study's recommendations no later than March 1, 2014.

D. CY 2011 Rate Update

1. Home Health Market Basket Update
    Section 1895(b)(3)(B) of the Act requires that the standard 
prospective payment amounts for CY 2011 be increased by a factor equal 
to the applicable HH market basket update for those HHAs that submit 
quality data as required by the Secretary. Section 3401(e) of the 
Affordable Care Act amended section 1895(b)(3)(B) of the Act by adding 
a new clause (vi) which states, ``After determining the HH market 
basket percentage increase * * * the Secretary shall reduce such 
percentage * * * for each of 2011, 2012, and 2013, by 1 percentage 
point. The application of this clause may result in the HH market 
basket percentage increase under clause (iii) being less than 0.0 for a 
year, and may result in payment rates under the system under this 
subsection for a year being less than such payment rates for the 
preceding year.''
    The following is a summary of the comments we received regarding 
the HH market basket update.
    Comment: A commenter believes that the market basket index fails to 
include consideration of the direct cost increases that CMS rules may 
have on the delivery of care. Instead, the index evaluates general cost 
changes such as the cost of caregivers, transportation, insurance, and 
office space. This approach does not provide CMS with sufficient 
information to adjust payment rates in relation to regulatory cost 
increases.
    When the HH services ``product'' changes because of new regulatory 
requirements, CMS should include in the market basket index an element 
to address the resulting cost changes. Alternatively, CMS should adjust 
base payment rates to account for such cost changes as done previously 
for costs associated with OASIS.
    Response: The 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 is rather intended 
to measure the input price pressures that the average HH 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 HHAs. Each cost category is assigned 
an appropriate price proxy whose projected movements are weighted by 
their respective cost shares and aggregated to arrive at the actual 
market basket update.
    Any cost increases that a provider bears based on regulatory 
requirements must be reflected in the increasing costs of the inputs on 
provision of the service. When the market basket is rebased, cost 
changes will be accounted for in the data, up to and including the base 
year. We evaluate the cost weight distributions on a periodic basis. If 
the cost structure of the HH industry changes, such as a greater share 
of expenses being devoted to wages and salaries, we will propose to 
rebase and revise the market basket, as appropriate.
    Comment: A commenter states that the continued reductions to the 
home health market basket update each year for 2011, 2012, and 2013 are 
drastic. These cuts come at a time when labor costs--particularly 
nurses and therapist--continue to rise.
    Response: Since publication of the CY 2011 HH PPS proposed rule, we 
have updated the HH market basket increase for CY 2011. The updated HH 
market basket increase is 2.1 percent, which is based on IHS Global 
Insight Inc.'s third quarter 2010 forecast, utilizing historical data 
through the second quarter of 2010. A detailed description of the 
methodology used to derive the HH market basket is available in the CY 
2008 HH PPS proposed rule (72 FR 25356, 25435). Due to the new 
requirement at section 1895(b)(3)(B)(vi) of the Act, the CY 2011 market 
basket update of 2.1 percent must be reduced by 1 percentage point to 
1.1 percent. In effect, the CY 2011 market basket update is 1.1 
percent. The statute does not permit us to exercise any discretion with 
respect to the application of this percentage point reduction.
2. Home Health Care Quality Improvement
a. OASIS
    Section 1895(b)(3)(B)(v)(II) of the Act requires that ``each home 
health agency shall submit to the Secretary such data that the 
Secretary determines are appropriate for the measurement of health care 
quality. Such data shall be submitted in a form and manner, and at a 
time, specified by the Secretary for purposes of this clause.'' In 
addition, section 1895(b)(3)(B)(v)(I) of the Act dictates that ``for 
2007 and each subsequent year, in the case of a HHA that does not 
submit data to the Secretary in accordance with sub clause (II) with 
respect to such a year, the HH market basket percentage increase 
applicable under such clause for such year shall be reduced by 2 
percentage points.'' This requirement has been codified in regulations 
at Sec.  484.225(i).
    Accordingly, for CY 2011, we will continue to use a HHA's 
submission of OASIS data to meet the requirement that the HHA submit 
data appropriate for the measurement of health care quality. For CY 
2011, 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, 2009 and before July 1, 2010 as 
fulfilling the quality reporting requirement for CY 2011. This time 
period allows for 12 full months of data collection and would provide 
us the time necessary to analyze and make any necessary payment 
adjustments to the payment rates in CY 2011. We will reconcile the 
OASIS submissions with claims data in order to verify full compliance 
with the quality reporting requirements in CY 2011 and each year 
thereafter on an annual cycle July 1 through June 30 as described 
above.
    As set forth in the CY 2008 final rule, agencies do not need to 
submit quality data for those patients who are excluded from the OASIS 
submission requirements under the Home Health Conditions of 
Participation (CoP) (Sec.  484.200 through 484.265), as well as those 
excluded, as described in the Final Rule Medicare and Medicaid 
Programs: Reporting Outcome and Assessment Information Set Data as Part 
of the Conditions of Participation for

[[Page 70401]]

Home Health Agencies December 23, 2005 (70 FR 76202) as follows:
     Those patients receiving only non-skilled services;
     Neither Medicare nor Medicaid is paying for HH care 
(patients receiving care under a Medicare or Medicaid Managed Care Plan 
are not excluded from the OASIS reporting requirement);
     Those patients receiving pre- or post-partum services; or
     Those patients under the age of 18 years.
    As set forth in the CY 2008 final rule (72 FR 49863), agencies that 
become Medicare-certified on or after May 1 of the preceding year (2010 
for payments in 2011) are excluded from any payment penalty for quality 
reporting purposes for the following CY. Therefore, HHAs that are 
certified on or after May 1, 2010 are excluded from the quality 
reporting requirement for CY 2011 payments. These exclusions only 
affect quality reporting requirements and do not affect the HHA's 
reporting responsibilities under the CoP. HHAs that meet the quality 
data reporting requirements would be eligible for the full HH market 
basket percentage increase. HHAs that do not meet the reporting 
requirements would be subject to a 2 percent reduction to the HH market 
basket increase in conjunction with applicable provisions of the 
Affordable Care Act, as discussed in the section II.X. of this final 
rule ``CY 2011 Payment Update.''
    Section 1895(b)(3)(B)(v)(III) of the Act further requires that 
``[t]he Secretary shall establish procedures for making data submitted 
under sub clause (II) available to the public. Such procedures shall 
ensure that a HHA has the opportunity to review the data that is to be 
made public with respect to the agency prior to such data being made 
public.'' We will continue to use the subset of OASIS data that is 
utilized for quality measure development and publicly reported on Home 
Health Compare as the appropriate measure of HH quality.
    To meet the requirement for making such data public, we will 
continue to use the Home Health Compare Web site, which lists HHAs 
geographically. Currently, the Home Health Compare Web site lists 12 
quality measures from the OASIS data set as described later. The Home 
Health Compare Web site, which is scheduled to be redesigned this Fall 
is located at http://www.medicare.gov/HHCompare/Home.asp. Each HHA 
currently has pre-publication access, through the CMS contractor, to 
its own quality data, as the contractor updates this periodically. We 
will continue this process, to enable each agency to view its quality 
measures before public posting of data on Home Health Compare Web site.
    The following 12 outcome measures are currently publicly reported:
     Improvement in ambulation/locomotion;
     Improvement in bathing;
     Improvement in transferring;
     Improvement in management of oral medications;
     Improvement in pain interfering with activity;
     Acute care hospitalization;
     Emergent care;
     Discharge to community;
     Improvement in dyspnea;
     Improvement in urinary incontinence;
     Improvement in status of surgical wounds; and
     Emergent care for wound infections, deteriorating wound 
status.
    We will continue to use specified measures derived from the OASIS 
data for purposes of measuring HH care quality. This would also ensure 
that providers would not have an additional burden of reporting quality 
of care measures through a separate mechanism, and that the costs 
associated with the development and testing of a new reporting 
mechanism would be avoided.
    We have changed the set of OASIS outcome measures that will be 
publicly reported beginning in July 2011 to include the following 
outcome measure:
     Increase in number of pressure ulcers.
    This outcome measure is the percentage of patient episodes in which 
there was an increase in the number of unhealed pressure ulcers. This 
measure is important because pressure ulcers are key indicators of the 
effectiveness of care and are among the most common causes of harm to 
patients. Though consensus endorsement is not a requirement for public 
reporting of HH quality measures, this measure is endorsed by the 
National Quality Forum (NQF).
    As previously stated, although NQF endorsement is not required for 
public reporting, we will discontinue public reporting of certain 
outcome measures, which were previously reported on Home Health Compare 
and are no longer endorsed by NQF. Those measures are the following:
     Discharge to community;
     Improvement in Urinary Incontinence; and
     Emergent Care for Wound Infections, Deteriorating Wound 
Status.
    We solicited comments on these measures in the CY 2011 HH PPS 
proposed rule.
    Additionally, the change to OASIS-C results in modifications to two 
of the outcome measures as follows:
     Improvement in bed transferring: This measure replaces the 
previously reported measure improvement in transferring. It provides a 
more focused measurement of the ability to turn and position oneself in 
bed and transfer to and from the bed.
     Emergency Department Use without Hospitalization: This 
measure replaces the previously reported measure: Emergent care. It 
excludes emergency department visits that result in a hospital 
admission because those visits are already captured in the acute care 
hospitalization measure.
    To summarize, the following outcome measures, which comprise 
measurement of HH care quality, will be publicly reported beginning in 
July 2011:
     Improvement in ambulation/locomotion;
     Improvement in bathing;
     Improvement in bed transferring;
     Improvement in management of oral medications;
     Improvement in pain interfering with activity;
     Acute care hospitalization;
     Emergency Department Use without Hospitalization;
     Improvement in dyspnea;
     Improvement in status of surgical wounds; and
     Increase in number of pressure ulcers.
    We implemented use of the OASIS-C (Form Number CMS-R-245 
(OMB 0938-0760)) on January 1, 2010. This revision to OASIS 
was tested and has been distributed for public comment and other 
technical expert recommendations over the past few years. The OASIS-C 
is on the CMS Web site at http://www.cms.hhs.gov/HomeHealthQualityInits/12_HHQIOASISDataSet.asp#TopOfPage.
    As a result of changes to the OASIS data set, process of care 
measures are available as additional measures of HH quality. We 
published information about new process measures in the August 13, 2009 
proposed rule (74 FR 40960) and in the November 10, 2009 final rule 
with comment period (74 FR 58096). We proposed and made final the 
decision to update the Home Health Compare Web site in October 2010 to 
reflect the addition of the following 13 new process measures:
     Timely initiation of care;
     Influenza immunization received for current flu season;
     Pneumococcal polysaccharide vaccine ever received;
     Heart failure symptoms addressed during short-term 
episodes;

[[Page 70402]]

     Diabetic foot care and patient education implemented 
during short-term episodes of care;
     Pain assessment conducted;
     Pain interventions implemented during short-term episodes;
     Depression assessment conducted;
     Drug education on all medications provided to patient/
caregiver during short-term episodes;
     Falls risk assessment for patients 65 and older;
     Pressure ulcer prevention plans implemented;
     Pressure ulcer risk assessment conducted; and
     Pressure ulcer prevention included in the plan of care.
    The implementation of OASIS-C impacts the schedule of quality 
measure reporting for CY 2010 and CY 2011. While sufficient OASIS-C 
data are collected and risk models are developed, the outcome reports 
(found on the Home Health Compare Web site and the contractor outcome 
reports used for HHA's performance improvement activities) will remain 
static with OASIS-B1 data. The last available OASIS-B1 reports will 
remain in the system and on the HHC site until they are replaced with 
OASIS-C reports. Sufficient numbers of patient episodes are needed in 
order to report measures based on new OASIS-C data. This is important 
because measures based on patient sample sizes taken over short periods 
can be inaccurate and misleading due to issues like seasonal variation 
and under-representation of long-stay HH patients. Once sufficient 
OASIS-C data have been collected and submitted to the national 
repository, we will begin producing new reports based on OASIS-C.
    December 2009 was the last month for which OBQI/M data was 
calculated for OASIS-B1 data and OASIS-B1 OBQI/M reports continue to be 
available after March 2010. OASIS-C process measures are available to 
preview as of September 2010 and will be publicly reported in October 
2010. OASIS-C outcome measures will be available to preview in May 2011 
and will be publicly reported in July 2011.
    The following is a summary of the comments we received regarding 
the Home Health Care Quality Improvement: OASIS proposal.
    Comment: One commenter expressed support for the proposed changes 
in OASIS reporting. Another commenter stated support for quality 
reporting. Commenters also stated they support the changes in OASIS 
publicly reported indicators and expressed support for the continued 
submission of OASIS data and expressed their commitment to continue 
working with CMS to develop appropriate measures. Commenters also 
support the adoption of OASIS-C process measures and applaud CMS for 
creating this patient-focused system.
    Response: We appreciate the positive feedback regarding changes in 
the measures which will be publicly reported and the quality reporting 
efforts in general. We appreciate the industry's encouragement and 
willingness to adopt the new methods that reflect the quality of care 
provided to Medicare beneficiaries.
    Comment: One commenter expressed concern with the addition of the 
Increase in Number of Pressure Ulcers measure to publicly reported 
outcomes. The commenter stated that it is not an appropriate measure of 
the homecare agencies' effectiveness of care but rather of the family's 
effectiveness and that HHAs are not responsible for the care provided 
24 hours a day.
    Response: Though HH services are provided on an intermittent, part-
time basis, and HHA staff are not present in the home 24 hours per day, 
the HHA is responsible for determining that the level of care provided 
by the agency is safe and adequate to manage the needs of the patient. 
Monitoring and addressing adherence to the Plan of Care established by 
the physician, HHA, patient, and family is the responsibility of the 
HHA. In many cases, though we agree not all, the provision of skilled 
nursing services, which includes family/caregiver instruction, in 
conjunction with the provision of personal care services, can 
accomplish a great deal in the prevention of new pressure ulcers. We 
believe this is an important indicator of HHA performance related to 
best practices, patient safety, and comfort. This measure is also 
harmonized with similar measures in other settings. We will move 
forward with reporting Increase in Number of Pressure Ulcers on Home 
Health Compare in July 2011.
    Comment: One commenter urged CMS to maintain ``Improvement in 
Urinary Incontinence'' among the publicly reported outcome measures, 
stating that this measure is of utmost importance to Medicare 
beneficiaries' quality of life and Medicare costs. Another commenter 
expressed disappointment in the removal of the outcome measure 
``Discharge to Community'' from public reporting, stating their belief 
that this measure is one of the best measures of the effectiveness of 
HHA intervention.
    Response: The Improvement in Urinary Incontinence outcome measure 
did not receive endorsement from NQF when reviewed in March 2009. NQF's 
rationale primarily involved concerns about reliability of the data, 
that is, that this information is difficult to capture reliably due to 
issues with patient reporting. We have also received feedback from 
providers and consumers, which leads us to believe that the measure 
lacks salience and meaningful use, particularly among consumers. It 
appears that consumers are unable to link this outcome to the HHA's 
performance and cannot attribute improvement to HHA care.
    The Discharge to Community measure also did not receive endorsement 
from NQF when reviewed in March 2009. NQF determined that this measure 
did not reflect whether patients met their treatment goals, but only 
that they were discharged from services, which may have been for other 
reasons unrelated to the care provided. NQF also noted that the acute 
care hospitalization measure captures many of these patients. However, 
the comments offered do present meaningful information that we will 
find useful when considering resubmitting these measures for NQF 
endorsement. Please note that these measures will continue to be 
provided to agencies for use in quality/performance improvement 
efforts.
    Comment: One commenter recommended CMS consider ending the 
requirement that OASIS data be submitted for Medicare Advantage (MA) 
plans, noting that that they have not found an MA plan that has used 
the data in the past decade.
    Response: Under section 1891(b) of the Act, the Secretary is 
responsible for assuring that the Conditions of Participation (CoPs) 
and their enforcement are adequate to protect the health and safety of 
individuals under the care of an HHA and to promote the effective and 
efficient use of Medicare funds. Medicare funds are used to pay for 
care provided to patients covered by MA plans.
    Under sections 1861(o), 1871, and 1891 of the Act, the Secretary 
has established in regulations the requirements that an HHA must meet 
to participate in the Medicare program. These requirements are set 
forth at 42 CFR Part 484, Conditions of Participation: Home Health 
Agencies. The current HH CoPs require that all HHAs participating in 
Medicare and Medicaid (including managed care organizations providing 
HH services to Medicare and Medicaid beneficiaries) collect and report 
OASIS data on adult, non-maternity patients receiving skilled care.
    One of the major purposes of collecting and reporting OASIS data is 
to track the quality of patient outcomes.

[[Page 70403]]

It is important that the content of reports depicting the status of 
patient outcomes and the HHA use of best practices include measures 
related to all Medicare beneficiaries, including those covered by MA 
Plans. It is also important to include MA beneficiary data in the 
calculation of agency, state, and national averages in both agency 
level and public quality measure reports. This quality information is 
available for use and is actually used not only by payers, but also by 
researchers, providers, and consumers of HH services. We are not 
currently considering a change in the OASIS reporting requirements.
    Comment: Two commenters urge that CMS remove New York State's 
LTHHCP agencies from the Pay for Reporting (P4R) initiative in order to 
ensure that these programs will not be adversely/unfairly affected or 
penalized once CMS implements a Pay for Performance system. The 
commenter also requests that any special needs CHHAs be removed from 
the P4R initiative for the same reasons.
    Response: The Pay for Reporting initiative requires that all 
Medicare certified HHAs submit OASIS assessments. The HH P4R 
requirements are based in section 5201(c)(2) of the DRA, which provides 
for an adjustment to the HH market basket percentage update depending 
on their submission of quality data. HHAs that submit the required 
quality data using OASIS will receive payments based on the full HH 
market basket update each calendar year. If a HHA does not submit 
quality data, the HH market basket will be reduced by 2 percentage 
points based on annual payment rule and the Congress. The submission of 
OASIS assessments is also required by the CoPs and as a Condition of 
Payment. The only exceptions to the reporting requirements are:
     Prepartum and postpartum patients;
     Patients under the age of 18;
     Patients not receiving skilled health care services; and
     Non-Medicare/non-Medicaid patients (patients receiving 
care under a Medicare or Medicaid Managed Care Plan are not excluded 
from the OASIS reporting requirement).
    Since New York's LTHHCP agencies or any special needs CHHAs do not 
fall within these exclusions, we are not waiving their reporting 
requirements.
    The Affordable Care Act requires that we submit a Report to 
Congress outlining a Value Based Purchasing Plan for HHAs by October, 
1, 2011. We are in the process of developing the Home Health Value 
Based Purchasing report and decisions have not yet been made about this 
issue. Therefore, it would be premature to link a Pay for Performance 
system to OASIS submission at this time.
    Comment: One commenter expressed concern that it is too soon to 
publicly report the new OASIS-C process measures and request an 
additional year of study and refinement before these measures are 
released to the public. The commenter also states that most agencies 
have no way to identify where they stand with regard to the process 
items and that many of these items remain problematic and confusing to 
providers.
    Response: The process measure reports, which detail the 47 new 
process measures based on OASIS-C, were made available to HHAs via the 
CASPER reporting system as of September 1, 2010. The availability of 
these reports meets the statutory requirement that HHAs have 
opportunity to view their measures prior to public reporting. Thirteen 
of the process measures were posted on Home Health Compare in October 
2010.
    We recognize that agencies have experienced many changes with the 
transition to OASIS-C on January 1, 2010 and will need to continue to 
make adjustments to move their newly measured performance forward. 
These changes and adjustments are all intended to improve the care 
provided to beneficiaries and to provide best practices that HHAs may 
choose to implement for their HH patients. Process measures are 
mechanisms for assessing the degree to which a provider competently and 
safely delivers clinical services that are appropriate for the patient 
in the optimal time period. Through efforts over time, HHAs should see 
improvements in their process measure reports, including those that are 
publicly reported. Recognizing that the first set of reports will 
provide the baseline of performance on which HHAs can build, we will 
continue with the proposed reporting plan and timeline.
    There are several resources available to assist with any remaining 
confusion within the HH industry related to the process items that 
include the following:
     In 2009, CMS provided three Train the Trainer calls via 
the Medicare Learning Network one of which focused on process items and 
measures. All three transcripts are still available at http://www.cms.gov/HomeHealthQualityInits/03_EducationalResources.asp#TopOfPage.
     A new training video specific to Process-Based Quality 
Improvement (PBQI) is now available on YouTube at http://www.youtube.com/watch?v=hNno1GIVAPA.
     Four new and/or revised manuals are also available as 
downloads from the Home Health Quality Initiatives site at http://www.cms.gov/HomeHealthQualityInits/.
     For questions regarding the OASIS items, the OASIS Answers 
mailbox can be accessed at [email protected].
    Comment: One commenter expressed concern with the increased demands 
placed upon HHAs to provide information regarding the quality of their 
services, and that possibly these newer requirements are unfair to HHAs 
that are honestly trying to provide good services and that agencies 
would stop admitting patients that are in dire need of HH services 
because outcomes would not be good. The commenter was concerned at the 
presence of unscrupulous HHAs that are taking advantage of seniors who 
are deserving of quality HH care, and advised CMS to be more cautious 
as to whom they let into the program. Another commenter stated that 
OASIS is very time consuming and the addition of HHCAHPs is ``enough.'' 
Some commenters suggested that OASIS-C, HHCAHPS, and general Quality 
Management requirements are unfunded mandates; that are very costly to 
implement. One commenter expressed concern that there is no mention of 
risk adjustments on publicly reported data. Another commenter noted 
that neither quality measures nor HHCAHPS address communication or 
swallowing capabilities.
    Response: We appreciate these commenters' concerns about fraudulent 
HH providers. We are also aware that newer requirements, such as OASIS-
C and HHCAHPS, may be perceived as an additional and burdensome 
responsibility that HHAs now have. However, we believe that both the 
OASIS-C process measures and HHCAHPS will be very useful to both HH 
beneficiaries and HHAs. Recipients of HH services will have access to 
more information about the quality of HH care. HHAs can utilize the 
data gleaned from these new requirements for their internal quality 
improvement purposes, which will assist them as businesses and 
providers. The HH quality requirements are intended to provide improved 
support for agency quality improvement efforts and enhanced quality 
information for both providers and beneficiaries. 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

[[Page 70404]]

individual patients and can provide guidance to agencies on how to 
improve care and avoid adverse events.
    Regarding the addition of process measures and best practices, it 
is also important to note that HHAs are encouraged to use these best 
care practices but they are not mandated under the current CoPs.
    With the exception of requiring that the item be included on the 
assessment form and answered, we are not prescribing the content of 
agency clinical assessments or mandating specific processes of care. 
There is no requirement for agencies to change their care processes to 
match the evidence-based practices measured in the OASIS C. It is up to 
each agency to determine which practices it will implement based on its 
own patients and operations. Regarding risk adjustment, all outcome 
measures will be risk adjusted for HHA reports and for public 
reporting. Regarding the absence of measures related to communication 
and swallowing, the development of both quality measures and patient 
satisfaction questions are dynamic processes and we will consider these 
categories in our future efforts.
    After considering the comments submitted, we have decided to 
finalize what was originally proposed.
b. Home Health Care CAHPS Survey (HHCAHPS)
    In the HH PPS Rate Update for CY 2010 final rule (74 FR 58078), we 
expanded the HH quality measures reporting requirements for Medicare-
certified agencies to include the CAHPS[supreg] Home Health Care 
(HHCAHPS) Survey for the CY 2012 annual payment update (APU). We are 
maintaining our existing policy as promulgated in the HH PPS Rate 
Update for CY 2010, and are moving forward with its plans for HHCAHPS 
linkage to the P4R requirements affecting the HH PPS rate update for CY 
2012.
    As part of the U.S. Department of Health and Human Services' (DHHS) 
Transparency Initiative, we have implemented a process to measure and 
publicly report patient experiences with HH 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 HH patients with a set of 
standardized questions about their HH care providers and about the 
quality of their HH care. Prior to this survey, there was no national 
standard for collecting information about patient experiences that 
would enable valid comparisons across all HHAs.
(i) Background and Description of the HHCAHPS
    AHRQ, in collaboration with its CAHPS grantees, developed the 
CAHPS[reg] 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 HH 
care). The HHCAHPS survey was designed to measure and assess the 
experiences of those persons receiving HH care with the following three 
goals in mind:
     To produce comparable data on patients' perspectives of 
care that allow objective and meaningful comparisons between HHAs 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 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 received clearance 
from OMB on July 18, 2009, and the OMB number is 0938-1066.
    The HHCAHPS survey includes 34 questions covering topics such as 
specific types of care provided by HH providers, communication with 
providers, interactions with the HHA, 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:
     Patient care
     Communications between providers and patients
     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 or her willingness to recommend the 
HHA to family and friends.
    The survey is currently available in five languages. At the time of 
the CY 2010 HH PPS final rule published on November 10, 2009, HHCAHPS 
was only available in English and Spanish translations. In the proposed 
rule for CY 2010, we stated that CMS would provide additional 
translations of the survey over time in response to suggestions for any 
additional language translations. We now offer HHCAHPS in English, 
Spanish, Chinese, Russian, and Vietnamese languages. We will continue 
to consider additional translations of the HHCAHPS in response to the 
needs of the HH patient population.
    The following types of HH care patients are eligible to participate 
in the HHCAHPS survey:
     Current or discharged Medicare and/or Medicaid patients 
who had at least one skilled HH visit at any time during the sample 
month;
     Patients who were at least 18 years of age at any time 
during the sample period, and are believed to be alive;
     Patients who received at least two skilled care visits 
from HHA personnel during a 2-month look-back period. (Note that the 2-
month look-back period is defined as the 2-month period prior to and 
including the last day in the sample month);
     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;
     Patients who are not currently receiving hospice care;
     Patients who do not have ``maternity'' as the primary 
reason for receiving HH care; and
     Patients who have not requested ``no publicity status.''
    We are maintaining for the CY 2012 APU the existing requirements 
for Medicare-certified agencies to contract with an approved HHCAHPS 
survey vendor. Beginning in summer 2009, interested vendors applied to 
become approved HHCAHPS survey vendors. The application process is 
online at https://www.homehealthcahps.org. Vendors are required to 
attend introductory and all update trainings conducted by CMS and the 
HHCAHPS Survey Coordination Team, as well as to pass a post-training 
certification test. We now have 40 approved HHCAHPS survey vendors. In 
this rule, we also

[[Page 70405]]

codify the requirements for being an approved HHCAHPS survey vendor for 
the CY 2013 APU.
    HHAs started to participate in HHCAHPS on a voluntary basis 
beginning in October 2009. We define ``voluntary participation'' as 
meaning that HHCAHPS participation is not attached to the quality 
reporting requirement for the APU. These agencies selected a vendor 
from the list of HHCAHPS approved survey vendors, which is available at 
https://www.homehealthcahps.org.
(ii) Public Display of the Home Health Care CAHPS Survey Data
    The Home Health Care CAHPS data will be incorporated into the Home 
Health Compare Web site to complement the clinical measures. The 
HHCAHPS data displays will be very similar to those of the Hospital 
CAHPS (HCAHPS) data displays and presentations on the Hospital Compare 
Web site, where the patients' perspectives of care data from HCAHPS are 
displayed along with the hospital clinical measures of quality. We 
believe that the HHCAHPS will enhance the information included in Home 
Health Compare by providing Medicare beneficiaries a greater ability to 
compare the quality of HHAs. We anticipate that the first reporting of 
HHCAHPS data will be in spring/summer 2011. The first reporting of 
HHCAHPS data will include data that were collected in the voluntary 
period of HHCAHPS data collection (October 2009 through September 
2010), prior to the period when HHCAHPS data collection will count 
toward the 2012 APU requirements. HHAs will be able to suppress the 
public reporting of data collected in the voluntary period of data 
collection.
(iii) Participation Requirements for CY 2012: The Consumer Assessment 
of Healthcare Providers and Systems (CAHPS[supreg]) Home Health Care 
Survey
    In the CY 2010 HH PPS final rule (74 FR 58078, et seq.), we stated 
that HHCAHPS would not be required for the APU for CY 2011. However, we 
stated that data collection should take place beginning in CY 2010 in 
order to meet the HHCAHPS reporting requirements for the CY 2012 APU 
Medicare-certified agencies were asked to participate in a dry run for 
at least 1 month in third quarter of 2010, and begin continuous monthly 
data collection in October 2010 in accordance with the Protocols and 
Guidelines Manual located on the HHCAHPS Web site at https://www.homehealthcahps.org.
    The dry run data should be submitted to the Home Health 
CAHPS[supreg] Data Center by 11:59 p.m., Eastern Standard Time on 
January 21, 2011. The dry run data will not be publicly reported on the 
CMS Home Health Compare Web site. The purpose of the dry run is to 
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.
    The mandatory period of data collection for the CY 2012 APU 
includes the dry run data in the third quarter 2010, data from the 
fourth quarter 2010 (October, November and December 2010), and data 
from the first quarter 2011 (January, February and March 2011). We 
previously stated that all Medicare-certified HHAs should continuously 
collect HHCAHPS survey data for every month in every quarter beginning 
with the fourth quarter (October, November, and December) of 2010, and 
submit these data for the fourth quarter of 2010 to the Home Health 
CAHPS[supreg] Data Center by 11:59 p.m., Eastern Daylight Time on April 
21, 2011. The data from the 3 months of the first quarter 2011 should 
be submitted to the Home Health CAHPS[supreg] Data Center by 11:59 
p.m., Eastern Daylight Time on July 21, 2011. These data submission 
deadlines are firm (that is, no late submissions will be accepted).
    These periods (a dry run in third quarter 2010, and 6 months of 
data from October 2010 through March 2011) have been deliberately 
chosen to comprise the HHCAHPS reporting requirements for the CY 2012 
APU because they coincide with the OASIS-C reporting requirements that 
are due by June 30, 2011 for the CY 2012 APU. In the previous rule, we 
stated that the HHCAHPS survey data would be submitted and analyzed 
quarterly, and that the sample selection and data collection would 
occur on a monthly basis. HHAs should target 300 completed HHCAHPS 
survey annually. Smaller agencies that are unable to reach 300 survey 
completes by sampling would survey all HHCAHPS eligible patients.
    We stated that survey vendors initiate the survey for each monthly 
sample within 3 weeks after the end of the sample month. We wrote that 
all data collection for each monthly sample would have to be completed 
within 6 weeks (42 calendar days) after data collection began. Three 
survey administration modes could be used: mail only; telephone only; 
and mail with telephone follow-up (the ``mixed mode''). We also 
conveyed that for mail-only and mixed-mode surveys, data collection for 
a monthly sample would have to end 6 weeks after the first 
questionnaire was mailed. We stated that for telephone-only surveys, 
data collection would have to end 6 weeks following the first telephone 
attempt. These criteria would remain the same for HHCAHPS data 
collection to meet the CY 2012 APU requirements.
    As stated in the CY 2010 HH PPS final rule (74 FR 58078), we would 
exempt Medicare-certified HHAs certified on or after April 1, 2011 from 
the HHCAHPS reporting requirements for CY 2012 as data submission and 
analysis will not be possible for an agency this late in the reporting 
period for the CY 2012 APU requirements.
    We would also exempt Medicare-certified agencies from the HHCAHPS 
reporting requirements if they have fewer than 60 HHCAHPS eligible 
unique patients from April 1, 2009 through March 31, 2010. In the CY 
2010 HH PPS final rule, we stated that by June 16, 2010, HHAs would 
need to provide CMS with patient counts for the period of April 1, 2009 
through March 31, 2010. We have posted a form that the HHAs need to use 
to submit their patient counts on the Web site at https://www.homehealthcahps.org. This patient counts reporting requirement 
pertains only to Medicare-certified HHAs with fewer than 60 HHCAHPS 
eligible, unduplicated or unique patients for that time period. The 
aforementioned agencies would be exempt from conducting the HHCAHPS 
survey for the APU in CY 2012. In this rule, we codify the requirement 
that if an HHA has fewer than 60 eligible unique HHCAHPS patients 
annually, then they must submit to CMS their total patient counts in 
order to be exempt from the HHCAHPS reporting requirement.
    For CY 2012, we maintain our policy that all HHAs, unless covered 
by specific exclusions, meet the quality reporting requirements or be 
subject to a 2 percentage point reduction in the HH market basket 
percentage increase in accordance with section 1895(b)(3)(B)(v)(I) of 
the Act.
    A reconsiderations and appeals process is being developed for HHAs 
that fail to meet the HHCAHPS data collection requirements. We proposed 
that these procedures will be detailed in the CY 2012 HH payment rule, 
the period for which HHCAHPS data collection would be required for the 
HH market basket percentage increase. During September through October 
2011, we will compile a list of HHAs that are not compliant with OASIS-
C and/or HHCAHPS for the 2012 APU requirements. These HHAs would

[[Page 70406]]

receive explicit instructions about how to prepare a request for 
reconsideration of the CMS decision, and these HHAs would have 30 days 
to file their requests for reconsiderations to CMS. By December 31, 
2011, we would provide our final determination for the quality data 
requirements for CY 2012 payment rates. HHAs have a right to appeal to 
the Prospective Reimbursement Review Board (PRRB) if they are not 
satisfied with the CMS determination.
(iv) Oversight Activities for the Consumer Assessment of Healthcare 
Providers and Systems (CAHPS[supreg]) Home Health Care Survey
    We stated that vendors and HHAs would 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. As stated, all approved 
survey vendors must develop a Quality Assurance Plan (QAP) for survey 
administration in accordance with the Protocols and Guidelines Manual. 
The QAP should include the following:
     An organizational chart;
     A work plan for survey implementation;
     A 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 
of 1996 (HIPAA) (Pub. L. 104-191, enacted on August 21, 1996).
    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 at https://www.homehealthcahps.org. We stated that all materials relevant to 
survey administration would be subject to review. The systems and 
program review would include, but not be limited to the following
     Survey management and data systems;
     Printing and mailing materials and facilities;
     Data receipt, entry and storage facilities; and
     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.
(v) HHCAHPS Requirements for CY 2013
    For the CY 2013 APU, we will begin to require that four quarters of 
data for HHCAHPS be collected and reported. The data collection period 
would include second quarter 2011 through first quarter 2012. HHAs will 
be required to submit to the Home Health CAHPS Data Center data for the 
second quarter 2011 by 11:59 p.m., Eastern Daylight Time on October 21, 
2011; for the third quarter 2011 by 11:59 p.m., Eastern Standard Time 
on January 21, 2012; for the fourth quarter 2011 by 11:59 p.m., Eastern 
Daylight Time on April 21, 2012; and for the first quarter 2012 by 
11:59 p.m., Eastern Daylight Time on July 21, 2012.
    As noted, we exempt HHAs receiving Medicare certification on or 
after April 1, 2012 from the full HHCAHPS reporting requirement for the 
CY 2013 APU, as data submission and analysis will not be possible for 
an agency that late in the reporting period for the CY 2013 APU 
requirements. However, we require that new HHAs that receive Medicare 
certification during CY 2012 begin HHCAHPS data collection and 
submission the quarter following receipt of the CMS Certification 
Number (CCN) in order to receive the CY 2013 APU.
    As noted, we require that all HHAs that have fewer than 60 HHCAHPS-
eligible unduplicated or unique patients in the period of April 1, 2010 
through March 31, 2011 will be exempt from the HHCAHPS data collection 
and submission requirements for the CY 2013 APU. For the CY 2013 APU, 
agencies with fewer than 60 HHCAHPS-eligible, unduplicated or unique 
patients would be required to submit their counts on the form posted on 
https://www.homehealthcahps.org, the Web site of Home Health Care CAHPS 
by 11:59 p.m., e.s.t. on January 21, 2012. This deadline is firm, as 
are all of the quarterly data submission deadlines.
    We proposed to codify the HHCAHPS survey vendor requirements to be 
effective with the CY 2013 APU. In our regulation, we are stating in 
Sec.  484.250(c)(2) that applicants to become approved HHCAHPS survey 
vendors must have been in business for a minimum of 3 years and have 
conducted ``surveys of individuals'' for at least 2 years immediately 
preceding the application to become a survey vendor for HHCAHPS. For 
purposes of the approval process for HHCAHPS survey vendors, a ``survey 
of individuals'' is defined as the collection of data from individuals 
selected by statistical sampling methods and the data collected are 
used for statistical purposes. An applicant organization must:
     Have conducted surveys of individuals responding about 
their own experiences, not of individuals responding on behalf of a 
business or organizations (establishment or institution surveys);
     Be able to demonstrate that a statistical sampling process 
(that is, simple random sampling [SRS], proportionate stratified random 
sampling [PSRS], or disproportionate stratified random sampling [DSRS]) 
was used in the conduct of previously or currently conducted survey(s);
     Be able to demonstrate that it, as an organization, has 
conducted surveys for at least two years, in which statistical samples 
of individuals were selected. If staff within the applicant 
organization has relevant experience obtained while in the employment 
of a different organization, that experience may not be counted toward 
the 2-year minimum of survey experience; and
     Currently possess all required facilities and systems to 
implement the HHCAHPS Survey.
    We also proposed that the following examples of data collection 
activities would not satisfy the requirement of valid survey experience 
for approved vendors as defined for the HHCAHPS, and these would not be 
considered as part of the experience required of an approved vendor for 
HHCAHPS:
     Polling questions administered to trainees or participants 
of training sessions or educational courses, seminars, or workshops;
     Focus groups, cognitive interviews, or any other 
qualitative data collection activities;
     Surveys of fewer than 600 individuals;
     Surveys conducted that did not involve using statistical 
sampling methods;
     Internet or Web-based surveys; and
     Interactive Voice Recognition Surveys.
    We also proposed to codify the criteria that would make 
organizations ineligible to become HHCAHPS approved survey vendors. We 
proposed to require that any organization that owns, operates, or 
provides staffing for a HHA not be permitted to administer its own 
HHCAHPS Survey or administer the survey on behalf of any other HHA. We 
began the HHCAHPS with the belief, based on input from many 
stakeholders

[[Page 70407]]

and the public, that an independent third party (such as a survey 
vendor) will be best able to solicit unbiased responses to the HHCAHPS 
Survey. Since HH patients receive care in their homes, this survey 
population is particularly vulnerable and dependent upon their HHA 
caregivers. Therefore, in Sec.  484.250(c), we proposed to require that 
HHAs contract only with an independent, approved HHCAHPS vendor to 
administer the HHCAHPS survey on their behalf. Furthermore, in Sec.  
484.250(c)(2), we stated that ``No organization, firm, of business that 
owns, operates, or provides staffing for an HHA is permitted to 
administer its own Home Health Care CAHPS (HHCAHPS) Survey or 
administer the survey on behalf of any other HHA in the capacity as an 
HHCAHPS survey vendor. Such organizations will not be approved by CMS 
as HHCAHPS survey vendors.''
    Specifically, we proposed that the following types of organizations 
would not be eligible to administer the HHCAHPS Survey as an approved 
HHCAHPS vendor:
     Organizations or divisions within organizations that own 
or operate a HHA or provide HH services, even if the division is run as 
a separate entity to the HHA;
     Organizations that provide telehealth, telemonitoring of 
HH patients, or teleprompting services for HHAs; and
     Organizations that provide staffing, whether personal care 
aides or skilled services staff, to HHAs for providing care to HH 
patients.
(vi) For Further Information on the HHCAHPS Survey
    We encourage HHAs interested in learning about the survey 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 email to 
the HHCAHPS Survey Coordination Team at [email protected] for more 
information.
    The following is summary of the comments we received regarding the 
HHCAHPS proposal.
    Comment: We received comments that the response rate on HHCAHPS 
(about 30 percent) will be low and thus difficult to meet the minimum 
survey requirement.
    Response: We conducted a Survey Mode Experiment for the HHCAHPS 
with 75 HHAs nationwide with data collection conducted between 
September 21, 2009, and January 5, 2010. The overall response rate (for 
all three modes of mail only, telephone only and mixed mode of mail 
with telephone follow-up) was 45.7 percent. As long as the HHCAHPS 
survey protocols are followed and that the random sampling is completed 
correctly, the response rate of the HHCAHPS is not of great concern. We 
have not designated a minimum survey response rate requirement for the 
HHAs.
    Comment: Some commenters believe that the costs to HHAs to 
implement the HHCAHPS, including administrative and vendor costs, will 
be very high (estimates range from $3,500 for 300 to 500 surveys, up to 
$85,000).
    Response: The commenters supplied a figure of $3,500 for 300 to 500 
surveys, but did not provide the number of surveys conducted for the 
$85,000 figure. Our Web site research shows that most of the vendors 
are charging between approximately $2,500 and $5,000 for about 300 
survey completes. We recognize that vendors will charge different 
amounts for the survey, and highly recommend that HHAs ``shop around'' 
for the best value for their agency. The HHCAHPS target for the number 
of survey completes is 300 regardless of agency size, thus the $85,000 
is not a realistic figure for the cost of conducting HHCAHPS. The 
approved HHCAHPS survey vendor list is available on https://www.homehealthcahps.org. Currently, 40 vendors are approved to conduct 
the HHCAHPS survey and additional vendors will be approved in the 
coming months.
    Comment: Some commenters stated that the requirement for HHCAHPS 
should begin in CY 2013 and not in CY 2012.
    Response: We are not delaying the HHCAHPS requirement for the APU 
to CY 2013, as our data suggest that HHAs began preparation for the 
HHCAHPS requirement since its pendency has been announced and discussed 
in prior regulations. HHAs anticipated the HHCAHPS requirement and this 
has allowed the HHAs to prepare for the HHCAHPS requirement. Our data, 
as of mid-October 2010 show that nearly 8,000 Medicare-certified HHAs 
have either applied for an exemption from participation in HHCAHPS or 
registered for credentialing to begin HHCAHPS. However, we will not 
have a certain estimate of the HHA participation rate in the HHCAHPS 
dry run until after the deadline for that data, which is 11:59 p.m., 
e.s.t. on January 21, 2011.
    In the CY 2010 HH PPS final rule (78 FR 58078), we delayed the 
HHCAHPS requirement for the APU, from CY 2011 to CY 2012. We announced 
in that final rule (78 FR 58078) that HHAs would need to conduct a dry 
run in third quarter 2010 and continuously collect survey data 
beginning in the fourth quarter 2010 and moving forward.
    Although we carefully considered the comments that we received 
requesting that HHCAHPS linkage to the APU be delayed until 2013, we 
believe that HHAs have had sufficient notice of the HHCAHPS 
requirements and that we do not need to delay the linkage of HHCAHPS to 
the CY 2013 APU. We initially discussed the HHCAHPS Survey in the May 
4, 2007 proposed rule (72 FR 25356) and in the November 3, 2008 Notice 
(73 FR 65357). In the CY 2010 HH PPS proposed rule (74 FR 40948), we 
proposed to expand the HH quality measures reporting requirements to 
include the CAHPS Home Health Care (HHCAHPS) Survey for the CY 2011 
APU. In the CY 2010 HH PPS final rule (74 FR 58078), we stated that the 
HHCAHPS would be effective with the CY 2012 APU, instead of with the CY 
2011 APU.
    Comment: Some commenters questioned the threshold of 300 surveys 
which would be too difficult for small HHAs to achieve, and too little 
for big HHAs. The commenters stated that they would not be able to make 
statistically valid comparisons between small and large HHAs with the 
same sample size of 300 completed surveys per HHA.
    Response: We understand concerns about the sample size. However, an 
established principle in statistics is that a sample size in absolute 
numbers is more important than a 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. The larger the sample (even if under 300), the 
less variability there will be in an agency's ratings over time. 
Therefore, in the final rule we are moving forward with the target 
sample size of 300 for HHCAHPS as proposed.
    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. We understand that 
300 may be difficult for some small agencies to achieve. Therefore, 
smaller agencies that are unable to reach 300 survey completes by 
sampling should survey all HHCAHPS eligible patients. We will accept 
less than 300 surveys completed annually if an agency is unable to 
achieve that number. Compliance is based on whether the agency did the 
survey, following the instructed protocols and not based on the number 
of patients that responded to the survey.

