Federal Register, Volume 75 Issue 221 (Wednesday, November 17, 2010)

[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

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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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[FR Doc. 2010-27778 Filed 11-2-10; 4:15 pm]
BILLING CODE 4120-01-C