[[Page 70408]]

    Comment: We received comments that the HHCAHPS survey is too long.
    Response: The version of the HHCAHPS survey that was used in the 
Agency for Healthcare Research and Quality (AHRQ) field test in 2008 
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 (which received National 
Quality Forum 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. We are not shortening the survey in this 
final rule.
    Comment: Some commenters believe that the HHCAHPS survey questions 
are too confusing. Other commenters stated that the HHCAHPS survey is 
poorly crafted.
    Response: The developmental work on the Home Health Care CAHPS 
began in mid-2006, and the first survey was field-tested (to validate 
the length and content of the survey) in 2008 by the AHRQ and the CAHPS 
grantees, and the final survey was used in a national, randomized mode 
experiment in 2009-2010. A rigorous, scientific process was used in the 
development of the survey, including: A public call for measures; 
literature reviews; focus groups with HH patients; cognitive interviews 
(several rounds in 2007) with HH patients; extensive stakeholder input; 
technical expert panel reviews, comprehensive assessment review and 
subsequent endorsement in March 2009 by the National Quality Forum 
(which represents the consensus of many health care providers, consumer 
groups, professional associations, purchasers, federal agencies and 
research and quality organizations); and public responses to Federal 
Register notices.
    We appreciate the commenters' sensitivity to the HH patients in 
asking about the usability 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 who is not 
associated with the HH services given to the patient, may assist the 
patient and answer the questions on behalf of the selected HH patient 
in the HHCAHPS HHA sample.
    Comment: We received comments that the HHAs need more education and 
information about HHCAHPS before it is a requirement.
    Response: We initially discussed the HHCAHPS Survey in the May 4, 
2007 proposed rule (72 FR 25356, 25423) and in the November 3, 2008 
Notice (73 FR 65357, 65358). In the CY 2010 HH PPS proposed rule 
(August 13, 2009), we proposed to expand the HH quality measures 
reporting requirements to include the CAHPS Home Health Care (HHCAHPS) 
Survey. In the CY 2010 HH PPS final rule, we stated that the HHCAHPS 
would be effective with the CY 2012 APU. The HHCAHPS requirements for 
CY 2012 have been discussed on the CMS Home Health and Hospice Open 
Door Forums from late 2009 to the present. We have posted information 
regarding the HHCAHPS requirements for CY 2012 on all CMS sponsored Web 
sites for Medicare and State Medicaid issues. We have spoken on this 
topic of HHCAHPS requirements for CY 2012 at conferences with the 
National Association for Home Care and on conference calls with the 
Visiting Nurse Associations of America. We have spoken about the 
HHCAHPS requirements for CY 2012 on the CMS State Medicaid sponsored 
calls. We have maintained a very thorough and up-to-date Web site at 
https://www.homehealthcahps.org that emphasized the importance of 
starting HHCAHPS in order to meet the requirements for CY 2012.
    Comment: We received comments that HHCAHPS does not address 
communication and swallowing issues for HH care patients.
    Response: We appreciate this input from the commenter and note that 
none of the HHCAHPS questions concern such specific issues since the 
number of issues that could be addressed in a survey of this length is 
limited. The main goal of the HHCAHPS is to obtain the patients' 
perspectives of care regardless of the specific needs of the patients.
    Comment: Some commenters question how they will know that the 
approved survey vendors are truly independent of HHAs and telehealth 
companies and ask what would happen if they inadvertently utilized an 
approved HHCAHPS vendor carrying on a prohibited financial relationship 
with another HHA.
    Response: In this final rule, beginning with the CY 2013 APU, we 
will be requiring that all HHCAHPS approved survey vendors affirm at 
their oversight review, that they do not provide direct HH care 
services to the patients of the HHAs to which they are or will be 
contracting to conduct HHCAHPS on behalf of these HHAs. If an approved 
HHCAHPS survey vendor has been discovered to have falsified its 
affirmation, then that vendor will be immediately removed from the 
approved HHCAHPS survey vendor list. For those HHAs contracting with a 
vendor that is removed from the approved HHCAHPS vendor list, CMS will 
allow affected HHAs to transfer their submitted HHCAHPS data to another 
approved HHCAHPS vendor of their choice, and arrangements will be made 
should this occur in the middle of a quarterly period when vendor 
changes are not usually allowed for HHAs. Moreover, the HHCAHPS data 
from these affected HHAs will be reported on Home Health Compare; 
however, they will be designated with a footnote that explains the 
circumstance.
    Comment: Some commenters stated that CMS should pay the HHAS for 
the (administrative) costs associated with HHCAHPS. We received a 
comment that it will cost $1.70 more per patient to obtain patient 
satisfaction input.
    Response: The collection of the patient's perspectives of care 
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 costs on their cost reports but should note that these costs 
are not reimbursable under the HH PPS. It is advised that HHAs ``shop 
around'' for the best cost value for them before contracting with an 
approved vendor to conduct HHCAHPS on their behalf.
    Comment: Some commenters believe that the HHCAHPS is not consistent 
with Hospital CAHPS (HCAHPS).
    Response: We believe that the two surveys do not have to be 
consistent as the populations are different for Hospital and Home 
Health CAHPS. The differences in the types of questions reflect the 
differences in the nature of the services provided. However, both CAHPS 
surveys followed the same processes for the development of the survey 
and data collection protocols.
    Comment: We received comments that about 70 percent of HHAs have 
not responded to the requirement for HHCAHPS thus far, since about July 
2010, only 2,109 of the 10,500 HHAs have signed up, and another 1,114 
have applied for exemptions from HHCAHPS. These figures show a poor 
rate of participation for HHCAHPS thus far.

[[Page 70409]]

    Response: The HHAs' response to participating in HHCAHPS has 
changed since July 2010. Recent data show us that very nearly 8,000 of 
Medicare-certified HHAs have begun to engage in HHCAHPS, by either 
beginning the vendor approval process for the survey on https://www.homehealthcahps.org, or by applying for an exemption from the 
survey on https://www.homehealthcahps.org. We anticipate that this 
participation rate will increase, especially in the next few months. We 
are carefully watching the participation rate for HHCAHPS, and we will 
continue to inform the public about HHCAHPS through the Home Health and 
Hospice Open Door Forums, Web sites, and other means of communication.
    Comment: One commenter stated concerns that while there are 
unscrupulous HHAS, most of the small HHAs have to comply with more 
requirements and face difficulty with remaining operational.
    Response: We appreciate the commenter's concerns with the complex 
HHA system, which may allow unscrupulous providers to take advantage of 
senior citizens needing good HH services. We are aware that newer 
requirements, such as HHCAHPS, may be perceived as an additional cost 
and responsibility for HHAs. However, at the same time, we believe that 
HHCAHPS will benefit both seniors and other users of HH services 
because the survey will provide transparency and access to more 
information about the quality of HH care. In addition, HHAs will 
benefit with the information gleaned from HHCAHPS to utilize for their 
internal quality improvement purposes that benefit their agencies as 
businesses and providers of HH services.
    Comment: We received a comment asking why interactive voice 
recognition (IVR) technology or internet-based technology would be 
excluded as a survey mode.
    Response: We appreciate the commenter's knowledge about IVR 
technology and the possible inclusion of this technology as an 
additional survey mode for HHCAHPS. Through the period of developing 
and testing the HHCAHPS survey, the mail only, telephone only, and mail 
with telephone follow-up modes were found to be the most suitable for 
the patient population receiving HH care services. However, we are 
certainly open to continue testing additional survey modes for HHCAHPS, 
especially with the possibility of internet methodologies in the 
future.
    Comment: We received a comment on how an approved survey vendor can 
simultaneously be an ``independent'' HHCAHPS surveyor and provide 
consultative services to the same HHAs on improving their operations. 
Such a situation is a classic conflict of interest.
    Response: We appreciate this commenter's concerns about the 
independence that HH CAHPS vendors should maintain from the HHAs that 
are their clients. However, we believe that one of the goals of the HH 
care CAHPS survey is that HHAs can identify opportunities for 
improvement and ways to improve care. As long as the vendor does not 
directly provide care to patients, the vendor can independently provide 
guidance regarding methods to improve care provided by the HHA.
    Comment: One commenter requested that we reevaluate and eliminate 
proposed criteria that would exclude potential vendors, as the criteria 
overstep CMS' authority to restrict legitimate business.
    Response: We proposed these vendor requirements because we need to 
ensure that fully qualified organizations would be capable of 
undertaking the HHCAHPS surveys. Based on the vast input from 
stakeholders and the public, we proposed these requirements to ensure 
that an independent party will be best able to solicit unbiased, un-
coerced responses to HHCAHPS survey.
    Comment: One commenter stated that HHCAHPS is a proposed change 
that will be damaging to the HH industry and to the care and services 
provided to Medicare beneficiaries.
    Response: We believe that HHCAHPS will benefit both seniors and 
other users of HH services because they will have access to more 
information about the quality of HH care. In addition, HHAs will 
benefit with the information gleaned from HHCAHPS to use for their 
internal quality improvement purposes and benefit their agencies as 
businesses and providers of HH services.
    Comment: One commenter requested that CMS extend the deadline for 
agencies to apply for the HHCAHPS survey exemption beyond the original 
June 16, 2010 deadline.
    Response: We will be extending the deadline for agencies to apply 
for HHCAHPS survey exemption for the CY 2012 APU to 11:59 p.m., e.s.t. 
on January 21, 2011. It is noted that the application for exemption 
from participation in HHCAHPS has to be submitted every year.
    Comment: One commenter asked if CMS will require additional 
consent/authorizations to allow protected health information (PHI) 
patients to be included in HHCAHPS, since these PHI patients are now in 
the excluded categories for HHCAHPS. These additional consent/
authorizations are required by New York State law.
    Response: These PHI patients are ineligible to be included in 
HHCAHPS by New York State Law. We are prohibited by law to include PHI 
patients in the HHCAHPS survey under any circumstances. In the HHCAHPS 
Protocols and Guidelines manual which can be found at https://homehealthcahps.org, it states that patients who have a condition or 
illness for which the state in which the patient resides has 
regulations or laws restricting the release of patient information for 
patients with that condition (for example, patients with HIV/AIDS), 
that these patients are not eligible to be included in the HHCAHPS 
sampling procedures.
(vii) Provisions of the Final Rule
    As a result of the comments, we will be extending the deadline for 
HHAs to apply for HHCAHPS survey exemption for the CY 2012 APU to 11:59 
p.m., e.s.t. on January 21, 2011. Therefore, the deadline for the 
submission of the dry run data (collected in the third quarter of 2010) 
for the CY 2012 APU is January 21, 2011, and the deadline to apply for 
HHCAHPS survey exemption for the CY 2012 APU is also January 21, 2011. 
It is noted that the application for exemption from participation in 
HHCAHPS has to be submitted every year.
    In this final rule, beginning with the CY 2013 APU, we will be 
requiring that all HHCAHPS approved survey vendors affirm at their 
oversight review, that they do not provide direct HH care services to 
the patients of the HHAs to which they are or will be contracting to 
conduct HHCAHPS on behalf of these HHAs. If an approved HHCAHPS survey 
vendor is found to have falsified its affirmation, then that vendor 
will be immediately removed from the approved HHCAHPS survey vendor 
list. For those HHAs contracting with an HHCAHPS vendor that is removed 
from the approved HHCAHPS vendor list, we will allow affected HHAs to 
transfer their submitted HHCAHPS data to another approved HHCAHPS 
vendor of their choice and arrangements will be made should this occur 
in the middle of a quarterly period when vendor changes are not usually 
allowed for HHAs. Moreover, the HHCAHPS data from these affected HHAs 
will be reported on Home Health Compare; however, they will be 
designated with a footnote that explains the circumstance.
    There are no other changes noted from the CY 2011 HH PPS proposed 
rule.

[[Page 70410]]

3. Home Health Wage Index
    Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the 
Secretary to provide appropriate adjustments to the proportion of the 
payment amount under the HH PPS to account for area wage differences, 
using adjustment factors that reflect the relative level of wages and 
wage-related costs applicable to the furnishing of HH services. We 
apply the appropriate wage index value to the labor portion 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). 
Previously, we determined each HHA's labor market area based on 
definitions of Metropolitan Statistical Areas (MSAs) issued by the 
Office of Management and Budget (OMB). We have consistently used the 
pre-floor, pre-reclassified hospital wage index data to adjust the 
labor portion of the HH PPS rates. We believe the use of the pre-floor, 
pre-reclassified hospital wage index data results in an appropriate 
adjustment to the labor portion of the costs, as required by statute.
    In the November 9, 2005 final rule for CY 2006 (70 FR 68132), we 
adopted revised labor market area definitions based on Core-Based 
Statistical Areas (CBSAs). At the time, we noted that these were the 
same labor market area definitions (based on OMB's new CBSA 
designations) implemented under the Hospital Inpatient Prospective 
Payment System (IPPS). In adopting the CBSA designations, we identified 
some geographic areas where there were no hospitals and, thus, no 
hospital wage data on which to base the calculation of the HH wage 
index. We continue to use the methodology discussed in the November 9, 
2006 final rule for CY 2007 (71 FR 65884) to address the geographic 
areas that lack hospital wage data on which to base the calculation of 
their HH wage index. For rural areas that do not have IPPS hospitals, 
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 could 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 IPPS 
hospitals, we use the average wage index of all urban areas within the 
State as a reasonable proxy for the wage index for that CBSA. The only 
urban area without IPPS hospital wage data is Hinesville-Fort Stewart, 
Georgia (CBSA 25980).
    On December 1, 2009, OMB issued Bulletin No. 10-02 located at 
http://www.whitehouse.gov/omb/assets/bulletins/b10-02.pdf.
    This bulletin highlights three geographic areas whose principal 
city has changed, and therefore led to the following CBSA names all and 
within a 0.05 percentage point range changes and new CBSA numbers.
     Bradenton-Sarasota-Venice, FL (CBSA 14600) is replaced by 
North Port-Bradenton-Sarasota, FL (CBSA 35840).
     Fort Walton Beach-Crestview-Destin, FL (CBSA 23020) is 
replaced by Crestview-Fort Walton Beach-Destin, FL (CBSA 18880).
     Weirton-Steubenville, WV-OH Metropolitan Statistical Area 
(CBSA 48260) is replaced by Steubenville-Weirton, OH-WV (CBSA 44600).
    The CBSAs and their associated wage index values are shown in 
Addendum B of this final rule. The wage index values for rural areas 
are shown in Addendum A of this final rule.
    The following is a summary of the comments we received regarding 
the HH wage index proposal.
    Comment: A commenter stated that the budget neutral nature of the 
methodology means that increases in the wage index in one area of the 
country necessarily result in decreases in another.
    Response: By nature, the construct of the hospital wage index, in 
the aggregate, is to average at 1.0. Hence, the index is constructed to 
be budget neutral in the sense that for areas where wage index values 
increase, those increases are offset by decreases in other areas. The 
hospital wage index is based on hospital cost data and hospital 
utilization, and thus in the aggregate, when applied to HH utilization 
for the purposes of impacts, the average wage index value may not 
result to be exactly 1.0. For instance, as explained in the impact 
analysis section for this final rule, the new wage index will result in 
an estimated increase of $20 million in aggregate payments to HHAs in 
CY 2011.
    Comment: A commenter stated that dropping critical access hospitals 
(CAHs) from the calculation of the wage index affects HHAs. As CAHs are 
located in rural areas, the absence of CAH wage data further 
compromises the accuracy, and therefore the appropriateness, of using a 
hospital wage index to determine the labor costs of HHAs located in 
rural areas.
    Response: While we understand the commenter's concern, we are not 
able to address the comment, because the methodology regarding the pre-
floor, pre-reclassified hospital wage index calculation (which we 
continue to believe results in an appropriate adjustment to the labor 
portion of the costs as required by statute), is outside of the scope 
of this final rule.
    Comment: A commenter stated that, pending development of an 
industry specific wage index, CMS should investigate the impact of a 
population density adjustment. A population density adjustment would 
result in a more accurate wage adjustment that recognizes the 
productivity lost in time spent in traveling to provide services in 
less densely populated areas. CMS could simply add a population density 
factor by zip code during calculation of the labor portion of the 
payment to account for increased costs of providing services in less 
densely populated areas. In addition, this adjustment would reduce 
excess reimbursement for services provided in densely populated urban 
and congregate living facilities.
    Response: We appreciate the commenter's comment, but we do not have 
evidence that a population density adjustment is an appropriate 
adjustment to a wage index. Section 3131(d) of the Affordable Care Act 
requires the Secretary to conduct a study on HHA costs involved with 
providing ongoing access to care to low-income Medicare beneficiaries 
or beneficiaries in medically underserved areas, and in treating 
beneficiaries with varying levels of severity of illness. Because 
medically underserved areas may be associated with population density, 
the purview of the above mentioned study may possibly include 
feasibility of such an adjustment as part of that research. However, we 
note that in setting up the original HH PPS rates in 2000, we were not 
able to find any cost differences between rural and urban HHAs. While 
rural agencies cite the added cost of long distance travel to treat 
their patients, urban/non-rural agencies also cite added costs such as 
needed security measures and the volume of traffic that they must 
absorb. We will consider this suggestion in future research activities.
    Comment: A commenter stated that the current wage index does not 
measure local wages accurately since the wages vary widely in some 
areas.
    Response: The wages are measured at the local level as defined by 
CBSAs. HHAs are reimbursed based on the site of service of the 
beneficiary, using the wage index value for that area to adjust payment 
for geographical differences.
    Comment: A commenter stated concerns regarding the use of the pre-
floor, pre-reclassified hospital wage index to determine geographically 
relevant wages for HH workers. The commenter stated that there is a 
lack of

[[Page 70411]]

parity between different health care provider types, each of which is 
subject to some form of a hospital wage index, but experiences distinct 
actual values in their specific geographic area. Hospitals are given 
the opportunity to reclassify as a means of being considered to be in a 
geographical area with a higher wage index. HHAs are not given this 
option. Using the pre-floor, pre-reclassified wage index continues to 
put home care at a distinct disadvantage in attracting and retaining 
employees. Existing law permits CMS a nearly unlimited degree of 
flexibility to utilize a wage index that recognizes the geographic 
differences in labor costs in the provision of HH services across the 
country. Section 1895(b)(4)(C) of the Act mandates the establishment of 
area wage index adjustment factors, provides the Secretary discretion 
to determine which factors to consider, and permits the Secretary to 
utilize the same wage index adjustment factors that are utilized in 
composing the hospital wage index. The inherent inequity of HHAs 
competing for labor in the same service area as a reclassified hospital 
is similarly overdue for redress. CMS has the statutory authority to 
select the wage index method to be applied to HHAs and should move the 
wage index toward some level of comparability with that enjoyed by 
hospitals.
    Response: The regulations that govern the HH PPS currently do not 
provide a mechanism for allowing providers to seek geographic 
reclassification. As we have explained in the past (most recently, in 
the CY 2010 HH PPS final rule (74 FR 58105)), the rural floor and 
geographic reclassification in the IPPS are statutorily authorized and 
are only applicable to hospital payments. The rural floor provision is 
provided at section 4410 of the Balanced Budget Act of 1997 (Pub. L. 
105-33) (BBA) and is exclusive to hospitals. The reclassification 
provision provided at section 1886(d)(10) of the Act is also specific 
to hospitals.
    Comment: In the current environment of deep, across-the-board cuts, 
the additional impact of inequitable, unpredictable, negative swings in 
wage index cannot be ignored any longer. Such swings are exacerbated by 
the current economic climate. The HH wage index is too volatile from 
one year to the next. CMS should develop a process that would alert 
HHAs to prospective swings in the hospital wage index prior to hospital 
wage data finalization, allowing agencies to seek intervention to 
eliminate or correct for missing or potentially spurious hospital cost 
report data on labor costs. The extra time would also allow agencies an 
opportunity to begin planning for changes needed to accommodate an 
otherwise unexpected wage index swing. At a minimum, the commenters 
urged CMS to put a ceiling and floor on year-to-year changes in the 
wage index to mitigate sudden payment changes. Another commenter asked 
CMS to consider applying the hospital wage index to all healthcare 
providers in a community. The commenter's opinion is that homecare 
nurses require more skills and certifications than hospital nurses and 
home care organizations should be able to reimburse them fairly.
    Response: We have consistently used the pre-floor, pre-reclassified 
hospital wage index to adjust the labor portion of the HH PPS rates. 
The commenter is 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 the BBA and is specific to hospitals. The reclassification 
provision provided at section 1886(d)(10) of the Act is also specific 
to hospitals. As such, we continue to believe that the use of the pre-
floor, pre-reclassified hospital wage index data results in the 
appropriate adjustment to the labor portion of the costs as required by 
statute.
    Comment: CMS should develop and conduct a voluntary pilot test on a 
HH specific wage index based on non-hospital, Bureau of Labor 
Statistics (BLS) data calculated on a county level, rather than on the 
Core Base Statistical Area (CBSA) level. Several commenters stated that 
CMS' decision five years ago to switch from the Metropolitan 
Statistical Areas (MSAs) to the Core-Based Statistical Areas (CBSAs) 
for the wage index calculation has had serious financial ramifications 
for HHAs. The commenters recommend that CMS pursue a total reform of 
the HH wage index.
    Response: As we have stated in previous rules, previous proposals 
to develop a HH-specific wage index were not well received by 
commenters or the industry. Generally, the volatility of the HH wage 
data and the resources needed to audit and verify that data make 
ensuring that such a wage index most accurately reflects the wages and 
wage-related costs applicable to the furnishing of HH services 
difficult. As such, we are not adopting a HH-specific wage index at 
this time. We believe that more importantly, a HH-specific wage index 
should be reflective of the wages and salaries paid in a specific area, 
be based upon a stable data source, and significantly improve our 
ability to determine HH payments without being overly burdensome.
    In its June 2007 report titled, ``Report to Congress: Promoting 
Greater Efficiency in Medicare'', MedPAC recommended that the Congress 
``repeal the existing hospital wage index statute, including 
reclassification and exceptions, and give the Secretary authority to 
establish new wage index systems.'' As such, we will continue to review 
and consider MedPAC's recommendations on a refined alternative wage 
index methodology for the HH PPS in the future. We believe that the 
current payment adjustment based on the CBSA areas is the best 
available method of compensating for differences in labor markets.
    Comment: A commenter encourages CMS to analyze HH care providers 
both by geographic location (urban vs. rural) and by business status 
(for-profit vs. not-for-profit) such that Medicare payment policy can 
be modified to reward quality and efficiency and reduce incentives to 
``pad'' documentation and increase revenue.
    Response: We will be looking to improve the accuracy of payment to 
HHAs in the future, through a number of efforts. Section 3131(a) of the 
Affordable Care Act requires the Secretary to rebase HH payments, 
beginning in 2014. Factors that will be analyzed and considered include 
changes in the number of visits in an episode, the mix of services in 
an episode, the level of intensity of services in an episode, the 
average cost of providing care per episode, and other factors that the 
Secretary considers to be relevant. In conducting the analysis for 
rebasing, we may consider differences between hospital-based and 
freestanding agencies, between for-profit and nonprofit agencies, and 
between the resource costs of urban and rural agencies. Additionally, 
section 3131(d) of the Affordable Care Act requires the Secretary to 
study and report on the development of HH payment revisions that would 
ensure access to care and payment for severity of illness. The study is 
to be on HHA costs involved with providing ongoing access to care to 
low-income Medicare beneficiaries or beneficiaries in medically 
underserved areas, and in treating beneficiaries with varying levels of 
severity of illness. As part of this study, we are required to consult 
with appropriate stakeholders, such as groups representing HHAs and 
groups representing Medicare beneficiaries. At the conclusion of this 
study, we must submit a Report to the Congress by March 1, 2014. Based 
on the findings of this study, the Secretary may provide for a 
demonstration project to test whether making payment adjustments for HH 
services under the

[[Page 70412]]

Medicare program would substantially improve access to care for 
patients with high severity levels of illness or for low-income or 
underserved Medicare beneficiaries.
4. CY 2011 Annual Payment Update
a. National Standardized 60-Day Episode Rate
    The Medicare HH PPS has been in effect since October 1, 2000. As 
set forth in the July 3, 2000 final rule (65 FR 41128), the base unit 
of payment under the Medicare HH PPS is a national standardized 60-day 
episode rate. As set forth in Sec.  484.220, we adjust the national 
standardized 60-day episode rate by a case-mix relative weight and a 
wage index value based on the site of service for the beneficiary.
    In the CY 2008 HH PPS final rule with comment period, we refined 
the case-mix methodology and also rebased and revised the HH market 
basket. To provide appropriate adjustments to the proportion of the 
payment amount under the HH PPS to account for area wage difference, we 
apply the appropriate wage index value to the labor portion of the HH 
PPS rates. The labor-related share of the case-mix adjusted 60-day 
episode rate is 77.082 percent and the non-labor-related share is 
22.918 percent. The CY 2011 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. Following are the steps we take to compute 
the case-mix and wage adjusted 60-day episode rate:
    (1) Multiply the national 60-day episode rate by the patient's 
applicable case-mix weight.
    (2) Divide the case-mix adjusted amount into a labor (77.082 
percent) and a non-labor portion (22.918 percent).
    (3) Multiply the labor portion by the applicable wage index based 
on the site of service of the beneficiary.
    (4) 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.
    In accordance with section 1895(b)(3)(B) of the Act, this document 
constitutes the annual update of the HH PPS rates. The HH PPS 
regulations at Sec.  484.225 set forth the specific annual percentage 
update methodology. In accordance with Sec.  484.225(i), for a HHA that 
does not submit HH quality data, as specified by the Secretary, the 
unadjusted national prospective 60-day episode rate is equal to the 
rate for the previous calendar year increased by the applicable HH 
market basket index amount minus two percentage points. Any reduction 
of the percentage change will apply only to the calendar year involved 
and will not be considered in computing the prospective payment amount 
for a subsequent calendar year.
    For CY 2011, we proposed to 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 HH 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 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. 
We also proposed to update the LUPA add-on payment amount and the NRS 
conversion factor by the applicable HH market basket update of 1.4 
percent for CY 2011.
    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 2011 National Standardized 60-Day Episode Payment Rate
    In calculating the annual update for the CY 2011 national 
standardized 60-day episode payment rates, we first look at the CY 2010 
rates as a starting point. The CY 2010 national standardized 60-day 
episode payment rate is $2,312.94.
    As previously discussed in section II.D. of this final rule 
(``Outlier Policy''), in our policy of targeting outlier payments to be 
approximately 2.5 percent of total HH PPS payments in CY 2011, we 
proposed to return 2.5 percent back into the HH PPS rates, to include 
the national standardized 60-day episode payment rate. Therefore, to 
calculate the CY 2011 national standardized 60-day episode payment 
rate, we first increase the CY 2010 national standardized 60-day 
episode payment rate ($2,312.94) to adjust for the 2.5 percent set 
aside in the previous year for CY 2010 outlier payments. We then reduce 
that adjusted payment amount by 5 percent, for outlier payments as a 
percentage of total HH PPS payment as mandated by section 3131 of the 
Affordable Care Act. Next, we update the payment amount by the CY 2011 
HH market basket update of 1.1 percent.
    As previously discussed in section II.A. of this final rule 
(``Case-Mix Measurement Analysis''), our updated analysis of the change 
in case-mix that is not due to an underlying change in patient health 
status reveals additional increase in nominal change in case-mix. 
Therefore, we reduce rates by 3.79 percent in CY 2011, resulting in an 
updated CY 2011 national standardized 60-day episode payment rate of 
$2,192.07. The updated CY 2011 national standardized 60-day episode 
payment rate for an HHA that submits the required quality data is shown 
in Table 4. The updated CY 2011 national standardized 60-day episode 
payment rate for an HHA that does not submit the required quality data 
(that is, HH market basket update of 1.1 percent is reduced by 2 
percentage points) is shown in Table 5.

[[Page 70413]]



    Table 4--National 60-Day Episode Payment Amount Updated by the Home Health Market Basket Update for CY 2011, Before Case-Mix Adjustment and Wage
                                               Adjustment Based on the Site of Service for the Beneficiary
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Adjusted to return the
    CY 2010 National       outlier funds that paid  Reduced by 5 percent due    Multiply by the home    Reduce by 3.79  percent      CY 2011 National
   standardized 60-day       for the 2.5 percent         to the outlier         health market basket     for nominal change in     standardized 60-day
  episode payment rate       target for outlier      adjustment mandated by     update of 1.1 percent           case-mix           episode payment rate
                             payments in CY 2010     The Affordable Care Act
--------------------------------------------------------------------------------------------------------------------------------------------------------
           $2,312.94                   / 0.975                    x 0.95                   x 1.011                  x 0.9621                $2,192.07
--------------------------------------------------------------------------------------------------------------------------------------------------------


  Table 5--For HHAs That Do Not Submit the Quality Data--National 60-Day Episode Payment Amount Updated by the Home Health Market Basket Update for CY
                          2011, Before Case-Mix Adjustment and Wage Adjustment Based on the Site of Service for the Beneficiary
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Adjusted to return the                               Multiply by the home
    CY 2010 National       outlier funds that paid  Reduced by 5 percent due    health market basket    Reduce by 3.79  percent      CY 2011 National
   standardized 60-day       for the 2.5 percent         to the outlier         update of 1.1 percent    for nominal change in     standardized 60-day
  episode payment rate       target for outlier      adjustment mandated by      minus 2 percentage             case-mix           episode payment rate
                             payments in CY 2010     the Affordable Care Act    points (-0.9 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
           $2,312.94                   / 0.975                    x 0.95                   x 0.991                  x 0.9621                $2,148.71
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. National Per-Visit Rates Used To Pay LUPAs and Compute Imputed Costs 
Used in Outlier Calculations
    In calculating the CY 2011 national per-visit rates used to 
calculate payments for LUPA episodes and to compute the imputed costs 
in outlier calculations, the CY 2010 national per-visit rates for each 
discipline are adjusted for the 2.5 percent set aside during CY 2011 
for outlier payments. Then these national per-visit rates are reduced 
by 5 percent as mandated by section 1895(b)(3)(C) of the Act, as 
amended by section 3131 of the Affordable Care Act. Next, the national 
per-visit rates are updated by the CY 2011 HH market basket update of 
1.1 percent. National per-visit rates are not subject to the 3.79 
percent reduction related to the nominal increase in case-mix. The CY 
2011 national per-visit rates per discipline are shown in Table 6. The 
six HH disciplines are as follows:
     Home Health Aide (HH aide);
     Medical Social Services (MSS);
     Occupational Therapy (OT);
     Physical Therapy (PT);
     Skilled Nursing (SN); and
     Speech Language Pathology Therapy (SLP).

    Table 6--National Per-Visit Amounts for LUPAs (Not Including the LUPA Add-On Amount for a Beneficiary's Only Episode or the Initial Episode in a
      Sequence of Adjacent Episodes) and Outlier Calculations Updated by the CY 2011 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   Reduced by                            Multiply by
                                                                              outlier     5 percent                CY 2011 per-   the home   CY 2011 per-
                                                               CY 2010 Per-  funds that   due to the                  visit        health       visit
                                                                  visit       paid for     outlier    Multiply by    payment       market      payment
                 Home health discipline type                   amounts per    the 2.5     adjustment    the home     amount f      basket     amount for
                                                                  60-day      percent    mandated by     health      For HHAs    update of    HHAs that
                                                                 episode     target for      The         market      that DO    1.1 percent     DO NOT
                                                                              outlier     Affordable     basket     submit the    minus 2     submit the
                                                                            payments in    Care Act    update of     required    percentage    required
                                                                              CY 2010                 1.1 percent    quality     points (-     quality
                                                                                                                       data         0.9          data
                                                                                                                                  percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
HH Aide......................................................       $51.18      / 0.975       x 0.95      x 1.011       $50.42      x 0.991       $49.42
MSS..........................................................       181.16      / 0.975       x 0.95      x 1.011       178.46      x 0.991       174.93
OT...........................................................       124.40      / 0.975       x 0.95      x 1.011       122.54      x 0.991       120.12
PT...........................................................       123.57      / 0.975       x 0.95      x 1.011       121.73      x 0.991       119.32
SN...........................................................       113.01      / 0.975       x 0.95      x 1.011       111.32      x 0.991       109.12
SLP..........................................................       134.27      / 0.975       x 0.95      x 1.011       132.27      x 0.991       129.65
--------------------------------------------------------------------------------------------------------------------------------------------------------

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 are adjusted by 
adding an additional amount to the LUPA payment before adjusting for 
area wage differences.
    The following is a summary of the comments we received regarding 
the LUPA add-on Payment.
    Comment: Several commenters stated that at a time when costs are 
increasing, the LUPA ``add-on reduction'' will make it more difficult 
for agencies to deal with the additional mandates that were added to 
the start of care visit. This is the first time a reduction is proposed 
for the LUPA add-on. Costs continue to

[[Page 70414]]

escalate, but CMS continues to expect more while decreasing payments.
    Response: We assume that the commenter is referring to either the 
2.5 percent reduction to the HH PPS payment amounts due to the outlier 
policy legislated by section 3131(b) of the Affordable Care Act or the 
1 percentage point reduction for CY 2011, 2012, and 2013 and the 
productivity adjustment for CY 2015 and subsequent years to the HH 
market basket update legislated by section 3401(e) of the Affordable 
Care Act; or both. As both reductions are legislated by the Affordable 
Care Act, we have no regulatory authority to do otherwise.
    As previously discussed, we are returning 2.5 percent back into the 
LUPA add-on payment. We then reduce the LUPA add-on payment by 5 
percent outlier adjustment as mandated by section 1895(b)(3)(C) of the 
Act as amended by section 3131 of the Affordable Care Act. Next, we 
update the LUPA payment amount by the CY 2011 HH market basket update 
percentage of 1.1 percent. The LUPA add-on payment amount is not 
subject to the 3.79 percent reduction related to the nominal increase 
in case-mix. For CY 2011, the add-on to the LUPA payment to HHAs that 
submit the required quality data will be updated by the HH market 
basket update of 1.1 percent. The CY 2011 LUPA add-on payment amount is 
shown in Table 7. The add-on to the LUPA payment to HHAs that do not 
submit the required quality data will be updated by the HH market 
basket update (1.1 percent) minus two percentage points.

                                                          Table 7--CY 2011 LUPA Add-On Amounts
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     For HHAs that DO submit the required      For HHAs that DO NOT submit the  required
 CY 2010 LUPA Add-On                                                             quality data                                quality data
 Amount Adjusted to    Adjusted to return   Reduced by 5 percent ---------------------------------------------------------------------------------------
 return the outlier     the outlier funds    due to the outlier                                               Multiply by the home
funds, that paid for    that paid for the    adjustment mandated  Multiply by the home   CY 2011 LUPA Add-On  health market basket   CY 2011 LUPA Add-On
   the original 5      2.5 percent target     by the Affordable   health market basket  Amount for HHAs that      update of 1.1     Amount for HHAs that
 percent target for   for outlier payments        Care Act            update of 1.1      DO submit required      percent minus 2        DO NOT submit
      outliers             in CY 2010                                    percent            quality data      percentage points (-    required quality
                                                                                                                  0.9 percent)              data
--------------------------------------------------------------------------------------------------------------------------------------------------------
    $94.72..........             / 0.975                x 0.95               x 1.011                $93.31               x 0.991                $91.46
--------------------------------------------------------------------------------------------------------------------------------------------------------

e. Nonroutine Medical Supply Conversion Factor Update
    The following is summary of the comments we received regarding the 
Nonroutine Medical Supplies (NRS).
    Comment: A commenter stated that the calculation for the nonroutine 
medical supply conversion factor includes a reduction of 3.79 percent 
for the change in nominal case-mix weight. The commenter does not 
believe this reduction should be applied to the calculation of the NRS, 
as the NRS payment amount is not directly affected by changes in case-
mix weight.
    When CMS developed the refinements to the PPS payment rates 
effective for calendar year 2008, significant changes were made to the 
methodology for reimbursing of nonroutine medical supplies. The 
analysis performed by CMS was designed to ``better match NRS payments 
with NRS costs.'' ``The proposed and final regression models were 
developed after additional variables from OASIS items and targeting 
certain conditions expected to be predictors of NRS use based on 
clinical considerations. To account for paying of NRS through the 
implementation of a 6-severity group methodology, and to maintain 
budget neutrality, we reduce the national standardized 60-day episode 
payment rate (72 FR 49851 through 49852).
    The standardized payment amount was adjusted to remove the cost 
attributed to NRS or $45.87 (72 FR 49865). Therefore, due to this 
change in methodology the NRS amount paid to HHAs is no longer subject 
to variation based upon the case-mix weight of the episode. Indeed, an 
episode with a case-mix of 0.5827 can receive the same NRS payment 
amount as an episode with a case-mix of 3.4872. Therefore, the case-mix 
adjustment as proposed should not be applied to the NRS payment 
amounts.
    Response: We appreciate the commenter's perspective and input. 
Because our case-mix adjustment parameter comes from modeling the 
episode case-mix weights, not the NRS case-mix levels, we will defer 
the application of the 3.79 percent case-mix reduction to the NRS 
payment amounts for CY 2011, pending the results of an independent 
review of our case-mix and NRS models. Therefore, the NRS payment 
calculation will not be decreased by 3.79 percent for CY 2011.
    Comment: A commenter stated that reimbursement for nonroutine 
supplies is not adequate to cover current costs for these supplies. 
Vendors of nonroutine supplies continue to increase costs for agencies.
    Response: In our CY 2008 final rule, we implemented the now 
existing 6-severity group methodology for payment of NRS. As part of 
that implementation, we built intelligence into the HIPPS code so that 
we would know when supplies are being provided and when they are not, 
at all NRS severity levels. Since the expiration of a 6-month grace 
period, HHAs have been required to denote, through the HIPPS code they 
submit on the claim, whether supplies were actually provided to the 
beneficiary during that HH episode of care. As such, we will soon have 
the improved data on NRS, providing us with a much better capability to 
analyze and evaluate payment to HHAs for NRS in the future.
    Payments for nonroutine 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 2010 NRS conversion 
factor ($53.34) for the 2.5 percent set aside for outlier payments in 
CY 2010. We then reduce that amount by the 5 percent outlier adjustment 
as mandated by section 1895(b)(3)(C), as amended by section 3131(b) of 
the Affordable Care Act. Next, we update by the CY 2011 market basket 
update of 1.1 percent. As mentioned above in our summary of comments 
related to the NRS, we will not apply the 3.79 percent case-mix 
reduction to the NRS payment amounts for CY 2011. The final updated CY 
2011 NRS conversion factor for CY 2011 in Table 8A. For CY 2011, the 
NRS conversion factor is $52.54.

[[Page 70415]]



            Table 8A--CY 2011 NRS Conversion Factor for HHAs That Do Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                         Adjusted to return
                         the outlier funds     Reduced by 5 percent                              CY 2011 NRS
     CY 2010 NRS       that paid for the 2.5    due to the outlier    Multiply by the home    conversion factor
  conversion factor      percent target for    adjustment mandated    health market basket    for HHAs that do
                        outlier payments in     by The  Affordable   update of 1.1 percent   submit the required
                              CY 2010                Care Act                                   quality data
----------------------------------------------------------------------------------------------------------------
             $53.34                / 0.975                 x 0.95                x 1.011                 $52.54
----------------------------------------------------------------------------------------------------------------

    Using the NRS conversion factor ($52.54) for CY 2011, the payment 
amounts for the various severity levels are shown in Table 8B.

                            Table 8B--Relative Weights for the 6-Severity NRS System
----------------------------------------------------------------------------------------------------------------
              Severity level                      Points  (scoring)         Relative weight   NRS payment amount
----------------------------------------------------------------------------------------------------------------
1.........................................  0...........................              0.2698              $14.18
2.........................................  1 to 14.....................              0.9742               51.18
3.........................................  15 to 27....................              2.6712              140.34
4.........................................  28 to 48....................              3.9686              208.51
5.........................................  49 to 98....................              6.1198              321.53
6.........................................  99+.........................             10.5254              553.00
----------------------------------------------------------------------------------------------------------------

    For HHAs that do not submit the required quality data, we again 
begin with the CY 2010 NRS conversion factor. We first adjust the CY 
2010 NRS conversion factor ($53.34) for the 2.5 percent set aside for 
outlier payments in CY 2010. We then reduce that amount by the 5 
percent outlier adjustment as mandated by section 1895(b)(3)(C) of the 
Act, as amended by section 3131 of the Affordable Care Act. Next, we 
update the conversion factor by the CY 2011 HH market basket update 
percentage of 1.1 percent minus 2 percentage points. The CY 2011 NRS 
conversion factor for HHAs that do not submit quality data is shown in 
Table 9A.

          Table 9A--CY 2011 NRS Conversion Factor for HHAs That Do Not Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                         Adjusted to return                             Multiply by the
                         the outlier funds     Reduced by 5 percent   proposed home health       CY 2011 NRS
     CY 2010 NRS       that paid for the 2.5    due to the outlier    market basket update    conversion factor
  conversion  factor     percent target for    adjustment mandated    of 1.1 percent minus  for HHAs that do not
                        outlier payments in     by The  Affordable   2 percentage points (-  submit the required
                              CY 2010                Care Act             0.9 percent)          quality data
----------------------------------------------------------------------------------------------------------------
             $53.34                / 0.975                 x 0.95                x 0.991                 $51.50
----------------------------------------------------------------------------------------------------------------

    The payment amounts for the various severity levels based on the 
updated conversion factor for HHAs that do not submit quality data are 
calculated in Table 9B.

        Table 9B--Relative Weights for the 6-Severity NRS System for HHAs That Do Not Submit Quality Data
----------------------------------------------------------------------------------------------------------------
              Severity level                    Points  (scoring)         Relative weight     NRS payment amount
----------------------------------------------------------------------------------------------------------------
1........................................  0..........................               0.2698               $13.89
2........................................  1 to 14....................               0.9742                50.17
3........................................  15 to 27...................               2.6712               137.57
4........................................  28 to 48...................               3.9686               204.38
5........................................  49 to 98...................               6.1198               315.17
6........................................  99+........................              10.5254               542.06
----------------------------------------------------------------------------------------------------------------

5. Rural Add-On
    The following is summary of the comments we received regarding the 
rural add-on policy.
    Comment: Several commenters stated support for the 3 percent rural 
add-on to the national standardized 60-day episode rate, national per-
visit rates, LUPA add-on amount, and nonroutine medical supplies (NRS) 
conversion factor for HH services provided in rural areas through 
December 15, 2015. They state that this rural add-on reflects the 
higher costs of rural agencies.
    Response: The rural add-on is mandated by section 3131(c) of the 
Affordable Care Act. Section 3131(c) of the Affordable Care Act amended 
section 421(a) of the MMA, which was amended by section 5201(b) of the 
DRA. Thus the amended section 421(a) of the MMA provides an increase of 
3 percent of the payment amount otherwise made under section 1895 of 
the Act for HH services furnished in a rural area (as defined in 
section 1886(d)(2)(D) of the Act), with respect to episodes and visits 
ending on or after April 1, 2010 and before January 1, 2016. The 
statute

[[Page 70416]]

waives budget neutrality related to this provision, as the statute 
specifically states that the Secretary shall not reduce the standard 
prospective payment amount (or amounts) under section 1895 of the Act 
applicable to HH services furnished during a period to offset the 
increase in payments resulting in the application of this section of 
the statute.
    The 3 percent rural add-on is applied to the national standardized 
60-day episode rate, national per-visit rates, LUPA add-on payment, and 
NRS conversion factor when HH services are provided in rural (non-CBSA) 
areas. We implemented this provision for CY 2010, for episodes and 
visits ending on or after April 1, 2010 and ending before January 1, 
2011 through Program Memorandum ``Temporary 3 Percent Rural Add-On for 
the Home Health Prospective payment System (HH PPS)'' (Transmittal 
674/Change Request 6955, issued April 23, 2010). 
Refer to Tables 10 thru 13b for these payment rates.

          TABLE 10--CY 2011 Payment Amounts for 60-Day Episodes for Services Provided in a Rural Area Before Case-Mix and Wage Index Adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    For HHAs that DO submit quality data                                       For HHAs that DO NOT submit quality data
--------------------------------------------------------------------------------------------------------------------------------------------------------
    CY 2011 national                                 Total CY 2011  national      CY 2011 national                                Total CY 2011 national
   standardized 60-day        Multiply by the 3        standardized 60-day       standardized 60-day       Multiply by the 3       standardized 60-day
  episode payment rate      percent rural add-on      episode  payment rate     episode payment rate      percent rural add-on    episode  payment rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
            $2,192.07                    x 1.03                 $2,257.83                 $2,148.71                   x 1.03                $2,213.17
--------------------------------------------------------------------------------------------------------------------------------------------------------


                             Table 11--Per-Visit Amounts for Services Provided in a Rural Area, Before Wage Index Adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     For HHAs that DO submit quality data      For HHAs that DO NOT submit quality data
                                                                 ---------------------------------------------------------------------------------------
                                                                  CY 2011 per-                                CY 2011 per-
                                                                   visit rate                     Total CY     visit rate                     Total CY
                   Home health discipline type                      for HHAs      Multiply by     2011 per-     for HHAs      Multiply by     2011 per-
                                                                     that DO     the 3 percent   visit rate    that DO NOT   the 3 percent   visit rate
                                                                     submit      rural add-on     for rural      submit      rural add-on     for rural
                                                                  quality data                      areas     quality data                      areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
HH Aide.........................................................        $50.42         x 1.03         $51.93        $49.42         x 1.03         $50.90
MSS.............................................................        178.46         x 1.03         183.81        174.93         x 1.03         180.18
OT..............................................................        122.54         x 1.03         126.22        120.12         x 1.03         123.72
PT..............................................................        121.73         x 1.03         125.38        119.32         x 1.03         122.90
SN..............................................................        111.32         x 1.03         114.66        109.12         x 1.03         112.39
SLP.............................................................        132.27         x 1.03         136.24        129.65         x 1.03         133.54
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                    Table 12--Total CY 2011 LUPA Add-On Amounts for Services Provided in Rural Areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    For HHAs that DO submit quality data                                       For HHAs that DO NOT submit quality data
--------------------------------------------------------------------------------------------------------------------------------------------------------
   CY 2011 LUPA add-on                               Total CY 2011 LUPA add-     CY 2011 LUPA add-on                             Total CY 2011 LUPA add-
 amount for HHAs that DO      Multiply by the 3        on amount for rural     amount for HHAs that DO     Multiply by the 3       on amount for rural
   submit quality data      percent rural add-on              areas            NOT submit quality data    percent rural add-on            areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
               $93.31                    x 1.03                    $96.11                    $91.46                   x 1.03                   $94.20
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                     Table 13A--Total CY 2011 Conversion Factor for Services Provided in Rural Areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    For HHAs that DO submit quality data                                       For HHAs that DO NOT submit quality data
--------------------------------------------------------------------------------------------------------------------------------------------------------
   CY 2011 conversion                                     Total CY 2011          CY 2011 conversion                                   Total CY 2011
 factor for HHAs that DO      Multiply by the 3       conversion factor for    factor for HHAs that DO     Multiply by the 3      conversion factor for
   submit quality data      percent rural add-on           rural areas        NOT submit  quality data    percent rural add-on         rural areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
               $52.54                    x 1.03                    $54.12                    $51.50                   x 1.03                   $53.05
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 70417]]


                             Table 13B--Relative Weights for the 6-Severity NRS System for Services Provided in Rural Areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               For HHAs that DO submit quality data          For HHAs that DO NOT submit quality data
                                                         -----------------------------------------------------------------------------------------------
                                                           NRS payment                                     NRS Payment
          Severity level              Points  (scoring)    amount for    Multiply by the 3    Total NRS    amount for    Multiply by the 3    Total NRS
                                                          HHAs that DO  percent rural add-     payment    HHAs that DO  percent rural add-     payment
                                                             submit             on           amount for    NOT submit           on           amount for
                                                          quality data                       rural areas  quality data                       rural areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.................................  0...................        $14.18  x 1.03............        $14.61        $13.89  x 1.03............        $14.31
2.................................  1 to 14.............         51.18  x 1.03............         52.72         50.17  x 1.03............         51.68
3.................................  15 to 27............        140.34  x 1.03............        144.55        137.57  x 1.03............        141.70
4.................................  28 to 48............        208.51  x 1.03............        214.77        204.38  x 1.03............        210.51
5.................................  49 to 98............        321.53  x 1.03............        331.18        315.17  x 1.03............        324.63
6.................................  99+.................        553.00  x 1.03............        569.59        542.06  x 1.03............        558.32
--------------------------------------------------------------------------------------------------------------------------------------------------------

E. Enrollment Provisions for HHAs

    In the CY 2011 HH PPS proposed rule, we proposed several payment 
safeguard provisions designed to: (1) Ensure that enrolling HHAs have 
sufficient capital on hand to operate the business; (2) improve our 
ability to verify that HHAs that are changing ownership meet and 
continue to meet the Conditions of Participation for HHAs as specified 
in 42 CFR part 484; and (3) improve the quality of care that Medicare 
beneficiaries receive from HHAs.
1. HHA Capitalization
a. Background
    As stated in the CY 2011 HH PPS proposed rule, in the January 5, 
1998 Federal Register (63 FR 291) we published a final rule that 
required an enrolling HHA to furnish proof that it has available 
sufficient funds--or ``initial reserve operating funds'' (IROF)--to 
operate the HHA for the 3 month period following the effective date of 
its provider agreement. This requirement, at Sec.  489.28, was 
triggered by our concern that HHAs were entering the Medicare program 
without sufficient funds, which could, as stated in the preamble to the 
January 5, 1998 final rule, have deleterious consequences on patient 
care. We stated therein:

    New HHAs generally are small businesses and have the same need 
for adequate capitalization as have other small businesses, which 
are just starting. As with other small businesses, a lack of funds 
in reserve to operate the business until a stream of revenues can be 
established can seriously threaten the viability of the business. In 
addition, for new HHAs, which are in business to render patient care 
services, any condition threatening the viability of the new 
business can adversely affect the quality of care to their patients 
and, in turn, the health and safety of those patients. That is, if 
lack of funds forces an HHA to close its business, to reduce staff, 
or to skimp on patient care services because it lacks sufficient 
capital to pay for the services, the overall well-being of the HHA's 
patients could be compromised. In fact, there could be the risk of 
serious ill effects as a result of patients not receiving adequate 
services.

    In the January 5, 1998 preamble, we also cited a 1997 OIG report 
entitled, ``Home Health: Problem Providers and their Impact on 
Medicare'' (OEI-09-96-00110), in which the OIG expressed similar 
concerns about undercapitalized HHAs. The OIG stated:

    If it were not for Medicare accounts receivable, problem 
agencies would have almost nothing to report as assets. Agencies 
tend to lease their office space, equipment, and vehicles. They are 
not required by Medicare to own anything, and they are almost always 
undercapitalized. On average, cash on hand and fixed assets amount 
to only one-fourth of total assets for HHAs, while Medicare accounts 
receivable frequently equal 100 percent of total assets. These 
agencies are almost totally dependent on Medicare to pay their 
salaries and other operating expenses. For a home health agency, 
there are virtually no startup or capitalization requirements. In 
many instances, the problem agencies lease everything without 
collateral. They do not even have enough cash on hand to meet their 
first payroll.

    We noted in the CY 2011 HH PPS proposed rule that our Medicare 
contractors have traditionally determined the provider's compliance 
with the capitalization provisions in Sec.  489.28 prior to making 
their recommendation for approval to the State Agency and CMS Regional 
Office (RO). This can occur many months before the HHA signs its 
provider agreement. To ensure that the HHA maintains its required level 
of capitalization during this potentially lengthy period--as well as 
during the period between when it signs said agreement and the time it 
is granted Medicare billing privileges (a period which also can last 
several months)--we proposed at Sec.  489.28(a) to require the HHA to 
``have available sufficient funds * * * at the time of application 
submission and at all times during the enrollment process to operate 
the HHA for the 3 month period after Medicare billing privileges are 
conveyed by the Medicare contractor.''
    We believe that confirming capitalization more than once during 
this process would address our concern that a provider may have 
redirected these funds--which were originally secured exclusively to 
meet the capitalization requirements--for a purpose other than to 
operate the business. Indeed, situations have arisen in which an HHA no 
longer has sufficient capitalization at the time it is enrolled in 
Medicare. This defeats the policy behind Sec.  489.28, which is to 
ensure that HHAs are adequately capitalized when they become Medicare 
providers. Accordingly, we believe that a prospective HHA must meet and 
maintain adequate capitalization during the entire period between when 
it submits its enrollment application to the Medicare contractor up to 
3 months after the contractor conveys Medicare billing privileges to 
the HHA. This will ensure that the HHA has sufficient operating funds 
at the time of application submission, during the period in which a 
State Agency or deemed accrediting organization is ensuring that the 
HHA meets the Conditions of Participation, and when Medicare billing 
privileges are conveyed.
b. Proposed Provisions
    We proposed the following provisions related to capitalization:
     In Sec.  424.510, we proposed to add the IROF requirement 
specified in Sec.  489.28(a), so as to make it an enrollment 
requirement for prospective HHAs.
     In Sec.  424.530(a)(8), we proposed to deny Medicare 
billing privileges to a prospective HHA if it could not furnish 
supporting documentation (within 30

[[Page 70418]]

days of a CMS or Medicare contractor's request) verifying that it met 
the IROF requirement specified in Sec.  489.28(a). We also proposed to 
deny Medicare billing privileges to a prospective HHA that failed to 
meet the IROF requirement at Sec.  489.28(a).
     In Sec.  424.535(a)(11), we proposed to revoke Medicare 
billing privileges and the corresponding provider agreement if the 
enrolled HHA was not able to furnish supporting documentation (within 
30 days of a CMS or Medicare contractor's request) verifying that it 
met the IROF requirement specified in Sec.  489.28(a).
     In Sec.  489.28(a), we proposed to require that the HHA 
have available sufficient IROF at the time of application submission, 
and at all times during the enrollment process to operate the HHA for 
the 3 month period after Medicare billing privileges are conveyed by 
the Medicare contractor (exclusive of actual or projected accounts 
receivable from Medicare).
     In Sec.  489.28(c), we proposed to add a new paragraph (1) 
to reemphasize that the Medicare contractor, in selecting comparative 
HHAs for the purpose of calculating the enrolling HHA's required level 
of capitalization, could only select HHAs that submitted cost reports 
to Medicare.
     In Sec.  489.28(g)(1), we proposed to establish that CMS 
may deny Medicare billing privileges to an HHA unless the HHA meets the 
initial reserve operating funds requirements of this section.
     In Sec.  489.28(g)(2), we proposed to establish that CMS 
may revoke the Medicare billing privileges of an HHA that fails to meet 
the initial reserve operating funds requirements of this section within 
three months of receiving its billing privileges.
c. Analysis of and Responses to Public Comments
    The following is a summary of the comments received on our proposed 
capitalization provisions, and our responses thereto:
    Comment: Several commenters expressed support for our proposal to 
require multiple instances of capitalization verification between the 
time an application is submitted up to 3 months after the contractor 
conveys Medicare billing privileges. One commenter stated that the 
proposed capitalization requirement would reduce the risk that incoming 
providers will have inadequate funds to operate. The commenter added 
that the provider enrollment process can take several months or more; 
thus, expanding Medicare's authority to verify the IROF more than once 
is a reasonable safeguard. Another commenter stated that the proposed 
capitalization requirements are important to ensure that new HHAs have 
adequate resources to provide quality care to patients.
    Response: We appreciate the support of these commenters.
    Comment: One commenter stated that the signing of a provider 
agreement signifies that the HHA has met the requirements to receive 
payment. The commenter also stated that proposed Sec.  489.28(g)(2) 
allows CMS to enter into a provider agreement before verification of 
capitalization is performed at the point that billing privileges are 
conveyed. From this, the commenter seemed to imply that verification of 
capitalization after the conveyance of a provider agreement is 
inappropriate, since the provider has already--via the provider 
agreement--been deemed to have met the Medicare requirements for 
participation, including the capitalization requirements. The commenter 
recommended that we: (1) Verify the IROF at the time of enrollment, the 
time of the initial survey, and the time the provider agreement is 
signed; and (2) delete proposed Sec.  489.28(g)(2), as it conflicts 
with Sec.  489.28(g)(1), which does not allow CMS to convey billing 
privileges until IROF requirements have been met.
    Response: In the August 16, 2010 final rule titled, ``Medicare 
Program; Hospital Inpatient Prospective Payment Systems for Acute Care 
Hospitals and the Long Term Care Hospital Prospective Payment System 
Changes and FY 2011 Rates; Provider Agreements and Supplier Approvals; 
and Hospital Conditions of Participation for Rehabilitation and 
Respiratory Care Services; Medicaid Program: Accreditation for 
Providers of Inpatient Psychiatric Services; Final Rule,'' we revised 
the effective date of provider and supplier agreements at Sec.  489.13. 
Specifically, section 489.13 was revised to clarify that the date of a 
Medicare provider or supplier approval may not be earlier than the 
latest date on which all applicable Federal requirements have been met, 
and that such requirements include review and verification of an 
application to enroll in the Medicare program by CMS's legacy fiscal 
intermediary, legacy carrier, or Medicare Administrative Contractor 
(MAC). These clarifications were necessary because a September 28, 2009 
decision of the Appellate Division of the Department of the Appeals 
Board (DAB) that interpreted Sec.  489.13 as not including enrollment 
application processing among the Federal requirements that must be met.
    Accordingly, the August 16, 2010 final rule mentioned above revised 
Sec.  489.13(b) to state,'' Federal requirements include, but are not 
limited to--
    (1) Enrollment requirements established in Part 424, Subpart P, of 
this chapter. CMS determines, based upon its review and verification of 
the prospective provider's or supplier's enrollment application, the 
date on which enrollment requirements have been met;
    (2) The requirements identified in Sec.  489.10 and Sec.  489.12; 
and
    (3) The applicable Medicare health and safety standards, such as 
the applicable conditions of participation, the requirements for 
participation, the conditions for coverage, or the conditions for 
certification.''
    Thus, Medicare billing privileges are conveyed by the Medicare 
contractor, not through the issuance of a provider agreement. That is, 
even though the provider has signed a provider agreement, the provider 
must, after that point, still continue to meet all enrollment 
requirements before the contractor conveys Medicare billing privileges. 
Moreover, as stated in this final rule, one of those requirements is 
the maintenance of adequate capitalization. In fact, even after billing 
privileges are conveyed, the provider must meet the capitalization 
requirement for another 3 months. This is consistent with the Medicare 
enrollment requirement in 42 CFR 424.500 et seq. that the provider 
remain in compliance with all enrollment requirements once it is 
enrolled in Medicare.
    With respect to the commenter's request to delete Sec.  
489.28(g)(2) because it conflicts with Sec.  489.28(g)(1), we believe 
there is no conflict. Section Sec.  489.28(g)(2) provides that the 
capitalization requirements be maintained for 3 months after billing 
privileges are conveyed--much like the requirement that the provider 
continue to meet other enrollment requirements after it is enrolled in 
Medicare. Section Sec.  489.28(g)(1), on the other hand, provides that 
capitalization requirements must be met before billing privileges are 
conveyed. The provisions, in other words, are not mutually exclusive. 
They simply cover two different timeframes.
    Nevertheless, to alleviate any confusion on this issue, we have 
revised Sec.  489.28(a) to reemphasize that the HHA must maintain 
capitalization during the 3 month period following its receipt of 
Medicare billing privileges.
    Comment: Several commenters stated that if CMS intends for HHAs to

[[Page 70419]]

maintain capitalization 3 months after they are able to bill Medicare, 
this does not comport with the provisions of Sec.  489.28(g), even 
after these provisions are changed pursuant to this rule. This is 
because Sec.  489.28(g) will still state that CMS will only convey 
Medicare billing privileges to an HHA that satisfies its IROF 
requirement. Another commenter also requested clarification on how our 
proposed changes are consistent with the current verbiage in Sec.  
489.28(g).
    Response: As indicated in our response to the previous commenter, 
the HHA will still be required to satisfy the IROF requirement before 
receiving Medicare billing privileges. However, the HHA will also be 
required to maintain the IROF level during the first 3 months after 
receiving billing privileges. These two requirements, again, are not 
inconsistent, but merely address two different timeframes. We have 
revised Sec.  489.28(a) to make this point more clear.
    Comment: One commenter stated that the new capitalization rules 
could hinder the creation of new HHAs, which, in turn, could harm 
underserved areas, and that the closure of a new HHA because of the new 
requirements could disrupt patient care. The commenter recommended 
flexibility and discretion in applying the capitalization requirements 
when the HHA's failure to meet the required IROF levels is superseded 
by the need for the HHA in that community, or when the HHA's financial 
condition on a prospective basis suggests that it will likely become 
financially viable.
    Response: While we understand and appreciate the commenter's 
concerns, we feel, for reasons already stated, that it is important for 
incoming HHAs to meet and maintain the capitalization amount specified 
by the Medicare contractor at the time of enrollment, throughout the 
enrollment process, and during the first 3 months after Medicare 
billing privileges are conveyed. We note, moreover, that if a HHA's 
Medicare billing privileges are denied or revoked for failing to meet 
the capitalization requirements, the HHA is afforded administrative 
appeal rights pursuant to the procedures set forth in 42 CFR part 498.
    Comment: One commenter stated that it is unclear whether CMS will 
require HHAs to show capitalization more than 3 months after they are 
able to bill the Medicare program.
    Response: Section 489.28(a) of the final rule states that the HHA 
must maintain capitalization up to 3 months after Medicare billing 
privileges have been conveyed to the provider.
    Comment: One commenter stated that the proposed provisions lack 
clarity as to when an HHA will be required to show capitalization.
    Response: We believe that Sec.  489.28(a) is clear as to the points 
at which proof of capitalization must be shown.
    Comment: One commenter recommended that CMS ensure there is 
transparency throughout the capitalization process. Specifically, the 
commenter urged CMS to make certain that the applicant: (1) Is able to 
determine how much capitalization is needed at the time it submits its 
application through the last stage of the review process; (2) is 
notified if or when the capitalization amount changes and give the 
applicant sufficient time to secure any capitalization shortfall; and 
(3) is subject to capitalization standards that are evidence-based and 
reviewable by an objective and independent person or entity. Another 
commenter recommended that CMS require each contractor to: (1) Publish 
the methodology used to calculate IROF levels for a particular region 
or State; (2) use current cost report data for each calendar year; and 
(3) publish ranges of IROF based on current cost report data.
    Response: We will ensure that: (1) Sufficient information is 
available to HHAs prior to submitting their enrollment applications so 
they know what the appropriate capitalization levels are and the 
justification for and basis behind them; (2) incoming HHAs are notified 
when their required capitalization amounts change; and (3) our Medicare 
contractors calculate the IROF amount consistent with existing 
regulations and the provisions in this final rule. Moreover, we expect 
that our contractors will make annual adjustments to the IROF to ensure 
that the capitalization amount is based on current full cost report 
data.
    Comment: One commenter indicated that the proposed clarification in 
Sec.  489.28(c)(1) regarding the use of cost reports when selecting 
comparative HHAs is superfluous, since Sec.  489.28(c) is already clear 
on this point.
    Response: Though we agree that Sec.  489.28(c) already discusses 
this topic, we have clarified in this final rule that Medicare 
contractors will use full cost report data to calculate the IROF 
amount. As such, Medicare contractors will exclude from the IROF 
calculation those HHAs that do not submit cost report data or that 
submit low utilization cost report data, as defined in existing program 
guidance.
    Comment: A commenter stated that Sec.  489.28(a) holds that the 
IROF is to be used to operate the HHA for the 3 month period after its 
Medicare provider agreement becomes effective. Requiring an HHA to show 
proof of IROF 3 months after billing privileges have been conveyed will 
not allow the agency to use these funds as intended by the rule.
    Response: We do not agree that the HHA would be unable to use these 
funds during the first 3 months of operations. Section 489.28(a) simply 
states that the provider must have adequate capitalization on hand to 
operate the business for the 3 month period after billing privileges 
are conveyed.
    Comment: One commenter stated that the need to show capitalization 
three times places a tremendous financial burden on prospective HHAs 
that are providing care to patients while awaiting reimbursement 
approval.
    Response: We believe this comment underscores our concern about 
undercapitalized HHAs enrolling in Medicare. Moreover, since most 
businesses receive monthly banking statements or have ready access to 
information about their financial net worth, we do not believe that it 
is burdensome to furnish this information upon a Medicare contractor's 
request.
2. HHA Changes of Ownership
a. Background
    In the CY 2010 HH PPS proposed rule, we also addressed the issue of 
HHA ``flipping'' (e.g., rapidly selling the HHA), or the HHA 
``certificate mill'' process. We explained in detail how this process 
works and our concerns about it in the preamble to that August 13, 2009 
rule (74 FR 40948):

    We have recently found instances where owners of a HHA, some of 
which were working in concert with brokers or organizations 
operating `turn-key' businesses, have enrolled or have attempted to 
enroll in the Medicare program for the specific purpose of selling 
the Medicare billing privileges and the Medicare provider agreement 
of their HHA to a third-party. In this scenario, the buyer or seller 
of the HHA typically would notify Medicare of the sale or change of 
ownership via the Medicare enrollment application (CMS-855A) after 
the billing privileges have been transferred when the HHA is sold.
    Current CMS policy recommends surveys when there is a change of 
ownership. However, surveys in cases of a change of ownership do not 
occur with the frequency that they do when providers initially 
enroll in Medicare. Consequently, there are instances in which a 
change of ownership takes place yet the new owner does not undergo a 
survey, in which case Medicare cannot conclusively ascertain whether 
the business, under new ownership, meets the Conditions of 
Participation under 42 CFR part 484. This serves as an incentive for 
certain prospective providers to enroll in the

[[Page 70420]]

Medicare program with the sole purpose of transferring Medicare 
billing privileges and the associated provider agreement when the 
business is sold.
    This is problematic for two reasons. First, the prospective 
provider has minimal incentive for ensuring quality care for its 
patients after it is enrolled because its exclusive objective for 
participating in Medicare in the first place is to sell the business 
shortly after receiving Medicare billing privileges. In other words, 
the provider, aware that it may be able to sell the business without 
the HHA having to undergo a survey, may have little motivation to 
ensure that it is in compliance with the Conditions of Participation 
under 42 CFR part 484, since it intends on selling the business in 
any event. Medicare beneficiaries, therefore, may receive inadequate 
services as a result of this activity. Second, without the 
protection that a survey provides, the HHA may attempt to bill 
Medicare for these insufficient services. These circumstances 
increase the risk for an HHA to submit inappropriate and potentially 
fraudulent claims to Medicare, which places the Medicare Trust Funds 
at risk.

    In short, under this scenario, entrepreneurs apply for Medicare HHA 
certification, undergo a survey, and become enrolled in Medicare, but 
then immediately sell the agency. These brokers, in other words, enroll 
in Medicare exclusively to sell the HHA, rather than to provide 
services to beneficiaries. This practice allows a purchaser of an HHA 
to enter the Medicare program through the back door--via the change of 
ownership process--without having to undergo a State survey. Because of 
this circumvention of the State survey process, we have no way of 
knowing whether the HHA, under its new ownership, is still in 
compliance with the HH conditions of participation.
    Largely to address this concern, we proposed in Sec.  424.550(b)(1) 
of the CY 2010 HH PPS proposed rule that if an owner of an HHA 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: (1) 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.
    We received several comments supporting the establishment of this 
``36 month rule'' and did not receive any specific recommendations that 
we establish exceptions thereto. We therefore left Sec.  424.550(b)(1) 
largely intact in the 2010 HH PPS final rule. However, we did reiterate 
in that rule that the 36-month provision was not only designed to deal 
with the specific issue of ``flipping,'' but to also address the 
broader problem of new owners of HHAs entering the program without a 
State survey being performed:

    We wish to make clear that the intent of 42 CFR Sec.  
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 that the newly-purchased HHA be subject to 
an appropriate level of review. (74 CFR 58118)

    The effective date of Sec.  424.550(b)(1) was January 1, 2010.
b. Proposed Provisions
    After the implementation of Sec.  424.550(b)(1), we received a 
number of comments regarding the impact of this provision on bona fide 
ownership transactions. Therefore, in this year's HH PPS proposed rule, 
we proposed to revise Sec.  424.550(b)(1), and to establish several 
exceptions:
     In Sec.  424.502, we defined the term ``change in majority 
ownership'' to mean when an individual or organization acquires more 
than a 50 percent interest in an HHA during the 36 months following its 
initial enrollment into the Medicare program or a change of ownership 
(including asset sales, stock transfers, mergers, or consolidations). 
This would include an individual or organization that acquires majority 
ownership in an HHA through the cumulative effect of asset sales, stock 
transfers, consolidations, and mergers during a 36 month period.
     In Sec.  424.550(b)(1), we proposed that any change in 
majority ownership within 36 months after the effective date of the 
HHA's enrollment in Medicare (including asset sales, stock transfers, 
mergers or consolidations) would require the entity to enroll as a new 
HHA and undergo a State survey or obtain accreditation.
     In Sec.  424.550(b)(2)(i), we proposed to exempt from 
Sec.  424.550(b)(1) a publicly-traded company that is acquiring another 
HHA, and both entities submitted cost reports to Medicare for the 
previous 5 years.
     In Sec.  424.550(b)(2)(ii), we proposed to exempt from 
Sec.  424.550(b)(1) an HHA parent company that is undergoing an 
internal corporate restructuring, such as a merger or consolidation, 
and the HHA submitted a cost report to Medicare for the previous 5 
years.
     In Sec.  424.550(b)(2)(iii), we proposed to exempt from 
Sec.  424.550(b)(1) those situations where the owners of an existing 
HHA are changing its existing business structure (for example, 
partnership to a limited liability company; sole proprietorship to 
subchapter S corporation), but the individual owners remain the same 
and there is no change in majority ownership.
     In Sec.  424.550(b)(2)(iv), we proposed to exempt from 
Sec.  424.550(b)(1) those ownership changes involving the death of an 
owner who owns a 49 percent or less interest in an HHA (where several 
individuals or organizations are co-owners of an HHA and one of the 
owners dies).
    We proposed these exceptions to account for certain legitimate 
transactions that might be unduly affected by the 36-month rule. 
However, as we stated in the proposed rule, our decision to do so in no 
way alleviated our ongoing concerns about the ``certificate mill'' 
process. We also remained concerned about the broader ability of new 
HHA owners to enter Medicare through the back door via the change of 
ownership process, as opposed to the initial enrollment and State 
survey mechanism.
c. Analysis of and Responses to Public Comments
    The following is a summary of the comments received regarding the 
36-month rule, and our responses thereto:
(1) General Application of Rule
    Comment: One commenter expressed support for the 36-month rule, as 
well as for our proposed changes and exceptions. The commenter stated 
that the rule is one means to reduce the number of new HHAs that: (1) 
Are entering Medicare ill-equipped to provide high-quality care; and 
(2) easily fall into patterns of behavior that hurt the integrity of 
the Medicare program. Another commenter stated that the additional 
clarification to the 36-month rule was positive.
    Response: We appreciate and agree with these comments.
    Comment: One commenter stated that the survey of an HHA that has 
changed owners would seem appropriate. New

[[Page 70421]]

owners/operators may not be well-educated on home care rules and 
regulations, and surveys of such agencies would often be in the 
patients' best interests. Exceptions might be considered when another 
already-certified and operating HHA with a proven track record 
purchases another HHA. Still, care transitions and managerial changes 
can place patient care at risk. Timely and targeted surveys may avoid 
many problems later on, both for the purchased HHA and its patients.
    Response: We appreciate this comment, and share the commenter's 
belief that surveying new owners would be in the best interests of the 
HHA's patients.
    Comment: Several commenters recommended that we limit the 
applicability of the 36-month rule to ownership changes occurring 
within 36 months after the effective date of the HHA's initial 
enrollment in Medicare, rather than within 36 months after the HHAs 
most recent ownership change. One commenter added that this single 
change would eliminate the most significant problems created by the 
proposed rule.
    Response: We believe that applying Sec.  424.550(b)(1) to ownership 
changes that occur within 36 months of: (1) Initial enrollment and (2) 
the HHA's most recent ownership change, is needed to ensure that newly-
sold HHAs are in compliance with the conditions of participation.
    Comment: Several commenters recommended that we rescind the current 
36-month rule and establish a technical advisory committee with experts 
from home care and the finance sector to establish guidelines that will 
ensure that patient care remains the top priority for existing and new 
home care agencies.
    Response: We disagree that a technical advisory committee is needed 
to address the provisions of the 36-month rule. We believe that the 
comments received in response to our proposal and our subsequent 
changes will result in improved patient care and financially viable 
HHAs.
    Comment: Several commenters stated that the proposed provisions 
constitute an expansion of the 36-month rule that would block new 
investments in the HH industry, which, in turn, could inhibit necessary 
industry consolidation and prevent providers from expanding. The 
commenters generally believed that the costs of the proposed revisions 
outweigh any benefits to the Medicare program or its beneficiaries. 
Another commenter stated that revising the rule to ensure that capital 
is available will lead to better patient care outcomes, fewer issues in 
the operations of HHAs, and increased innovations that will lower the 
overall costs of care.
    Response: We disagree with the assertion that the costs of the 
proposed rule outweigh its benefits. Beyond the issue of ``certificate 
mills'' and HHAs' ``flipping'' ownership to a third-party, we remain 
concerned about: (1) The sale or transfer of HHAs that have little or 
no enterprise value except the Medicare billing number, and (2) new 
owners entering Medicare without the HHA having to undergo a State 
survey.
    Comment: Several commenters stated that for many HHAs that have 
been enrolled in Medicare for more than 36 months (or even less than 36 
months), the proposed rule will deprive them of access to capital, in 
that no existing HHA can afford to lose its Medicare participation 
until a new survey is conducted, a process which can take many months. 
No ongoing business, the commenters stated, can continue to incur 
expenses with no revenue during that time, and that patient care could 
therefore suffer. Several commenters further contended that by 
expanding the rule to apply to changes occurring more than 36 months 
after initial enrollment, banks will not loan money to, private equity 
firms will not invest in, and quality HHA organizations will not 
purchase, existing HHAs. This is because the bank/purchaser realizes it 
will be unable to effectively (a) foreclose upon, or (b) sell its 
majority interest in the business, due to the need to enroll as a new 
provider and undergo a survey. The commenters stated that some 
financiers have, since the implementation of Sec.  424.550(b)(1), 
declined to loan money to HHAs because of these concerns, with one 
commenter adding that this closing of access to funds does not help 
address the issue of ``flipping.'' One commenter added that CMS should 
not require enhanced capitalization in one section of the proposed rule 
while denying access to that capital in another. Another commenter 
stated that many entities will avoid the HHA business entirely if they 
cannot exit their investment for 36 months or obtain capital. 
Meanwhile, enrolled HHAs, another commenter noted, will be reluctant to 
exit Medicare, which could prove problematic for Medicare if the HHA is 
poorly-performing or of low-quality. Another commenter stated that 
lenders already perform due diligence on the HHA before loaning it 
money. This important safeguard is lost if lenders will not loan funds 
to the HHA because of the 36-month rule.
    Response: As already stated, the 36-month rule is designed to 
ensure that enrolled HHAs comply with the HHA conditions of 
participation and furnish quality services to Medicare beneficiaries. 
Nevertheless, we have adopted, as explained below in more detail, 
certain exceptions to the 36-month rule. We believe these exceptions 
will help ensure that HHAs are able to obtain financing, while at the 
same time protecting the integrity of the Medicare program.
    Comment: One commenter suggested that rather than require an HHA to 
reenroll in Medicare, the entity should instead have to obtain re-
accreditation from an approved accreditation organization within 6 
months of the ownership change. If reaccreditation is obtained within 
this period, the reenrollment process should not be required. If 
reaccreditation is not obtained, reenrollment would be necessary. The 
commenter believed that the reaccreditation process would be a faster 
and more cost-effective way to identify and stop the certificate mill 
process, and would not result in a gap in reimbursement for legitimate 
HHAs or a reduction in services for patients. Another commenter stated 
that the HHA should still be able to bill Medicare while awaiting the 
survey. This will prevent a disruption of services.
    Response: Though we appreciate these comments, our concern is that 
during the period in which the HHA is waiting for the survey to be 
performed, an entity that is potentially out of compliance with the 
conditions of participation because of its ownership change may be 
billing Medicare for services it is not qualified to provide. 
Accordingly, we are not adopting these recommendations.
    Comment: A commenter stated that although the survey requirement of 
the 36-month rule is essentially based on the old owner's conduct--that 
is, the owner's sale of its HHA--it is the new owner that must undergo 
the survey. The commenter believed this was somewhat unfair.
    Response: We disagree. In the commenter's scenario, the buyer is 
voluntarily agreeing to purchase the HHA. If a prospective buyer is 
uncomfortable with undergoing a survey, it need not proceed with the 
sale. Moreover, by ensuring that the HHA has submitted full cost 
reports, we believe this information will assist the buyer in 
establishing a fair valuation for the HHA it is purchasing.
    Comment: One commenter questioned the value of Sec.  424.550(b)(1) 
on two grounds. First, if an owner has operated a Medicare-enrolled HHA 
for at least 36 months, it is clear that it is not a broker looking to 
immediately ``flip'' the HHA

[[Page 70422]]

after enrollment. Second, an HHA can easily circumvent the 36-month 
rule by simply not disclosing the ownership change; the commenter 
suggested that by the time CMS learns of the transaction, it may be too 
late. Several commenters contended that the rule is only triggered when 
the HHA self-reports the change in ownership to CMS. Legitimate 
businesses that are willing to self-report under these circumstances 
are not the types of entities that generally pose a risk to Medicare. 
It therefore follows that the 36-month rule will prevent only 
legitimate transactions from taking place. Another commenter stated 
that if an HHA is enrolled for more than 36 months, this should be 
adequate proof that the entity is not a certificate mill. Hence, the 
rule should only apply to the first 36 months of enrollment.
    Response: With respect to the first comment, we have, as previously 
mentioned, elected to apply Sec.  424.550(b)(1) to ownership changes 
that occur within 36 months of: (1) Initial enrollment, and (2) the 
HHA's most recent ownership change. Again, our concerns go beyond the 
issue of ``flipping,'' and touch on the larger question of whether a 
newly-sold HHA is still in compliance with the conditions of 
participation.
    Regarding the remaining comments, we note that--under the Medicare 
enrollment regulations at 42 CFR 424.500 et seq.--a failure to report 
an ownership change to CMS can result in a: (1) Retroactive revocation 
of the provider's Medicare billing privileges, and (2) a bar against 
reenrolling in Medicare for a period of 1 to 3 years. Hence, it is to 
the provider's advantage to self-report the ownership change, for 
failing to do so could keep the provider out of Medicare for a much 
longer period if the provider's billing privileges are revoked. 
Moreover, Sec.  424.550(b)(1) is triggered when the change of ownership 
occurs, rather than whether it is reported. In other words, it is not 
the submission of a CMS-855A ownership change application that 
implicates Sec.  424.550(b)(1), but the ownership change itself.
    Comment: Several commenters stated that Sec.  424.550(b)(1) was 
inconsistent with section 1891(c)(2)(B)(i) of the Act. They contended 
that Congress did not intend for State surveys to take place every time 
there is a change of ownership, and that if a survey was nevertheless 
necessary, it had to occur within 2 months of the change. The 
commenters believed that CMS has therefore exceeded the authority 
provided to the Secretary under section 1891(c)(2)(B)(i).
    Response: We disagree. Nothing in the statute itself prohibits us 
from enacting Sec.  424.550(b)(1). Section 1891(c)(2)(B)(i) gives CMS 
the discretion to perform a survey within 2 months if a change of 
ownership has occurred. This issue was discussed in the legislative 
history of this provision, which read in part:

    The Committee amendment would authorize the States and the 
Secretary to conduct a standard survey, or an abbreviated version of 
a standard survey within 2 months after any change in ownership, 
administration, or management of a facility, as well as after a 
change in the director of nursing. (H.R. Rep. 100-391(I), 1987 
U.S.C.C.A.N. 2313-1) (Emphasis added).

    However, as both the statute and the aforementioned language 
indicate, we are not mandated to take this action within the 2 month 
period. In addition, while we appreciate the need for surveys in such 
situations to be conducted as rapidly as possible, State survey 
workloads generally do not permit them to happen within 2 months of the 
change.
    Comment: Several commenters stated that instead of requiring a new 
enrollment and survey--a process which could take an extended period of 
time--CMS should use its authority under section 1891(c)(2)(B)(i) to 
conduct a survey of a sold HHA within 2 months of the sale's effective 
date. They added that the Sec.  424.550(b)(1) survey requirement will 
further burden State survey agencies and accreditation organizations. 
In light of this, they questioned the need for such surveys if both the 
buyer and seller are legitimate businesses, as shown by their 
submission of cost reports for 36 months.
    Response: While we appreciate this suggestion, the commenters seem 
to imply that we do not have the authority to conduct a survey outside 
of that referenced in section 1891(c)(2)(B)(i) of the Act. As already 
indicated, we do not agree. We further note that a survey performed 
pursuant to Sec.  424.550(b)(1) is of a new HHA, not an existing one; 
this is because Sec.  424.550(b)(1) requires the HHA to enroll as a new 
provider.
    Comment: One commenter suggested that CMS hold that an HHA provider 
number will not transfer upon an ownership change unless either: (1) 
The new owner has successfully been through the State survey or 
accreditation process and the parent company has filed cost reports on 
behalf of other HHAs it owns for 36 months; or (2) the HHA being 
purchased has filed cost reports for at least 36 months. This would, 
the commenter explained, significantly curtail, if not eliminate, the 
certificate mill process.
    Response: As already explained, our concerns are not limited to the 
``flipping'' process. We are also concerned with ensuring that newly-
sold HHAs are still in compliance with the conditions of participation. 
Nevertheless, we have adopted an exception to the 36-month rule that is 
consistent with the commenter's second suggestion.
    Comment: Several commenters stated that the primary intent of this 
provision was to stem the practice of turn-key ventures that establish 
HHAs for the sole purpose of selling them. The commenters argued that 
the proposed rule exceeds this intent.
    Response: We disagree that this rule exceeds its intent. Again, 
aside from the issue of ``flipping,'' we believe it is crucial for 
Medicare to ensure that entities undergoing an ownership change remain 
in compliance with the conditions of participation. We believe the 
final rule helps fulfill this intent.
    Comment: One commenter stated that the proposed changes are 
confusing and discriminatory, that the rule conflicts with existing law 
regarding transfers of ownership, and will effectively halt all mergers 
and acquisitions in the HH industry unless the HHA is a public company. 
The commenter stated that many HHAs are small companies, and their 
investment in our communities should be protected.
    Response: We are unable to address the commenter's first and second 
contentions, as the commenter did not explain how the proposed rule is 
confusing or discriminatory, or how it is inconsistent with current 
laws regarding ownership changes. With respect to the third contention, 
we agree that the volume of HHA ownership changes, including asset 
sales and stock transfers, could be reduced as a result of the 36-month 
rule. Yet we also believe that the exceptions outlined in this final 
rule will allow a number of legitimate HHA ownership changes to 
proceed.
    Comment: Several commenters stated that no evidence of the 
``certificate mill'' problem has been substantiated by CMS. Another 
commenter stated that CMS has not defined or described the program 
integrity or quality of care concerns that the proposed rule is 
designed to address, nor has CMS identified the harm caused by the 
``flipping'' process. This commenter added that if CMS's concerns go 
beyond the issue of ``flipping,'' this needs to be clearly disclosed so 
that comments can be furnished.
    Response: We disagree with these assertions. In the proposed and 
final rules for CY 2010 and 2011, we clearly articulated our concerns 
about this

[[Page 70423]]

problem and stated that we have uncovered instances where entities have 
enrolled in Medicare for the specific purpose of selling their HHAs to 
other entities looking to obtain Medicare billing privileges. We 
further explained that this practice allows a new entity to enter 
Medicare without having to undergo a State survey, which therefore 
raises questions as to whether the HHA is furnishing quality services 
to Medicare beneficiaries. In the 2010 proposed and final rules, we 
also articulated why this issue is especially disconcerting in light of 
the program integrity issues prevalent in the HHA community. In 
addition, we have consistently explained our concerns about the need to 
verify that newly-sold HHAs--even those not specifically engaged in the 
practice of ``flipping''--are in compliance with the conditions of 
participation.
    Comment: One commenter stated that a change in majority ownership 
does not necessarily imply a change in the management of the HHA's day-
to-day operations. A survey should be conducted only if the majority 
ownership change is accompanied by other factors that raise questions 
about the entity's compliance. In other words, surveys pursuant to 
Sec.  424.550(b)(1) should be conducted on a case-by-case basis. Other 
commenters, too, expressed concern about the ``majority ownership'' 
standard, and stated that CMS should instead apply the definition of 
``change of ownership'' in Sec.  489.18 to the 36-month rule, or should 
require a 100 percent ownership change before Sec.  424.550(b)(1) is 
triggered.
    Response: While we agree that a change in majority ownership of a 
particular HHA may not always result in a change in the HHA's 
management, it has been our experience that a change in management 
routinely occurs when there is a change in ownership.
    Comment: Several commenters recommended that the proposed revisions 
to the 36-month rule be applied prospectively only. Specifically, the 
commenters believed that no currently-enrolled HHA should be subject to 
the rule, in that they entered Medicare without a restriction on the 
sale of the HHA other than those existing at that time. At most, one 
commenter stated, CMS should apply the rule to HHAs initially enrolled 
in Medicare on January 1, 2010 (the effective date of the rule) or 
later. Otherwise, applying the rule to HHAs enrolled prior to that 
point will affect the business's value and financial stability.
    Response: For reasons already stated, it is important for us to 
confirm that an entity undergoing an ownership change is still in 
compliance with the HHA conditions of participation. Consequently, we 
do not believe that all HHAs enrolled prior to January 1, 2010 should 
be exempt from the provisions of this final rule. As an example, assume 
that an HHA initially enrolled in Medicare on July 1, 2009. The HHA is 
subject to Sec.  424.550(b)(1) through July 1, 2012, or 36 months after 
its date of initial enrollment. If the HHA undergoes a change in 
majority ownership on September 1, 2011, it will be subject to Sec.  
424.550(b)(1) until September 1, 2014, or 36 months after its most 
recent ownership change.
    Comment: Several commenters expressed concern that Sec.  
424.550(b)(1) would lead to beneficiaries that are under treatment by 
an HHA undergoing a Sec.  424.550(b)(1) ownership change to be denied 
certain services (or discharged and compelled to find care elsewhere), 
since the HHA will have to enroll as a new entity. Another commenter 
stated that this could also lead to layoffs of the HHA's staff.
    Response: We disagree. As we have stated in a number of forums, 
there is no shortage of available HH services throughout the country. A 
patient who may be discharged under the commenter's scenario will 
retain access to care via other HHAs within the community. We do not 
think there is a risk of a discharged beneficiary being unable to 
obtain HHA services from another provider.
    Comment: A commenter suggested that instead of the 36-month rule, 
CMS should use its deactivation authority under Sec.  424.540 to 
deactivate the billing privileges of an entity undergoing a change of 
ownership until a State survey is completed; additional ownership 
changes could be prohibited during that period. The new owner would 
therefore receive payments, but they would be delayed. This would be 
consistent with Sec.  424.540(b)(3)(i), which mandates a survey prior 
to the reactivation of an HHA's billing privileges. Likewise, another 
commenter suggested that CMS, in the alternative: (1) Require an HHA to 
notify CMS of the forthcoming sale 60 days in advance (and terminate 
the HHA if such notice is not given); (2) suspend the HHA's billing 
privileges effective the date of the sale; and (3) require the HHA to 
undergo a State survey or obtain accreditation within 6 months of the 
ownership change. Failure to meet either (1) or (3) would result in the 
termination of the provider's Medicare enrollment.
    Response: We appreciate these suggestions. However, we believe that 
Sec.  424.550(b)(1) more adequately furnishes the program safeguards we 
seek because the HHA will be required to enroll as a new provider and 
be subject to all of the provider enrollment and State survey vetting 
processes that other new HHAs must undergo.
    Comment: Another commenter suggested that CMS mandate that a 
provider agreement would not transfer upon a change of ownership if 
both the purchasing and selling entities: (1) Have not successfully 
been through the State survey process (or deemed accreditation 
process); and (2) have never filed an HHA cost report.
    Response: We appreciate this suggestion. The commenter's first 
criterion, however, is superfluous because the enrolled HHA that is 
being purchased will have already gone through the State survey or 
accreditation process prior to enrollment. Moreover, the second 
criterion makes no distinction between full cost reports and low or no 
utilization cost reports. Consequently, under the commenter's scenario, 
an HHA could be exempt from the 36-month rule so long as it submitted 
one cost report--even if it was a no utilization cost report. In light 
of this, we do not believe the commenter's recommendation provides the 
necessary program safeguards.
    Comment: One commenter stated that while the 36-month rule was 
well-founded in purpose and intent, it will negatively impact bona fide 
HHAs and the patients they serve and should be redesigned wholesale or 
significantly revised to better balance the interests of patients, 
providers, and Medicare. The commenter recommended that CMS work with 
the health care industry to achieve the program integrity purposes 
behind the rule.
    Response: We believe the exceptions in this final rule strike the 
necessary balance between our program integrity concerns and our desire 
to address some of the issues raised by the HHA industry.
    Comment: One commenter stated that the 36-month rule will create 
more harm than good. The commenter cited an example of an HHA that is 
poorly run. The HHA, rather than being able to freely sell the 
business, would now be encouraged to hold on to the HHA until the 36-
month clock expires. Another commenter added that even in cases where 
an HHA owner had every intention of maintaining its ownership for more 
than 36 months after its initial investment, many personal and 
professional circumstances can occur to impact that timing.

[[Page 70424]]

    Response: Given the changes we have adopted in this final rule, we 
believe that the owner of an HHA as described above would need to make 
the business decision to remain in the Medicare program or to exit the 
Medicare program voluntarily.
    Comment: Several commenters asked for clarification as to whether 
indirect ownership changes are subject to the 36-month rule.
    Response: Indirect ownership changes are not subject to the 36-
month rule. We have clarified this in the regulatory text of the final 
rule. However, CMS will further analyze and monitor this issue, and may 
consider modifying this policy in future rulemaking.
    Comment: One commenter suggested that indirect ownership changes 
without significant day-to-day management changes be exempt from the 
36-month rule.
    Response: As previously stated, indirect ownership changes are not 
subject to the 36-month rule.
    Comment: A commenter stated that with the termination of the 
provider agreement upon the application of Sec.  424.550(b)(1), 
Medicare loses the assumption of Medicare liabilities that come with 
the transfer of the provider agreement.
    Response: We appreciate this comment, but believe that the 36-month 
rule helps us address the program integrity concerns we have outlined.
    Comment: One commenter stated that because many states require an 
HHA to maintain a valid Medicare certification as a condition of 
Medicaid enrollment, loss of the HHA's enrollment in Medicare could 
prevent the entity from furnishing Medicaid services.
    Response: We understand the commenter's concern. However, we 
believe that owners of an HHA need to consider the impact of any 
changes of ownership on all of their payer relationships, not just 
Medicare.
    Comment: One commenter stated that CMS needs to apply caution in 
detailing regulations that financially impact legitimate HHAs and large 
numbers of patients. This is especially true if, for instance, a State 
is involved in purchasing or selling a significant number of HHAs and 
many CMS-855A applications must be completed.
    Response: We agree, and have incorporated public comments into this 
final rule that protect the Medicare program while helping to ensure 
that HHAs continue to have access to capital markets.
    Comment: One commenter stated that several of CMS's concerns about 
certificate mills may be somewhat misguided. The commenter cited 
verbiage in the CY 2010 and 2011 HH PPS rules in which we stated that 
certain HHA brokers sell the business without having seen a patient or 
hired an employee. The commenter stated that the entity is required to 
provide services to at least 10 patients prior to obtaining a provider 
agreement.
    Response: In this final rule, we have incorporated the submission 
of a full cost report for 2 years as an exception to the 36-month rule. 
Accordingly, we recognize that some HHAs do not submit cost report data 
or submit low utilization cost reports.
    Comment: One commenter stated that the 36-month rule will be 
extremely damaging to the home care industry and requested that CMS not 
implement it.
    Response: Though we are unsure as to the commenter's specific 
concerns about the 36-month rule, we believe, for reasons already 
stated, that it is necessary.
    Comment: Several commenters asked whether Sec.  424.550(b)(1) 
applies if there is a transfer between partners that changes one 
person's ownership interest from 40 percent to greater than 50 percent. 
The commenters questioned the provision's applicability, since the 
parties have not changed but have simply shifted the assets between 
them.
    Response: Section 424.550(b)(1) applies if there is a change in 
majority ownership. Since, in the example posed by the commenters, 
there is a change in majority ownership (that is, a person or entity 
now owns over 50 percent of the HHA) Sec.  424.550(b)(1) indeed 
applies, assuming the entity does not qualify for an exception under 
Sec.  424.550(b)(2).
    Comment: One commenter stated that there were two typographical 
errors in the definition of ``majority ownership'' in Sec.  424.502. 
First, the word ``months'' should immediately follow the phrase 
``during the 36.'' Second, after ``Medicare program,'' the phrase ``or 
a change of ownership'' should be deleted.
    Response: We have revised Sec.  424.502 to incorporate the first 
change, but we are not incorporating the second change.
(2) Exceptions
    Comment: One commenter recommended that if additional assurance is 
required that an HHA is indeed a viable agency and not being 
``flipped,'' we could extend the applicability of the proposed 36-month 
rule to sales of HHAs that have never filed a full cost report or that 
have filed a no or low utilization cost report pursuant to the Provider 
Reimbursement Manual.
    Response: We agree in part with this commenter, and have adopted 
the use of full cost reports in our exception criteria for the 36-month 
provision and in Sec.  489.28(c)(1). Moreover, we agree that an HHA 
must submit two or more consecutive full cost reports before the agency 
can receive an exception under Sec.  424.550(b)(2)(i). It is also 
important to note that we do not believe the submission of a low 
utilization cost report or no cost report for a given practice location 
meets the full cost report standard.
    Comment: Several commenters recommended that we adopt a public 
company exception to the 36-month requirement that states, ``A company 
is acquiring another company that is an HHA (or is the parent company 
of one or more HHAs) and the majority of the HHAs being acquired are 
bona fide operating HHAs that have submitted cost reports to Medicare 
for the previous 36 months or longer.''
    Response: As already stated, an HHA must submit two or more 
consecutive full costs reports before it can qualify for an exception 
under Sec.  424.550(b)(2)(i). We believe this exception would 
effectively block all unwanted ``license flipping'' transactions, while 
ensuring that bona fide operating businesses can obtain financing.
    Comment: Several commenters expressed concern over the proposed 
exception in Sec.  424.550(b)(2)(i) for publicly-traded companies that 
purchase an HHA. Among the arguments they presented were that: (1) It 
gives an unfair advantage to publicly-traded firms, (2) it restricts 
competition and is contrary to the public interest; (3) private 
companies in many cases have the resources and size comparable to 
publicly-traded companies; (4) a transaction by a privately-held, bona 
fide HHA is no less legitimate than one involving a publicly-held 
company; (5) since the statute does not give publicly-traded HHAs any 
greater rights or privileges, neither should the 36-month rule; (6) the 
additional legal and oversight requirements applicable to public 
companies do not make a difference with respect to compliance with 
Medicare rules to warrant an exclusive exception; and (7) because most 
HHAs are small, privately-held companies that lack the resources of 
some larger, publicly-held companies, the latter have an unfair 
advantage. Several of these commenters also contended that Sec.  
424.550(b)(2)(i) should be expanded to include private companies, and 
that public and private companies should be exempt if the HHA submitted 
cost reports to Medicare for the previous 3 years. One commenter stated 
that this will balance the need to protect the Medicare program without 
restricting

[[Page 70425]]

legitimate transactions. Another commenter, believing that proposed 
Sec.  424.550(b)(2)(i) is unfair, suggested two additional exceptions. 
One was for an individual or company that purchases an HHA with an 
initial investment of $15 million (or some other substantial figure). 
The second should be for buyers that already operate one or more HHAs 
with aggregate revenues of greater than $25 million. These prospective 
buyers, the commenter stated, are not of the types that intend to 
commit fraud.
    Response: Section 424.550(b)(2)(i) has been revised to apply to 
both private and public companies.
    Comment: One commenter stated that the public-company exception 
should be replaced with an exception for a company acquiring another 
company that is an HHA (or is the parent company of one or more HHAs), 
and the majority of the HHAs being acquired are bona fide operating 
HHAs that have submitted cost reports to Medicare for the previous 36 
months or longer. The commenter defined ``bona fide'' as an operating 
entity that employs caregivers, provides services to beneficiaries and 
other patients, and has filed Medicare cost reports for the previous 36 
months or longer. Another commenter recommended that CMS exempt from 
the 36-month rule any ``experienced'' acquiring party, whether a public 
or private company. The commenter defined ``experienced'' as an HHA 
that has had at least one survey within the last 36 months.
    Response: Section 424.550(b)(2)(i) has been expanded to include any 
HHA that has submitted 2 consecutive years of cost reports (excluding 
low or no utilization cost reports).
    Comment: Several commenters questioned why CMS did not propose an 
exception for non-profit entities. One commenter requested that CMS 
furnish a rationale for this decision. Another commenter stated that 
the transfer of control of non-profit, tax-exempt HHAs to another non-
profit, tax-exempt entity should be exempt from the 36-month rule 
because of other safeguards that prevent ``flipping'' transactions.
    Response: Section 424.550(b)(2)(i) is equally applicable to non-
profit and for-profit entities.
    Comment: One commenter believed that the exceptions to the 36-month 
rule were reasonable in view of the need to accommodate legitimate 
changes in ownership. The commenter added, however, that while non-
profits are not engaged in buying and selling HHAs or operating large 
national chains, non-profits that must merge for financial or other 
reasons should be offered full support by CMS to ensure the 
continuation of service to vulnerable patients.
    Response: We appreciate the commenter's support for our proposed 
exceptions to the 36-month rule and, as already mentioned, non-profit 
entities are included within the purview of Sec.  424.550(b)(2)(i).
    Comment: One commenter suggested that any change in ownership of a 
holding company that owns and operates HHAs through subsidiaries be 
exempt from the 36-month rule, so long as that holding company has one 
or more consolidated subsidiaries that have submitted cost reports to 
Medicare for at least 2 years.
    Response: While we appreciate this suggestion, it is moot because, 
as already mentioned, indirect ownership changes are not impacted by 
the 36-month rule.
    Comment: Several commenters suggested that we establish an 
exception to Sec.  424.550(b)(1) to permit a qualifying bank or other 
legitimate lending institution to foreclose on a defaulted loan and to 
permit the lender to, in turn, sell the HHA to an accredited buyer. 
Failure to do so will curtail the ability of HHAs to secure financing, 
since banks will be reluctant to loan money to HHAs if, should the HHA 
collapse financially, the bank will be unable to foreclose on the 
business. Another commenter agreed, stating that the proposed 36-month 
rule eliminates the option of foreclosure as security for lenders.
    Response: Since there is no enterprise value to an HHA that is in 
bankruptcy or where the lender forecloses (except the Medicare billing 
number), we do not believe that this exception should be adopted in 
formal rulemaking. However, we believe that we would be compelled to 
follow a court order approving the sale of an HHA.
    Comment: Several commenters suggested an exception for ownership 
changes triggered by a bankruptcy with court approval. This will allow 
the HHA to obtain needed capital.
    Response: As stated above, we will comply with court orders, but we 
do not believe that a bankruptcy exception to the 36-month rule is 
necessary.
    Comment: One commenter suggested that we create an exception to 
Sec.  424.550(b)(1) to allow a buyer that already operates an 
accredited HHA to acquire an unrelated HHA if the accrediting body 
extends the buyer's accreditation to include the newly-acquired HHA. 
Accrediting organizations, the commenter stated, will only extend 
accreditation if they are satisfied with the buyer's ability to operate 
the HHA in accordance with its standards.
    Response: We appreciate this suggestion. However, we believe that 
Sec.  424.550(b)(1) and its associated exceptions more adequately 
provide the program safeguards we desire.
    Comment: Several commenters stated that the exception in Sec.  
424.550(b)(2)(iv) is superfluous because the death of an owner of 49 
percent or less of the business does not result in a change in majority 
ownership anyway. The commenters suggested that the exception be 
revised to include the death of a majority owner, provided the 
remaining owners or partners retain their ownership. One commenter 
expressed concern that Sec.  424.550(b)(2)(iv) applies only when a 
deceased owner has less than a 50 percent ownership interest and that 
the exception applies to all types of business structures. This, the 
commenter states, could cause the entity undue hardship. Another 
commenter stated that the transfer of ownership from death should be 
completely exempt from the 36-month rule, and added that the currently 
proposed exception does not clarify the types of ownership interests to 
which it applies.
    Response: We have revised Sec.  424.550(b)(2)(iv) to state that the 
death of an owner does not trigger the 36-month rule.
    Comment: A commenter requested clarification of the term ``several 
individuals'' as used in proposed Sec.  424.550(b)(2)(iv), which reads: 
``The death of an owner who owns 49 percent or less interest in an HHA 
(where several individuals or organizations are co-owners of an HHA and 
one of the owners dies.)'' The commenter asked whether a trust 
qualifies as an ``individual.''
    Response: The term ``several individuals'' refers to more than one 
person, not to trusts. However, the verbiage in parentheses was meant 
to include all owners regardless of type. It was used only to describe 
situations in which an HHA has multiple owners. Yet the issue is 
largely moot based on our aforementioned revisions to Sec.  
424.550(b)(2)(iv).
    Comment: One commenter asked whether the exception in Sec.  
424.550(b)(2)(iv) applies if a corporation owned by three people 
establishes an HHA under a 49 percent, 49 percent, and 1 percent stock 
ownership scenario, and one person dies.
    Response: As stated above, we have revised Sec.  424.550(b)(2)(iv) 
to state that the death of an owner does not trigger the 36-month rule.

[[Page 70426]]

    Comment: Several commenters recommended that CMS reduce the cost 
reporting time for the proposed exceptions to the 36-month rule from 5 
years to 2 years. The commenters believed that 2 years was sufficient.
    Response: We agree, and have revised this final rule accordingly.
    Comment: Several commenters stated that an ownership change 
resulting from estate planning should be exempt because it shows a 
commitment to the delivery of care.
    Response: We believe that the expansion of Sec.  424.550(b)(2)(i) 
will allow a number of bona fide estate transactions to proceed.
    Comment: Several commenters stated that the ``parent company'' 
exception in Sec.  424.550(b)(2)(ii) should be revised to include the 
parent's subsidiaries, including the HHA itself. That is, as we 
understood the comment to read, if the HHA itself is internally 
restructuring, this should not trigger the 36-month rule, regardless of 
the number of cost reports the entity has submitted.
    Response: We have removed the cost report submission requirement 
from Sec.  424.550(b)(2)(ii). We note further that Sec.  
424.550(b)(2)(iii) exempts certain situations in which the HHA itself 
is changing its business structure.
    Comment: A commenter recommended an exception for changes of 
ownership involving entities that share a common corporate ownership.
    Response: We are not in a position to adopt this suggestion for 
this particular final rule. Nevertheless, we may consider it as part of 
a future rulemaking effort.
    Comment: One commenter stated that the exception in Sec.  
424.550(b)(2)(iii) for a change in business structure should apply if 
there is no change in the individual owners, regardless of whether 
there is a change in majority ownership. The commenter further stated 
that there should be no qualifiers on allowing corporate restructurings 
where the chain of ownership remains the same. The experience of the 
HHA--which we interpreted to mean, from the provider's comment, as the 
filing of cost reports for the previous 5 years--has no bearing on 
whether the restructuring changes the day-to-day operations.
    Response: If the majority ownership is not changing, Sec.  
424.550(b)(2)(iii) is inapplicable. However, we have revised Sec.  
424.550(b)(2)(iii) to state that a change in business structure--such 
as a change either to or from a corporation, a partnership (general or 
limited), or an LLC--does not trigger Sec.  424.550(b)(1) if there is 
no change in the owners of the HHA.
    The cost report submission requirement specified in proposed Sec.  
424.550(b)(2)(i) and (ii) was not part of proposed Sec.  
424.550(b)(2)(iii), and we have not inserted it into the final version 
of the latter provision.
    Comment: One commenter stated that further clarification is needed 
related to the internal restructuring that qualifies for the exception.
    Response: Though we are uncertain as to type of clarification the 
commenter seeks, we believe that the exceptions in Sec.  
424.550(b)(2)(ii) and (iii) regarding internal restructuring, and the 
revisions made to the latter, are clear. We note that several examples 
of the types of restructuring impacted by Sec.  424.550(b)(2)(iii) are 
included within that provision. CMS, however, may in the future issue 
further guidance on this subject as needed.
(3) Miscellaneous Program Safeguard Comments
    The following is a summary of comments we received on the proposed 
rule that do not specifically address the merits of our proposed 
changes to the capitalization provisions and the 36-month rule.
    Comment: Several commenters recommended that we provide education 
to Medicare contractors regarding the implementation of any new 
provisions related to changes in ownership.
    Response: We agree with these commenters, and will develop manual 
instructions to implement the provisions of this final rule.
    Comment: Several commenters stated that this portion of the 
proposed rule is confusing, contains certain internal language 
conflicts, and requires clarification. Another commenter stated that 
further clarification is needed to determine the rule's full impact on 
HHAs.
    Response: Without further information as to the provisions that are 
of concern to these commenters, we are unable to address these 
comments.
    Comment: One commenter stated that the proliferation of new for-
profit HHAs is contributing to the fraud, abuse, and misuse of the HH 
benefit, and recommended that CMS impose a moratorium on the 
certification of new HHAs effective immediately. If, the commenter 
stated, CMS's assertion that there is already adequate access to HH 
services is true, then adding further capacity creates inefficiency in 
the system by adding more fixed costs and, in some situations, 
provider-induced demand.
    Response: While we appreciate this comment, it is outside the scope 
of this final rule.
    Comment: Another commenter expressed great concern about the ease 
of entry into the HH marketplace and raised questions as to the 
qualifications of certain HHAs that are granted deemed status. The 
commenter urged CMS to use the final rule to suspend all deemed status 
certifications and impose a national ``cooling off period'' for new 
entries to the marketplace. The commenter suggested that this occur for 
a minimum of 18 months following publication of this final rule.
    Response: While we appreciate this comment, it is outside the scope 
of this final rule.
    Comment: One commenter stated that CMS should ensure that the 
Medicare contractor completes the processing of tie-in notices within 
21 days of its receipt of said notice.
    Response: This comment is outside the scope of this final rule.
    Comment: One commenter stated that the proposed changes will limit 
a health system's ability to engage in good business practices.
    Response: Without further information as to the specific business 
practices the commenter refers to, we are unable to address this 
comment.
4. Provisions of Final Rule
    Based on the public comments, we are adopting the provisions of the 
proposed rule with the following revisions:
     In Sec.  424.502, we have inserted the word ``months'' 
immediately after the phrase ``during the 36.'' We have inserted the 
term ``direct'' to clarify that the definition of majority ownership 
only applies to changes in direct ownership of the HHA. We have also 
changed the verbiage ``following the initial enrollment into the 
Medicare program or a change of ownership'' to ``following the HHA's 
initial enrollment into the Medicare program or the 36 months following 
the HHA's most recent change in majority ownership,'' so as to more 
clearly articulate the definition's applicability.
     In Sec.  424.550(b)(2)(i), we have replaced the 
``publicly-traded exception'' with an exception for an existing HHA 
that has submitted 2 consecutive years of Medicare full cost reports. 
For purposes of this exception, low utilization or no utilization cost 
reports do not qualify as full cost reports. We have also inserted the 
phrase ``or within 36 months after the HHA's most recent change in 
majority ownership,'' to ensure consistency with the verbiage in the 
definition of ``change in majority ownership'' in Sec.  424.502.

[[Page 70427]]

     In Sec.  424.550(b)(2)(ii), we have eliminated the 5-year 
period for cost report submissions.
     In Sec.  424.550(b)(2)(iii), a change in majority 
ownership of the HHA will be exempt from Sec.  424.550(b)(1) if the HHA 
is changing its existing business structure--such as from a 
corporation, a partnership (general or limited), or an LLC to a 
corporation, a partnership (general or limited) or an LLC--and the 
owners remain the same.
     In Sec.  424.550(b)(2)(iv), the death of an owner will not 
trigger Sec.  424.550(b)(1).
     In Sec.  489.28(a), we reemphasized that the HHA must also 
have available sufficient initial reserve operating funds for the 3 
month period following the conveyance of Medicare billing privileges.

F. Home Health Face-to-Face Encounter

    As a condition for payment, the Affordable Care Act mandates that, 
prior to certifying a patient's eligibility for the HH benefit, the 
physician must document that the physician or a permitted nonphysician 
practitioner (NPP) has had a face-to-face encounter with the patient. 
The Affordable Care Act allows the Secretary to determine a reasonable 
timeframe for the encounter to occur. The certifying physician must 
document the face-to-face encounter regardless of whether the physician 
himself or herself or one of the permitted NPPs perform the face-to-
face encounter. The Affordable Care Act describes NPPs who may perform 
this face-to-face patient encounter as a nurse practitioner or clinical 
nurse specialist, as those terms are defined in section 1861(aa)(5) of 
the Act, who is working in collaboration with the physician in 
accordance with State law, or a certified nurse-midwife (as defined in 
section 1861(gg) of the Act, as authorized by State law), or a 
physician assistant (as defined in section 1861(aa)(5) of the Act), 
under the supervision of the physician.
    We proposed a change to the timeframe of the face-to-face 
encounter. The goal of the Affordable Care Act provision is to achieve 
greater physician accountability in certifying a patient's eligibility 
and establishing a patient's plan of care. We believe these goals can 
be achieved better if the face-to-face encounter occurs closer to the 
HH start of care, increasing the likelihood that the clinical 
conditions exhibited by the patient during the encounter are related to 
the primary reason the patient comes to need HH care. Therefore, we 
proposed that the encounter occur within the 30 days preceding the 
start of HH care, if the reason for the encounter is related to primary 
reason the patient requires home care. If no such encounter occurred 
prior to the start of HH care, we proposed that the encounter must 
occur within 2 weeks after the start of care.
    Additionally, as part of the Affordable Care Act mandated encounter 
documentation, we proposed that the physician document on the 
certification how the clinical findings of the encounter support the 
eligibility requirements that a patient be homebound and need 
intermittent skilled nursing or therapy. The Affordable Care Act allows 
NPPs to perform the face-to-face encounter and inform the certifying 
physician. We also proposed that a NPP performing the face-to-face 
encounter with a patient cannot be employed by the HHA providing care, 
consistent with current policy which precludes a physician who 
certifies a patient's HH eligibility from having a financial 
relationship with the HHA.
    For a complete description of the Home Health Face-to-Face 
Encounter proposed implementation approach we refer readers to the CY 
2011 HH PPS proposed rule published on July 23, 2010.
    Comment: A number of commenters stated concern regarding the 
feasibility of implementing a face-to-face encounter requirement and 
they suggested that the face-to-face encounter requirement be removed 
altogether. Commenters stated opposition to implementation of the face-
to-face encounter requirement, fearing that it would cause agencies to 
go out of business and place stress on the physician-HHA relationship. 
Another commenter suggested that the face-to-face requirements would 
also place a strain on the relationship between emergency personnel, 
such as hospitalists and ER physicians, and primary care physicians. 
Additionally, some commenters stated that the face-to-face encounters 
could cause decreased access to physician care services since the 
physician would be inundated performing face-to-face encounters and 
would not have enough time to provide medically-related services. 
Furthermore, a commenter suggested that CMS allow the certifying 
physician to decide whether or not a face-to-face encounter was even 
needed. Commenters described the challenges and health risks associated 
with homebound patients visiting a physician's office for the face-to-
face encounter, and some patients would need to be transported via 
ambulance to see a physician or NPP for the encounter. A few commenters 
stated that there should be an audit process after HH services are 
provided as an alternative to implementing face-to-face encounter 
requirements. Many commenters suggested that the face-to-face encounter 
requirements would delay and decrease access to HH services, resulting 
in unnecessary and prolonged visits to hospitals or emergency care 
settings, which ultimately increase Medicare costs. Commenters also 
described the burden and additional costs, which agencies will incur as 
a result of this requirement, with many commenters stating that the 
requirement will risk access to HH care for Medicare beneficiaries. A 
commenter asked CMS to explain the rationale behind the requirement for 
a face-to-face encounter and of HH care. Another commenter asked CMS to 
clarify whether the face-to-face encounter would be required solely for 
the first episode or also for consecutive episodes.
    Response: We note that section 6407(a) of the Affordable Care Act 
(as amended by section 10605) amends the requirements for physician 
certification of HH services by requiring that, prior to making such 
certification, the physician must document that the physician himself 
or herself or specified NPP has had a face-to-face encounter with the 
patient. The legislation mandates the face-to-face encounter as a 
condition for payment. We are required by law to implement this 
provision and we do not have the authority to waive the requirement or 
to adopt alternatives to it. The provision does provide us with some 
flexibility in the implementation, such as providing us with the 
discretion to set a reasonable timeframe for this encounter.
    While we are sensitive to commenters' concern regarding care risk 
associated with this requirement, we also note that in enacting this 
provision, the Congress allowed practitioners other than the certifying 
physician to perform the encounter. Specifically, the Affordable Care 
Act describes NPPs who may perform this face-to-face patient encounter 
as a nurse practitioner or clinical nurse specialist, as those terms 
are defined in section 1861(aa)(5) of the Act, who is working in 
collaboration with the physician in accordance with State law, or a 
certified nurse-midwife, as defined in section 1861(gg) of the Act, as 
authorized by State law, or a physician assistant, as defined in 
section 1861(aa)(5) of the Act, under the supervision of the physician. 
The Affordable Care Act also allows the encounter to be satisfied 
through the use of telehealth services, subject to the requirements in 
section 1834(m) of the

[[Page 70428]]

Act. We remind the commenter that a criterion to be eligible for 
Medicare's HH benefit has always been that the patient must be under 
the care of a physician. In response to the commenter who requested 
that we provide a rationale for the face-to-face encounter, we 
reiterate that this is a mandate of the Affordable Care Act and, 
because this is a statutory requirement, we must require this encounter 
as a condition of payment. However, we believe that more physician and/
or practitioner involvement with the HH patient will improve the 
quality of care provided to the HH patient by providing the physician, 
who is managing the care plan, with more direct clinical information 
about the patient which is obtained from the encounter. If a NPP 
performed the encounter, the NPP would communicate the patient's 
clinical information obtained during the encounter to the certifying 
physician. We also believe increased physician involvement will enable 
the certifying physician to more accurately certify the ``homebound'' 
and ``in need of skilled services'' eligibility requirements, thus 
promoting more appropriate use of Medicare's HH benefit.
    In response to the commenter who asked CMS to clarify whether the 
encounter is required only for the first episode, we believe that the 
commenter is asking whether the provision applies to the initial 
certification or whether it also applies to each subsequent 
recertification as well. We note that the Congress enacted the 
requirement to apply to the physician's certification, not the 
recertification. Therefore, we have interpreted this provision to apply 
to the initial certification only. In response to the commenter's 
concern about transporting homebound patients to see a physician in 
order to meet the requirement, we remind the commenter that we are 
allowing an encounter which occurred prior to home health admission to 
satisfy the requirement, with certain caveats, as we describe in more 
detail in the following response. Also in response to the burden 
concerns, we refer commenters to a 2001 survey by the OIG which 
reported that of the physicians in the study sample, 86 percent who 
sign home health orders see their patients under home health care at 
least monthly. (The Physician's Role in Medicare Home Health (OIG 
publication No. OEI-02-00-00620)).
    Comment: Some commenters expressed concern about the proposed 
certification timing requirements, stating that the proposed 
requirements may prevent patients from receiving necessary HH services 
due to the inability to have a face-to-face encounter in the required 
timeframe. The time requirement may not be met due to the shortage of 
certifying physicians and their limited availability and/or the 
patients' limited transportation options, especially for homebound 
patients and those who live in rural areas. A commenter also suggested 
that patients with dementia or behavioral health conditions may have a 
particularly difficult time meeting the face-to-face requirements. A 
few commenters described a survey of HHAs which suggested that the 
proposed timeframe will decrease access to care and cause delays. In 
order to prevent delays or decreased access to HH care, commenters 
suggested increasing the timeframe in which a face-to-face encounter 
must occur. Several commenters believed that if physicians have seen 
the patient within the last 6 months, then that visit should satisfy 
the encounter requirement. Some commenters stated that the Congress 
intended that the face-to-face encounter could occur up to 6 months 
prior to the initiation of HH services up to and including the date the 
physician signs the certification. Other commenters suggested other 
timeframes, such as 90 days prior to the start of care and up to one 
month after the start of care.
    A commenter suggested that CMS start with a long timeframe for the 
face-to-face encounter requirement and then slowly transition to a 
shorter timeframe to better address any unforeseen issues and ease the 
transition associated with this requirement.
    One commenter believed there should be stricter requirements for 
the face-to-face encounter. Two commenters suggested that CMS remove 
the provision, which allows a face-to-face encounter to be performed 
after the start of services. One of the two commenters further stated 
that the reason for the face-to-face encounter requirement is to ensure 
that the there is an independent evaluation of the need for HH services 
before they are provided. Allowing services to be provided before this 
assessment is made may cause confusion if the face-to-face requirements 
cannot be met, potentially causing a sudden termination of services and 
a lack of payment for the services already provided. The commenter 
stated that CMS can prevent these scenarios by requiring that a face-
to-face encounter occur before the start of HH services. The commenter 
also stated that the 30-day timeframe proposed in the face-to-face 
encounter requirements was appropriate for patients who were discharged 
from the hospital or emergency room. However, the commenter thought 
that the 30-day timeframe should be shortened to 15 days for patients 
who are admitted to the HH setting from the community. The commenters 
suggested that CMS may want to consider an extended timeframe for the 
encounter in rural settings. Another commenter believed that the face-
to-face requirements be altered or completely removed in rural areas.
    Other commenters urged CMS to abandon the proposed requirement 
which states that the encounter must be related to the reason the 
patient needs home care, describing concerns with enforcement of such a 
provision. Commenters have suggested that when a patient's condition 
changes, communication between the certifying physician and the HHA is 
sufficient and can replace the need for a more current face-to-face 
encounter.
    A commenter asked CMS how it would ensure that there was, in fact, 
a face-to-face encounter within the timeframe.
    Other commenters stated that there may be scenarios where patients 
are seen by specialists who do not act as their certifying physician. 
In this case, a primary care physician would need to perform a face-to-
face encounter; however, the encounter could be redundant since the 
patient was already seen by the specialist. Similarly, another 
commenter stated that often patients will be referred to HH services by 
resident physicians or hospitalists and they may not be able to see a 
primary care physician for the face-to-face encounter. In addition, 
while the patient is in the hospital or emergency care setting, the 
primary care physician may not have hospital privileges and may not be 
allowed to see the patient. Furthermore, commenters have stated that 
even if hospitalists and emergency room physicians are allowed to 
certify the face-to-face encounter, they may be hesitant to do so since 
they would not want to or be able to take over the plan of care 
responsibilities. A commenter suggested that the primary care 
physicians be allowed to certify HH services after reading the 
hospitalist's discharge summary. Also, a commenter stated that there 
already are problems with delays in starting HH services due to 
patients' lack of follow-up visits or infrequent visits with their 
primary care physician. Other commenters have stated that some patients 
do not have a primary care physician and may need to be treated by a 
community-based or clinic physician, which may take longer than 14 days 
to have the face-to-face encounter. Moreover, commenters expressed 
concern with a timeframe of 2 weeks after the start of care to have the

[[Page 70429]]

face-to-face encounter, stating that, should a timely encounter not 
occur, the HHA would then lose money for services provided during that 
time and the patient would not receive all of the necessary services. 
The HHA would be held financially liable when the patients or 
physicians are at fault. A few commenters asked whether an agency could 
require patients to sign an Advanced Beneficiary Notification (ABN), 
which would allow the agency to hold the patient financially 
responsible if a face-to-face encounter did not occur as required. 
Commenters expressed concerns where a patient might not be able to 
secure an appointment or obtain transportation within the 2-week 
timeframe or who may be physically unable to get to the doctor's 
office. Another commenter suggested that there be an exception 
provision to the timeframe requirements if there was sufficient 
documentation that showed that there was a reasonable attempt to 
schedule a face-to-face encounter with a physician. A commenter also 
asked CMS to clarify whether partial payment would apply if the 
encounter occurred, but did not occur during the required timeframe.
    Some commenters thought that a hospitalist's or specialist's face-
to-face encounter could serve as the certifying encounter. Other 
commenters also thought that the hospitalist or specialist could sign 
the plan of care. Additionally, commenters suggested that the physician 
who has the best understanding of the patient's condition should serve 
as the certifying physician and a primary care physician can then 
formulate and sign the plan of care and take over responsibility for 
further care. Alternatively, a commenter proposed that the ``HHA 
medical director'' be allowed to act as the certifying physician in the 
face-to-face encounter or the HHAs hire physicians to perform the face-
to-face encounter. Another commenter asked if and how a part-time HHA 
medical director could serve as a primary care certifying physician.
    Furthermore, a commenter suggested that a HHA employee find out the 
patient's last face-to-face physician encounter and document the date. 
If the date was within 6 months of the HH referral, then the patient 
could receive HH services. If the patient had not seen a physician in 6 
months, the commenter proposed that the patient see a physician before 
he or she could be enrolled in HH care services. The commenter also 
recommended that the date of the face-to-face encounter be placed on 
the plan of care.
    A commenter also thought that the same timing standards currently 
used for certification be applied to the face-to-face encounter 
certification.
    Response: In the proposed rule, we proposed that the encounter 
occur within the 30 days preceding the start of HH care, if the reason 
for the encounter is related to the primary reason the patient requires 
home care. If no such encounter occurred prior to the start of HH care, 
we proposed that the encounter must occur within 2 weeks after the 
start of care. We believe that this timeframe increases the likelihood 
that the clinical conditions exhibited by the patient during the 
encounter are related to the primary reason the patient comes to need 
HH care. We also believe that this timeframe best meets the program 
integrity and quality goals associated with the provision. The 
timeframe ensures that the certifying physician can accurately 
determine whether the patient meets the homebound and skilled need 
eligibility criteria while also ensuring that the physician understands 
the current clinical needs of the patient to establish an effective 
care plan. Additionally, a recent study shows that physician 
involvement with the HH patient within 30 days prior to HH admission 
results in significantly better patient outcomes. Patients receiving a 
face-to-face physician visit within 30 days of HH care were 1.45 times 
more likely to be discharged without hospitalization than patients who 
did not receive a face-to-face physician visit during their episode of 
care (Wolff et al., 2009, p. 1151 \1\). We incorporated studies such as 
this one and our clinical judgment in the creation and formation of the 
proposed timeframe. However, we found some of the commenters' concerns 
compelling. Regarding the feasibility of the proposed timeframes and 
the corresponding access to care risks, especially in rural areas, we 
will revise the timeframes described in the proposed rule to allow the 
encounter to occur up to 90 days prior to the start of care, if the 
reason for the encounter is related to the reason the patient comes to 
need HH care. If no such encounter has occurred, we will allow the 
encounter to occur up to 30 days after the start of care. This 
alternative timeframe was recommended in comments submitted by a major 
association of home care physicians. The comments described that 
chronic illnesses among the elderly are commonly associated with an 
office visit every 3 months, and by adopting a timeframe where the 
encounter could occur up to 3 months prior to the start of care, we 
would significantly mitigate the access to care risk. For those 
patients who had no encounter during the 3 months prior to the start of 
care which was related to the reason the patient comes to need HH care, 
we will allow the encounter to occur up to 30 days after the start of 
care. We continue to believe that it is essential for the encounter to 
be related to the reason the patient comes to need home care. 
Otherwise, the encounter does not meet what we believe to be the goals 
of the provision--to enable more appropriate use of the benefit while 
also improving the physician's ability to manage the patient's care. 
However, we understand the commenters' concerns surrounding enforcement 
of this provision. It is not our intent that those who enforce the 
provision would take such a literal interpretation to look for a cause 
and effect relationship between a diagnosis on the physician's claim 
and the diagnosis on the HH claim. Instead, it is our intent that 
should a patient's clinical condition change significantly between the 
time of the encounter and the start of home health care such that the 
physician's or NPP's ability to accurately assess eligibility and care 
plan would be at risk, a more current encounter would be necessary in 
order to meet the goals of the statutory requirement. As such, to 
address the commenters' concerns, we will expand on this requirement in 
manual guidance which we believe is the appropriate venue for such 
clarification.
    We disagree with the commenters who stated that the Congress 
intended for us to allow the face-to-face encounter timeframe to 
encompass the 6 months prior to the date on which the physician signs 
the certification. If this was the Congress's intent, the legislative 
provision would not have included specific language, ``reasonable 
timeframe as determined by the Secretary,'' which allows the Secretary 
to determine the timeframe.
---------------------------------------------------------------------------

    \1\ Wolff, J. L., Meadow, A., Boyd, C. M., Weiss, C. O., & Leff, 
B. (2009). Physician evaluation and management of Medicare home 
health patients. Medical Care. 47(11), 1147-1155.
---------------------------------------------------------------------------

    We disagree with the commenter who suggested that the encounter 
must occur prior to the start of care. We believe that it will not be 
uncommon that a patient needs home care but has not seen a physician in 
the 3 months prior to the start of care and this should not preclude 
access. As is the practice today, the HHA would be responsible for 
ensuring that services are provided to eligible patients, and the face-
to-face encounter, associated documentation, and signing of the 
certification would occur after the start of care.
    In response to the commenters who believe that we should abandon 
the proposed criterion that the encounter

[[Page 70430]]

has to be related to the reason the patient has come to need HH, we 
continue to believe that in order to achieve what we believe to be the 
goals of the provision, the encounter must occur close enough to the HH 
start of care to ensure that the clinical conditions exhibited by the 
patient during the encounter are related to the primary reason for the 
patient's need for HH care. It ensures that the certifying physician 
can accurately determine whether the patient meets the homebound and 
skilled need eligibility criteria while also ensuring that the 
physician understands the current clinical needs of the patient to 
establish an effective care plan.
    In response to the commenter who wanted to know how we would ensure 
that there was, in fact, a face-to-face encounter within the timeframe, 
we will issue instructions to the contractors who perform medical 
reviews to ensure compliance with this regulation. We also expect that 
other program integrity oversight efforts will be effective vehicles to 
monitor compliance with this condition of payment. We also expect that 
surveyors will monitor compliance with this requirement. In response to 
the commenter who asked that we clarify whether partial payment would 
apply if the encounter occurred outside the required timeframe, we 
reply that the Affordable Care Act established this provision as a 
condition of payment and therefore we would have no statutory authority 
to partially pay an agency if they complied with some but not all of 
the provision.
    To address the commenters' concerns surrounding which physician 
must perform the face-to-face encounter and document that the face-to-
face encounter occurred, we remind the commenter that the Affordable 
Care Act requires the certifying physician to document that the 
physician himself or herself or specified NPP has had a face-to-face 
encounter (including through the use of telehealth, subject to the 
requirements in section 1834(m) of the Act) with the patient. The 
Affordable Care Act describes NPPs who may perform this face-to-face 
patient encounter as a nurse practitioner or clinical nurse specialist 
(as those terms are defined in section 1861(aa)(5) of the Act) who is 
working in collaboration with the physician, in accordance with State 
law, a certified nurse-midwife (as defined in section 1861(gg)of the 
Act, as authorized by State law), or a physician assistant (as defined 
in section 1861(aa)(5)of the Act), under the supervision of the 
physician.
    Where the patient is admitted to HH from the hospital, we believe 
that current practice associated with the HH certification would apply 
to the face-to-face encounter as well. In most cases, we would expect 
the same physician to refer the patient to HH, order the HH services, 
certify the beneficiary's eligibility to receive Medicare HH services, 
and sign the plan of care. It would be this physician who would be 
responsible for documenting on the certification that he or she, or a 
specified NPP working in collaboration with the certifying physician, 
had a face-to-face encounter with the patient. However, we recognize 
that, in certain scenarios, one physician performing all of these 
functions may not always be feasible. An example of such a scenario 
would be a patient who is admitted to HH upon hospital discharge. While 
we would still expect that in most cases, a patient's primary care 
physician would be the physician who refers and orders HH services, 
documents the face-to-face encounter, certifies eligibility, and signs 
the plan of care, there are valid circumstances when this is not 
feasible for the post-acute patient. For example, as several commenters 
pointed out, some post-acute HH patients have no primary care 
physician. In other cases, the hospital physician assumes primary 
responsibility for the patient's care during the acute stay, and may 
(or may not) follow the patient for a period of time post-acute. In 
circumstances such as these, it is not uncommon practice for the 
hospital physician to refer a patient to HH, initiate orders and a plan 
of care, and certify the patient's eligibility for HH services. In the 
patient's hospital discharge plan, we would expect the hospital 
physician to describe the community physician who would be assuming 
primary care responsibility for the patient upon discharge. It would be 
appropriate for the physician who assumes responsibility for the 
patient post-acute to sign the plan of care and thus be considered 
``under the care'' of that community/personal physician throughout the 
time the patient is receiving HH services. In a scenario such as this, 
if the hospital physician certifies the patient's HH eligibility and 
initiates the orders for services, the hospital physician could 
document that a face-to-face encounter occurred and how the findings of 
that encounter, which in this scenario would have occurred during the 
patient's acute stay, support HH eligibility. The community physician 
designated on the discharge plan would assume responsibility for the 
patient at some point after acute discharge, updating orders, signing 
the plan of care, etc.
    It is important to reiterate that to be eligible for Medicare's HH 
benefit, the patient must be under the care of a physician, and it is 
ultimately the responsibility of the HHA that this criterion is met. We 
have always held the HHA responsible for ensuring that there is a 
physician-signed plan of care, physician-signed orders, and a 
physician-signed certification. Therefore, we will also hold the 
agencies responsible for the certifying physician's encounter 
documentation. By statute, this documentation is a requirement for 
payment just as a physician-signed certification of eligibility is a 
requirement for payment. As such, the requirements for the face-to-face 
encounter documentation have many similarities to the existing 
certification requirements. We have no flexibility to adopt exceptions 
to the statutory face-to-face documentation requirements.
    In response to the commenters who suggested that they deliver an 
HHABN to the HH patient describing the patient's possible financial 
liability should the face-to-face encounter not occur as required, this 
practice is not permitted. The HHABN, Form CMS-R-296, has been approved 
by the Office of Management and Budget (OMB) to provide limitation of 
liability protections to Original Medicare beneficiaries receiving HH 
services under section 1862(a)(1)(A)of the Act for care that CMS or its 
contractors determines is not reasonable and necessary under Medicare; 
section 1862(a)(9) for custodial care; (g)(1)(A) for care when the 
beneficiary is not homebound; and section 1862(g)(1)(B) for care 
provided to a beneficiary who is not in need of skilled nursing care. 
The HHABN must not be used to transfer liability to the beneficiary 
when technical requirements for payment, such as a face-to-face 
encounter, are not met. The HHABN is not approved for this use.
    In response to the commenters who requested that HHA medical 
directors act as the certifying physician in the face-to-face encounter 
or that the HHAs hire physicians to perform the face-to-face encounter, 
we remind the commenters of longstanding regulatory prohibitions in 
Sec.  424.22 which impose financial restrictions on the relationship 
between the HHA and the certifying physician. We continue to believe 
that these financial restrictions strengthen the integrity of the 
benefit.
    Comment: Commenters have also expressed concern about the 
requirement that the face-to-face encounter be related to the reason 
the patient needs HH services and concern

[[Page 70431]]

about the documentation and rationalization requirements. Commenters 
also stated that the HHA has no control over the quality of the 
physician's documentation and no method to enforce proper physician 
documentation. A commenter suggested that the increased documentation 
responsibilities placed on the primary care physician would result in 
fewer referrals to HH. The commenter also stated that since the HHAs 
have no control over the quality of a physician's documentation, there 
should be a ``without fault'' provision applied when there is proper 
certification but lack of proper documentation. Furthermore, another 
commenter stated that it will be extremely costly for agencies to 
change their documentation systems to ensure the face-to-face encounter 
documentation is sufficient. Moreover, the commenter stated that there 
should be payment guarantees so that HHAs are not penalized because of 
improper physician documentation. A commenter suggested that CMS not 
finalize the proposed requirement that the physician's own medical 
record documentation be consistent with the encounter documentation on 
the certification. Another commenter suggested that CMS should not 
withhold payment for failing to meet the encounter documentation and 
instead impose other sanctions. One commenter also suggested that CMS 
provide payment even when a face-to-face encounter does not occur if 
the HHA can show that it informed patients and physicians of the 
requirements. In addition, a commenter suggested that agencies be 
protected from potential patient complaints that may be a by-product of 
these requirements. Another commenter suggested that CMS should not 
withhold payment for failing to meet the encounter documentation and 
instead impose other sanctions. Some commenters have suggested a 
gradual implementation of the new face-to-face requirements, or 
delaying the implementation of the new face-to-face encounter 
requirements. Commenters stated that the face-to-face encounter 
documentation requirements will slow the HHAs' efforts to move to 
electronic health records. Commenters have also stated that there are 
language barriers with communicating the new face-to-face encounter 
requirements. Other commenters requested that CMS permit HHAs to 
include standardized language on the certification form which would be 
signed and dated by the certifying physician to suffice as the 
encounter documentation. Commenters asked CMS to educate physicians and 
beneficiaries about the new face-to-face requirements, the rationale 
for the requirements, and their responsibility in these requirements.
    Response: We thank the commenters for their suggestions. Regarding 
the comment, which suggested that we permit HHAs to include 
standardized face-to-face encounter language on the certification form, 
which would be signed and dated by the certifying physician, we remind 
the commenter that the statutory language in the Affordable Care Act 
requires that prior to certifying, the physician must document that the 
face-to-face encounter occurred. The law requires this as a condition 
for HH payment. We proposed that the documentation of the encounter be 
a separate and distinct section of, or an addendum to, the 
certification, and that the documentation include why the clinical 
findings of the encounter support HH eligibility. We believe that our 
proposed documentation requirements meet the Congress' intent for more 
physician involvement in determining the patient's eligibility and 
managing the care plan. We believe that were we to allow the HHA to 
craft standard language which the physician would then simply sign, we 
would not achieve the sort of physician involvement in the eligibility 
determination and care plan which was the Congress' intent. As such, we 
believe that if a HHA were to develop standardized encounter language 
to be signed by the physician, they would not be adhering to the 
statutory payment requirements that the ``physician document'' the 
encounter. Similarly, regarding the comment that we should not withhold 
payment, or should consider imposing other non-payment sanctions, or 
hold the HHA ``without fault'' for failing to meet the encounter 
documentation requirement, we reiterate that the law requires the 
physician to document that the face-to-face encounter occurred prior to 
certifying HH eligibility, as a condition of payment. Under section 
6407(b) of the Affordable Care Act, we have no legal authority to 
exempt a HHA from this requirement, or to impose alternate sanctions if 
a HHA fails to meet a statutory payment condition.
    Regarding the commenter who requested that we should not require 
the physician's own medical record documentation to be consistent with 
the documentation on the certification, we understand the commenter's 
concern, and we will revise the proposed regulation text to make clear 
that we are not holding the HHA responsible for the physician's own 
medical record documentation associated with the encounter. We would 
expect that a physician who performs a medically necessary physician 
service, which also satisfies the face-to-face encounter requirement, 
would maintain medical record documentation concerning the encounter, 
and the clinical findings associated with that encounter would be 
consistent with the physician's certification documentation. However, 
it is not our intent to penalize the HHA if the physician's own medical 
record documentation associated with the encounter is not in good 
order. Rather, we would look to the physician to fulfill his or her 
responsibility for ensuring appropriate medical record documentation 
associated with the encounter, and any associated Medicare billing. 
Regarding the commenter who asked us to protect agencies from 
complaints, which may be associated with this provision, we are unsure 
what the commenter means. We will continue to require providers to 
adhere to quality care practices while adhering to Medicare's 
Conditions of Participation.
    We concur with the commenter who suggests that we educate 
physicians regarding this new law, and will do so via open door forums, 
listserv announcements, and MedLearn articles.
    Regarding the comments which requested that we delay the face-to-
face requirements, the comment that the face-to-face encounter 
documentation requirements will slow the HHAs' efforts to move to 
electronic health records, and the comments that suggested there are 
language barriers with communicating the new face-to-face encounter 
requirement, we again reiterate that this is a statutory requirement, 
which we must implement. We do not understand the rationale behind the 
commenter's fear that this requirement would delay adoption of 
electronic health records. We suspect this commenter is concerned that 
agency resources which might have been directed toward adopting 
electronic health records would be re-directed to implement this 
provision. We again reiterate that this is a statutory requirement, 
which we are required to implement.
    We are also confused why the commenter believes that language 
barriers would preclude the face-to-face encounter, and remind the 
commenter that being under the care of a physician is a longstanding 
eligibility requirement for the HH benefit.
    Comment: Commenters stated concern regarding the requirements for a 
face-to-face encounter by telehealth, stating that the current 
qualifications for telehealth coverage should not apply to the face-to-
face encounter by telehealth

[[Page 70432]]

and that CMS has overly strict requirements on the parameters for a 
face-to-face encounter by telehealth. The current qualifications 
require the patient to go to an ``originating site'' outside of their 
home; however, by doing so, the patient's homebound status and 
therefore eligibility for HH services may be questioned. The commenter 
requested that CMS use section 1834(m) of the Act solely to define 
telehealth and expand the definition of telehealth services to allow 
for the use of equipment in the patient's home. Some commenters 
suggested that the face-to-face encounter by telehealth can be 
satisfied via telephone calls from the physician to the patient. Other 
comments suggested that CMS allow face-to-face telehealth visits at the 
patient's home and that the use of technology, such as video chat and 
remote assessment devices, be allowed in the telehealth visits.
    Response: There are several codes that are currently defined as 
Medicare telehealth services that could be used to furnish and bill for 
medically necessary physician services, which would satisfy the 
encounter requirement, if furnished by telehealth. However, section 
1834(m) requires the patient to be located at one of several specified 
types of originating sites, and we have no flexibility to permit 
telehealth services to be furnished to a patient in the home.
    Regarding the comment that a patient's visit to a physician's 
office or telehealth originating site would threaten the patient's 
homebound status, we note that longstanding policy describes that if a 
patient leaves the home for health care treatment, the patient would 
nevertheless be considered homebound.
    Comment: Several commenters stated concern regarding the proposed 
restriction that NPPs who are employed by the HHA cannot perform the 
face-to-face encounter. Commenters state that the proposed regulation 
imposes stricter financial criteria on the relationship between the HHA 
and NPPs who are performing the face-to-face encounter than has 
previously been applied to physicians who certify HH eligibility. 
Commenters stated that by having the same financial relationship 
criteria for certifying physicians and NPPs performing a face-to-face 
encounter, CMS will minimize conflict of interest while maximizing the 
number of medical personnel who are qualified to perform the face-to-
face encounter. Other commenters believe that HHA NPPs should be 
allowed to perform the face-to-face encounter, noting that the increase 
in integrated health systems and associated efficiencies in providing 
care would justify allowing the practitioner to be an employee of the 
HHA. Several commenters also requested that NPPs be allowed to certify 
HH eligibility.
    Response: We believe that given the HH program integrity concerns 
in certain pockets of the country surrounding the certification of HH 
eligibility, it is imperative that NPPs be subject to the same 
financial limitations with the HHA as currently apply to the certifying 
physician. We agree with the commenters that the NPPs should not be 
subject to harsher financial limitations with the HHA than the 
certifying physician and we have revised the proposed Sec.  424.22 
accordingly. In response to the commenter who requested that NPPs be 
allowed to certify HH eligibility, we remind the commenter that 
sections 1814(a)(2)(C) and 1835(a)(2)(A) of the Act prohibit this.
    Comment: Commenters expressed concern about the requirements for a 
physician signature and date on the encounter certification, stating 
that often physicians will not date documents. Commenters stated 
opposition to the requirement for a date from the physician, stating 
that this requirement would cause unnecessary burdens as the agency 
could frequently be resending certifications back to physicians to 
obtain the date. Commenters stated that since CMS has previously 
allowed the agency to date the certification based on the receipt date 
for other documents, CMS should apply the same policy to the encounter 
certification date. One commenter explicitly stated that the receipt 
date is adequate proof that the agency received the required 
documentation before billing for the HH services.
    Response: The requirement that a physician date the certification 
reflects longstanding manual guidance. As such, this is existing 
policy. We are taking this opportunity to codify this in regulation for 
clarification.
    Comment: Some commenters suggested that CMS increase the 
reimbursement associated with the current billing code (G0180) which 
physicians use when billing for their services associated with Medicare 
HH certification. Other commenters questioned whether the face-to-face 
encounter visits would be separately reimbursed by Medicare. Commenters 
wanted CMS to clarify whether the certification will be billed 
separately from the face-to-face encounter. Furthermore, the commenters 
wondered what the pay codes would be for the face-to-face encounter and 
suggested that there would be delayed RAP payment to agencies since 
agencies would need to wait until the proper certification and 
documentation were collected in order to receive payment. Another point 
commenters brought up was that residents may have more than one 
residence and therefore they may need more than one certifying 
physician, further burdening patients who require HH services. Also, 
commenters stated that by requiring the face-to-face encounter, the 
patient must pay an additional twenty percent copayment for the 
physician visit, which may be costly, particularly for those patients 
who were recently discharged from the hospital and were required to pay 
their Medicare hospital deductible as well. Commenters brought up the 
example that a patient may not want to have a face-to-face encounter 
with a physician when there is no medical reason for the visit. 
Moreover, a commenter proposed that CMS continue to pay RAPs through 
its current method; however, CMS should change the payment of the final 
claims based on the signed certification.
    Response: It is our intention to allow RAP payments as we currently 
do today while the HHA is awaiting physician completion of the 
certification. If the face-to-face encounter included medically-
necessary covered physician services to the HH patient, the physician 
could bill Medicare for these covered services under the physician fee 
schedule. Regarding the physician billing practices associated G0180, 
we see no need to change those requirements or the associated 
reimbursement. Regarding the post acute patient co-pay concern, we 
refer the commenter to the response to the comment above which 
describes the role of the hospitalist in the face-to-face encounter. 
Regarding the broader copayment comment, we again remind the commenter 
that a HH patient must be under the care of a physician as an 
eligibility requirement, and therefore would expect that regular 
physician visits to occur during the HH course of treatment. As such, 
we do not believe that a face-to-face encounter would impose a new 
copayment financial burden on the patient.
    Comment: Some commenters were supportive of our proposal to allow 
NPPs to have the face-to-face encounter. Commenters also agreed that 
employees of the HHA should not be allowed to do the face-to-face 
encounter. The commenters also agreed with the face-to-face encounter 
requirements and the documentation requirements and that the encounter 
requirements should be able to be fulfilled through the use of 
telehealth.

[[Page 70433]]

    Response: We thank the commenters for their support.
    Comment: Some commenters expressed concern that the face-to-face 
encounter requirement would bring into question a patient's right to 
refuse a clinical visit for care that is for regulatory compliance only 
and not medically necessary.
    Response: We again remind the commenters that this is a mandate of 
the Affordable Care Act and, because this is a statutory requirement, 
we must require this encounter as a condition of payment. We would 
expect that practitioners would typically be conducting a medically 
necessary service to the patient, and this service would also meet the 
face-to-face encounter requirement. We disagree with the commenters 
that such encounters satisfy a regulatory requirement only. We refer 
again to the research,\2\ which shows that physician visits result in 
better HH patient outcomes. Finally, we also remind the commenters 
that, in order to be eligible for the Medicare HH benefit, a patient 
must be under the care of a physician. Should a patient refuse to have 
a face-to-face encounter with the physician responsible for care, CMS 
would question whether the patient was legitimately under the care of 
the physician.
---------------------------------------------------------------------------

    \2\ Wolff, J.L., Meadow, A., Boyd, C.M., Weiss, C.O., & Leff, B. 
(2009). Physician evaluation and management of Medicare home health 
patients. Medical Care. 47 (11), 1147-1155.
---------------------------------------------------------------------------

    We thank the commenters for their insightful comments. In summary, 
we will finalize the proposed implementation approach with the 
following exceptions:
    We will revise the timeframes described in the proposed rule to 
allow the encounter to occur up to 90 days prior to the start of care, 
if the reason for the encounter is related to the reason the patient 
comes to need home health care. If no such encounter has occurred, we 
will allow the encounter to occur up to 30 days after the start of 
care. We will also revise the proposed regulation to re move the 
requirements concerning the physician's own medical record 
documentation. We will also revise the regulation text to impose the 
same financial restrictions with the HHA to nonphysician practitioners 
who perform the face-to-face encounter as currently apply to certifying 
physicians.

G. Future Plans to Group HH PPS Claims Centrally During Claims 
Processing

    Generally speaking, Medicare makes payment under the HH PPS on the 
basis of a national standardized 60-day episode payment rate that is 
adjusted for case-mix and geographic wage variations. The national 
standardized 60-day episode payment rate includes services from the six 
HH disciplines (skilled nursing, HH aide, physical therapy, speech 
language pathology, occupational therapy, and medical social services) 
and nonroutine medical supplies. Durable medical equipment covered 
under HH 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 Outcome & Assessment Information Set 
(OASIS) instrument. On Medicare claims, the HHRGs are represented as 
Health Insurance Prospective Payment System (HIPPS) codes.
    At a patient's start of care, at the start of each subsequent 60 
day episode, and when a patient's condition changes significantly, the 
HHA is required to perform a comprehensive clinical assessment of the 
patient and complete the OASIS assessment instrument. The OASIS 
instrument collects data concerning 3 dimensions of the patient's 
condition: (1) Clinical severity (orthopedic, neurological or diabetic 
conditions, etc.); (2) Functional status (comprised of 6 activities of 
daily living {ADL{time} ); and (3) Service utilization (therapy visits 
provided during episode). HHAs enter data collected from their 
patients' OASIS assessments into a data collection software tool. For 
Medicare patients, the data collection software invokes HH PPS Grouper 
software to assign a HIPPS code to the patient's OASIS assessment. The 
HHA includes the assigned HIPPS code on the Medicare HH PPS bill, 
ultimately enabling our claims processing system to reimburse the HHA 
for services provided to patients receiving Medicare's HH benefit.
    Additionally, the HHA is separately required to electronically 
submit OASIS assessments for their Medicare and Medicaid patients to 
CMS via their state agency. On the HH PPS Web site at http://www.cms.gov/homehealthpps/01_overview.asp, we provide a free OASIS 
assessment data collection tool (HAVEN) which includes the HH PPS 
grouper software, a separate HH PPS grouper program which can be 
incorporated into an HHA's own data collection software, and HH PPS 
data specifications for use by HHAs or software vendors desiring to 
build their own HH PPS grouper. Most HHAs do not use the HAVEN 
freeware, instead preferring to employ software vendors to create and 
maintain a customized assessment data collection tool which can be 
integrated into the HHA's billing software. Likewise, many vendors 
employed by HHAs do not utilize the HH PPS grouper freeware, instead 
preferring to build their own HH PPS grouper from the data 
specifications which we provide.
    In 2008, we deployed the first refinements to the HH PPS since its 
inception in 2000. Prior to the 2008 refinements, we made infrequent, 
minor changes to the HH PPS grouper software. Effective with the 
refinements, the HH PPS grouper became more complex and more sensitive 
to the yearly ICD-9-CM code changes. As a result, since 2008, HHAs have 
been required to update their HH PPS grouper software at least once 
each year. Most HHAs employ software vendors to effectuate these 
updates. HHAs have expressed concerns to CMS that the frequent grouper 
updates coupled with the additional complexity of the grouper has 
resulted in unexpected costs and an increased burden to them.
    In addition, since the 2008 refinements were implemented, we have 
identified a significant increase in OASIS assessments submitted with 
erroneous HIPPS codes. These errors occur when HHAs or their software 
vendors inaccurately replicate the HH PPS grouper algorithm into the 
HHA's customized software. The significant increase in these errors 
since 2008 suggests that many HHA software vendors are struggling to 
accurately replicate the complex algorithms in the HH PPS grouper. We 
inform HHAs if the submitted HIPPS on the OASIS is inaccurate and 
provides HHAs with the correct HIPPS to enable the HHA to accurately 
bill Medicare. However, HHAs have expressed concerns that the HH PPS 
grouper complexities increase their vulnerability to submit an 
inaccurate HIPPS code on the Medicare bill. Further, some HHAs have 
expressed concern that this vulnerability will further increase when 
the U.S. health care industry permanently transitions from ICD-9 to 
ICD-10 for medical diagnosis and procedure coding in October 2013, 
because the ICD-10-CM migration will require major changes to an 
already complex HH PPS grouper.
    Because of these concerns, we have begun analyzing options to 
streamline the process which assigns HIPPS codes. We are analyzing an 
option, which would enable us to assign HIPPS codes to the HH PPS bills 
during claims processing. If we are successful in

[[Page 70434]]

implementing this option, OASIS assessment data collection tools would 
no longer invoke HH PPS grouper software to assign HIPPS codes to the 
OASIS assessments. Further, HHAs would no longer be required to include 
HIPPS codes on HH PPS bills. Such a process would relieve the HHA of 
all responsibility associated with the HH PPS grouper. If we can 
centralize the assignment of the HIPPS code to the HH PPS bill during 
claims processing, we will achieve process efficiencies, improve 
payment accuracy by improving the accuracy for HIPPS codes on bills, 
decrease costs, and burden to HHAs, and better position HHAs and CMS 
for an easier transition from ICD-9 to ICD-10 codes in the future.
    Several changes have occurred recently that allow CMS to consider 
this option of assigning HIPPS codes to the HH PPS bills during claims 
processing. National claims coding standards have expanded the number 
of positions of data available in the treatment authorization field on 
the bill from 18 to 30. In addition, the National Uniform Billing 
Committee has created occurrence code 50 for assessment reference 
dates. This new code 50 will allow a separate field for HHAs to report 
the M0090 assessment date currently carried in the treatment 
authorization field. These two changes provide enough space on the HH 
PPS bill for HHAs to encode all the OASIS payment items on the bill, 
thus potentially enabling the HIPPS code to be computed during claims 
processing.
    However, a major challenge exists with the feasibility of computing 
the HH PPS group during claims processing is the awarding of case-mix 
points for reported primary and secondary diagnoses. A centralized HH 
PPS grouper would look to the diagnoses on the HH PPS bill for 
grouping. The Health Insurance Portability and Accountability Act 
(HIPAA) authorized CMS to require that all diagnoses on the bill comply 
with ICD-9-CM coding guidelines as set out at 45 CFR 162.1002 (65 FR 
50370, August 17, 2000). Currently, when certain conditions apply, to 
prevent the loss of case-mix points, the HH PPS grouper will award 
case-mix points to some diagnoses reported as a secondary diagnosis 
when the assignment is performed to comply with ICD-9-CM coding 
requirements. We currently instruct HHAs to report these diagnoses in 
M1024 (previously M0246) on the OASIS to prevent loss of case-mix 
points.
    We provide detailed guidance on this topic in page 5 of Appendix D 
within the OASIS Implementation Manual, which can be accessed at http://www.cms.gov/HomeHealthQualityInits/downloads/HHQIAttachmentD.pdf. This 
coding guidance has been provided to prevent the loss of case-mix 
points when an underlying case-mix diagnosis is associated with the 
primary V-code diagnosis.
    As required by 45 CFR 162.1002, those diagnoses currently encoded 
in M1024 (formerly M0246) which should not be reported as primary or 
secondary diagnoses cannot be reported on the bill. In an attempt to 
solve this problem, we are analyzing options to map diagnoses currently 
reported in M1024 (formerly M0246) to diagnoses that are reportable as 
primary and secondary diagnoses in the HH setting, per ICD-9-CM coding 
guidelines. We have been encouraged with our ability to map some trauma 
codes reported in M1024 to after-care codes, which are reportable as 
primary and secondary diagnoses in the HH setting. However, additional 
analysis and mapping are needed to fully resolve this challenge.
    We solicited public comments on the potential enhancement described 
above to assign the HIPPS code to the HH PPS bill during claim 
processing. This enhancement would require HHAs to report all the OASIS 
items necessary to group the episode on the HH PPS bill. As stated 
above, reporting on OASIS items on the bill would address the costs and 
burden HHAs currently experience with regards to frequent updates of a 
complex HH PPS grouper, address vulnerabilities that HHAs have 
associated with the possible submission of inaccurate HIPPS codes on 
the claim, while better positioning HHAs and CMS for the ICD-9 to ICD-
10 transition. We are in the early stages of assessing the feasibility 
of such changes, and wanted to seize the opportunity to solicit the 
public for their comments on this topic.
    The following is summary of the comments we received regarding the 
proposal to group HH PPS claims centrally.
    Comment: Several commenters stated their support of our proposal to 
centralize grouping of HH PPS claims as long as the HH grouper 
continued to remain available for HHAs and their vendors.
    Response: We recognize that HHAs and their vendors will continue to 
have a need for the HH grouper software. Therefore, we do not have any 
plans to discontinue this process should we decide to implement the 
grouping of HH PPS claims during claims processing.
    Comment: One commenter suggested that we anticipate and plan to 
develop the appropriate claim response for claims that contain data 
errors that prevent the calculation of a HIPPS code.
    Response: We appreciate this feedback and will be sure to address 
this concern should we decide to move forward with this proposal. We 
will note that currently our claims processing system has 
specifications that define valid values for each field. The necessary 
guidance would be provided to HHAs and their vendors for implementation 
of this requirement.
    Comment: One commenter stated that our proposal does not specify 
the effect of this proposed change on the current Resident Assessment 
Protocol (RAP) and final claim processing timelines.
    Response: The proposal to group HH PPS claims centrally during 
claims processing has no effect on the RAP or final claims processing 
timelines. In fact, the RAP is not utilized in the HH setting. In terms 
of the final claims processing timelines, the long standing guidelines 
for our contractors will continue to apply. The guidance can be 
accessed at http://www.cms.gov/manuals/downloads/clm104c01.pdf through 
the Internet only manual, IOM 100-4 Chapter 1 Section 80.2.1.
    Comment: Several commenters stated that while we identified a 
concern regarding the increased number of errors in HIPPS codes 
submitted, we did not acknowledge errors identified by HHAs and their 
vendors in the HHRG released by us.
    Response: Beginning in 2010, we put into place a mechanism for our 
contractor that developed the HHRG software for CMS to beta test any 
updates to the software with interested parties. All issues noted 
during beta testing are to be addressed by our contractor prior to 
final release of an updated HHRG. Our aim is to permit proper vetting 
of any grouper such that we can avoid errors within our HHRG in the 
future.
    Comment: One commenter stated that grouping HH PPS claims centrally 
during claims processing does not reduce burden upon HHAs because the 
burden of reporting HIPPS codes is replaced with one of reporting OASIS 
items.
    Response: OASIS information reported on claims under this proposal 
would be reported in claims fields currently used by HHAs; so we do not 
believe that requiring a replacement of data in current fields 
represents an additional burden.
    Comment: Several commenters stated that our solicitation of 
comments did not provide enough detail surrounding the impact upon 
accounts receivable information to provide meaningful comments. The 
commenters suggested a separate Federal Register notice be issued.

[[Page 70435]]

    Response: We appreciate this feedback and believe that based upon 
our plans to continue to provide the HHRG software, that the concern 
about potential impact upon HHA operations and their accounting needs 
will be addressed. In addition, should we decide to implement this 
provision in a future regulation, we will address additional details 
through a notice of proposed rulemaking in which additional comments 
can be provided by HHAs.
    Comment: One commenter stated concern that our future plans to 
group HH PPS claims centrally during claims processing will create a 
burden on HHAs and their vendors.
    Response: We appreciate this feedback and believe that since the 
data being reported duplicates the information necessary for OASIS, we 
are not creating additional burden for HHAs and their vendors. In 
addition, as noted above, the proposed reporting of this information 
would replace other data in currently used claims fields.
    Comment: Several commenters stated that there are no details 
surrounding how the grouper assignment would be communicated back to 
the agencies and on claims.
    Response: The HIPPS code that our claim processing system assigns 
will be added to the claim record so that the provider will be able to 
view the assignment upon online look-up. The HIPPS code assigned will 
also be returned on the electronic remittance advice.
    Comment: A commenter asked about OASIS data corrections identified 
after the claim is submitted and how the corrections process will be 
handled and its effect on payment. In addition, the commenter would 
like to know whether HIPPS code will be assigned at the RAP or on the 
final claim.
    Response: The HIPPS code would be assigned on both the RAP and the 
final claim. If OASIS data corrections caused the HIPPS code assigned 
to the episode to change, the HHA would be able to cancel and resubmit 
the RAP for the episode. This resubmission process to the RAP presently 
occurs. HHAs that do not maintain grouping software for their internal 
purposes would have access to the HIPPS code calculated by the State 
OASIS system.
    Comment: A commenter asked how Medicare Advantage (PFFS) payors 
will be able to calculate the HHRG in the future based upon 
implementation of this proposal. In addition, the commenter stated 
concerns that if the HHRG software is not made available that the HHAs 
will be unable to advise patients of the copayment amounts.
    Response: We appreciate this feedback and again want to reassure 
HHAs and their vendors that we plan to continue to make the HHRG 
software updates available for use which will permit the Medicare 
Advantage plans to use the HHRG to assist claims processing. In 
addition, the HHAs and their vendors will be able to continue to advise 
patients of copayments due.

H. New Requirements Affecting Hospice Certifications and 
Recertifications

    Section 3132 of the Affordable Care Act requires hospices to adopt 
some of MedPAC's hospice program eligibility recertification 
recommendations, including a requirement for a hospice physician or 
nurse practitioner to have a face-to-face visit with patients prior to 
the 180th-day recertification, and to attest that such a visit took 
place. The Affordable Care Act was enacted too late in the calendar 
year for the implementation proposals relating to these new 
requirements to be included in a Hospice Wage Index Proposed Rule. 
Therefore, these proposals were included in the Home Health Prospective 
Payment System Rate Update for Calendar Year 2011; Changes in 
Certification Requirements for Home Health Agencies and Hospices 
Proposed Rule. As such, we are responding to comments and issuing our 
implementation plan in this final rule.
    In its March 2009 Report to Congress, MedPAC wrote that additional 
controls are needed to ensure adequate accountability for the hospice 
benefit. MedPAC reported that greater physician engagement is needed in 
the process of certifying and recertifying patients' eligibility for 
the Medicare hospice benefit. The Commission reported that measures to 
ensure accountability would also help ensure that hospice is used to 
provide the most appropriate care for eligible patients. MedPAC 
recommended these measures be directed at hospices that tend to enroll 
very long-stay patients. Specifically, MedPAC recommended that a 
hospice physician or advanced practice nurse visit the patient to 
determine continued eligibility prior to the 180-day recertification 
and each subsequent recertification, and attest that such visits took 
place. (MedPAC, Report to the Congress: Medicare Payment Policy, 
Chapter 6, March 2009, pp. 365 through 371.)
    Section 3132(b) of the Affordable Care Act requires hospices to 
adopt MedPAC's hospice program eligibility recertification 
recommendations. Specifically, the Affordable Care Act amends section 
1814(a)(7) of the Act to require that on and after January 1, 2011, a 
hospice physician or nurse practitioner (NP) must have a face-to-face 
encounter with every hospice patient to determine the continued 
eligibility of that patient prior to the 180-day recertification, and 
prior to each subsequent recertification. Furthermore, the Affordable 
Care Act requires that the hospice physician or NP attest that such a 
visit took place, in accordance with procedures established by the 
Secretary of the HHS. The Affordable Care Act provision does not amend 
the statutory requirement that a physician must certify and recertify a 
patient's terminal illness. By statute, only a physician (not a NP) may 
certify a patient's terminal illness, however, section 3132 (b)(2) of 
the Affordable Care Act allows a NP to furnish a face-to-face 
encounter; in the case where the NP provides the face-to-face 
encounter, the NP would then need to provide the clinical findings from 
that encounter to the physician who is considering recertifying the 
patient. This new statutory requirement will better enable hospices to 
comply with hospice eligibility criteria and to identify and discharge 
patients who do not meet those criteria.
    Hospices which admit a patient who previously received hospice 
services (from the admitting hospice or from another hospice) must 
consider the patient's entire Medicare hospice stay to determine in 
which benefit period the patient is being served, and whether a face-
to-face visit will be required for recertification.
    As required by the Affordable Care Act, we made several proposals 
regarding Sec.  418.22(a)(3), (a)(4), (b)(3), (b)(4), and (b)(5) in 
order to implement this new statutory requirement. We believe that 
required visits should be fairly close to the recertification date, so 
that the visit allows a current assessment of the patient's continued 
eligibility for hospice services. These visits can be scheduled in 
advance, particularly for those patients with diagnoses where life 
expectancy is harder to predict. As such, in Sec.  418.22(a)(4), we 
proposed that hospice physicians or NPs make these visits no more than 
15 calendar days prior to the 180-day recertification and subsequent 
recertifications, and that the visit findings be used by the certifying 
physician to determine continued eligibility for hospice care. We noted 
that this 15-day timeframe also aligns the timeframe for 
recertification visits with the timeframe required for the 
comprehensive assessment update, as specified in our Conditions of 
Participation (CoPs) at Sec.  418.54(d). This timeframe requirement is 
also consistent

[[Page 70436]]

with the timeframe required for the review of the plan of care, as 
specified in our CoPs at Sec.  418.56(d). We wrote that the 15-day 
timeframe provides a balance between flexibility in scheduling the 
visit and enabling a relatively current assessment of continued 
eligibility, while also allowing efficiency in update and review 
processes, as required by the hospice CoPs.
    As noted earlier, the statute requires that the face-to-face 
encounter be used to determine the patient's continued eligibility for 
hospice services. We proposed that the clinical findings gathered by 
the NP or by the physician during the face-to-face encounter with the 
patient be used in the physician narrative to justify why the physician 
believes that the patient has a life expectancy of 6 months or less. 
Accordingly, we added this proposed requirement to Sec.  418.22(b)(3) 
as subparagraph(v).
    Because the statute also requires the hospice physician or NP to 
attest that the face-to-face encounter occurred and by statute only a 
physician may certify the terminal illness, at Sec.  418.22(b)(4) we 
proposed that the face-to-face attestation and signature be either a 
separate and distinct area on the recertification form, or a separate 
and distinct addendum to the recertification form, that is easily 
identifiable and clearly titled. We also proposed that the attestation 
language be located directly above the physician or NP signature and 
date line.
    The attestation is a statement from the certifying physician or 
from the NP which attests that he or she had a face-to-face encounter 
with the patient. If the face-to-face encounter was provided by a NP, 
the attestation should also include a statement that the clinical 
findings of that encounter have been provided to the certifying 
physician for use in determining continued eligibility for hospice 
care. We proposed that the attestation include the name of the patient 
visited, the date of the visit, and that it be signed and dated by the 
NP or physician who made the visit. Hospices are free to use other 
attestation language, provided that it incorporates these required 
elements. These elements must be included whether the visit is made by 
a NP or a physician. We note that it is possible that the certifying 
hospice physician is the same physician who made the visit.
    As previously mentioned, we proposed to revise Sec.  418.22 to 
incorporate these requirements and we proposed to add paragraphs (a)(4) 
and (b)(4) to implement the requirements for a face-to-face encounter 
with long-stay hospice patients and the attestation of that face-to-
face encounter.
    In requiring a timeframe in which the face-to-face encounter must 
occur, for consistency, we believe it is important to also clarify 
required timeframes for all certifications and recertifications. Long-
standing guidance in our Medicare Benefit Policy Manual's chapter on 
hospice benefit policy allows the initial certification to be completed 
up to 14 days in advance of the election, but does not address the 
timeframe for advance completion of recertifications (see CMS Pub. No. 
100-02, chapter 9, section 20.1). To clarify our policy in the 
regulations, and to be consistent with the timeframe for the newly 
legislated face-to-face encounter for recertifications, we proposed 
that both certifications and recertifications be completed no more than 
15 calendar days prior to either the effective date of hospice election 
(for initial certifications), or the start date of a subsequent benefit 
period (for recertifications). This proposed timeframe also aligns with 
the CoP timeframe for updating the comprehensive assessment (Sec.  
418.56(d)), and with the CoP timeframe for reviewing the plan of care 
(Sec.  418.54(d)). Finally, this proposed 15-day advance certification 
or recertification timeframe would also help ensure that the decision 
to recertify is based on current clinical findings, enabling greater 
compliance with Medicare eligibility criteria. We believe the new 
statutory requirements reflect the Congress' desire for increased 
compliance with Medicare eligibility and, in order to implement these 
provisions, we proposed to revise Sec.  418.22(a)(3).
    Furthermore, longstanding manual guidance stipulates that the 
physician(s) must sign and date the certification or recertification. 
However, the HHS Office of Inspector General (OIG) recently found that 
certifications for some hospice patients failed to meet Federal 
requirements, including the signature requirement (HHS OIG, ``Medicare 
Hospice Care for Beneficiaries in Nursing Facilities: Compliance with 
Medicare Coverage Requirements, September 2009''). In keeping with the 
Congress' desire for increased compliance with Medicare eligibility 
criteria, and to achieve consistency with the 180-day recertification 
attestation requirements, we proposed to add language to the 
certification requirements in our regulations to clarify that these 
documents must include the signature(s) of the physician(s) and the 
date each physician signed the document.
    Additionally, with the new statutory requirements for a face-to-
face encounter prior to the 180-day recertification, and for every 
recertification thereafter, it is important for hospices to easily 
identify which benefit periods require a recertification visit. Hospice 
patients are allowed two 90-day benefit periods followed by an 
unlimited number of 60-day benefit periods, so every 60-day benefit 
period is by definition beyond the 180-day recertification. Because we 
do not currently require that certifications or recertifications show 
the dates of the benefit period to which they apply, we proposed to add 
language to our certification and recertification regulations to make 
this a requirement for all hospices. While many hospices already 
include this information, there are some that do not. Having the 
benefit period dates on the certification would make it easier for the 
hospice to identify those benefit periods which would require a face-
to-face encounter and would ease enforcement of this new statutory 
requirement.
    Section 1814(a)(7)(A) of the Act requires a valid certification or 
recertification for Medicare coverage. Additionally, section 
1814(a)(7)(D) of the Act now also requires a face-to-face encounter 
with patients who reach the 180th-day recertification. We proposed to 
revise our regulations to require that the physician's signature(s), 
date signed, and the benefit period dates be included on the 
certification or recertification because we believe this information is 
necessary to determine if these documents are valid, and to ease the 
implementation of the new statutory requirements. We believe these 
requirements are consistent with practices in the hospice industry, and 
we do not believe these proposals will be burdensome to hospices. As 
such, we proposed to add Sec.  418.22(b)(5) to incorporate these 
signature and date requirements.
    The following is a summary of the comments we received regarding 
the new requirements affecting hospice certification and 
recertification proposals.
    Comment: Commenters asked for clarification of whether 180 days of 
hospice care must be provided before the face-to-face encounter was 
required, or whether the face-to-face was required when a patient 
enters the 3rd or later benefit periods. Several commenters suggested 
that we clarify the proposal so that the focus is on benefit periods, 
which they believe is consistent with the intent of the statute and the 
regulation, and which is easier to track; these commenters suggested we 
change

[[Page 70437]]

the regulatory text to reference election periods rather than days.
    In contrast, other commenters suggested we reword the proposal so 
that an encounter and its accompanying attestation will be required 
after 180 days of hospice care and every 60 days thereafter. The 
commenters wrote that basing the encounter timeframe on benefit periods 
rather than actual days of care would result in some patients requiring 
visits after only a short time in hospice, which the commenters believe 
was not in keeping with CMS' intent to have patients with long lengths 
of stay assessed for continued eligibility. A commenter suggested that 
those 180 days must be continuous in order to trigger a face-to-face 
encounter.
    Other commenters wrote that each new hospice admission should begin 
as day 1 for that hospice. One said that patients with a history of 
inappropriate admissions to different hospices should not cause the 
appropriate admissions to hospices to be penalized. Another wrote that 
although Medicare hospice is not fee-for-service, hospices still assume 
the risk of enrolling patients with high-cost medical needs based on 
the expectation that other patients will have lower cost medical needs. 
This commenter wrote that if a patient has had a previous hospice stay, 
and those days are counted toward the 180th-day recertification 
requirement, payment for those days was made to another hospice. The 
commenter also believes this invalidates an argument that the hospice 
has ``accrued'' sufficient funds to cover the additional costs of the 
required visits. The commenter suggested we not consider a patient's 
total hospice history in defining the 180th-day recertification 
requirement, but only focus on days of care within the specific hospice 
providing care. The commenter suggested that this would also eliminate 
problems related to accurately tracking time spent in hospice.
    Another commenter wrote that if a patient had a significant break 
in hospice service, CMS should restart the time clock for the 180th-day 
recertification. Several commenters suggested that we consider each new 
terminal diagnosis to restart the clock as day 1; these commenters were 
referring to situations where a patient receives hospice care for a 
terminal diagnosis from which he or she recovers, and later receives 
hospice care for a different terminal diagnosis.
    Other commenters asked for information about how to count the days 
when a hospice patient becomes eligible for Medicare in the midst of a 
non-Medicare hospice stay or when the patient has previously received 
hospice care outside of the Medicare hospice benefit.
    Response: The relevant language in the Affordable Care Act reads, 
``* * * a hospice physician or nurse practitioner has a face-to-face 
encounter with the individual to determine continued eligibility of the 
individual for hospice care prior to the 180th-day recertification and 
each subsequent recertification * * *'' The Medicare statute, as 
amended by the Affordable Care Act, does not define the term ``180th-
day recertification.'' For purposes of this provision, the Medicare 
statute also does not specifically address how the face-to-face 
encounter requirement should apply in the situation in which a 
beneficiary completes the first 90-day benefit period and is 
recertified for a second 90-day benefit period but does not receive 90 
days of service in the second benefit period due to (for example) a 
revocation in the middle of the benefit period.
    In interpreting the statutory term ``180-day recertification,'' we 
considered the statutory scheme and the existing language used in the 
statute and in our regulations, all of which is structured around the 
concept of benefit periods which, by statute, cannot last longer than a 
maximum number of days (90 days for the first two and 60 days for 
subsequent benefit periods). The fact that the statute imposes a 
maximum number of days per period does not mean that an individual must 
receive hospice services for the maximum number of days before a 
statutory requirement can be imposed on subsequent benefit periods. For 
example, for payment to be made to a hospice provider with respect to a 
beneficiary, section 1814(a)(7) of the Act requires a certification 
(and recertification) at the beginning of each benefit period, the 
first two of which can last as long as 90 days each. Previously, we 
have interpreted these provisions to require a recertification at the 
beginning of each subsequent benefit period, even if the prior benefit 
period did not last the maximum number of days due to, among other 
things, the beneficiary's revocation under section 1812(d)(2)(B) of the 
Act. Thus, the regulatory language at Sec.  418.22 requires 
certifications at the beginning of benefit periods rather than 
requiring certifications after a certain number of days of service was 
actually provided to a beneficiary.
    For the foregoing reasons, we are defining the 180th-day 
recertification to be the recertification which occurs at the start of 
the 3rd benefit period--that is, the benefit period following the 
certification for a second, 90-day benefit period, regardless of 
whether the beneficiary received a full 90 days of service in the 
second 90-day benefit period. We note that, as one commenter wrote, 
this method of counting the time will also be easier for hospices to 
track. We also believe that the statute considers the patient's total 
hospice benefit period, rather than starting the clock at day 1 or 
period 1 for each new hospice or for a different terminal diagnosis. 
Furthermore, this method of counting benefit periods is consistent with 
how our systems operate when tracking Medicare hospice beneficiaries.
    We agree with the commenter who wrote that hospices assume the risk 
of enrolling patients with high-cost medical needs based on the 
expectation that other patients will have lower cost medical needs. As 
such, we believe that hospices should consider costs of patient care in 
the aggregate, and not on a per-patient basis. Therefore, we did not 
argue in the proposed rule that a hospice ``accrues'' sufficient funds 
on a per-patient basis to cover the cost of the visit based on a 
patient having prior days of care with that hospice.
    To illustrate this benefit period method of counting, if a hospice 
patient elected the benefit for the first time on June 1st, completed 
the 1st 90 day period (on August 30th), began the 2nd 90 day period, 
but revoked 30 days into the benefit period (on September 29th), and 
re-elected hospice the following January, the beneficiary would be in 
his 3rd benefit period. The 3rd benefit period would require a face-to-
face visit at admission even though he had not received 180 calendar 
days of care.
    The Medicare hospice benefit periods only apply to Medicare hospice 
patients, regardless of whether Medicare is the primary or secondary 
coverage. In other words, non-Medicare stays are not considered when 
counting benefit periods to determine when a face-to-face encounter 
must occur. The first Medicare benefit period would begin on the 
effective date of the first Medicare hospice election.
    To clarify the language used about the timing of the requirement, 
we are modifying our proposal and the regulatory text to refer to the 
face-to-face encounter as being required prior to the 3rd benefit 
period recertification and each subsequent recertification.
    Comment: Several commenters were concerned that they could not 
provide a face-to-face encounter within 15 days prior to the 180th-day 
recertification or each subsequent recertification. One wrote that this 
timeframe is a barrier to rational geographic batching of visits. They 
cited difficulties due to shortages

[[Page 70438]]

of physicians and NPs, particularly in rural areas. Several commenters 
said they would need to hire additional staff but were concerned about 
being able to successfully recruit a physician or NP because of 
shortages, particularly in rural areas.
    One wrote that there are not enough well-trained hospice 
practitioners in this country to handle the potential volume of these 
visits and asked if we were concerned that the influx of providers 
required to make these visits would ``water down'' the quality of the 
assessments, and negatively impact the delivery of care to hospice 
patients.
    Some noted that they have a part-time Medical Director with a busy 
private practice, who is simply not available to make the visits. One 
noted that in urban areas, traffic tie-ups add to the time required to 
make these visits. Others wrote that visits in rural areas require 
significant travel time, sometimes as long as 4 hours; one added that 
during these visits, their Medical Director would also be completely 
unavailable by phone for other patient and staff needs because in some 
remote areas there is limited cell phone service.
    One asked if there was a requirement regarding the location(s) 
where a required face-to-face visit could occur. Another commenter 
wrote that the language of the proposed regulation at Sec.  
418.22(c)(4) implies that the practitioner must visit the patient at 
his or her home, rather than allowing the patient to come to the 
physician or NP. This commenter suggested that we change the regulatory 
text from ``must visit'' to ``have a face-to-face encounter'' as 
specified by section 3132 of the Affordable Care Act. A commenter noted 
that in some areas, patients would have to come to the physician, 
creating a burden on patients and families. Several commenters added 
that they cannot get frail or dying patients to the physicians because 
many cannot sit up in a car, and in rural areas, Emergency Medical 
Services (EMS) may be the only option for transportation.
    Another commenter wrote that patients would not be able to afford 
the ambulance ride to a physician's office to make the visit; others 
were concerned that forcing a patient to travel to a physician was an 
undue hardship on both the patient and the family, would expose the 
patient to potentially infectious patients in the doctor's office, and 
could lead to exacerbation of symptoms such as severe pain or dyspnea.
    One commenter suggested we consider the impact of the required 
visit on the family; another commenter wrote that the required visits 
would be an added stress to the family as they wait for confirmation 
from hospice staff that hospice care can continue. Another commenter 
wrote that if a patient required ambulance transport to a doctor's 
office, it would be an unreimbursed expense for the hospice, and asked 
if Medicare could cover the ambulance ride outside of the hospice per 
diem payment amount. One commenter said EMS will not cross county 
lines, yet 21 percent of the hospice's patients lived in a different 
county.
    Another commenter asked if the hospice could discharge a patient if 
the patient or family refused the physician visit, or delayed it, and 
noted that with 15 days, there may not be time for adequate discharge 
planning. Several noted that some states have minimum discharge 
requirements, such as Alabama with a minimum 30-day requirement, which 
make the 15-day timeframe unworkable; one commenter asked how to handle 
the situation where the recertification visit determines that discharge 
is needed, but it occurs with less than 30 days to plan, as required by 
some State laws. This commenter asked that we allow for adequate 
discharge planning.
    A few commenters asked what the hospice should do if the visit 
cannot be made due to scheduling difficulties, inclement weather, 
unsafe road conditions, or due to an emergency. Another commenter said 
that a hospice physician might not have an attending physician's 
dictation from the visit in time to make the attestation, and ask for 
more time to make the visits. One commenter wrote that the time 
constraints do not fit well with patients' conditions if their disease 
trajectories are in rapid decline. A commenter asked what would be the 
impact on a hospice if the required visit was not made in the allowable 
timeframe but was earlier or later. This commenter also asked if this 
requirement only affected Medicare hospice patients. Many commenters 
asked for more time to make the visit, suggesting 21 or 30 days.
    Response: We appreciate commenters' input on the problems in 
scheduling these face-to-face encounters, and we recognize that rural 
hospices, in particular, may experience more logistical difficulty due 
to the shortage of physicians or NPs in some areas. Based on concerns 
and recommendations from the public comments on potential logistical 
issues, we are revising our proposed policy to change the visit 
timeframe from up to 15 days prior to the start of the 180th-day 
recertification, and each subsequent recertification, to a visit 
timeframe of up to 30 calendar days prior to the 3rd benefit period 
recertification, and each subsequent recertification. We believe this 
additional time will provide hospices with the flexibility they need to 
meet this Congressional mandate, to provide adequate time for discharge 
planning when indicated, and to accommodate other logistical issues 
discussed in the public comments.
    We are unclear about the meaning of the comment related to State 
laws about discharge, and believe it may be outside the scope of this 
rule. We are only able to focus on the Medicare statute and payment 
regulations, which require that patients who are no longer eligible for 
the benefit be discharged. The statute does not allow us to pay for 
hospice care for patients who are not eligible for the benefit.
    The regulations at Sec.  418.26(d) require hospices to have a 
discharge planning process in place ``that takes into account the 
prospect that a patient's condition might stabilize or otherwise change 
such that the patient cannot continue to be certified as terminally 
ill.'' The word ``prospect'' in this regulatory text indicates that 
hospices should be considering whether stable or improving patients 
might become ineligible in the future, and plan for a possible future 
discharge.
    Hospices are required to follow State laws in additional to federal 
laws. However, we do not see the recertification requirement and any 
State discharge requirements as being in conflict.
    If a patient or family member refuses to allow the hospice 
physician or NP to make the required visit, a hospice could consider 
discharge for cause, as the refusal would impede the hospice's ability 
to provide care to the patient. The hospice would need to follow the 
procedures for discharge for cause, which are given in Sec.  418.26.
    In response to the comment suggesting that we change the proposed 
regulatory text at 418.22 (C)(4) from ``must visit'' to ``have a face-
to-face encounter'' as language of the proposed regulation implies that 
the practitioner must visit the patient at his or her home, rather than 
allowing the patient to come to the physician or NP, we are revising 
the proposed language. We believe that the Affordable Care Act allows 
hospices the flexibility for patients to have a face-to-face encounter 
with a hospice physician or nurse practitioner. We are revising the 
regulatory text at Sec.  418.22(a)(4) to now read, ``As of January 1, 
2011, a hospice physician or hospice nurse practitioner must have a 
face-to-face encounter * * *'' We expect that hospices will not require 
patients to

[[Page 70439]]

come to the hospice physician or NP for the encounter if doing so would 
exacerbate symptoms or otherwise jeopardize the patient's well-being; 
the hospice Conditions of Participation (CoPs) in Sec.  418.100(a) 
require that hospices provide care that optimizes patient comfort, and 
is consistent with the patient's and family's needs and goals. All 
patient transport must occur within the context of optimizing patient 
comfort and meeting the specific needs and goals of patients and their 
families. If transportation to a hospice physician would not optimize 
patient comfort and/or meet the goals and needs of the patient and 
family, the hospice physician or NP would need to travel to the 
patient. If a hospice patient travelling to the hospice physician or NP 
required ambulance transportation because of his or her medical 
condition, the ambulance transportation would be included in the 
hospice per diem; it could not be billed to patient.
    We believe that the face-to-face encounters will not be an added 
stress to family members if they know they are a routine part of the 
hospice recertification process, and if the family understands that the 
visit has the potential to improve the quality of care for their loved 
one.
    In response to the commenter's concern that the patient's attending 
physician's dictation might not be available to the hospice in the 15 
days prior to the recertification, and this would prevent the hospice 
from meeting the 15-day timeframe that was originally proposed, we 
believe that the commenter appears to misinterpret the statutory 
requirement. Pursuant to section 3132(B) of the Affordable Care Act, a 
hospice physician or hospice NP must perform the encounter. The 
definition of hospice physician is addressed later in this section.
    In response to the comments asking for clarification about to which 
patients the face-to-face encounter requirement applies, we note that 
it only applies to Medicare hospice patients.
    Finally, we proposed clarifying some language in our benefit policy 
manual and aligning timeframes so that recertifications could not be 
completed more than 15 days prior to the start of the subsequent 
benefit period. While the entire recertification cannot be completed 
more than 15 days prior to the start of the benefit period, we are 
clarifying that the face-to-face encounter and its accompanying 
attestation are only parts of the recertification, and therefore can be 
completed up to 30 calendar days prior to the start of the 3rd benefit 
period recertification and each subsequent recertification.
    Comment: Several commenters have asked if the hospice face-to-face 
encounter is billable, and if so what reimbursement code should be 
used. A number of commenters wrote that their hospices do not have the 
resources to accomplish this if the visit is not billable; one wrote 
that this requirement could have the potential to drive smaller 
providers out of the market. They wrote that this requirement would be 
a financial burden, especially to rural providers, in the face of 
reductions due to the budget neutrality adjustment factor (BNAF) phase-
out and future market basket cuts, declining charitable donations, 
increased costs, and demands for competitive wages. A few commenters 
mentioned that hospices will be absorbing more than a 14 percent 
reduction in their Medicare and Medicaid reimbursement levels over the 
next 10 years; they wrote that these reductions are especially 
difficult for the hospice community since hospice programs are 
disproportionately dependent upon Medicare and Medicaid for 
reimbursement. These commenters believe the upcoming payment reductions 
place increasing financial pressure on hospices that seek to deliver 
quality care and comply with additional administrative and regulatory 
requirements.
    A number of commenters wrote that they could not afford this 
unfunded mandate. One rural commenter noted that their reimbursement is 
already lower due to wage index adjustments, and yet the costs of these 
required visits will fall more heavily on rural providers, with long 
distances to see patients; this commenter believes the burden to rural 
hospices was becoming ``almost insurmountable.'' Commenters also 
mentioned the administrative costs of coordinating the visits, of 
changing existing forms and documents, and of increased liability 
risks, and several believe that these are not included in the current 
hospice reimbursement. Another noted that hospices would be expected to 
pay physicians or NPs for their travel time, visit time, and mileage, 
and would have additional administrative costs while receiving the same 
per diem payment amount. One commenter said that his hospice would be 
forced to reduce services to patients to pay for these visits. One 
commenter wrote that this requirement creates a 2-tiered system where 
providers are compensated better for patients under the 180-day 
recertification requirement than for beneficiaries who require a face-
to-face encounter.
    Several said that they would have to hire someone full-time to make 
the visits, which would create significant financial hardship without 
reimbursement; one wrote that those monies would be better spent on 
providing quality care and on fair wages for employees. A few added 
that having a physician or NP spend hours traveling to see patients 
would be a waste of scarce human resources in areas where there are 
physician or NP shortages. A few mentioned that the net result would be 
less patient care, and more time spent on paperwork.
    Nearly all commenters suggested some form of reimbursement for the 
visit, with one commenter writing that all physician visits mandated by 
payers should be billable separately by the physician directly to the 
payer for reimbursement. One commenter was concerned that because these 
required visits are medically unnecessary, there would be no 
reimbursement for them, yet hospices would still incur costs from 
making the visits. Another commenter added that many physicians or NPs 
would order tests such at CAT scans or lab tests to obtain results that 
justify recertification of patients, and yet would not receive 
reimbursement for these tests.
    A few commenters suggested that any part of the visit that becomes 
medically necessary, including those where the doctor changes the plan 
of care (POC) or makes medication adjustments, should be billable. One 
commenter asked if a hospice could bill the patient for the face-to-
face visit if it was not covered.
    One commenter wrote that when the Medicare hospice benefit was 
originally designed, physician face-to-face visits were viewed as an 
encounter for additional counseling, education, information, and 
support. The commenter asked why any physician face-to-face visit would 
not be billable. Another commenter cited our regulations at Sec.  
418.304, and asked if the face-to-face visit was considered part of the 
establishment and updating of the plan of care, or is it outside the 
services listed, and could be billed separately. If the visits are part 
of the per diem amount, the commenter encouraged CMS to review the 
payment rates and increase the per diem to reflect this new, mandated 
service.
    A number of commenters believe that the face-to-face requirement 
was beyond the administrative services provided by the hospice Medical 
Director, and outlined in the hospice claims processing manual in 
section 40.1.1 (see Internet Only Manual, 100-04, chapter 11). Several 
commenters wrote that since active clinical work and a comprehensive 
analysis will be required of the physician (as distinguished from 
simple documentation in the medical

[[Page 70440]]

record), they believed that a billable visit is appropriate. Another 
wrote that while the medical decision-making is primarily directed at 
determining prognosis, in many cases, changes in medication and patient 
management may also be suggested. A different commenter wrote that the 
face-to-face encounter requires direct patient care services, including 
a comprehensive clinical assessment and is comparable to the billing 
for evaluation and management services provided in other settings and 
should be reimbursed as such. Another commenter wrote that there is no 
precedent for a physician to be required by law to provide a thorough 
medical assessment of a seriously ill patient and be constrained from 
coding, billing, or seeking usual and customary reimbursement for such 
care.
    For any portion of the visit that is billable, commenters asked how 
to document that billable portion, including whether to make one note 
or two. A number of commenters wrote that their anticipated costs for 
the visits would far exceed any reimbursement, particularly given the 
travel time and mileage costs. Another also noted that there is 
currently no physician reimbursement for Medicaid patients visited by 
the hospice physician.
    A few commenters noted that NP services that are equivalent to 
physician services are not currently billable unless the NP is the 
patient's attending physician. One asked if this would change under the 
proposed rule.
    A commenter wrote that the Medicare CoPs speak to the actions of a 
physician providing medical care to a hospice patient as separate from 
the role of the Medical Director, and that these services are accounted 
for differently in the per diem payment rate. This commenter wrote that 
the roles of these two physicians are distinct, and that CMS should 
consider providing adequate reimbursement for the services being 
required. Another commenter asserted that if Medicare wants quality 
healthcare, Medicare must allow practitioners to bill for their time.
    A few commenters wrote that there was an established precedent in 
Skilled Nursing facilities that encounters to meet mandated 
requirements are billable and reimbursed by CMS, beyond the 
administrative duties of the Medical Director. Given this information, 
they asked us to clarify if the mandated visit would be billable.
    A commenter asked if we plan to track face-to-face encounters with 
a particular CPT code, and if it should be reported on the claim. 
Another commenter asked if we are concerned about the distortion of the 
actual cost associated with providing care to hospice patients if these 
visits are not captured on the claim. Some commenters asked us to 
devise a HCPCS code to compensate the hospice physician or NP for the 
time and mileage for making these visits. Others asked us to develop a 
billing code that would include mileage costs and travel time, and 
increase the per diems to reflect the additional administrative costs 
related to the proposal. One recommended a separately reimbursable fee 
schedule amount specific to face-to-face encounter visits.
    Response: We appreciate the commenters concerns about the financial 
effects of the face-to-face requirement. However, the billing 
regulations for hospice do not allow for physician reimbursement for 
administrative activities of physicians. The certification or 
recertification of terminal illness is not a clinical document, but 
instead is a document supporting eligibility for the benefit. In the 
1983 Hospice Care Final Rule, certifications of terminal illness were 
described as ``simply determinations as to the patient's medical 
prognosis, not the plan of care or the type of treatment actually 
received'' (48 FR 56010). As such, the certification or recertification 
of terminal illness has been excluded from separate physician 
reimbursement and has been considered an administrative activity of the 
hospice physician. The face-to-face requirement is part of the 
recertification, and therefore is an administrative activity included 
in the hospice per diem payment rate. In contrast, the SNF bundle 
specifically excludes the services of physicians and other advanced 
practiced disciplines including NPs. Therefore, SNF physicians or NPs 
can bill for mandated encounters, as these visits are not part of the 
bundled payment.
    The hospice face-to-face encounter is an administrative requirement 
related to certifying the terminal illness mandated by the Affordable 
Care Act. By itself, it would not be billable, as it is considered 
administrative, as explained above and in section 40.1.1 of the Claims 
Processing Manual (Internet Only Manual 100-04, chapter 11): ``Payment 
for physicians' administrative and general supervisory activities is 
included in the hospice payment rates. These activities include 
participating in the establishment, review and updating of plans of 
care, supervising care and services and establishing governing 
policies.'' Determining continued patient eligibility would fall under 
the ``general supervisory services'' described at Sec.  418.304(a)(1), 
rather than under review and update of plans of care described at Sec.  
418.304(a)(2).
    However, if a physician or nurse practitioner provides reasonable 
and necessary non-administrative patient care such as symptom 
management to the patient during the visit (for example, the physician 
or NP decides that a medication change is warranted), that portion of 
the visit would be billable. We believe that allowing for this type of 
billing will not only increase the quality of patient care, but also 
will help defray the costs to hospices of meeting this requirement. 
Hospices may not bill patients for face-to-face encounters or for any 
medically necessary physician services provided during the encounter, 
as these are hospice services. Billing for medically necessary care 
provided during the course of a face-to-face encounter should flow 
through the hospice, as the physician or NP who sees the patient is 
employed by or where permitted, working under arrangement with the 
hospice (for example, a contracted physician).
    The commenter who wrote that hospices cannot bill for physician 
services provided by a NP unless the NP is the attending physician is 
correct. The regulations at Sec.  418.304(e) only allow nurse 
practitioner services to be billed when the nurse practitioner is the 
patient's designated attending physician. In order to be billable, this 
regulation also requires that the NP must provide medically reasonable 
and necessary services that are physician level services, and not 
nursing services (that is, in the absence of a nurse practitioner, the 
services would be provided by a physician and not by a nurse). The 
regulation also excludes billing for services related to the 
certification of terminal illness.
    The hospice physician or NP that has the face-to-face encounter 
with the patient should ensure that any clinical findings of the 
visit(s) are communicated back to the interdisciplinary group (IDG), 
for use in coordinating the patient's care. This is particularly true 
if the physician or NP discovers unmet medical needs during the 
billable or non-billable portion of the visit, so that the IDG can 
coordinate with any attending physician. Hospices are not to provide 
services that are duplicative of what the attending physician is doing 
and are responsible for coordinating with the attending physician if 
they provide any reasonable and necessary patient care when having a 
face-to-face encounter. If there is a billable portion attributable to 
the visit, hospices must maintain medical documentation that is clear 
and precise

[[Page 70441]]

to substantiate the reason for the services that went beyond the face-
to-face encounter, and which apply to the billed services; this can be 
done in one note.
    At this time, we do not plan to track these required visits with a 
special CPT code, or to create any additional HCPCS codes related to 
these visits. In the coming years, we will be reforming the hospice 
payment system, and will be analyzing hospice costs and reimbursements 
to ensure that providers are being paid fairly.
    We are unclear about the meaning of the comment that indicated that 
there is currently no physician reimbursement for Medicaid patients 
visited by the hospice physician. However, we note that the Medicare 
hospice benefit reimburses hospice physicians and attending physicians 
for reasonable and necessary care provided to hospice patients, whether 
the patients are dually eligible or not. If the commenter is referring 
to patients who have Medicaid only, we suggest that the commenter see 
his or her State Medicaid Manual, particularly sections 4305.05 and 
4307, which deal with the Medicaid hospice benefit and with physician 
services, respectively. The paper-based State Medicaid Manual can be 
accessed through our Web site, at http://www.cms.hhs.gov/Manuals/PBM/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=1&sortOrder=ascending&itemID=CMS021927.
    Finally, the hospice face-to-face encounter is only required for 
recertifications when the patient is in the 3rd benefit period or 
beyond. By definition, hospice patients are terminally ill, with a 
prognosis of 6 months or less if, the illness runs its normal course. 
Therefore, the majority of hospice patients should not require a face-
to-face encounter.
    Comment: A number of commenters wrote that hospices cannot 
currently access accurate information in a timely manner to determine 
the status of previous hospice services. The commenters expressed 
concern that a hospice might admit a patient without having complete or 
accurate information about previous hospice services, and therefore not 
be aware that a face-to-face encounter could be required, resulting in 
denial of payment. Commenters stressed that without timely, accurate 
information, it is impossible for hospices to comply with this 
regulation.
    Several asked if the fiscal intermediary standard systems (FISS) 
was available 24 hours per day, 7 days per week, or if the fiscal 
intermediaries (FIs) or Medicare Administrative Contractors (MACs) 
could impose down times for maintenance, holidays, weekends, or other 
reasons, noting that many hospice admissions take place after hours and 
on weekends, and recommended that we review FISS operating hours to 
ensure that it is available at all times. A few wrote that FISS cannot 
be accessed via secure internet site from any computer, but that 
hospices are required to purchase individual licenses and connection 
capabilities for each computer. One wrote that if a patient is 
discharged alive from a hospice more than six months from the inquiry 
date in the Eligibility Home Health Inquire (ELGH), the ELGH screen 
fails to reflect the previous hospice election, inaccurately suggesting 
to the provider that the patient had never elected hospice. One noted 
that using the look-up systems to determine a patient's hospice history 
is cumbersome. This commenter also asked how far back benefit period 
records are kept within FISS. Several commenters noted that many 
hospices do not bill in a timely fashion, which places the receiving 
hospice at risk even if the Common Work File (CWF) or other resources 
are dutifully checked at time of admission. One commenter asked that we 
explore options to access the FISS system, and to ensure timeliness and 
availability of the complete hospice history.
    A few commenters asked who would be responsible for monitoring the 
patient's time in hospice, to know if a face-to-face encounter was 
required. The commenters stated they would not know the patient's 
history otherwise. One asked how a hospice would know when the last 
face-to-face encounters took place on patients who are transferred or 
who came from out of the area. This commenter also asked if a hospice 
could rely on a previous face-to-face encounter if the patient is being 
transferred from another hospice within 60 days of the last face-to-
face encounter. Several commenters asked if the Provider Statistical 
and Reimbursement Report (PS&R) would be able to provide benefit period 
information.
    Some also wrote that hospices should not be held accountable for 
failure to provide a visit if the data systems were unable to provide 
them with the accurate and timely information needed, or if the 
provider miscalculated the certification or recertification dates and/
or face-to-face visit requirement because of inaccurate system 
information. Several asked that we provide clear guidance as to what 
would constitute a ``best effort'' to secure a patient's full hospice 
history for establishing the proper benefit period, and ``hold 
harmless'' those providers who have met the ``best effort'' standard. 
One commenter suggested we delay implementation of the face-to-face 
requirement until there is a CMS system in place that is available 24 
hours per day, 7 days per week, and that providers not be responsible 
for knowing about prior hospice use if the data are not available in 
FISS. This commenter suggested that FISS operating hours be reviewed 
and that CMS consider requiring the FI/MAC contractors to have FISS 
available for longer hours and on nights, weekends, and holidays.
    Response: Hospices are responsible for verifying which benefit 
period a patient is in at admission by using the CWF to determine the 
beneficiary's benefit period. The CWF is used because the FISS is 
responsible for the actual processing and payment of claims, and does 
not track benefit periods. There are several CWF query systems to 
determine which benefit period a hospice patient is in. Both ELGH and 
Health Insurance Query for Home Health Agencies (HIQH) give real time 
data; hospices should be using the CWF queries for the most accurate 
beneficiary information. If providers are unsure how to use the CWF 
queries, they should contact their MACs.
    Because CWF has 9 host sites, a provider would have to search 
through up to 9 databases to determine if a patient who moved from 
another part of the country received prior hospice care; a 
beneficiary's records are only in 1 of the 9 databases, so as soon as 
the beneficiary is located, the search may cease. Although this may be 
cumbersome, the CWF is required to be available from 6 a.m. to 6 p.m. 
Monday through Friday and 6 a.m. to noon on Saturdays, by the time zone 
of the host site. We strive to have the CWF available beyond these 
minimum timeframes, but there are some regular downtimes: every 
Saturday, usually from 4 p.m. to past midnight, Sundays from 7 p.m. to 
9 p.m. (central time), and the third Sunday of every month from 12 a.m. 
to 4 a.m. (central time).
    The PS&R system cannot currently provide the information needed to 
determine the current benefit period, and the revised system is still 
under development.
    If CWF is not available, hospices have another option for verifying 
a patient's hospice benefit periods, using an inquiry that is usually 
available 24 hours per day, 7 days per week, 365 days per year: the 
Health Insurance Portability and Accountability Act (HIPAA) Eligibility 
Transaction System (HETS), specifically the 270/271

[[Page 70442]]

transaction. Those hospices that file their claims through a 
clearinghouse, or which have a direct connection to CMS, or whose MAC 
provides an Internet portal, would have access to the HETS system as a 
data source for their eligibility. The HETS 270/271 inquiry is in real 
time, but claim information lags up to 24 hours. It is also a national 
database, therefore there is no need to search multiple host sites. A 
270 transaction is a transaction query and a 271 transaction is the 
response to the user. A 270 transaction query for a patient's benefit 
periods will return up to 3 years of data, showing all prior hospice 
benefit periods. This query system can be used if the CWF system is not 
available; providers can go to http://www.cms.gov/HETSHelp/ for 
information on the HETS 270/271 transaction, or they can call 1-866-
534-7315. Therefore, hospices have multiple ways of verifying a 
patient's prior hospice history to determine which benefit period the 
patient is in.
    If a beneficiary has received hospice care at another provider, 
commenters are correct that the CWF may not be up-to-date if that 
previous provider has not billed promptly. We share commenters' 
interest that the benefit period information available via the CWF or 
the 270/271 transaction should be as up-to-date as possible. Hospices 
have a financial incentive to bill in a timely fashion, and in our 
claims processing manual, we have encouraged providers to file their 
Notice of Elections as soon as possible after an election; similarly, 
we have often encouraged providers during the public CMS Open Door 
Forum discussions to bill in a timely fashion. In addition to checking 
our data systems for benefit period information, hospices can also ask 
the beneficiary (or his or her representative) if he or she has 
received hospice care previously. In putting forth their ``best 
effort'' to identify whether a patient requires a face-to-face 
encounter, hospices should not rely solely on data systems to determine 
the benefit period, but should also talk with the patient or 
representative where possible, and should document the information they 
find along with the methods used to find the information.
    Several commenters suggested that we ``hold harmless'' those who 
rely on the CWF response information to determine whether a face-to-
face encounter is required. We are unable to provide flexibility as the 
statutory language in the Act requires a certification or 
recertification in order for Medicare to cover hospice days of care. If 
a hospice has not had a required face-to-face encounter, then the 
recertification would not be complete, and we would be unable to cover 
the days of care that were under that recertification.
    However, we believe that the flexibility afforded to hospices in 
determining benefit period data eliminates most situations where a 
hospice does not have accurate benefit period data. Furthermore, we 
believe that in many cases, the patient or his or her representative 
will know if hospice care was provided previously. Based on analysis of 
our FY 2007 claims data, about 20 percent of all hospice beneficiaries 
reach benefit period 3 or later, and thus would require a face-to-face 
evaluation. Of that 20 percent, only a fraction of those beneficiaries 
might have benefit period data that are not up-to-date in the systems, 
and which cannot be verified with the patient or representative. In 
addition, of that fraction, another fraction will show benefit period 1 
or 2, rather than period 3 or later, due to having prior hospice care. 
Therefore, given the historical data, we do not believe that this 
situation will be common or that there is a need to hold hospices 
harmless.
    The Affordable Care Act requires that a hospice physician or NP 
have a face-to-face encounter with any patient that it admits in the 
3rd or later benefit period; prior face-to-face encounters performed by 
previous providers cannot be used to substitute for a face-to-face 
encounter that is required by the current hospice. In a transfer 
situation, the benefit period does not change, so the originating 
hospice would have been responsible for any required face-to-face 
encounter if the patient was in the 3rd or later benefit period. When a 
patient is in the 3rd or later benefit period transfers to a new 
hospice, the receiving hospice must recertify the patient, but it does 
not have to have a face-to-face encounter for that current period if it 
can verify that the previous hospice provided the visit.
    In response to comments asking that we delay the effective date, we 
note that we are unable to delay implementation of the face-to-face 
requirement since the statutory language requires that it begins on 
January 1, 2011.
    Comment: Several commenters were concerned about requirements when 
a patient with a prior hospice stay requires a visit upon admission to 
a new hospice. This group of commenters along with others also noted 
that during a time of crisis, the need to admit the patient for pain 
and symptom control should take precedence over provision of any 
required face-to-face encounter. Another commenter was concerned that 
requiring a face-to-face encounter would create barriers to timely 
access and increase costs in situations where a patient elects hospice, 
revokes, re-elects, revokes, and re-elects in a short time period. 
Recertification at this 3rd benefit period would require a face-to-face 
encounter. One commenter noted that if a visit is required at 
admission, it may unduly delay needed care or prove impossible prior to 
death if the patient is actively dying. Several commenters wrote that 
if a patient requires a face-to-face visit at admission, it will likely 
result in a break in service until the physician can make the visit; 
one suggested this may lead to patient and family complaints. This 
commenter asked whether these complaints should be referred to CMS, 
since the commenter has no control over this legislative mandate, and 
added that denial of service is a serious issue, especially if the 
patient is near death.
    Several commenters asked that we waive the face-to-face requirement 
for patients who, because of prior hospice enrollment, require a face-
to-face encounter at admission, but whose death is imminent or who die 
within a week.
    One commenter asked what would be required if a patient transferred 
near the end of the 2nd 90-day period (for example, at day 175), and 
the recertification was not completed. The commenter wondered how much 
time the receiving hospice would have to complete the face-to-face 
encounter. Another commenter asked if providers could rely on the 
previous hospice's face-to-face encounter if the patient was being 
transferred from another hospice within 60 days of the last face-to-
face encounter, and wondered how hospices would know when the last 
face-to-face encounter took place. A commenter suggested that the 
initial and comprehensive assessment be communicated to the Medical 
Director, to replace the need for a face-to-face encounter, when a 
patient would require one upon admission. When a visit is required upon 
admission, several commenters suggested timeframes after admission to 
allow the visit, including 2 days, 5 days, 15 days, and 21 days.
    Response: During a time of crisis, the need to admit a patient and 
provide pain and symptom control is a priority. Since this is a new 
admission, whether the patient is coming from another provider type, 
from home, or is transferring from another hospice, we understand that 
the receiving hospice may not have up to 30 calendar days prior to the 
start of the benefit period to have a face-to-face encounter. However, 
the statute requires that the visit occur ``prior to the 180th-day 
recertification and each subsequent recertification

[[Page 70443]]

* * *'' (emphasis added). We do not have the ability to waive a 
statutory requirement or to allow the initial and comprehensive 
assessments to replace the required encounter.
    As noted previously, in a transfer the benefit period remains the 
same. When a patient in the 3rd or later benefit period transfers to a 
new hospice, the receiving hospice must recertify the patient; however, 
since the benefit period does not change with a transfer, the receiving 
hospice does not have to have a face-to-face encounter for that current 
period if it can verify that the previous hospice provided the visit. 
According to the hospice CoPs at Sec.  418.104(e), the sending hospice 
must forward to the receiving hospice the patient's clinical record, 
which includes the certifications and recertifications of terminal 
illness, if requested. The clinical record can be used to verify 
whether or not the sending hospice provided any required face-to-face 
encounters.
    Our regulations describe recertification as a process. We currently 
allow 2 calendar days after a period begins for a hospice to provide 
either a written or a verbal certification or recertification. If a 
verbal certification is provided, the written certification, including 
the narrative, must be completed prior to filing the claim. Therefore, 
certification or recertification can occur at a point in time, but 
often occur over a period of time.
    In response to the comment asking whether complaints should be 
referred to CMS, we note that hospices are free to refer complaints to 
us at CMS or to Congressional representatives. We welcome input, and 
would consider it when evaluating our policies given the constraints of 
the statute. We appreciate the concerns that commenters have raised 
about providing a visit upon admission, particularly in rural areas. We 
will be examining this issue to see how it fits with the statutory and 
regulatory language. In the meantime, we will monitor the program for 
any unintended consequences.
    Comment: A number of commenters requested flexibility in who could 
make the face-to-face visits, and asked us to clarify our 
interpretation of ``hospice physician or NP''. One asked if there was a 
distinction between the physician as an employee (who received a W-2 
from the hospice), a contract physician (who receives a Form 1099 from 
the hospice), or a volunteer. Others asked if certification in hospice 
and palliative care was required, or if full-time, part-time, or per 
diem status mattered. One commenter wrote that the proposal to require 
a ``hospice physician or nurse practitioner'' to perform the face-to-
face encounter was materially different from the language in section 
3132 of the Affordable Care Act. This commenter suggested that we take 
an approach consistent with the definition of ``physician designee'' in 
Sec.  418.3, and allow the patient's primary care physician, 
specialist, hospitalist, hospice Medical Director, or other qualified 
physician to perform the visit, provided that physician is willing to 
certify eligibility for the benefit and communicate the encounter 
results to the hospice certifying physician.
    Several commenters suggested allowing a Physician's Assistant (PA) 
to perform the face-to-face encounter; a few noted that in rural areas, 
PAs are more common than NPs. Other commenters asked if a hospitalist 
could perform the visit. A third commenter wrote that if a physician 
can collaborate with a NP to make the visit, why not also with a 
registered nurse (RN). One commenter said that the requirement that a 
physician make the visit was an insult to both the RN case manager and 
to the patient, and suggested that the RN case manager is capable of 
making the visit. The commenter added that the proposed rule sends the 
message that an RN case manager is good enough when it merely involves 
a human being's needs, but when it comes to reimbursement/money, a 
physician is required. Another commenter wrote that the Scope of 
Practice and Nurse Practice Acts for all Registered Nurses specifically 
allows for physical assessment and expects pathophysiology expertise. 
The commenter also added that RNs are as equally qualified as a NP to 
perform these assessments and report findings to the hospice Medical 
Director to establish eligibility.
    Another commenter raised concerns about using a contracted 
physician to make the visit; this physician may be trained and may have 
reviewed the chart, but it would likely be the first time this doctor 
has seen the patient. The commenter wrote that based on the nurse's 
notes, the patient has a steady decline, but if the physician sees the 
patient on a good day, the physician may not believe that the patient 
is eligible for hospice care, and may recommend discharge. The 
commenter believes and highly respects the qualifications of 
physicians, in this case the trained nurse, certified in hospice and 
palliative care, has been seeing the patient multiple times per week, 
and is a better judge of the patient's eligibility.
    Several commenters asked if NPs could sign the certification or 
recertifications. A few commenters asked that we allow medical 
residents or fellows to provide the face-to-face visits if they are 
rotating through a hospice or in a setting where hospice patients 
reside. One commenter asked if hospices can contract with physicians to 
only provide the face-to-face encounters, and what employment 
requirements would those physicians need to meet. Another commenter 
asked if a hospice could have volunteer physicians make the visit or 
contract with another hospice, to have their physician or NP make the 
visit.
    A few commenters recommended that a hospice be allowed to contract 
with a NP for the purpose of making required face-to-face visits, 
rather than requiring a W-2 employment relationship only. A commenter 
also asked that we clarify that NPs providing the face-to-face visit 
must meet Medicare's general qualifications for a NP and must be 
licensed by the State in which they are practicing, but that they do 
not have to have a particular specialty certification or credentials in 
order to be considered a ``hospice nurse practitioner'' for purposes of 
providing the face-to-face visits. A few commenters asked if the NP 
must be the patient's designated attending in order to make the 
required visit. One asked if hospices could contract with a NP even 
though the hospice did not have a contract with the physician 
supervising the NP. The commenter added that in her area, there were 
competing hospitals, which could create a conflict of interest if the 
hospice Medical Director was associated with one hospital and the 
contracted NP with a competing hospital. Another commenter asked that 
we clarify how supervision will work for contracted NPs whose role is 
to make the face-to-face visits.
    Other commenters suggested that advanced practice nurses such as 
Clinical Nurse Specialists (CNS) could make the visit and that allowing 
them to do so would decrease the burden of the visits in areas where 
there are shortages of physicians or NPs, enabling them to meet the 
requirement. One noted that CNS can become certified in hospice and 
palliative care.
    A number of commenters suggested allowing the patient's attending 
physician to perform the required visits. These commenters noted that 
in many rural areas, the hospice physicians do not assume direct 
medical care of the hospice patients, but instead determine continued 
eligibility through review of clinical findings reported by the members 
of the IDG. The commenters wrote that the attending physicians are 
involved in these hospice patients' care, have a history with the 
patient, and may

[[Page 70444]]

be geographically closer to the patient. In advocating for allowing 
attending physicians to make these required visits, one commenter noted 
that because of historical knowledge and perspective, the attending 
physician's medical opinion should be deemed relevant and critical to 
the delivery of hospice care, and indeed his or her signature is 
required on the initial certification. One commenter stated that the 
proposed regulation fails to recognize the ongoing relationship between 
an attending physician and the patient, by excluding attending 
physicians from the encounter. Another wrote that attending physicians 
would make better use of resources and be more in line with the 
emphasis placed on attending physician involvement in the 2008 Medicare 
CoPs for hospices. A different commenter wrote that allowing the 
attending physician to make visits would be in keeping with Medicare's 
Home model. A few asked if hospices could contract with the patient's 
attending physician to make the visit, and if so, would the billing be 
through the hospice or through Part B. One suggested that such billing 
should flow through the hospice.
    A commenter suggested that for hospice patients residing in a 
facility, the facility physician should be allowed to perform these 
face-to-face visits and report them to the physician who will sign the 
plan of care; the commenter added that this would promote coordination 
of care between the facility and hospice.
    A few commenters noted that in some rural areas, the only available 
physicians are employed by Rural Health Clinics (RHCs) or Federally-
Qualified Health Centers (FQHCs). Federal requirements applicable to 
both of these provider types create barriers to hospices wishing to 
work with them. One commenter stated that Medicare has recommended that 
RHC physicians treat hospice patients after business hours in a 
separate space other than the RHC, billing under Part B, which further 
inhibits health care provider accessibility. Another commenter asked 
for additional conversations with us to discuss this issue.
    A commenter stated that if a ``hospice physician'' is interpreted 
to mean a doctor who is employed by or under contract with a hospice, 
or the patient's attending physician, hospices will begin making 
contracts with doctors to pay a fee for eligibility certifications 
whenever the hospice staff physicians are unable to have the encounter. 
The commenter believed that the potential for abuse is obvious, with 
payment given for favorable eligibility determinations.
    Response: The statutory language in the Affordable Care Act limits 
the disciplines of those who can provide a hospice face-to-face 
encounter to a hospice physician or NP. A few commenters asked why RNs 
could not meet the requirement, particularly since they are involved in 
the patient's ongoing care. This statutory provision was based upon a 
recommendation made by MedPAC. In its 2009 Report to Congress, MedPAC 
reported that a panel of hospice experts agreed that more physician 
accountability was needed in the certification and recertification 
process. They wrote that the panel discussed a tension that can exist 
between the physician and nonphysician hospice staff which can lead to 
inappropriate recertification in some cases. MedPAC's panelists 
believed that physicians sometimes deferred too much authority for 
making eligibility decisions to nonphysician staff. They added that by 
virtue of their day-to-day contact with patients, these staff members 
may form emotional attachments with patients that can color their view 
and their charting of a patient's continued eligibility for hospice 
(Medicare Payment Advisory Commission, Report to Congress: Medicare 
Payment Policy, Chapter 6, March 2009, page 365, available at http://www.medpac.gov/documents/Mar09_EntireReport.pdf). The panelists' 
comments were part of the impetus for MedPAC's recommendation regarding 
the face-to-face encounter which the Congress enacted in the Affordable 
Care Act. Accordingly, by law, RNs (other than NPs) are not allowed to 
perform the face-to-face visit. This is in no way intended to insult or 
to diminish the importance of RNs in hospice care--they are key to 
patient care in hospice, and provide quality, compassionate care to 
those at end-of-life.
    A commenter was concerned about a scenario where a contracted 
physician who is unfamiliar with the patient might see the patient on a 
day when the patient is doing well, clinically, and thus recommend for 
discharge when the patient is in fact eligible. The determination of 
eligibility involves considering the terminal illness, related 
conditions, co-morbidities, functional status, clinical indicators, 
laboratory results, etc. We believe the potential for a truly eligible 
terminally ill patient being found ineligible because he or she was 
doing well clinically, on the day of the encounter, is unlikely. Even 
so, the decision to discharge the patient is not made simply by the 
contracted physician, but involves the members of the IDG and the 
patient's attending physician. Hospices should already have policies 
and procedures in place for handling a situation where there is 
disagreement about continuing eligibility.
    PAs and CNSs are not authorized by the Affordable Care Act to 
perform the face-to-face visit. Moreover, section 1814(a)(7) of the Act 
explicitly prohibits NPs from certifying or recertifying hospice 
patients, and limits this function to physicians only. Therefore, we 
cannot adopt a policy to allow NPs to certify or recertify patients 
without change in the statute.
    Hospices cannot routinely contract with NPs, because NPs fall under 
nursing, which is a core service. The only situations under which a 
hospice could contract with a NP would be under extraordinary 
circumstances or if the NP service is highly specialized. Extraordinary 
circumstances generally would be a short-term temporary event that was 
unanticipated, and would not include face-to-face encounters, which are 
administrative in nature and which are usually planned. Examples of 
allowable extraordinary circumstances might include, but are not 
limited to, unanticipated periods of high patient loads (such as an 
unexpectedly large number of patients requiring continuous care 
simultaneously), staffing shortages due to illness, receiving patients 
evacuated from a disaster such as a hurricane or a wildfire, or 
temporary travel of a patient outside the hospice's service area. 
Hospices may qualify for an ``extraordinary circumstance'' exemption 
when they believe that the nursing shortage has affected their ability 
to directly hire sufficient numbers of nurses. For details on this 
waiver, please see the letter from CMS' Survey and Certification group 
found at http://www.cms.gov/Surveycertificationgeninfo/downloads/SCLetter10_31.pdf.
    Hospices can employ NPs on a full-time, part-time, or per diem 
basis if needed to have face-to-face encounters. As long as the NP is 
receiving a W-2 form from the hospice, or is volunteering for the 
hospice, the NP is considered to be employed by the hospice.
    Commenters asked about other physicians who could be considered 
``hospice physicians'' who could be used to meet the face-to-face 
requirement, including attending physicians. We believe that to be a 
``hospice physician'', a physician must be either employed by or 
working under arrangement with a hospice (i.e., contracted). Section 
418.3 defines a hospice employee as someone who is receiving a W-2 form 
from the hospice or who is a volunteer. We agree

[[Page 70445]]

with commenters that the attending physician has had a history with the 
patient, has signed the initial certification, and has typically 
remained involved in the patient's care while the patient is under the 
hospice benefit. We do not wish to diminish this physician's role; 
however, the regulations have considered services of attending 
physicians to be outside of the hospice benefit (which is one reason 
why their services are billed to Part B rather than through the hospice 
to Part A), and therefore we cannot include the attending physician as 
a ``hospice physician.'' By limiting ``hospice physician'' to those 
physicians who are employed by or working under contract with a 
hospice, we also increase accountability, as the hospice is in control 
over its employees and contracted physicians, but not over an outside 
attending physician who might have the encounter. Furthermore, as part 
of the effort to increase accountability, we are clarifying that the 
hospice physician who has the face-to-face encounter must be the same 
physician who is composing the narrative and signing the certification. 
Given that the hospice is ultimately responsible for the certification, 
part of which is the face-to-face attestation, the hospice needs 
control over the timing of the staff visit, and over the preparation 
and review of visit documentation, which is used for the narrative and 
to inform the decision whether to recertify or not.
    Other commenters suggested that non-hospice physicians other than 
attending physicians should be able to make the visit (for example, 
hospitalists, specialists, primary care physicians, etc). In addition 
to not meeting the statutory criteria of being a ``hospice physician,'' 
we agree with the commenter who wrote that allowing physicians who are 
not involved with the patient's overall care to have the visit could 
lead to abuse, where an unscrupulous doctor might continue to support 
eligibility of ineligible patients for a fee. Additionally, we do not 
believe that allowing any physician to have the required face-to-face 
encounter would be appropriate because determining eligibility for 
hospice care requires knowledge of the patient's complete medical 
situation, including the terminal illness, related conditions, and 
other co-morbidities. Medical residents or fellows who are rotating 
through a hospice may provide the required face-to-face encounter if 
they are employed by the hospice or are working under contract with the 
hospice, and if they will be composing the narrative and signing the 
recertification.
    Physicians or NPs who volunteer for a hospice are considered 
employees, and could make the required visits. No payment is made for 
physician or NP services furnished voluntarily. However, some 
physicians and NPs may seek payment for certain services while 
furnishing other services on a volunteer basis. Payment may be made for 
services not furnished voluntarily if the hospice is obligated to pay 
the physician or NP for the services.
    We allow hospices to contract with another hospice to serve their 
patients, and would allow a hospice to arrange with another hospice to 
use its physicians to have the required face-to-face encounter. 
Likewise, hospices can contract with physicians for the purpose of 
having face-to-face encounters with their patients, but as previously 
noted, the contracted physician must then be the same physician who 
composes the narrative and signs the certification. Hospice physicians 
and NPs can be full-time, part-time, or work on a per diem. Hospice 
physicians and NPs are not required to have certification in hospice 
and palliative care.
    NPs providing the face-to-face visit must meet Medicare's general 
qualifications for a NP and must be licensed as NPs by the State in 
which they are practicing. Physicians must meet the existing 
requirements for physicians in section 1861(r) of the Act. They must 
meet all State and local requirements as required in Sec.  418.116. 
Finally, they must meet the licensed professional requirements at Sec.  
418.62.
    If physicians employed by RHCs or FQHCs are also employed by or 
working under arrangement with a hospice, they could have the required 
face-to-face encounter, however they must follow statutory and 
regulatory requirements in doing so.
    In summary, we are defining ``hospice physician'' as a physician 
employed by the hospice or working under arrangement with, or under 
contract with, the hospice. A hospice NP would be a NP employed by the 
hospice.
    Comment: Several commenters asked if the encounter could be done 
using telephone or video technology, and still meet regulatory 
requirements. A few suggested that a nurse could be present to do the 
physical examination under the direct supervision of the physician, who 
could still see the patient and interact with him or her. Commenters 
suggested such an approach would be less burdensome and less costly, 
accomplish the same objectives, and open the door for critical but cost 
effective physician care to underserved or rural areas. Commenters were 
concerned about lack of human resources to accomplish the visit, 
particularly in rural areas, where driving distances can be great, 
increasing the cost of visits, and where there can be shortages of 
physicians or NPs. A commenter wrote that allowing telehealth would be 
consistent with the objectives of health care reform, and would offset 
travel time and travel costs. A few commenters noted that if telehealth 
were available, it would not help them due to lack of proper 
communication infrastructure in some remote areas; others noted that 
they would be willing to invest in telehealth to counterbalance the 
cost of sending a physician on home visits.
    Response: We appreciate the commenters' concerns about meeting the 
face-to-face requirements in rural areas, and their suggestions to 
consider telehealth. However, section 1834(m) of the Act does not 
include hospices as an originating site for telehealth. Therefore, 
hospice patients would have to go to an originating site for the face-
to-face encounter. In our analysis of claims data, we found that only 
2.9 percent patients who would require a face-to-face encounter are in 
rural areas. Given this small volume of patients, we believe that not 
having telehealth does not hamper hospices' ability to meet the 
Affordable Care Act requirements; however, we will continue to monitor 
this for any unintended consequences.
    Comment: A commenter wrote that in her hospice, the Medical 
Director would perform the face-to-face encounter and write the 
physician narrative. This commenter and others asked if the narrative 
and the face-to-face attestation could be combined; one asked if the 
visit note could serve in place of the narrative when the attending 
performs both functions. Several commenters suggested the face-to-face 
requirements were partially duplicative of the narrative. One notes 
that physicians are used to judging a patient's condition based on 
records. Other commenters asked for clarification of the differences 
between the face-to-face attestation and the physician narrative, and 
about the format, wording, and location of the attestation, and about 
how notes for the face-to-face encounter should be entered in the 
chart; a few asked for consistent guidelines for the narrative and the 
face-to-face attestation. One commenter asked if the same physician is 
responsible for both the visit and the narrative, could the 
recertification visit documentation form be combined with the 
recertification of terminal illness brief narrative form with both 
attestations so that the physician does

[[Page 70446]]

not have to dictate two separate notes and sign two separate forms.
    A few commenters asked if the certification narrative and the face-
to-face may be performed by more than one individual, or if hospice 
physicians could cover for each other. A commenter asked why a NP would 
provide an attestation of the face-to-face in addition to the 
physician. One commenter wrote that the face-to-face attestation should 
be a separate and distinct section of the narrative, and that providers 
should use an addendum form for the face-to-face attestation if the NP 
or a different physician from the certifying physician has the 
encounter. Another commenter asked if the NP could prepare the 
narrative and have the physician sign off on it. A few asked if 
electronic signatures were permitted for the attestation, narrative, 
and/or certification or if the face-to-face attestation could be 
dictated. One asked if a medically necessary visit is made within the 
same timeframe (proposed at 15 days), could the visit documentation 
serve as the narrative requirement, or would a separate narrative note 
be necessary. This commenter also asked whether it was a problem if the 
date of the visit did not coincide with the date of the attestation.
    A commenter asked that the attestation also include the National 
Provider Identifier (NPI) of the physician or NP making the visit, to 
increase accountability. Another commenter asked us to clarify what 
goes directly above the certification signature--the narrative or the 
face-to-face attestation. Other commenters asked that the narrative 
attestation be placed above the physician's signature attesting that 
he/she composed the narrative based on his/her review of the medical 
record, or if applicable, his or her examination of the patient. 
Another commenter asked for guidance regarding the validity of the 
narrative if a clerical mistake is made in recording benefit period 
dates or certification dates. This same commenter noted that if his 
hospice uses contracted physicians or NPs to make the required face-to-
face visits, these practitioners will be less familiar with the 
patient's history and disease progression, and stated that the 
narrative has the potential to be more informative about the patient's 
eligibility than the visit.
    Another commenter asked if separate documentation would be required 
for any billable services provided during the visit, or could the 
narrative serve as the documentation. This commenter also asked what 
the documentation requirements for this visit would be. Several asked 
if there would need to be separate notes for the face-to-face encounter 
versus any billable portion of the visit.
    A commenter wrote that attesting that an encounter has occurred and 
that documentation has been relayed does not confirm that the 
information was utilized in confirming eligibility. This commenter 
believes that the responsibility for verifying that all eligibility 
requirements have been met should remain with the certifying physician 
and be included in a single attestation.
    A few commenters wrote that the additional attestation required for 
the face-to-face encounter creates an additional paperwork burden, and 
creates issues with forms, transcribing, timely documentation, and 
software updates. One commenter wrote that the final implementation 
date should be delayed to allow time for providers to update electronic 
and paper forms. A different commenter believed that it was burdensome, 
redundant, and unnecessary to require a physician or NP to attest in 
writing to having had a face-to-face encounter, and reiterated that the 
responsibility for verifying that the patient meets all eligibility 
criteria should remain with the physician and be included in a single 
attestation.
    Response: The face-to-face requirement was added to the 
requirements for physician recertifications. Those requirements are 
described in detail in our regulations at Sec.  418.22. In brief, 
currently hospices provide a signed certification or recertification 
which:
     States that the patient is terminally ill, with a 
prognosis of 6 months or less if the illness runs its normal course;
     Includes a written narrative either immediately prior to 
the physician's signature, or as a signed addendum. The narrative 
includes a statement under the physician signature attesting that by 
signing, the physician confirms that he/she composed the narrative 
based on his/her review of the patient's medical record or, if 
applicable, his or her examination of the patient; and,
     Is accompanied by clinical information or other 
documentation supporting the diagnosis.
    The Affordable Care Act added a fourth component to the 
certification, with the face-to-face encounter and its attestation that 
the visit occurred. We proposed that the face-to-face attestation and 
signature be either a separate and distinct area on the recertification 
form, or a separate and distinct addendum to the recertification form, 
that is easily identifiable and clearly titled. We also proposed that 
the attestation language be located directly above the physician or NP 
attestation signature and date line.
    Like the physician narrative, the face-to-face requirement is 
designed to increase physician accountability in the certification 
process, and to ensure that beneficiaries are eligible for the hospice 
benefit. While the purposes of the narrative and the face-to-face visit 
are similar, we do not believe that the two are duplicative of each 
other. There is value in having a physician see a patient, rather than 
just reviewing medical records about that patient, in determining 
continued eligibility.
    The face-to-face attestation is a statement from the certifying 
physician or the NP which attests that he or she had a face-to-face 
encounter with the patient; if a NP had the encounter, the attestation 
should also state that the clinical findings of that encounter have 
been provided to the certifying physician for use in determining 
continued eligibility for hospice care. Unlike the narrative, the face-
to-face attestation does not detail the clinical findings of the visit, 
but simply attests that the visit occurred. The regulations describing 
the narrative require that it be composed by the certifying physician, 
therefore a NP could not prepare it. We agree with the commenter who 
suggested that including the NPI of the individual who visited the 
patient increases accountability and we will consider including the NPI 
the face-to-face attestion in the future. We do not want to prescribe 
language that hospices should use in preparing the face-to-face 
attestation, provided the attestation includes the elements we have 
described.
    The face-to-face attestation statement includes the date of the 
visit, and the signature of the physician or NP who made the visit, 
along with the date signed.
    The date of the face-to-face encounter does not have to match the 
date that the attestation was signed; however, both dates should be 
included.
    Several commenters asked if the narrative could be combined with 
the face-to-face attestation. The face-to-face encounter can be 
conducted by either a hospice physician who completes the 
certification, or a NP, and the face-to-face attestation must be signed 
by the person who conducted the visit. The narrative must be composed 
by the certifying physician, who by signing, attests that he or she 
composed it based on his or her review of the medical records and on 
examination of the patient (if any). We are clarifying that if a 
physician is the clinician who has the face-to-face encounter, then the 
same

[[Page 70447]]

physician should compose the narrative and sign the recertification.
    The hospice has the option of putting both the face-to-face 
attestation and the narrative, with its accompanying attestation and 
signature, on the same page of the recertification. We would require 
that the format be such that the face-to-face attestation appears 
separate and distinct from the narrative and its attestation; hospices 
are free to decide how to separate the sections (that is, through 
spacing, through lines, etc.). We agree that for consistency, the 
narrative and its accompanying attestation should be above the 
physician's signature, and the face-to-face attestation should be above 
its accompanying signature, and are changing the regulatory text to 
reflect this. If the narrative and its attestation and the face-to-face 
attestation are included as part of the certification (rather than as 
an addendum), we suggest, but do not require, the order of the content 
to appear as follows: The face-to-face attestation (if applicable), 
followed by the physician narrative, followed by a narrative 
attestation, followed by the physician signature. We believe this order 
is logical as it allows the narrative attestation signature to be the 
same as the certification or recertification signature for those 
hospices which include the face-to-face attestation and narrative as 
part of the main certification document.
    Hospices also have the option of placing the face-to-face 
attestation, the physician's or NP's signature, the narrative, and its 
attestation and signature, on a single page as an addendum to the main 
certification or recertification. They may also have the face-to-face 
attestation and narrative on separate pages as addenda to the 
certification and recertification documents. Finally, hospices may also 
include either the face-to-face attestation or the narrative in the 
main certification document, and have the other as an addendum. We are 
seeking to give hospices greater flexibility in how they include this 
information as part of their recertifications.
    In summary, the narrative and face-to-face attestation may be 
included in the main certification document, but should be separate 
sections. They may also be on a single page as part of the main 
certification or recertification document, or as an addendum. The face-
to-face attestation is completed by the person who visited the patient: 
either a hospice physician or a NP. If a NP saw the patient and 
completed the face-to-face attestation, the physician should not also 
complete the face-to-face attestation, because the physician did not 
make the visit. However, a certifying physician would still have to 
compose the narrative, using clinical findings from any face-to-face 
visit, and sign the narrative attestation.
    We agree that attesting that an encounter has occurred and that 
documentation has been relayed does not confirm that the information 
was utilized in confirming eligibility. That is why we require hospice 
physicians to use the information from the face-to-face encounter in 
composing the narrative. We cannot combine the narrative and the face-
to-face attestations into a single attestation because the statute 
allows NPs to perform face-to-face visits, but NPs cannot compose or 
sign the narrative.
    The face-to-face encounter must be documented in accordance with 
hospice policy using currently accepted standards of practice. The 
documentation from the face-to-face encounter is part of the clinical 
record, and should be used in composing the written narrative. It is 
not necessary for the physician or NP to make separate notes for any 
billable services provided, as long as the visit documentation clearly 
supports any billable services that were provided. Visit notes are not 
a substitute for a physician narrative, which is a brief explanation of 
the clinical findings that supports continuing eligibility for the 
hospice benefit; the narrative draws on information from a variety of 
sources, and not just from notes of any face-to-face encounter which 
occurs.
    While the mandated face-to-face attestation does create additional 
paperwork for hospices, we believe that we have provided sufficient 
flexibility for providers to meet the requirement. We appreciate 
hospices' concerns about required software changes and the timing 
required to make those changes. As noted earlier and again later in 
this final rule, our timeframe was driven by the required 
implementation date set by the Affordable Care Act, which was enacted 
in late March 2010. The statute requires implementation as of January 
1, 2011; thus, it does not provide flexibility with respect to the date 
of implementation.
    Electronic signatures are permitted on hospice certifications and 
recertifications; the narrative and the face-to-face attestation are 
parts of the certification or recertification, and therefore may also 
be signed electronically. If a physician forgets to date the 
certification, our longstanding policy described in our benefit policy 
manual in section 20.1 (Internet only manual 100-02, chapter 9) states, 
``If the physician forgets to date the certification, a notarized 
statement or some other acceptable documentation can be obtained to 
verify when the certification was obtained.'' The certification or 
recertification applies to the benefit period dates noted on the 
document, therefore, if those dates are recorded incorrectly, the 
hospice could potentially have days of service denied for coverage 
during a medical review.
    Comment: A few commenters asked how the recertification visits 
relate to the local coverage determinations (LCDs). One commenter wrote 
that her hospice already completes guidelines from the LCDs for 
recertification, but much of this information requires prior knowledge 
of the patient condition to determine deterioration. The commenter 
noted that if the expectation is that the physician will be verifying 
the patient's condition based on the LCDs, this should be clear. The 
commenter was concerned about the situation where a physician or NP 
visits the patient, documents clear and valid reasons for 
recertification, but subsequent review determines the patient is not 
eligible based simply on lack of certain measures of decline. A few 
commenters asked us to provide clear guidance on what the face-to-face 
encounter should include (that is, elements that make up an encounter) 
for purposes of satisfying the requirement.
    One commenter asked how a hospice should handle a situation where 
the physician determines the patient is no longer hospice eligible and 
discharges him, but the Quality Improvement Organization (QIO) finds 
the patient is hospice appropriate. The commenter wrote that it could 
not admit the patient in good conscience and asked for guidance.
    Another commenter stated that he hoped that CMS is funding research 
to improve LCDs, saying that there is no formula for predicting ``six 
months or less,'' especially for non-cancer diagnoses.
    Response: In general, the face-to-face encounter for 
recertification requires that the same clinical standards be met as for 
the initial certification. The face-to-face encounter enables the 
clinician to assess the signs and symptoms in relation to the patient's 
terminal illness to determine whether the patient meets the clinical 
standards for recertification. When assessing the patient for hospice 
recertification, the medical records in addition to the face-to-face 
examination are utilized to provide a rationale for recertification. 
The clinical findings should include evidence from the three following 
categories:
    (1) Decline in clinical status guidelines (for example, decline in

[[Page 70448]]

systolic blood pressure to below 90 or progressive postural 
hypotension);
    (2) Non disease-specific base guidelines (that is, decline in 
functional status) as demonstrated by Karnofsky Performance Status or 
Palliative Performance Score and dependence in two or more activities 
of daily living; and
    (3) Co-morbidities. For more information about the criteria, please 
see local coverage determinations (L13653, L25678, or L29881). These 
LCDs are on the CMS Web site in the Medicare Coverage Database at 
http://www.cms.gov/mcd/overview.asp. They are also on the local 
contractors' Web pages.
    Predicting life expectancy is not an exact science. We are not 
currently funding research related to LCDs; research that could inform 
LCDs is completed through a number of venues, including academic 
institutions, the private sector, and some government agencies. In 
determining life expectancy for conditions with less predictable 
trajectories, hospice physicians are also free to use any disease-
specific scores or scales that can help them in predicting life 
expectancy. Some providers already do so, and have reported that it 
improves the accuracy of their prognoses.
    If a patient improves or stabilizes sufficiently over time while in 
hospice, such that he/she no longer has a prognosis of 6 months or less 
from the most recent recertification evaluation or definitive interim 
evaluation, that patient should be considered for discharge from the 
Medicare hospice benefit. Such patients can be reenrolled for a new 
benefit period when a decline in their clinical status is such that 
their life expectancy is again 6 months or less. Conversely, patients 
in the terminal stage of their illness, who originally qualify for the 
Medicare hospice benefit but stabilize or improve while receiving 
hospice care, yet have a reasonable expectation of continued decline 
for a life expectancy of less than 6 months, remain eligible for 
hospice care.
    A patient's condition may temporarily improve with hospice care. 
When improvement is evident in documentation such as physician orders, 
medications, hospital records, doctor's records, other health records, 
test reports, etc, contractors consider the length-of-stay and the 
length of sustained improvement.
    There should be clear evidence of the status of the patient's 
conditions and the clinical factors that caused the patient to be not 
eligible or to be recertified as terminally ill. If the patient is 
recertified, the medical records should reflect the length of time the 
symptoms have been evident, evidence of progressive deterioration or 
sudden deterioration, and increase in frequency and intensity of 
hospice services and medications.
    If a patient appeals a pending discharge to the QIO, the QIO 
decision is binding; a hospice could not discharge a patient as 
ineligible if the QIO deems that patient to be eligible. The provider 
is required to continue to provide services for the patient. In the QIO 
response, the QIO should advise the provider as to why it disagrees 
with the hospice, which should help the provider to re-evaluate the 
discharge decision. If at another point in time the hospice believes 
that the patient is no longer hospice eligible, the provider should 
give timely notice to the patient of its decision to discharge. The 
patient could again appeal to the QIO, and the hospice and patient 
would await a new determination from the QIO based on the situation at 
that time.
    Comment: A number of commenters were concerned that the required 
face-to-face encounter would create access problems for patients, would 
delay care and thereby lead to unnecessary patient suffering, or would 
reduce the quality of patient care. One commenter wrote that doctors 
may be less willing to refer patients to hospice if required to have 
these encounters, while others were concerned that patients would be 
discharged; several suggested that the face-to-face requirement could 
lead to overall Medicare costs increasing as these patients use 
emergency rooms and inpatient services at end-of-life rather than 
hospice. Several commenters were concerned that those who were actively 
dying would have care delayed if they required a visit upon admission 
due to previous hospice stays, as the hospice may have to wait to get a 
hospice physician or NP to see the patient.
    Some commenters wrote that access to hospice services may be 
limited for patients who live in outlying areas, because of the travel 
time required to make the visits. Another commenter wrote that lack of 
transport to bring rural patients to a physician would lead to denying 
access to care for many elderly or bedbound patients unable to have a 
timely face-to-face visit. A few commenters suggested they may have to 
reduce their service areas to meet the requirement, which would 
jeopardize access to hospice services for beneficiaries in outlying 
areas. Another commenter believed that with staff shortages, meeting 
the face-to-face requirement would require the hospice to pull 
practitioners from patients who need the care and expertise of a 
physician or a NP to make required visits. The commenter believed this 
would reduce services and lower the quality of care that patients 
receive. A few commenters wrote that the requirement could lead to 
patient discharge, with one noting that the subsequent hospice would 
then have to incur the cost of the required visit. One commenter wrote 
that discharging patients could lead to ethical dilemmas or charges of 
patient abandonment. A few commenters suggested that the result of this 
mandate would be increased cost to the health care system if long-stay 
patients are discharged from hospice care. One commenter asked what 
options would be available to a hospice, or to the patients, if 
agencies in medically underserved areas are unable to locate physicians 
or NPs who are able and willing to make the required face-to-face 
visits.
    A few commenters said that volunteer Medical Directors used by 
rural providers cannot make these visits, which would force the hospice 
to discharge patients. Another commenter said that with the maturation 
of the baby boomer generation, demand for hospice services would be 
rising, at the same time that fewer qualified physicians are pursuing 
careers in gerontology or palliative care, and believes that this would 
intensify the current situation. Another commenter wrote that it is in 
his agency's best interest to have physicians certified in hospice and 
palliative care to make the visits, but that recent requirements for an 
internship mean these physicians will be in shorter supply, and 
therefore, more costly to hospices.
    A few commenters were concerned that hospice programs may not be 
able to manage this burden, and their closure would affect vitally 
important access to hospice services. One wrote that the data collected 
by the Community Hospice Partnership, a national coalition researching 
the economic sustainability of not-for-profit hospices, estimates that 
the cumulative reductions in reimbursement would lead to closure of 65 
percent of Wisconsin's rural hospices by 2014. The commenter added that 
this proposed face-to-face requirement was not considered in the 
analysis, meaning rural Wisconsin providers would be more severely 
affected.
    Response: We appreciate the commenters' concern about the 
timeliness and quality of patient care and about patient access to 
hospice services. We believe that this provision was included in the 
Affordable Care Act to ensure the continued eligibility of

[[Page 70449]]

hospice patients, who are supposed to have a life expectancy of 6 
months or less. MedPAC, the OIG, and CMS have concerns about the 
appropriateness of some long-stay patients, who may have been admitted 
to hospice care too early in the course of their illness. The hospice 
face-to-face encounter is only required for recertifications when the 
patient is in the 3rd benefit period or beyond, which is after 6 months 
of hospice care for those who complete each benefit period. As 
mentioned previously, we found that only 2.9 percent of all Medicare 
hospice beneficiaries were in the 3rd or later benefit period and in 
rural areas, where physician or NP shortages are greatest. Therefore, 
only a small percentage of all Medicare hospice patients will both 
require these encounters and will be in a rural area where physician is 
more of a concern.
    With that perspective, we believe that physicians will not hesitate 
to refer appropriate patients to hospice. We clarify, for the 
commenter, that it is the responsibility of the hospice to ensure that 
the face-to-face encounter occurs. We do not allow outside attending 
physicians to have the face-to-face encounter, and the hospice is 
responsible for either providing the encounter itself or for arranging 
for the encounter. Therefore, we do not believe that physicians will 
reduce referrals inappropriately, leading to unnecessary suffering and 
increased Medicare costs for patients at end-of-life. As noted in a 
previous comment, a patient may require a visit at admission and be 
actively dying. In this situation, a hospice physician or NP might see 
the patient anyway, given the circumstances cited; hospices are 
supposed to provide physician services to their patients when needed 
during a time of crisis. Our data suggest that only 1.1 percent of 
hospice beneficiaries live in rural areas and require a face-to-face 
encounter at admission. Therefore, we believe this is an infrequent 
situation, which will not lead to delays in care or in the admission of 
the patient.
    While we appreciate the additional training and experience of those 
physicians who specialize in gerontology or in palliative care, we do 
not require a hospice physician or NP to be certified in those 
specialties. Volunteer physicians are considered hospice employees, and 
are permitted to have face-to-face encounters with patients. As 
previously noted, we also are allowing hospices to bill for any 
medically reasonable and necessary patient care provided by a hospice 
physician, or by a hospice NP who is also the patient's attending 
physician, in the course of a face-to-face visit. Therefore, hospices 
will receive some financial relief for the costs of having these 
required visits, and should not experience the financial burden some 
commenters described.
    As noted previously, we have also doubled the time allowed for 
making a required visit to 30 calendar days prior to the 
recertification date to better enable hospices to meet this 
requirement. Given the additional time for having face-to-face 
encounters, we do not believe that hospices will need to discharge 
patients due to lack of time to complete the face-to-face encounters, 
which could result in increases in non-hospice healthcare costs or 
which may raise ethical issues. Similarly, if a hospice physician or 
attending NP cannot travel to the patient for the required visit due to 
distance, time, or other reasons, and the hospice is encountering a 
shortage of physicians or NPs such that it cannot find any to hire or 
any physicians to contract with, the hospice can have the patient come 
to the physician or NP for the face-to-face encounter, provided the 
hospice meets the requirements in the CoPs regarding patient safety and 
comfort. Having the patient come to the physician or NP, when 
appropriate, can also be considered if a hospice is concerned that 
using its staff to make required face-to-face visits would reduce 
services or lead to lower quality patient care. We believe that 
requiring a face-to-face encounter with a hospice physician or nurse 
practitioner will lead to increased quality of care for hospice 
patients, rather than decreasing quality of care.
    We are unable to comment on the data collected by the Community 
Hospice Partnership, or their findings, as we do not have those data, 
the study methods, or findings, however, the reimbursement allowed to 
hospices for providing reasonable and necessary patient care in the 
course of a required face-to-face encounter should provide financial 
relief to providers.
    Comment: Several comments suggested alternative approaches to the 
face-to-face encounter to ensure continued hospice eligibility. One 
commenter suggested that hospices can better manage their patients by 
performing an automatic chart review for long-stay patients, and 
include better prognostication information on their recertifications. 
This commenter also wrote that her hospice is researching using 
validated prognostication tools which are disease specific, and which 
can be done by a RN just as effectively as by a physician. A different 
commenter wrote that his hospice uses a detailed review process for 
patients not showing decline, and is therefore already performing what 
the proposed rule is trying to accomplish. This commenter suggested 
that we initially enforce the face-to-face requirements for all 
hospices but allow those providers that have a lower rate of long-stay 
patients to ``opt out'' in the future. The commenter believes this 
would force hospices to focus on admission practices and not place an 
undue burden on responsible providers. Another commenter wrote that his 
hospice's Discharge Management process is redundant in relation to the 
face-to-face requirement, and asked that we eliminate it. Another 
suggested that we require a separate comprehensive assessment for long-
stay patients.
    One commenter wrote that it seemed like her hospice was being 
punished because a lack of Federal oversight has allowed some hospice 
programs to go astray. Several commenters understand the need to combat 
fraud and abuse; one also suggested that uncontrolled growth in the 
number of providers, vulnerabilities in the payment systems, and a 
diminished commitment to integrity by some newer providers was at the 
core of the problem, and led to ill-conceived regulatory changes. These 
commenters suggested that better enforcement of existing regulations, 
closer inspection of documentation through ADRs/medical review, review 
by recovery audit contractors, comprehensive error rate testing audits, 
Medicaid program integrity audits, zone program integrity audits, OIG 
investigations, more frequent surveys, and/or other interagency efforts 
to combat Medicare fraud would be a better approach. One commenter 
suggested that if we are concerned about the growth of hospice, we 
should implement a moratorium on new hospice providers for 5 years, 
where no new hospices could enter a market unless an existing hospice 
in that same area closes. A few commenters wrote that they believe the 
cap reimbursement mechanism is the best control of utilization rather 
than ``Monday morning quarterbacking prognosis'' or seeking 
confirmation of prognosis by a visit by a physician or other 
practitioner.
    A few suggested we delay or suspend implementation (often 
suggesting a delay until January or February 2012), or eliminate the 
requirement altogether. One commenter asked that if we decide to delay 
implementation, we notify the industry immediately, rather than waiting 
for publication of the final rule, so that hospices could effectively 
plan their staffing and hiring. Another noted that hospices have not 
been allowed

[[Page 70450]]

adequate time in practice to determine the increased level of physician 
involvement to meet this requirement. One wrote that we should 
eliminate the face-to-face visit prior to readmission, if the two 
physicians agree to the certification of terminal illness. Another 
commenter suggested we only require a face-to-face encounter if the 
Medical Director has not made a visit within the recertification period 
for other medical issues.
    Several suggested that we only require the face-to-face for 
hospices that have a higher than average length of stay, or that we 
apply the requirement to patients with stays greater than 240 days. 
Other commenters suggested we waive the requirement for hospices that 
tend not to enroll very long-stay patients, or for small and rural 
hospices with less than a 25-50 person daily census, or for all rural 
hospices. Another commenter suggested we exempt patients and providers 
in Health Professional Shortage Areas from the requirement. One 
commenter suggested that we only apply this mandate to continuous 
service greater than 180 days with no break in service. A few suggested 
we require the visit at 180-days but only at every other or every third 
recertification thereafter, or every 180 days thereafter; another 
suggested we not require the visit at the benefit periods after 180 
days until the total effects of the mandate have been evaluated. Some 
suggested a phased or stepped approach to implementation, such as 
applying it to hospices with a high proportion of long-stay patients 
first. Another suggested 100 percent review of patient stays over 180 
days in providers with an unusually high percentage of ``long-stay'' 
patients. This commenter wrote that this would be a welcome edit 
targeted at problem providers.
    The same commenter also suggested that the face-to-face encounter 
be crafted around the provider and not the patient, with the encounter 
required prior to the 180th day of care within a provider, rather than 
over the patient's entire hospice history, with subsequent visits 
required again at each 180-day interval within that provider. This 
commenter suggested that if the patient transfers or is later admitted 
to another hospice, the 180-day count would start over. To avoid having 
unscrupulous providers that own other provider numbers in the same 
geographic area make patient transfers designed to dodge the visit 
requirement, the commenter suggested we could have a 100 percent review 
of long-stay providers, using an edit of chain-related providers.
    Another commenter suggested that if there was greater than a 3- or 
6-month hiatus between hospice admissions, the mandate should not apply 
to the total hospice stay, but instead would start with the subsequent 
hospice admission.
    Other commenters suggested that the hospice Medical Director could 
meet the requirement with a phone consultation with the patient while a 
hospice nurse was seeing the patient, at the time of the 
recertification visit. Another commenter believes that since the 
patient is reviewed by the hospice team at least every 14 days, a 
physician is already certifying his/her belief that the patient is 
indeed eligible. Others wrote that hospice nurses are trained in 
recognizing and documenting the appropriateness of patients, and are 
familiar with the patients' history. These commenters stated the 
requirement was an unnecessary burden on hospices since nurses are 
adequately handling this now, and could communicate with the physician 
regarding the continued need for care and recertification.
    Some commenters were concerned that the impact of the narrative 
requirement from the August 6, 2009 FY 2010 hospice wage index final 
rule (74 FR 39384) was not yet known, and were concerned about the 
effect of the face-to-face requirement on rural providers. One 
suggested we conduct studies first to determine the effectiveness of 
the narrative before requiring the face-to-face encounter. Others 
suggested that we waive the requirement in areas of documented 
physician shortages, and others suggested that we waive the requirement 
for patients that require a face-to-face encounter at admission and who 
die within a week or who are imminently terminal.
    Response: We agree with the commenter who suggested that providers 
can improve their patient management by performing automatic chart 
reviews or other review processes for long-stay patients. We also 
encourage hospices to consider using validated prognostication tools, 
when available, to inform the larger process of estimating life 
expectancy.
    We agree that preventing fraud and abuse is important; Medicare and 
other agencies continue in their efforts to identify providers who are 
abusing the hospice benefit. We also agree that the hospice aggregate 
cap is an effective means of controlling inappropriate utilization. We 
believe that while both fraud and abuse prevention and the aggregate 
cap are helpful in preventing inappropriately long stays, they are not 
the only means to do so. The face-to-face requirement should reduce 
inappropriately long stays as physician accountability in the 
recertification process increases. In the effort to prevent fraud and 
abuse, the aggregate cap and the face-to-face encounter are 
complementary approaches to dealing with abuses in the hospice benefit.
    A few commenters suggested targeted medical reviews, and the 
Affordable Care Act also requires medical reviews of certain long-stay 
cases.
    State governments, not the Federal Government, control whether to 
place a moratorium on new providers, so that comment is outside of our 
purview.
    In its 2009 Report to Congress, MedPAC reported that a panel of 
hospice experts agreed that more physician accountability was needed in 
the certification and recertification process (Medicare Payment 
Advisory Commission, Report to Congress: Medicare Payment Policy, 
Chapter 6, March 2009, pg 365, available at http://www.medpac.gov/documents/Mar09_EntireReport.pdf). The panelists' comments were part 
of the impetus for MedPAC's recommending the face-to-face encounter 
that the Congress enacted in the Affordable Care Act. Requiring another 
comprehensive assessment for long-stay patients would shift the burden 
of gathering information to ensure eligibility from physicians back to 
RNs and other staff, which would defeat the purpose of the MedPAC 
recommendation and would not follow the statutory language. Allowing a 
physician to speak by phone with the nurse while he or she is present 
with the patient is not a face-to-face encounter as required by the 
law.
    Section 3132(b)(2) states that the face-to-face encounter is 
effective beginning on January 1, 2011. The statute is clear and we 
have no discretion to delay, phase-in, or suspend implementation, 
regardless of the type of hospice (e.g., rural, those with small 
censuses, those in areas of physician shortages) or for any other 
reason (other than a change in law). Nor can we apply the mandate to 
select situations, such as to patients with more than 180 days of 
continuous service, to patients who haven't seen the medical director 
for another reason within the recertification period. We also cannot 
allow some providers to ``opt-out'' of the requirement after a period 
of time, nor can we limit the requirement to those hospices with a 
higher percentage of long-stay patients, or to those patients where two 
physicians agree to the recertification. We cannot craft the timeframe 
for the face-to-face encounter around the provider, as the statutory 
language is explicit in requiring it at certain benefit periods. 
Benefit periods are counted

[[Page 70451]]

based upon a patient's total Medicare hospice history, rather than a 
patient's hospice history with a given provider. We cannot deviate from 
the statutory language which specifies when the face-to-face encounter 
must occur (``prior to the 180th-day recertification and each 
subsequent recertification''). We will continue to monitor the data for 
any unintended consequences from the physician narrative or from the 
hospice face-to-face requirement.
    Comment: A few commenters asked if hospices would be expected to 
perform a face-to-face encounter in December 2010 for patients who will 
require a face-to-face encounter during January 2011. One asked that we 
``grandfather'' in patients whose recertification would require a face-
to-face visit in January 2011. Others asked that the requirement only 
be effective for patients admitted to hospice on or after January 1, 
2011 rather than including patients who were admitted prior to January 
1, 2011, and whose stays crossed into 2011. One commenter wrote that 
this would allow hospices to marshal the necessary personnel and 
training resources, to create systems, and to minimize disruption in 
patient care.
    Response: In implementing the hospice face-to-face requirement, we 
must follow the relevant statutory language in the Affordable Care Act, 
which says, ``a hospice physician or nurse practitioner has a face-to-
face encounter with the individual to determine continued eligibility 
of the individual for hospice care prior to the 180th-day 
recertification and each subsequent recertification * * *''.
    The language does not require hospices to have a face-to-face 
encounter with existing patients who entered the 3rd or later benefit 
period in 2010, and were recertified in 2010. It does require that 
patients who enter the 3rd or later benefit period in 2011 have the 
face-to-face encounter; the statutory language does not give us 
flexibility to ``grandfather'' in existing patients. We also believe 
that by extending the timeframe for the face-to-face encounter from 15 
to 30 calendar days, hospices will have the flexibility to meet this 
requirement for patients who will enter the 3rd or later benefit 
periods in 2011.
    Comment: A commenter stated that she is not aware of any data 
indicating that a physician who sees a patient in a face-to-face 
encounter once in a 6-month period is better able to prognosticate than 
a skilled hospice nurse who has seen the patient serially over a 6-
month timeframe. The commenter added that unless the physician's one 
time face-to-face assessment results in a more accurate prognosis, this 
requirement is of very questionable value in the efforts to improve the 
process. Another commenter wrote that the additional burden from the 
visit does not support a face-to-face encounter; one wrote that those 
who provide care ethically and in compliance with regulations would 
have an additional paperwork burden, but this will not effectively 
eliminate the unethical providers. Another commenter wrote that it 
would be extremely cumbersome to develop processes in-house with 
electronic records and software to meet the face-to-face requirements. 
One commenter wrote that the proposal goes beyond the mandates of the 
Affordable Care Act in proposing additional layers of payment cuts on 
top of the disproportionate cuts already scheduled for hospice.
    Another commenter said that it is not always feasible, practical, 
or efficient to require face-to-face encounters as proposed. A 
commenter believed that the attestation and narrative requirement 
already created a burden greater than the benefit for physicians, 
patients, and agencies, and that this additional face-to-face 
requirement would serve as a further barrier to care in areas where 
patients are already underserved, an economic hardship for small 
nonprofit providers, and would ultimately result in decreased quality 
of care for patients and increased costs to Medicare through 
unnecessary testing, procedures, hospitalizations, and readmissions. A 
commenter wrote that this face-to-face encounter requirement would lead 
to decreased utilization of hospice services, decreases lengths of stay 
if hospices discharge patients too soon, which may diminish the purpose 
of hospice and mute its services. Other commenters wrote that requiring 
a face-to-face visit by a physician or NP adds a layer of complexity 
not only to the hospice, but also to the patient's routine, due to 
travel, location, and additional paperwork without any compensatory 
benefit. One commenter wrote that this new requirement does little to 
truly benefit the patient or to protect the hospice benefit from abuse. 
Another wrote that patients in small rural communities would be 
inconvenienced because of the fraudulent behavior of large for-profit 
hospices.
    Response: We appreciate the commenters' thoughts on the value of 
the face-to-face encounter. We are taking a long-term view of the 
encounter, and expect that it will increase physician accountability, 
lead to discharge of ineligible beneficiaries thereby reducing some 
lengths of stay, and improve the quality of patient care. While we 
value the hospice nurse's experience with the patient, and his or her 
assessment of the patient's prognosis, we believe that face-to-face 
encounters with hospice physicians or NPs can only improve upon that 
process.
    We do not believe this requirement will decrease hospice 
utilization by eligible patients. We also do not claim that by itself, 
this requirement will eliminate all abuse of the hospice benefit. As 
noted previously in this section, this mandate complements other 
efforts related to protecting the hospice benefit from fraud and abuse.
    This requirement does not cut payments, nor do we believe it is 
overly burdensome. We have provided financial relief for the cost of 
the visits by allowing billing of reasonable and necessary patient care 
by the hospice physician or hospice attending NP that occurs during a 
required face-to-face encounter. We have also provided additional 
flexibility in the timing of visits, to assist rural providers. We 
believe these changes help ensure that this requirement does not serve 
as a barrier to care in underserved area, and will monitor for any 
unintended consequences.
    While changes in certification requirements may lead to additional 
paperwork or to software changes, we do not believe that these will be 
burdensome or overwhelming; rather they are a routine cost of doing 
business. We have also provided hospices with great flexibility in how 
they include the face-to-face attestation as part of their 
recertification documents. We agree that the allowable timeframe for 
making changes to software or to electronic records is short, and have 
addressed these concerns later in this section.
    We believe that in the long-term, it will strengthen the hospice 
benefit by returning it to the benefit the Congress intended, for 
patients who are terminally ill with 6 months or less to live. We are 
concerned that the hospice benefit is being used by some providers to 
care for chronically ill patients rather than terminally ill patients, 
or to serve as a long-term care benefit. We believe that this face-to-
face requirement may help to ensure the continued viability of 
Medicare's hospice benefit for those at end-of-life.
    Comment: A number of commenters wrote to support the intent of the 
rule to certify only those hospice patients who remain eligible for the 
hospice benefit or to increase physician accountability, though a few 
mentioned that those who abuse the benefit would find a way to 
circumvent the requirement or that the proposed rule

[[Page 70452]]

was too stringent. One wrote that it is a wise way to counter the 
growing use of hospice services by those who are chronically ill, 
rather than terminally ill. Another commenter values the sort of 
practice, which was proposed as it ties the persons of the treatment 
team with the patient and with the family. A few commenters also 
supported our proposal that a certification or recertification could be 
completed 15 days prior to the start of the benefit period. A commenter 
from a non-profit hospice wrote that the Congress' and CMS' faith in 
the value of physician certification to halt abuse was reasonable, and 
was important for the nonprofit hospice community to support.
    Response: We thank the commenters for their support.
    Comment: A commenter was concerned that the timing of the proposed 
rule, with the open comment period until September 14th and a final 
rule not due out until late October or mid-November, puts a 
considerable burden on providers and their patient management software 
companies. The commenter wrote that software changes would need to be 
made based on the proposed rule, and that her software company could 
not beta test its changes because there is not enough time to do so, 
and to get the software out in November. The commenter added that any 
changes CMS makes between the proposed and final rules are difficult to 
accommodate, but obviously necessary. The commenter believes that in 
the future it would be more reasonable for CMS to publish proposed 
rules with adequate time for comments, review, and a final rule to be 
published several months before the effective date, so that software 
companies and their clients would have adequate time to prepare for the 
changes. The commenter added that due to the number of unresolved 
issues with the face-to-face proposal, the regulation effective date 
may be delayed which would also impact the timing of hiring of 
additional staff. A few commenters wrote that the timeframe, from 
publication of the final rule to its effective date, means that 
hospices have little time to meet with current physician staff to 
determine if they can manage the required visits, and to hire and train 
additional physicians and NPs if needed; several asked for more time to 
hire and train additional staff.
    Response: The hospice face-to-face requirement was included in the 
Affordable Care Act, which was enacted on March 23, 2010. Conforming 
amendments were added to that law on March 30, 2010. We typically 
publish hospice payment-related proposed rules in April and final rules 
in late July or early August. Because of the internal process to 
publish a proposed rule by the end of March and the date the Affordable 
Care Act was signed into law, it was too late to include the provisions 
related to the face-to-face requirement in a hospice proposed rule. The 
most appropriate rulemaking publication we could use was the HH 
proposed and final rules. In addition, the HH payment rules have an 
effective date of January 1st while the hospice payment rules are 
effective on October 1st.
    When we propose and finalize changes to policies, we try to do so 
with a timeframe that provides adequate time and flexibility to 
providers, contractors, and software vendors, to implement final rule 
requirements. In this case, the timing of the enactment of the 
Affordable Care Act led us to propose the requirements later than 
usual; the effective date of the face-to-face requirement is mandated 
in the statute, and we cannot change it. However, the timing of the 
proposed rule allowed for a 60 day public comment period and the final 
rule will be effective on January 1, 2011.
    Comment: Some commenters asked if they were expected to report the 
required face-to-face visit on their claims. One wrote that if hospices 
are expected to report the visit, they should be paid for it. A 
commenter asked whether hospices should report the NP's NPI number on 
the claim or the NPI number of the physician supervising the NP. 
Several commenters asked if any special codes should be included on 
claims when the face-to-face visit is combined with a patient care 
visit, or when the face-to-face visit occurs during a medically 
necessary physician visit.
    Response: We are not requiring any visit reporting for the required 
face-to-face encounter on hospice claims. This is consistent with our 
policy of not currently requiring reporting of other administrative 
activities on hospice claims. Hospice claims currently show the NPI of 
the attending physician (who may be a NP) and the certifying physician, 
at the claim level rather than showing the NPI of a practitioner at the 
line-item level. If hospice physicians or attending NPs provide 
billable services (as described previously in this section) during the 
course of the visit, those are to be billed on the claim following 
usual physician billing procedures, using revenue code 0657 and the 
appropriate CPT codes. If billable NP attending physician services are 
included on the claim, the claim should also include a GV modifier, 
since NP services are paid at 85 percent of services provided by 
physicians. The NP's NPI number would only be reported on the claim if 
the hospice NP is also the patient's attending physician.
    Comment: A commenter wrote that hospice programs have raised 
concerns that hospice physicians or NPs may, during their visit to 
gather clinical findings to meet the face-to-face encounter 
requirement, be expected, by the patient or family members, to treat 
the patient for issues that are not related to the terminal diagnosis. 
The commenter noted that this is a particular concern in cases where 
the patient is not under the direct medical care of the hospice Medical 
Director but under the care of his or her primary care physician. The 
commenter suggested that CMS should acknowledge the potential for such 
professional/ethical conflicts and make every effort to avoid 
establishment of any barriers (either through hospice CoPs or coverage 
requirements) that would prevent the physician or NP from providing 
adequate notice or explanation to a patient or responsible family 
member regarding the purpose of the hospice face-to-face encounter.
    Response: The hospice physician is responsible for providing care 
for the terminal illness and related conditions, and for caring for any 
unmet medical needs that the patient's attending physician (if any) has 
not addressed. If both the hospice physician and the attending 
physician are involved in the patient's care, the patient is taught who 
to consider ``primary'' and contact first. The hospice is to 
collaborate with the patient's attending physician (if any) in 
obtaining the initial certification, in performing the comprehensive 
assessment and any updates to that assessment, in developing the 
written plan of care, in discharging the patient, etc. Therefore, there 
should already be a working relationship with the patient's attending 
physician; in having a required face-to-face encounter, the physician 
or NP should coordinate with the attending physician in providing any 
care to the patient. Because the required face-to-face encounter is 
usually an expected event, the hospice has time for such coordination. 
If the hospice physician or attending NP provides reasonable and 
necessary patient care while making a required face-to-face visit, the 
hospice may bill for those non-administrative physician services, as 
described previously in this final rule.
    Comment: A commenter wrote that CMS has provided no clarity 
regarding the hospice's exposure should the face-to-face requirement 
not be met.

[[Page 70453]]

    Response: The face-to-face requirement is part of the hospice 
recertification process. Having a valid recertification is a statutory 
requirement for coverage and payment. We would have grounds to demand 
and recoup payments for claims that were paid based on an invalid 
recertification due to not satisfying the face-to-face requirement.
    Comment: A commenter recommended that CMS continue to accept the 
hospice date stamp on POCs returned to the agency by physicians who 
forget or fail to date their signature on this document.
    Response: At this time, there is nothing to preclude a hospice from 
using a date stamp if a physician fails to date his or her signature on 
the POC.
    Comment: One commenter wrote that including the benefit period 
dates on the certification and recertification forms imposes a clerical 
task in physician charting. The commenter asked why this was proposed 
if the face-to-face encounter requirement is based upon actual days of 
care.
    Response: As noted previously, the face-to-face encounter is based 
upon benefit periods and not on actual days of care. Therefore, it is 
helpful to show benefit periods on the certification. As we wrote in 
the proposed rule, having the benefit period dates on the certification 
makes it easier for the hospice to identify those benefit periods which 
require a face-to-face encounter, and will ease enforcement of this new 
statutory requirement. Additionally, including the benefit period dates 
on certifications or recertifications simplifies the medical review 
process. The physician does not have to be the one to fill in the 
benefit period dates, but he or she should know what period of time the 
document covers.
    Comment: A commenter wrote that this rule was proposed as intended 
to be applied to hospices that routinely skew the length of stay 
averages with long lengths of stay and exceed the hospice caps. The 
commenter added that it is now applicable to every certified hospice 
regardless of appropriate lengths of stay or not.
    Response: Our proposal is entirely based on section 3132(b) of the 
Affordable Care Act. The Affordable Care Act did not limit the face-to-
face requirement to certain hospices, but required it of all certified 
hospices.
    Comment: A commenter wrote that if CMS plans to reimburse the face-
to-face visits, long term care (LTC) facilities should not be involved 
in hospice billing as the proposed rule is clearly focused on hospice 
operations, not those of the LTC that contracts with the hospice so 
patients may receive hospice services. The commenter asked that if CMS 
anticipates any increased responsibilities of LTC providers, that his 
organization be included in any stakeholder discussions. Finally, the 
commenter asked that we clarify that the role of LTC providers will not 
change under this new regulation.
    Response: These requirements affect hospices only and do not affect 
or change the responsibilities of LTC providers that serve hospice 
patients who reside in their facilities.
    Comment: A commenter asked if the new requirement for physician or 
NP face-to-face encounters replaces current RN assessments of hospice 
patients.
    Response: This new requirement does not affect the roles and 
responsibilities of hospice nurses. Hospice nurses should continue to 
care for and assess patients in accordance with the CoPs. They should 
continue to provide care for the palliation and management of the 
terminal illness and related conditions.
    Comment: A commenter asked if the new face-to-face requirement 
allowed the Medical Director to certify hospice patients. Several 
commenters urged that electronic signatures be accepted for 
certifications and recertifications or on the attestations. Another 
commenter asked if having a different diagnosis at admission would 
affect the face-to-face requirement.
    Response: Hospice Medical Directors have always been able to 
certify or recertify hospice patients. Additionally, electronic 
signatures on certifications and recertifications continue to be 
allowed; the narrative and the face-to-face attestation are parts of 
the certification, and therefore both can be signed electronically. The 
new face-to-face requirement does not affect either of these policies. 
The face-to-face encounter is required based upon being in the 3rd or 
later benefit period, considering the entire hospice history, 
regardless of diagnosis.
    Comment: A commenter wrote that if the face-to-face encounter must 
occur within 2 weeks of the start-of-care date, and be documented, the 
industry could not afford this. This commenter noted also that hospices 
have little or no influence over physician behavior to comply with the 
additional scheduling and documentation requirements of this proposed 
rule.
    Response: We believe this comment is related to the HH face-to-face 
requirement, but it was unclear from the language used, so we will 
respond from a hospice perspective. The hospice face-to-face 
certification is not required at start-of-care unless, when considering 
the patient's entire hospice history, the start-of-care coincides with 
the recertification at the 3rd or later benefit period. If a hospice 
employs or contracts with a physician, it has influence regarding 
physician compliance with these requirements.
    Comment: A commenter wrote that a recent Duke University study 
showed that patients who died under the care of hospice cost the 
Medicare program an average of $2,300 less than those who did not. This 
commenter believes that the current reimbursement model no longer fits 
with the evolution of the hospice benefit since 1983. The commenter 
also believes that this maturation of hospice necessitates a full scale 
review and evaluation of the current reimbursement model. The commenter 
added that changes to the benefit and payment system should preserve 
access the hospice benefit, quality care, and reasonable reimbursement 
rates to maintain a viable and stable delivery system. The commenter 
also wrote that hospice patients should not have to forgo curative care 
that might lengthen their lives and enhance their quality of life. This 
commenter also wrote that the Congress should prevent CMS from 
implementing payment rate cuts in hospice until the Secretary is able 
to justify that the cuts do not negatively impact patients and access 
to care. The commenter suggested that the Congress prevent us from 
implementing the payment rate to ensure the full market basket update 
for the hospice benefit, and that they preserve the BNAF; commenters 
suggested a rural add-on payment to ensure access for rural patients 
and to compensate for the financial burden of the face-to-face visits.
    A few commenters who opposed the elimination of the BNAF wrote that 
we moved the hospice wage index away from one which was agreed upon 
years ago; one asked that we suspend the phase-out until a better 
approach for wage index adjustment is developed. Another commenter 
believes the hospice wage patterns do not mirror those of hospitals. 
This commenter wrote that hospices compete in the same labor market as 
hospitals, which are allowed to reclassify. The commenter urged us to 
develop a voluntary pilot project to test a hospice specific wage 
index, and hopes that we will slow the phase-out. A few commenters also 
urged that we maintain the aggregate hospice cap, as it protects 
against abuse of the benefit. One supported our efforts to improve the 
calculation and enforcement of the cap, provided those efforts do not 
take away from payment

[[Page 70454]]

reform. A different commenter suggested we have standards for data 
submitted on cost reports and not use data from agencies that submit 
reports that are missing required information.
    Response: Some of these comments are outside the scope of this rule 
so we will not respond to them in this final rule. However, we will 
respond to those comments related to the Affordable Care Act. Section 
3132(a) of the Affordable Care Act requires that we begin reforming the 
hospice payment system no earlier than October 1, 2013. We have been 
collecting additional data from hospices for several years now, in 
preparation for payment reform. Any reformed payment model that we 
propose would preserve access to hospice care, encourage quality care, 
and would fairly pay providers. Section 3140 of the Affordable Care Act 
requires that we conduct a concurrent care demonstration project where 
hospice services will be provided without the beneficiary having to 
forgo curative care. The results of this 3-year demonstration project 
will help inform future decisions about any changes to the hospice 
benefit. In the Affordable Care Act, the Congress also reduced the 
market basket update for hospice, but those reductions will not occur 
until 2013, and therefore are not included in the FY 2011 payment 
rates. We do not have the statutory authority to provide a rural add-on 
to hospices. The BNAF phase-out was finalized in the August 6, 2009 
final rule, and is outside the scope of this rule. Likewise, the 
hospice wage index, cost reports, and cap are outside the scope of this 
rule, and therefore we cannot comment, though we appreciate the 
commenter's support regarding the hospice aggregate cap.
    In summary, as a result of the comments we received on the proposed 
rule, we are finalizing the proposals made in the proposed rule with 
the following changes:
     We are changing the regulatory text at Sec.  418.22(a)(4) 
to clarify that we are counting a beneficiary's time across all 
hospices based upon benefit periods rather than on actual days of 
hospice care. Therefore, a face-to-face encounter will be required 
prior to the 3rd benefit period recertification and each 
recertification thereafter.
     We are clarifying in the regulatory text at Sec.  
418.22(a)(4) that the hospice physician or nurse practitioner is not 
required to go to the patient for the face-to-face encounter, but that 
the patient is allowed to travel to the hospice physician or nurse 
practitioner when medically appropriate.
     We are changing the regulatory text at Sec.  418.22(a)(4) 
so that hospice physicians or nurse practitioners will have up to 30 
calendar days prior to the 3rd benefit period recertification, and up 
to 30 calendar days prior to each recertification thereafter, to have 
the face-to-face encounter.
     We are changing the regulatory text at Sec.  
418.22(b)(3)(iii) so that the narrative attestation is directly above 
physician's signature, rather than directly below it.
     We clarified that hospices may bill for reasonable and 
necessary care provided to the patient by a hospice physician in the 
course of having a required face-to-face encounter with a patient.

III. 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 are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

A. ICRs Regarding Therapy Coverage Requirements

    As described previously in this rule, we are clarifying our 
coverage requirements for skilled services provided by therapists, 
which are described in Sec.  409.44(c). Our clarifications include 
requirements to: Document necessity for a course of therapy (Sec.  
409.44(c)(1)); include clinic notes which reflect progress toward 
goals, which incorporate the functional assessment and reassessments, 
which justify medical necessity, which describe the content of progress 
notes, and which include objective evidence of the expectation that the 
patient's condition will improve (Sec.  409.44(c)(2)(i)); document any 
variable factors that influence the patient's condition or affect the 
patient's response to treatment, and include objective measurements of 
progress toward goals in the clinical record (409.44(c)(2)(iv)).
    These clarifications to our coverage requirements in Sec.  
409.44(c) are already part of our current Conditions of Participation 
(CoPs) and are approved under OMB 0938-1083. The current CoPs 
at Sec.  484.12 already require that the HHA and its staff comply with 
accepted professional standards and principles that apply to 
professionals furnishing services in an HHA. Those accepted 
professional standards include complete and effective documentation, 
such as we described in our proposals. Additionally, Sec.  484.32 of 
the CoPs already requires in part that the therapist prepare clinical 
and progress notes. Section 484.55 of the CoPs already requires that 
HHAs provide a comprehensive assessment that ``accurately reflects the 
patient's current health status and includes information that may be 
used to demonstrate progress toward achievement of desired outcomes''. 
Because these clarifications to our coverage requirements in Sec.  
409.44(c) reflect longstanding policy from our CoPs as well as from 
accepted standards of clinical practice, we believe that these 
requirements will not create any additional burden on HHAs.
    Additionally, our coverage regulations at Sec.  409.44(c)(2)(i) 
already mandate that for therapy services to be covered in the HH 
setting, the services must be considered under accepted practice to be 
a specific, safe, and effective treatment for the beneficiary's 
condition. We are revising Sec.  409.44(c)(2)(i) to require a 
functional assessment on the 13th and 19th therapy visit, and at least 
every 30 days, to determine continued need for therapy services, and to 
ensure material progress toward goals. The functional assessment does 
not require a special visit to the patient, but is conducted as part of 
a regularly scheduled therapy visit. Functional assessments are 
necessary to demonstrate progress (or the lack thereof) toward therapy 
goals, and are already part of accepted standards of clinical practice, 
which include assessing a patient's function on an ongoing basis as 
part of each visit.
    Our current CoPs at Sec.  484.55 already require that HHAs 
``identify the patient's continuing need for home care * * *''. 
Functional assessments of therapy need guide HHAs in determining 
whether continued therapy is necessary. Therefore, we believe that the 
requirement to perform a functional assessment at the 13th and 19th 
visits, and at least every 30 days, will also not

[[Page 70455]]

create any burden on HHAs. Rather, we have clarified the minimum 
timeframes for functional assessments in the coverage regulations. 
Longstanding CoP policy at Sec.  484.55 requires HHAs to document 
progress toward goals; therefore, we again do not believe that 
performing or documenting functional assessments at these 3 time-points 
would create a new burden. Both the functional assessment and its 
accompanying documentation are already part of existing HHA practices 
and accepted standards of clinical practice, and are approved under 
OMB 0938-1083. Therefore, we do not believe these proposed 
requirements place any new documentation requirements on HHAs. We also 
believe that a prudent HHA would self-impose these requirements in the 
course of doing business.
    We are revising the currently approved PRA package (OMB 
0938-1083) to describe these clarifications to the regulatory text.

B. ICRs Regarding HHA Capitalization

    As stated above, we are revising Sec.  489.28(a) to state that a 
newly enrolling HHA must consistently maintain sufficient 
capitalization between the time it submits its enrollment application 
until 3 months after its provider agreement becomes effective. The HHA 
will therefore be required to submit proof of capitalization at 
multiple points during this period.
    In the proposed rule, we estimated that a newly enrolling HHA would 
be required to submit such proof 3 times prior to receiving Medicare 
billing privileges, and that the burden involved in doing so would be 
1.5 hours on each occasion. We further projected that 500 newly 
enrolling HHAs (of which 200 would become enrolled) would be requested 
to furnish this data. The total annual burden would therefore be 2,250 
hours (500 HHAs x 3 submissions x 1.5 hours).
    We are adopting the aforementioned estimates for this final rule. 
These estimates are reflected in Table 14.

                                              Table 14--Estimated Annual Reporting and Recordkeeping Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                       OMB No.                            Requirement         Respondents          Responses          Hour burden            Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
None................................................   Sec.   489.28(a)                 500                 500                 4.5               2,250
--------------------------------------------------------------------------------------------------------------------------------------------------------

C. ICRs Regarding the Home Health Face-To-Face Encounter Requirement

    The Affordable Care Act amends the requirements for physician 
certification of HH services contained in sections 1814(a)(2)(C) and 
1835(a)(2)(A) of the Act by requiring that prior to certifying a 
patient as eligible for HH services, the physician must document that 
the physician/NPP has had a face-to-face encounter (including through 
the use of telehealth. The Affordable Care Act provision does not amend 
the statutory requirement that a physician must certify a patient's 
eligibility for Medicare's HH benefit (see sections 1814(a)(2)(C) and 
1835(a)(2)(A) of the Act). In this rule, we are amending Sec.  
424.22(a)(1)(v) to require the certifying physician sign and date the 
documentation entry into the certification that the face-to-face 
patient encounter occurred no more than 90 days prior to the HH start 
of care date by himself or herself, or by an allowed NPP for initial 
certifications. We are requiring that the certifying physician's 
documentation of the face-to-face patient encounter be either a 
separate and distinct area on the certification, or a separate and 
distinct addendum to the certification, that is easily identifiable and 
clearly titled, dated, and signed by the certifying physician, and that 
it include the clinical findings of that encounter.
    The burden associated with the documentation requirement for the 
patient's face-to-face encounter by the physician and certain allowed 
nonphysician practitioners includes the time for each HHA to develop a 
revised certification form or certification addendum which the HHA 
provides to the physician. The revised certification form or addendum 
to the certification must allow the physician to record that a face-to-
face patient encounter has occurred. The revised form or addendum must 
also include the patient's name, a designated space for the physician 
to provide the date of the patient encounter, a designated space for 
the physician's documentation of the face-to-face encounter, and a 
designated space for the physician to provide his/her signature and the 
date signed.
    There were 9,432 HHAs that filed claims in CY 2008. We estimate it 
would take each HHA 15 minutes of the HH administrator's time to 
develop and review the above described form language and 15 minutes of 
clerical time for each HHA to revise their existing initial 
certification form or to create an addendum with that form language. 
The estimated total one-time burden for developing the patient 
encounter form would be 4,716 hours.
    The certifying physician's burden for composing the face-to-face 
documentation which includes how the clinical findings of the encounter 
support eligibility; writing, typing, or dictating the face-to-face 
documentation; signing, and dating the patient's face-to-face encounter 
is estimated at 5 minutes for each certification. We estimate that 
there would be 2,926,420 initial HH episodes in a year based on our 
2008 claims data. As such, the estimated burden for documenting, 
signing, and dating the patient's face-to-face encounter would be 
243,868 hours for CY 2011.
    We reiterate that our longstanding policy has been that physicians 
must sign and date the certification statement that the patient is in 
need of HH services and meets the eligibility requirements to receive 
the benefit. Therefore, our making this requirement explicit in the 
regulation poses no additional burden to HHAs.
    Additionally, it has been our longstanding manual policy that 
physicians must sign and date the certification and any 
recertifications. Our current regulations only address the physician's 
signing of the certification and recertification. In this rulemaking, 
we are strengthening our regulations at Sec.  424.22 to achieve 
consistency with the timing and documentation of the face-to-face 
encounter and to mirror our longstanding manual policy by revising our 
regulations to make it a requirement that physicians not only sign, but 
also date certifications and recertifications. Because it has been our 
longstanding manual policy that physicians sign and date certifications 
and recertifications, and we are merely making this requirement 
explicit in our regulations, there is no additional burden to 
physicians.
    Based on the criteria for payment of physician supervision of a 
patient receiving Medicare-covered services provided by a participating 
HHA as stipulated in the description of HCPC code G0181, our making the 
patient encounter requirement explicit in the regulation poses no 
additional burden to physician offices. Tables 15 and 16

[[Page 70456]]

summarize the burden estimate associated with these requirements.

                                                  Table 15--Estimated One-Time Form Development Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
         OMB No.                 Requirement                  HHAs                    Responses               Hour burden             Total  (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
           0938-1083      Sec.   424.22(a)(1)(v)                   9,432                         1                        .5                    4,716
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                  Table 16--Estimated Physicians Burden for Documenting, Signing, and Dating Encounter
--------------------------------------------------------------------------------------------------------------------------------------------------------
         OMB No.                 Requirement                Patients                  Responses               Hour burden             Total  (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
           0938-1083      Sec.   424.22(a)(1)(v)               2,926,420                         1                  .0833333                  243,868
--------------------------------------------------------------------------------------------------------------------------------------------------------

Details of our burden estimates are availabe in the Paperwork Reduction 
Act (PRA) package approved under OMB 0938-1083. We are 
revising this currently approved package to incorporate these 
requirements.

D. ICRs Regarding the Requirements for Hospice Certification Changes

    As described previously in this final rule, as of January 1, 2011 
the Affordable Care Act requires physicians or NPs to attest that they 
determined continued hospice eligibility through a face-to-face 
encounter with all hospice patients prior to the 3rd benefit period 
recertification and at every subsequent recertification. We will 
require the physician or NP to sign and date an attestation statement 
that he or she had a face-to-face encounter with the patient, and 
include the date of that visit. This attestation would be a separate 
and distinct part of the physician recertification, or an addendum to 
the physician recertification.
    The burden associated with this attestation requirement is the time 
for each hospice to develop simple attestation language to attach as an 
addendum or include as part of the recertification document, and the 
time for the physician or NP to include the patient name, the date that 
the patient was visited, the visiting physician or NP signature, and 
the date signed. As of February 2010, there were 3,429 hospices with 
claims filed in FY 2009. We estimate it would take each hospice 15 
minutes of administrative time to develop and review the attestation 
language, and 15 minutes of clerical time to revise their existing 
recertification form or to create an addendum. The estimated total one-
time burden for developing the attestation form would be 1,714 hours.
    The burden for completing the attestation form is estimated at 30 
seconds for each recertification at 180 days or beyond. We used the 
distribution of lengths of stay from hospice claims data to estimate 
the percentage of patients who required recertification at 180 days, 
and at subsequent 60-day benefit periods. We estimated that there would 
be 457,382 recertifications at 180 days or beyond, each of which 
requires an attestation. We assume that 90 percent of the visits were 
performed by physicians and 10 percent by nurse practitioners, based on 
our analysis of FY 2009 physician and NP hospice billing data, with 30 
seconds time allowed to sign and date the attestation statement, and to 
write in the name of the patient and the date of the visit, resulting 
in an estimated total burden to complete the attestation form of 3,811 
hours for CY 2011. In the FY 2010 hospice rule (74 FR 39384), we 
finalized a requirement that the recertifying physician include a brief 
narrative explanation of the clinical findings which support continued 
hospice eligibility. Effective January 1, 2011, regulation text changes 
to require this narrative to describe why the clinical findings of the 
face-to-face encounter, occurring at the 180-day recertification and 
all subsequent recertifications, continue to support hospice 
eligibility. However, these regulation changes are for clarification. 
The narrative requirement finalized in FY 2010 requires that the 
narrative include why the clinical findings of any physician/NP/patient 
encounter support continued hospice eligibility. Therefore, the only 
documentation burden associated with this requirement is the signed and 
dated attestation that the encounter occurred.
    In addition, commenters asked that we change the regulatory 
language at Sec.  418.22(b)(3)(iii) to require the physician's 
signature to follow the narrative attestation statement, rather than to 
be above it on the form. The commenters believed that the signature 
should ``close the loop'', and that this placement would be consistent 
with the face-to-face attestation requirements. We agree with the 
commenters, and are finalizing this as a change in the regulation. We 
do not believe that moving the signature underneath the narrative 
attestation (rather than leaving it above it) creates any additional 
burden to hospices. The estimate of administrative burden to create the 
face-to-face attestation includes enough administrative time for form 
revision to cover moving the narrative attestation signature line.
    We reiterate that our longstanding policy has been that physicians 
must sign and date the certification and any recertifications. 
Therefore, our making this requirement explicit in the regulation poses 
no additional burden to hospices. We also clarified the timeframe which 
the certifications and recertifications cover by requiring physicians 
to include the dates of the benefit period to which the certification 
or recertification applies. We believe this is already standard 
practice at nearly all hospices, but are addressing it in regulation. 
Using the distribution of lengths of stay from 2007 and 2008 claims 
data, we estimate that there would be 1,733,663 initial certifications 
and recertifications during the course of a year. We estimate that it 
would take a physician 30 seconds at most to include the benefit period 
dates. We estimate that the time to require physicians to include the 
benefit period dates on the certification or recertification would be 
30 seconds per certification or recertification, for a total burden of 
14,447 hours for CY 2011. Table 17 summarizes the burden estimate 
associated with these requirements.

[[Page 70457]]



                                 Table 17--Estimated Annual Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
             OMB No.                 Requirements          Units          Responses     Hour burden      Total
----------------------------------------------------------------------------------------------------------------
0938-1067........................     418.22(b)(4)  3,429 hospices.....            1        0.50           1,714
0938-1067........................     418.22(b)(4)  457,382 >= 180-day             1        0.0083333      3,811
                                                     recerts.
0938-1067........................     418.22(b)(5)  1,733,663 All                  1        0.0083333     14,447
                                                     certs. & recerts.
----------------------------------------------------------------------------------------------------------------

    Details of our burden estimates are available in the PRA package 
approved under OMB 0938-1067. We are revising this currently 
approved package to incorporate these requirements.
    We received one comment about the burden estimate of the hospice 
face-to-face attestation, and one about an addition to the face-to-face 
attestation.
    Comment: A commenter wrote that the administrative burden 
calculated by CMS did not include the staff time required to track down 
these face-to-face encounters. The administrative cost that was 
calculated is not included in the reimbursement for hospices.
    Response: The above mentioned burden estimate only reflects the 
burden associated with any additional required documentation. In this 
case, the additional required documentation is the attestation of the 
face-to-face encounter. Our burden estimate includes the administrative 
time to develop an attestation form as well as the time that we believe 
would be required to revise the hospice's existing certification or 
recertification forms, if necessary. The requirement as stated in Sec.  
418.22 pertains to additional documentation only, that is, 
documentation requirements subsequent to the face-to-face encounter; 
therefore, the estimate above does not include any burden associated 
with the administrative coordination and conduct of face-to-face 
encounters or tracking the encounters.

E. ICRs Regarding the Home Health Care CAHPS Survey (HHCAHPS)

    As part of the DHHS Transparency Initiative on Quality Reporting, 
we are implementing a process to measure and publicly report patients' 
experiences with HH care they receive from Medicare-certified HHAs with 
the Home Health Care CAHPS (HHCAHPS) survey. The HHCAHPS was developed 
and tested by the Agency for Healthcare Research and Quality (AHRQ) and 
is part of the family of CAHPS surveys, is a standardized survey for HH 
patients to assess their HH care providers and the quality of the HH 
care they received. Prior to the HHCAHPS, there was no national 
standard for collecting data about HH care patients' perspectives of 
their HH care.
    Section 484.250, Patient Assessment Data, will require an HHA to 
submit to CMS HHCAHPS data in order for CMS to administer the payment 
rate methodologies described in Sec.  484.215, Sec.  484.230, and Sec.  
484.235. The burden associated with this is the time and effort put 
forth by the HHA to submit the HHCAHPS data, the patient burden to 
respond to the survey, and the cost to the HHA to pay the survey vendor 
to collect the data on their behalf. This burden is currently accounted 
for under OMB 0938-1066.
    The HHCAHPS survey received OMB clearance on July 18, 2009, and the 
number is 0938-1066. In that PRA package, we did not state the burden 
to the HHAs concerning the hours that they would need to secure an 
approved HHCAHPS vendor and to pay for that vendor. In this rule, we 
have included the burden directly affecting HHAs, which is the burden 
to select a survey vendor from http://www.homehealthcahps.org and to 
sign a contract with that survey vendor that will conduct HHCAHPS on 
behalf of the HHA. We have determined that this would take 16.0 hours 
for each HHA. It is noted that 91 percent of all HHAs (9,890 HHAs of a 
total of 10,998 HHAs) would be conducting HHCAHPS, since about 9 
percent of HHAs will be exempt from conducting HHCAHPS because they 
have less than 60 eligible patients in the year. In Table 18, we have 
listed this burden to the HHAs:

                                             Table 18--Estimated Annual Burden on HHAs for Vendor Selection
--------------------------------------------------------------------------------------------------------------------------------------------------------
         OMB No.                Requirements                  Units                   Responses               Hour burden                 Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
           0938-1066      Sec.   484.250(c)(2)                     9,890                         1                      16.0                  158,240
--------------------------------------------------------------------------------------------------------------------------------------------------------

    OMB Number 0938-1066 will be revised to reflect the update 
concerning burden to the HHAs for vendor services for HHCAHPS.
    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 HH market 
basket percentage increase will be reduced 2 percentage points. In 
accordance with the statue, 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 Sec.  484.225(h) 
and (i).
    In the CY 2010 HH PPS proposed rule (August 13, 2009), we to expand 
the HH 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 65357,65358). As part of the DHHS 
Transparency Initiative, we proposed to implement a process to measure 
and publicly report patient experiences with HH care using a survey 
developed by AHRQ in its CAHPS[supreg] program. In the CY 2010 HH PPS 
final rule, we stated our intention to move forward with the HHCAHPS 
and link the survey to the CY 2012 annual payment update under the DRA 
``pay-for-reporting'' requirement.
    As part of this requirement, each HHA sponsoring a 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 HHAs 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.

[[Page 70458]]

    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget.
    Attention: CMS Desk Officer, [CMS-1510-F]
    Fax: (202) 395-6974; or
    E-mail: [email protected].

IV. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this 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 major 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 that to the best of our ability presents the costs and 
benefits of the rulemaking.
1. CY 2011 Update
    The update set forth in this final rule applies to Medicare 
payments under HH PPS in CY 2011. Accordingly, the following analysis 
describes the impact in CY 2011 only. We estimate that the net impact 
of the proposals in this rule is approximately $960 million in CY 2011 
savings. The $960 million impact to the proposed CY 2011 HH PPS 
reflects the distributional effects of an updated wage index ($20 
million increase) plus the 1.1 percent HH market basket update ($210 
million increase), for a total increase of $230 million. The 3.79 
percent case-mix adjustment applicable to the national standardized 60-
day episode rates ($700 million decrease) plus the 2.5 percent returned 
from the outlier provisions of the Affordable Care Act ($490 million 
decrease) results in a total decrease of $1,190 million, which, when 
added to the $230 million increase, totals savings of $960 million in 
CY 2011. The $960 million in savings is reflected in the first row of 
column 3 of Table 19 below as a 4.89 percent decrease in expenditures 
when comparing the current CY 2010 HH PPS to the proposed CY 2011 HH 
PPS.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. 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 less than $7.0 million to $34.5 million in any 1 year. For 
the purposes of the RFA, our updated data show that approximately 95 
percent of HHAs are considered to be small businesses according to the 
Small Business Administration's size standards with total revenues of 
$13.5 million or less in any one year. Individuals and States are not 
included in the definition of a small entity. The Secretary has 
determined that this final rule would have a significant economic 
impact on a substantial number of small entities. In the proposed rule, 
we stated that our analysis reveals that nominal case-mix continues to 
grow under the HH PPS. Specifically, nominal case-mix has grown from 
the 11.75 percent growth identified in our analysis for CY 2008 
rulemaking to 17.45 percent for this year's rulemaking. Because we have 
not yet accounted for all of the increase in nominal case-mix, that is 
case-mix that is not real (real being related to treatment of more 
resource intense patients), case-mix reductions are necessary. As such, 
we believe it appropriate to reduce the HH PPS rates now, so as to move 
towards more accurate payment for the delivery of HH services. We have 
amended the proposal that would have implemented two successive years 
of payment reductions, with each year's reduction at 3.79 percent. 
Instead we are finalizing in this rule only the first year's reduction 
(for CY 2011) while we study additional case-mix data, and methods to 
incorporate such data, into our methodology for measuring real vs. 
nominal case-mix change. Other reductions to HH PPS payments discussed 
in this rule were mandated in provisions in the Affordable Care Act. 
Our analysis shows that small HHAs and large HHAs are impacted 
relatively similarly by the final provisions of this rule. Further 
detailed impact assessment, by facility type, is presented in the 
analysis below.
    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. 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 final rule applies to HHAs. Therefore, 
the Secretary has determined that this final rule would not have a 
significant economic impact on the operations of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2010, that 
threshold is approximately $135 million. This final rule is not 
anticipated to have an effect on State, local, or tribal governments in 
the aggregate, or on the private sector, of $135 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule (and subsequent final 
rule) that imposes substantial direct requirement costs on State and 
local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this final rule under the threshold 
criteria of Executive Order 13132, Federalism, and have determined that 
it would 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 2010 notice published on November 10, 2009. The impact analysis 
of this final rule presents the estimated expenditure effects of policy 
changes proposed in this rule. We use the latest data and best analysis 
available, but we do not make adjustments for future changes in such

[[Page 70459]]

variables as number of visits or case-mix.
    This analysis incorporates the latest estimates of growth in 
service use and payments under the Medicare HH benefit, based on 
Medicare claims from 2008. 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, the Affordable Care Act, or new statutory provision. 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 19 represents how HHA revenues are likely to be affected by 
the policy changes proposed in this rule. For this analysis, we used 
linked HH claims and OASIS assessments; the claims represented a 20-
percent sample of 60-day episodes occurring in CY 2008. The first 
column of Table 19 classifies HHAs according to a number of 
characteristics including provider type, geographic region, and urban 
and rural locations. The second column shows the payment effects of the 
wage index only. The third column shows the payment effects of all the 
policies outlined earlier in this rule. For CY 2011, the average impact 
for all HHAs is a .08 percent increase in payments due to the effects 
of the wage index. The overall impact, for all HHAs, in estimated total 
payments from CY 2010 to CY 2011, is a decrease of approximately 4.89 
percent. There is very little difference in the estimated impact on 
HHAs when looking at the type of facility. Freestanding HHAs are 
estimated to see a 4.88 percent decrease in payments while facility 
based HHAs are estimated to see a 4.92 percent decrease. Similarly, 
voluntary not-for-profit HHAs are estimated to see a 4.97 percent 
decrease in payments, while for-profit HHAs are estimated to see a 4.84 
percent decrease in payments. Rural agencies are estimated to see a 
4.67 percent decrease in payment in CY 2011, while urban agencies are 
estimated to see a 4.93 percent decrease in payments. Agencies in New 
England (-5.39 percent) and in the South (-5.19 percent) are estimated 
to experience the largest decreases, while HHAs in the Pacific (-4.49 
percent) and the West (-4.66 percent) are estimated to have less of a 
decrease in payments in CY 2011. In general, smaller agencies are 
estimated to see less of a decrease in payments in CY 2011, than are 
larger agencies, with agencies with 100-199 first episodes estimated to 
see a 4.73 percent decrease and agencies with 200 or more first 
episodes estimated to see a 4.93 percent decrease in payment in CY 
2011.
    We supplemented our impact analysis from the proposed rule by 
linking to Medicare cost report data which has total revenues for HHAs. 
Using total revenues and the $13.5 million threshold of the RFA, we 
categorized an HHA as being either small or large. To perform this 
analysis, we were able to match approximately 72 percent of the cost 
report data to our model. For the remainder of the agencies in the 
model, we proxy for large agencies as those agencies with at least 750 
first episodes (doing so results in approximately 95 percent of 
agencies being classified as small and 5 percent of agencies being 
large, which is reflective of what our cost report files show us). This 
analysis provides similar results to the one using first episodes as a 
measure of an agency's size in that small HHAs fare slightly better, a 
4.84 percent decrease in payments, than do large HHAs, which are 
estimated to experience a 5.01 percent decrease in payments in CY 2011.
    Section 3131(c) of the Affordable Care Act amended section 421(a) 
of the MMA. The amended section 421(a) of the MMA provides an increase 
of 3 percent of the payment amount otherwise made for HH services 
furnished in a rural area, with respect to episodes and visits ending 
on or after April 1, 2010 and before January 1, 2016. Column 3 of Table 
19 displays a comparison of estimated payments in CY 2010, including a 
3 percent rural add-on for the last three quarters of CY 2010, to 
estimated payments in CY 2011, including a 3 percent rural add-on for 
all four quarters of CY 2011.

                    Table 19--Impacts by Agency Type
------------------------------------------------------------------------
                                                 Comparisons
                                   -------------------------------------
                                      Percent change
               Group                    due to the      Impact of all CY
                                      effects of the   2011 policies \1\
                                       updated wage         (percent)
                                        index only
------------------------------------------------------------------------
All Agencies:                                    0.08              -4.89
Type of Facility:
    Free-Standing/Other Vol/NP....              -0.10              -4.99
    Free-Standing/Other                          0.16              -4.85
     Proprietary..................
    Free-Standing/Other Government              -0.23              -4.97
    Facility-Based Vol/NP.........              -0.08              -4.95
    Facility-Based Proprietary....               0.20              -4.68
    Facility-Based Government.....              -0.06              -4.86
        Subtotal: Freestanding....               0.10              -4.88
        Subtotal: Facility-based..              -0.05              -4.92
        Subtotal: Vol/NP..........              -0.09              -4.97
        Subtotal: Proprietary.....               0.17              -4.84
        Subtotal: Government......              -0.15              -4.92
Type of Facility (Rural * Only):
    Free-Standing/Other Vol/NP....               0.00              -4.70
    Free-Standing/Other                          0.26              -4.61
     Proprietary..................
    Free-Standing/Other Government              -0.43              -5.01
    Facility-Based Vol/NP.........              -0.10              -4.73
    Facility-Based Proprietary....               0.20              -4.53

[[Page 70460]]

 
    Facility-Based Government.....              -0.12              -4.78
Type of Facility (Urban * Only):
    Free-Standing/Other Vol/NP....              -0.12              -5.03
    Free-Standing/Other                          0.15              -4.89
     Proprietary..................
    Free-Standing/Other Government               0.02              -4.93
    Facility-Based Vol/NP.........              -0.07              -5.01
    Facility-Based Proprietary....               0.20              -4.78
    Facility-Based Government.....               0.03              -4.95
Type of Facility (Urban* or
 Rural*):
    Rural.........................               0.10              -4.67
    Urban.........................               0.07              -4.93
Facility Location: Region*:
    North.........................              -0.34              -5.19
    South.........................               0.18              -4.80
    Midwest.......................               0.01              -4.98
    West..........................               0.33              -4.66
    Outlying......................              -0.11              -5.03
Facility Location:
Area of the Country:
    New England...................              -0.54              -5.39
    Mid Atlantic..................              -0.23              -5.08
    South Atlantic................               0.05              -4.94
    East South Central............              -0.09              -5.04
    West South Central............               0.41              -4.58
    East North Central............               0.07              -4.95
    West North Central............              -0.22              -5.11
    Mountain......................              -0.15              -5.05
    Pacific.......................               0.54              -4.49
    Outlying......................              -0.11              -5.03
Facility Size: (Number of First
 Episodes):
< 19..............................               0.21              -4.88
20 to 49..........................               0.20              -4.86
50 to 99..........................               0.26              -4.77
100 to 199........................               0.25              -4.73
200 or More.......................               0.01              -4.93
Facility Size: (estimated total
 revenue)
    Small (estimated total revenue               0.14              -4.84
     <= $13.5 million)............
    Large (estimated total revenue              -0.08             -5.01
     > $13.5 million).............
------------------------------------------------------------------------
Note: Based on a 20 percent sample of CY 2008 claims linked to OASIS
  assessments.
*Urban/rural status, for the purposes of these simulations, is based on
  the wage index on which episode payment is based. The wage index is
  based on the site of service of the beneficiary.
REGION KEY:
New England = Connecticut, Maine, Massachusetts, New Hampshire, Rhode
  Island, Vermont; Middle Atlantic = Pennsylvania, New Jersey, New York;
  South Atlantic = Delaware, District of Columbia, Florida, Georgia,
  Maryland, North Carolina, South Carolina, Virginia, West Virginia;
  East North Central = Illinois, Indiana, Michigan, Ohio, Wisconsin;
  East South Central = Alabama, Kentucky, Mississippi, Tennessee; West
  North Central = Iowa, Kansas, Minnesota, Missouri, Nebraska, North
  Dakota, South Dakota; West South Central = Arkansas, Louisiana,
  Oklahoma, Texas; Mountain = Arizona, Colorado, Idaho, Montana, Nevada,
  New Mexico, Utah, Wyoming; Pacific = Alaska, California, Hawaii,
  Oregon, Washington; Outlying = Guam, Puerto Rico, Virgin Islands.
\1\ Percent change due to the effects of the update wage index, the 1.1
  percent HH market basket update, the 3.79 percent reduction to the
  national standardized episode rates, the national per-visit rates, the
  LUPA add-on payment amount, the 5 percent decrease in the rates due to
  the Affordable Care Act, the new approximate 2.5 percent target for
  outliers as a percentage of total HH PPS payments, a 0.67 FDL ratio,
  10 percent outlier cap, and the 3 percent rural add-on.

    In a separate, supplemental analysis, as merely an indicator of 
possible access to care issues, we looked at estimated margins of HHAs, 
by county, and the estimated effect that the provisions of this rule 
might have on HHA margins. We note that predicting the size of the 
increase in negative-margin agencies as a result of this rule is 
difficult to do because many agencies may find ways to cut costs or 
increase revenues so that margins do not deteriorate. We also note that 
margin analysis alone is not an accurate access to care indicator. Many 
factors affect whether agencies with low or negative margin would close 
or not, such as the organization's mission, the availability of 
alternate sources of funding, and whether or not the organization is 
embedded in a larger one.
    We performed the following analysis for the purposes of identifying 
potential access risks associated with this rule. In particular, we 
looked to identify whether the finalized policies of this rule might 
increase the number of counties not served by at least one HHA with a 
positive margin. The analysis demonstrated that the occurrence of such 
counties was very infrequent. Looking further, we also identified that 
the counties we identified had at least one HHA in a contiguous county 
with a positive margin. As we have previously described, we believe HH

[[Page 70461]]

industry margins are sufficient to support a rate reduction of this 
size. We note here as we have elsewhere in this rule that MedPac 
projected 2011 margins would remain high, at 13.7 percent (assuming the 
previously planned rate reduction of -2.71 percent in 2011), and MedPAC 
also reported that the number of agencies continues to grow, reaching 
in excess of 10,400 in 2009, a 50 percent increase since 2002. We again 
note that access to care was not found to be inadequate in 2002, when 
the number of agencies nationally was much lower than it is today. 
Thus, we do not believe that the finalized policies in this rule will 
result in access to care issues. We would note that the above described 
analysis is an indicator that access to care will not be an issue as a 
result of the provisions of this rule.

C. Alternative Considered

    As stated above, in section IV.A. of this rule, Overall Impact, we 
estimate that this final rule would have a significant economic impact 
on a substantial number of small entities. In the proposed rule, our 
analysis on the impact on small HHAs was from an episodic perspective. 
As a result of the public comments received on the proposed rule, we 
supplemented our impact from the proposed rule by linking to Medicare 
cost report data, which has reported total revenues for HHAs. The 
results of that supplemental analysis reveal that in using Medicare 
cost report data and a $13.5 million threshold to determine small 
versus large HHAs, the effect on small HHAs is virtually unchanged from 
that which was described in the proposed rule.
    In CY 2008 rulemaking, we promulgated case-mix reductions of 2.75 
percent for CY 2008, CY 2009, CY 2010, and 2.71 percent for CY 2011. 
Since that rulemaking, our analysis still shows that case-mix continues 
to grow. More specifically, nominal case-mix has grown from the 11.75 
percent growth identified in our analysis for the CY 2008 rulemaking to 
17.45 percent for this rule. While the 2.71 percent case-mix reduction 
was promulgated in CY 2008 rulemaking, because nominal case-mix 
continues to grow and thus to date we have not accounted for all of the 
increase in nominal case-mix growth, we believe it appropriate to 
reduce HH PPS rates now, so as to move towards more accurate payment 
for the delivery of HH services under the Medicare HH benefit.
    Furthermore, we have amended our proposal from the proposed rule, 
which would have implemented 2 successive years of case-mix reductions 
at 3.79 percent, and are instead finalizing only one 3.79 percent 
reduction for CY 2011. We will study additional case-mix data, and 
methods to incorporate such data, into our methodology for measuring 
real versus nominal case-mix change in future rulemaking.
    The other reductions to the HH PPS payments discussed in this rule 
and included in the final provisions of this rule are not discretionary 
as they are required by the Affordable Care Act.

D. 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 final rule.
    Table 20 provides our best estimate of the decrease in Medicare 
payments under the HH PPS as a result of the changes presented in this 
final rule based on the best available data. The expenditures are 
classified as a transfer to the Federal Government of $960 million.

       Table 20--Accounting Statement: Classification of Estimated
   Expenditures, From the 2010 HH PPS Calendar Year to the 2011 HH PPS
                              Calendar Year
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  Negative transfer--Estimated
                                             decrease in expenditures:
                                             $960 million.
From Whom to Whom.........................  Federal Government to HH
                                             providers.
------------------------------------------------------------------------

E. Conclusion

    In conclusion, we estimate that the net impact of the proposals in 
this rule is approximately $960 million in CY 2011 savings. The $960 
million impact to the proposed CY 2011 HH PPS reflects the 
distributional effects of an updated wage index ($20 million increase), 
the 1.1 percent HH market basket update ($210 million increase), the 
3.79 percent case-mix adjustment applicable to the national 
standardized 60-day episode rates ($700 million decrease), as well as 
the 2.5 percent returned from the outlier provisions of the Affordable 
Care Act ($490 million decrease). 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 418

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

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.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapters IV and V 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).

Subpart E--Home Health Services Under Hospital Insurance

0
2. Section 409.44 is amended by revising paragraphs (c)(1), (c)(2)(i), 
(c)(2)(iii), and (c)(2)(iv) to read as follows:


Sec.  409.44  Skilled services requirements.

* * * * *
    (c) * * *
    (1) Speech-language pathology services and physical or occupational 
therapy services must relate directly and specifically to a treatment 
regimen (established by the physician, after any needed consultation 
with the qualified therapist) that is designed to treat the 
beneficiary's illness or injury. Services related to activities for the 
general physical welfare of beneficiaries (for example, exercises to 
promote overall fitness) do not constitute physical therapy, 
occupational therapy, or speech-language pathology services for 
Medicare purposes. To be covered by Medicare, all of the requirements 
apply as follows:
    (i) The patient's plan of care must describe a course of therapy 
treatment and therapy goals which are consistent with the evaluation of 
the patient's

[[Page 70462]]

function, and both must be included in the clinical record. The therapy 
goals must be established by a qualified therapist in conjunction with 
the physician.
    (ii) The patient's clinical record must include documentation 
describing how the course of therapy treatment for the patient's 
illness or injury is in accordance with accepted professional standards 
of clinical practice.
    (iii) Therapy treatment goals described in the plan of care must be 
measurable, and must pertain directly to the patient's illness or 
injury, and the patient's resultant impairments.
    (iv) The patient's clinical record must demonstrate that the method 
used to assess a patient's function included objective measurements of 
function in accordance with accepted professional standards of clinical 
practice enabling comparison of successive measurements to determine 
the effectiveness of therapy goals. Such objective measurements would 
be made by the qualified therapist using measurements which assess 
activities of daily living that may include but are not limited to 
eating, swallowing, bathing, dressing, toileting, walking, climbing 
stairs, or using assistive devices, and mental and cognitive factors.
    (2) * * *
    (i) The services must be considered under accepted standards of 
professional clinical practice, to be a specific, safe, and effective 
treatment for the beneficiary's condition. Each of the following 
requirements must also be met:
    (A) The patient's function must be initially assessed and 
periodically reassessed by a qualified therapist, of the corresponding 
discipline for the type of therapy being provided, using a method which 
would include objective measurement as described in Sec.  
409.44(c)(1)(iv). If more than one discipline of therapy is being 
provided, a qualified therapist from each of the disciplines must 
perform the assessment and periodic reassessments. The measurement 
results and corresponding effectiveness of the therapy, or lack 
thereof, must be documented in the clinical record.
    (B) At least every 30 days a qualified therapist (instead of an 
assistant) must provide the needed therapy service and functionally 
reassess the patient in accordance with Sec.  409.44(c)(2)(i)(A). Where 
more than one discipline of therapy is being provided, a qualified 
therapist from each of the disciplines must provide the needed therapy 
service and functionally reassess the patient in accordance with Sec.  
409.44(c)(2)(i)(A) at least every 30 days.
    (C) If a patient is expected to require 13 therapy visits, a 
qualified therapist (instead of an assistant) must provide all of the 
therapy services on the 13th therapy visit and functionally reassess 
the patient in accordance with Sec.  409.44(c)(2)(i)(A). Exceptions to 
this requirement are as follows:
    (1) The qualified therapist's visit can occur after the 10th 
therapy visit but no later than the 13th therapy visit when the patient 
resides in a rural area or when documented circumstances outside the 
control of the therapist prevent the qualified therapist's visit at the 
13th therapy visit.
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide all of the 
therapy services and functionally reassess the patient in accordance 
with Sec.  409.44(c)(2)(i)(A) during the visit associated with that 
discipline which is scheduled to occur close to but no later than the 
13th therapy visit per the plan of care.
    (D) If a patient is expected to require 19 therapy visits, a 
qualified therapist (instead of an assistant) must provide all of the 
therapy services on the 19th therapy visit and functionally reassess 
the patient in accordance with Sec.  409.44(c)(2)(A). Exceptions to 
this requirement are as follows:
    (1) This required qualified therapist service can instead occur 
after the 16th therapy visit but no later than the 19th therapy visit 
when the patient resides in a rural area or documented circumstances 
outside the control of the therapist preclude the qualified therapist 
service at the 19th therapy visit.
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide the therapy 
service and functionally reassess the patient in accordance with Sec.  
409.44(c)(2)(i)(A) during the visit which would occur close to but 
before the 19th visit per the plan of care.
    (E) Pursuant to the requirements described in paragraphs 
(c)(2)(i)(A)(B), (C), and (D) above, subsequent therapy visits will not 
be covered until the following conditions are met:
    (1) The qualified therapist has completed the reassessment and 
objective measurement of the effectiveness of the therapy as it relates 
to the therapy goals.
    (2) The qualified therapist has determined if goals have been 
achieved or require updating.
    (3) The qualified therapist has documented measurement results and 
corresponding therapy effectiveness in the clinical record in 
accordance with Sec.  409.44(c)(2)(i)(H) of this section.
    (F) If the criteria for maintenance therapy, described at Sec.  
409.44(c)(2)(iii)(B) and (C) of this section are not met, the following 
criteria must also be met for subsequent therapy visits to be covered:
    (1) If the objective measurements of the reassessment do not reveal 
progress toward goals, the qualified therapist together with the 
physician must determine whether the therapy is still effective or 
should be discontinued.
    (2) If therapy is to be continued in accordance with Sec.  
409.44(c)(2)(iv)(B)(1) of this section, the clinical record must 
document with a clinically supportable statement why there is an 
expectation that the goals are attainable in a reasonable and generally 
predictable period of time.
    (G) Clinical notes written by therapy assistants may supplement the 
clinical record, and if included, must include the date written, the 
signature, professional designation, and objective measurements or 
description of changes in status (if any) relative to each goal being 
addressed by treatment. Assistants may not make clinical judgments 
about why progress was or was not made, but must report the progress or 
the effectiveness of the therapy (or lack thereof) objectively.
    (H) Documentation by a qualified therapist must include the 
following:
    (1) The therapist's assessment of the effectiveness of the therapy 
as it relates to the therapy goals;
    (2) Plans for continuing or discontinuing treatment with reference 
to evaluation results and or treatment plan revisions;
    (3) Changes to therapy goals or an updated plan of care that is 
sent to the physician for signature or discharge;
    (4) Documentation of objective evidence or a clinically supportable 
statement of expectation that the patient can continue to progress 
toward the treatment goals and is responding to therapy in a reasonable 
and generally predictable period of time; or in the case of maintenance 
therapy, the patient is responding to therapy and can meet the goals in 
a predictable period of time.
* * * * *
    (iii) For therapy services to be covered in the home health 
setting, one of the following three criteria must be met:
    (A) There must be an expectation that the beneficiary's condition 
will improve materially in a reasonable (and generally predictable) 
period of time based on the physician's assessment of the beneficiary's 
restoration potential and unique medical condition.

[[Page 70463]]

    (1) Material improvement requires that the clinical record 
demonstrate that the patient is making improvement towards goals when 
measured against his or her condition at the start of treatment.
    (2) If an individual's expected restorative potential would be 
insignificant in relation to the extent and duration of therapy 
services required to achieve such potential, therapy would not be 
considered reasonable and necessary, and thus would not be covered.
    (3) When a patient suffers a transient and easily reversible loss 
or reduction of function which could reasonably be expected to improve 
spontaneously as the patient gradually resumes normal activities, 
because the services do not require the performance or supervision of a 
qualified therapist, those services are not to be considered reasonable 
and necessary covered therapy services.
    (B) The unique clinical condition of a patient may require the 
specialized skills, knowledge, and judgment of a qualified therapist to 
design or establish a safe and effective maintenance program required 
in connection with the patient's specific illness or injury.
    (1) If the services are for the establishment of a maintenance 
program, they must include the design of the program, the instruction 
of the beneficiary, family, or home health aides, and the necessary 
periodic reevaluations of the beneficiary and the program to the degree 
that the specialized knowledge and judgment of a physical therapist, 
speech-language pathologist, or occupational therapist is required.
    (2) The maintenance program must be established by a qualified 
therapist (and not an assistant).
    (C) The unique clinical condition of a patient may require the 
specialized skills of a qualified therapist to perform a safe and 
effective maintenance program required in connection with the patient's 
specific illness or injury. Where the clinical condition of the patient 
is such that the complexity of the therapy services required to 
maintain function involve the use of complex and sophisticated therapy 
procedures to be delivered by the therapist himself/herself (and not an 
assistant) or the clinical condition of the patient is such that the 
complexity of the therapy services required to maintain function must 
be delivered by the therapist himself/herself (and not an assistant) in 
order to ensure the patient's safety and to provide an effective 
maintenance program, then those reasonable and necessary services shall 
be covered.
    (iv) The amount, frequency, and duration of the services must be 
reasonable and necessary, as determined by a qualified therapist and/or 
physician, using accepted standards of clinical practice.
    (A) Where factors exist that would influence the amount, frequency 
or duration of therapy services, such as factors that may result in 
providing more services than are typical for the patient's condition, 
those factors must be documented in the plan of care and/or functional 
assessment.
    (B) Clinical records must include documentation using objective 
measures that the patient continues to progress towards goals. If 
progress cannot be measured, and continued progress towards goals 
cannot be expected, therapy services cease to be covered except when--
    (1) Therapy progress regresses or plateaus, and the reasons for 
lack of progress are documented to include justification that continued 
therapy treatment will lead to resumption of progress toward goals; or
    (2) Maintenance therapy as described in Sec.  409.44(c)(2)(iii)(B) 
or (C) is needed.

PART 418--HOSPICE CARE

0
3. The authority citation for part 418 continues to read as follows:

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

Subpart B--Eligibility, Election and Duration of Benefits

0
4. Section 418.22 is amended by--
0
A. Revising paragraphs (a)(3) and (b)(3)(iii).
0
B. Adding paragraphs (a)(4), (b)(3)(v), (b)(4), and (b)(5).
    The revisions and additions read as follows:


Sec.  418.22  Certification of terminal illness.

    (a) * * *
    (3) Exceptions. (i) If the hospice cannot obtain the written 
certification within 2 calendar days, after a period begins, it must 
obtain an oral certification within 2 calendar days and the written 
certification before it submits a claim for payment.
    (ii) Certifications may be completed no more than 15 calendar days 
prior to the effective date of election.
    (iii) Recertifications may be completed no more than 15 calendar 
days prior to the start of the subsequent benefit period.
    (4) Face-to-face encounter. As of January 1, 2011, a hospice 
physician or hospice nurse practitioner must have a face-to-face 
encounter with each hospice patient, whose total stay across all 
hospices is anticipated to reach the 3rd benefit period, no more than 
30 calendar days prior to the 3rd benefit period recertification, and 
must have a face-to-face encounter with that patient no more than 30 
calendar days prior to every recertification thereafter, to gather 
clinical findings to determine continued eligibility for hospice care.
    (b) * * *
    (3) * * *
    (iii) The narrative shall include a statement directly above the 
physician signature attesting that by signing, the physician confirms 
that he/she composed the narrative based on his/her review of the 
patient's medical record or, if applicable, his/her examination of the 
patient.
* * * * *
    (v) The narrative associated with the 3rd benefit period 
recertification and every subsequent recertification must include an 
explanation of why the clinical findings of the face-to-face encounter 
support a life expectancy of 6 months or less.
    (4) The physician or nurse practitioner who performs the face-to-
face encounter with the patient described in (a)(4), must attest in 
writing that he or she had a face-to-face encounter with the patient, 
including the date of that visit. The attestation of the nurse 
practitioner shall state that the clinical findings of that visit were 
provided to the certifying physician, for use in determining whether 
the patient continues to have a life expectancy of 6 months or less, 
should the illness run its normal course. The attestation, its 
accompanying signature, and the date signed, must be a separate and 
distinct section of, or an addendum to, the recertification form, and 
must be clearly titled.
    (5) All certifications and recertifications must be signed and 
dated by the physician(s), and must include the benefit period dates to 
which the certification or recertification applies.

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).

Subpart B--Certification and Plan Requirements

0
6. Section 424.22 is amended by--
0
A. Adding paragraph (a)(1)(v).

[[Page 70464]]

0
B. Revising paragraph (a)(2), (b)(1), and (d).
    The revisions and additions read as follows:


Sec.  424.22  Requirements for home health services.

    (a) * * *
    (1) * * *
    (v) The physician responsible for performing the initial 
certification must document that the face-to-face patient encounter, 
which is related to the primary reason the patient requires home health 
services, has occurred no more than 90 days prior to the home health 
start of care date or within 30 days of the start of the home health 
care by including the date of the encounter, and including an 
explanation of why the clinical findings of such encounter support that 
the patient is homebound and in need of either intermittent skilled 
nursing services or therapy services as defined in Sec.  409.42(a) and 
(c) respectively. Under sections 1814(a)(2)(C) and 1835(a)(2)(A) of the 
Act, the face-to-face encounter must be performed by the certifying 
physician himself or herself or by a nurse practitioner, a clinical 
nurse specialist (as those terms are defined in section 1861(aa)(5) of 
the Act) who is working in collaboration with the physician in 
accordance with State law, a certified nurse midwife (as defined in 
section 1861(gg)of the Act) as authorized by State law, or a physician 
assistant (as defined in section 1861(aa)(5) of the Act) under the 
supervision of the physician. The documentation of the face-to-face 
patient encounter must be a separate and distinct section of, or an 
addendum to, the certification, and must be clearly titled, dated and 
signed by the certifying physician.
    (A) The nonphysician practitioner performing the face-to-face 
encounter must document the clinical findings of that face-to-face 
patient encounter and communicate those findings to the certifying 
physician.
    (B) If a face-to-face patient encounter occurred within 90 days of 
the start of care but is not related to the primary reason the patient 
requires home health services, or the patient has not seen the 
certifying physician or allowed nonphysician practitioner within the 90 
days prior to the start of the home health episode, the certifying 
physician or nonphysician practitioner must have a face to face 
encounter with the patient within 30 days of the start of the home 
health care.
    (C) The face-to-face patient encounter may occur through 
telehealth, in compliance with Section 1834(m) of the Act and subject 
to the list of payable Medicare telehealth services established by the 
applicable physician fee schedule regulation.
    (D) The physician responsible for certifying the patient for home 
care must document the face-to-face encounter on the certification 
itself, or as an addendum to the certification (as described in 
paragraph (a)(1)(v) of this section), that the condition for which the 
patient was being treated in the face-to-face patient encounter is 
related to the primary reason the patient requires home health 
services, and why the clinical findings of such encounter support that 
the patient is homebound and in need of either intermittent skilled 
nursing services or therapy services as defined in Sec.  409.42(a) and 
(c) respectively. The documentation must be clearly titled, dated and 
signed by the certifying physician.
    (2) Timing and signature. The certification of need for home health 
services must be obtained at the time the plan of care is established 
or as soon thereafter as possible and must be signed and dated by the 
physician who establishes the plan.
    (b) * * *
    (1) Timing and signature of recertification. Recertification is 
required at least every 60 days, preferably at the time the plan is 
reviewed, and must be signed and dated by the physician who reviews the 
plan of care. The recertification is required at least every 60 days 
when there is a--
* * * * *
    (d) Limitation of the performance of physician certification and 
plan of care functions. The need for home health services to be 
provided by an HHA may not be certified or recertified, and a plan of 
care may not be established and reviewed, by any physician who has a 
financial relationship as defined in Sec.  411.354 of this chapter, 
with that HHA, unless the physician's relationship meets one of the 
exceptions in section 1877 of the Act, which sets forth general 
exceptions to the referral prohibition related to both ownership/
investment and compensation; exceptions to the referral prohibition 
related to ownership or investment interests; and exceptions to the 
referral prohibition related to compensation arrangements.
    (1) If a physician has a financial relationship as defined in Sec.  
411.354 of this chapter, with an HHA, the physician may not certify or 
recertify need for home health services provided by that HHA, establish 
or review a plan of treatment for such services, or conduct the face-
to-face encounter required under sections 1814(a)(2)(C) and 
1835(a)(2)(A) of the Act unless the financial relationship meets one of 
the exceptions set forth in Sec.  411.355 through Sec.  411.357 of this 
chapter.
    (2) A Nonphysician practitioner may not perform the face-to-face 
encounter required under sections 1814(a)(2)(C) and 1835(a)(2)(A) of 
the Act if such encounter would be prohibited under paragraph (d)(i) if 
the nonphysician practitioner were a physician.

Subpart P--Requirements for Establishing and Maintaining Medicare 
Billing Privileges

0
7. Section 424.502 is amended by adding the definition of ``Change in 
Majority Ownership'' in alphabetical order to read as follows:


Sec.  424.502  Definitions.

* * * * *
    Change in Majority Ownership occurs when an individual or 
organization acquires more than a 50 percent direct ownership interest 
in an HHA during the 36 months following the HHA's initial enrollment 
into the Medicare program or the 36 months following the HHA's most 
recent change in majority ownership (including asset sale, stock 
transfer, merger, and consolidation). This includes an individual or 
organization that acquires majority ownership in an HHA through the 
cumulative effect of asset sales, stock transfers, consolidations, or 
mergers during the 36-month period after Medicare billing privileges 
are conveyed or the 36-month period following the HHA's most recent 
change in majority ownership.
* * * * *

0
8. Section 424.510 is amended by adding paragraph (d)(9) to read as 
follows:


Sec.  424.510  Requirements for enrolling in the Medicare program.

* * * * *
    (d) * * *
    (9) In order to obtain enrollment and to maintain enrollment for 
the first three months after Medicare billing privileges are conveyed, 
a home health agency must satisfy the home health ``initial reserve 
operating funds'' requirement as set forth in Sec.  489.28 of this 
chapter.
* * * * *

0
9. Section 424.530 is amended by adding paragraph (a)(8)to read as 
follows:


Sec.  424.530  Denial of enrollment in the Medicare program.

    (a) * * *
    (8) Initial Reserve Operating Funds. (i) CMS or its designated 
Medicare

[[Page 70465]]

contractor may deny Medicare billing privileges if, within 30 days of a 
CMS or Medicare contractor request, a home health agency (HHA) cannot 
furnish supporting documentation which verifies that the HHA meets the 
initial reserve operating funds requirement found in Sec.  489.28(a) of 
this title.
    (ii) CMS may deny Medicare billing privileges upon an HHA 
applicant's failure to satisfy the initial reserve operating funds 
requirement found in 42 CFR 489.28(a).
* * * * *

0
10. Section 424.535 is amended by adding paragraph (a)(11) to read as 
follows:


Sec.  424.535  Revocation of enrollment and billing privileges in the 
Medicare program.

    (a) * * *
    (11) Initial Reserve Operating Funds. CMS or its designated 
Medicare contractor may revoke the Medicare billing privileges of an 
HHA and the corresponding provider agreement if, within 30 days of a 
CMS or Medicare contractor request, the HHA cannot furnish supporting 
documentation verifying that the HHA meets the initial reserve 
operating funds requirement found in 42 CFR Sec.  489.28(a).
* * * * *

0
11. Section 424.550 is amended by adding paragraphs (b)(1) and (b)(2) 
to read as follows:


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

* * * * *
    (b) * * *
    (1) Unless an exception in (b)(2) of this section applies, if there 
is a change in majority ownership of a home health agency by sale 
(including asset sales, stock transfers, mergers, and consolidations) 
within 36 months after the effective date of the HHA's initial 
enrollment in Medicare or within 36 months after the HHA's most recent 
change in majority ownership, 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 (initial) HHA under the 
provisions of Sec.  424.510 of this subpart.
    (ii) Obtain a State survey or an accreditation from an approved 
accreditation organization.
    (2)(i) The HHA submitted two consecutive years of full cost 
reports. For purposes of this exception, low utilization or no 
utilization cost reports do not qualify as full cost reports.
    (ii) An HHA's parent company is undergoing an internal corporate 
restructuring, such as a merger or consolidation.
    (iii) The owners of an existing HHA are changing the HHA's existing 
business structure (for example, from a corporation to a partnership 
(general or limited); from an LLC to a corporation; from a partnership 
(general or limited) to an LLC) and the owners remain the same.
    (iv) An individual owner of an HHA dies.
* * * * *

PART 484--HOME HEALTH SERVICES

0
12. 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 E--Prospective Payment System for Home Health Agencies

0
13. Section 484.250 is revised to read as follows:


Sec.  484.250  Patient assessment data.

    (a) An HHA must submit to CMS the OASIS-C data described at Sec.  
484.55 (b)(1) and Home Health Care CAHPS data in order for CMS to 
administer the payment rate methodologies described in Sec.  484.215, 
Sec.  484.230, and Sec.  484.235 of this subpart, and meet the quality 
reporting requirements of section 1895 (b)(3)(B)(v) of the Act.
    (b) An HHA that has less than 60 eligible unique HHCAHPS patients 
annually must submit to CMS their total HHCAHPS patient count to CMS in 
order to be exempt from the HHCAHPS reporting requirements.
    (c) An HHA must contract with an approved, independent HHCAHPS 
survey vendor to administer the HHCAHPS on its behalf.
    (1) CMS approves an HHCAHPS survey vendor if such applicant has 
been in business for a minimum of three years and has conducted surveys 
of individuals and samples for at least 2 years. For HHCAHPS, a 
``survey of individuals'' is defined as the collection of data from at 
least 600 individuals selected by statistical sampling methods and the 
data collected are used for statistical purposes. All applicants that 
meet these requirements will be approved by CMS.
    (2) No organization, firm, or business that owns, operates, or 
provides staffing for a HHA is permitted to administer its own Home 
Health Care CAHPS (HHCAHPS) Survey or administer the survey on behalf 
of any other HHA in the capacity as an HHCAHPS survey vendor. Such 
organizations will not be approved by CMS as HHCAHPS survey vendors.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
14. The authority citation for part 489 continues to read as follows:

    Authority:  Secs. 1102, 1819, 1820(e), 1861, 1864(m), 1866, 
1869, and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i-3, 
1395x, 1395aa(m), 1395cc, 1395ff, and 1395hh).

Subpart B--Essentials of Provider Agreements

0
15. Section 489.28 is amended by--
0
A. Revising paragraphs (a) and (g).
0
B. Adding paragraph (c)(1).
0
C. Reserving paragraph (c)(2).
    The addition and revisions read as follows:


Sec.  489.28  Special capitalization requirements for HHAs.

    (a) Basic rule. An HHA entering the Medicare program on or after 
January 1, 1998, including a new HHA as a result of a change of 
ownership, if the change of ownership results in a new provider number 
being issued, must have available sufficient funds, which we term 
``initial reserve operating funds,'' at the time of application 
submission and at all times during the enrollment process up to the 
expiration of the 3-month period following the conveyance of Medicare 
billing privileges to operate the HHA for the three-month period after 
Medicare billing privileges are conveyed by the Medicare contractor, 
exclusive of actual or projected accounts receivable from Medicare.
* * * * *
    (c) * * *
    (1) In selecting the comparative HHAs as described in this 
paragraph (c), the CMS contractor shall only select HHAs that have 
provided cost reports to Medicare. When selecting cost reports for the 
comparative analysis, CMS will exclude low utilization or no 
utilization cost reports.
    (2) [Reserved.]
* * * * *
    (g) Billing Privileges. (1) CMS may deny Medicare billing 
privileges to an HHA unless the HHA meets the initial reserve operating 
funds requirements of this section.
    (2) CMS may revoke the Medicare billing privileges of an HHA that 
fails to maintain and comply with the initial reserve operating funds 
requirements of this section for the three-month period after it 
receives its Medicare billing privileges.

    Authority:  (Catalog of Federal Domestic Assistance Program No. 
93.773, Medicare--

[[Page 70466]]

Hospital Insurance; and Program No. 93.774, Medicare--Supplementary 
Medical Insurance Program)

    Dated: October 26, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 29, 2010.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

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

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