[Federal Register Volume 76, Number 89 (Monday, May 9, 2011)]
[Proposed Rules]
[Pages 26806-26851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10689]



[[Page 26805]]

Vol. 76

Monday,

No. 89

May 9, 2011

Part II





Department of Health and Human Services





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 Centers for Medicare & Medicaid Services



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42 CFR Part 418



 Medicare Program; Hospice Wage Index for Fiscal Year 2012; Proposed 
Rule

  Federal Register / Vol. 76 , No. 89 / Monday, May 9, 2011 / Proposed 
Rules  

[[Page 26806]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 418

[CMS-1355-P]
RIN 0938-AQ31


Medicare Program; Hospice Wage Index for Fiscal Year 2012

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would set forth the hospice wage index for 
fiscal year 2012 and continue the phase-out of the wage index budget 
neutrality adjustment factor (BNAF), with an additional 15 percent BNAF 
reduction, for a total BNAF reduction in FY 2012 of 40 percent. The 
BNAF phase-out will continue with successive 15 percent reductions from 
FY 2013 through FY 2016. This proposed rule would change the hospice 
aggregate cap calculation methodology. This proposed rule also would 
revise the hospice requirement for a face-to-face encounter for 
recertification of a patient's terminal illness. Finally, this proposed 
rule would begin implementation of a hospice quality reporting program.

DATES: Comment Date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
eastern time on July 8, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1355-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1355-P, P.O. Box 8012, 
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received before 
the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1355-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses: a. For delivery in Washington, 
DC--Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue, SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is 
not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address, please 
call telephone number (410) 786 9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: For information regarding ``Quality 
Reporting for Hospices'' and ``Collection of Information Requirements'' 
sections, please contact Robin Dowell at (410) 786-0060. For 
information regarding ``Hospice Wage Index'' and ``Hospice Face-to-Face 
Requirement'' sections, please contact Anjana Patel at (410) 786-2120. 
For information regarding all other sections, please contact Katie 
Lucas at (410) 786-7723.

SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments 
from the public on all issues set forth in this rule to assist us in 
fully considering issues and developing policies. You can assist us by 
referencing the file code CMS-1355-P and the specific ``issue 
identifier'' that precedes the section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

I. Background
    A. General
    1. Hospice Care
    2. Medicare Payment for Hospice Care
    B. Hospice Wage Index
    1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified, Hospital 
Wage Index)
    2. Changes to Core-Based Statistical Area (CBSA) Designations
    3. Definition of Rural and Urban Areas
    4. Areas Without Hospital Wage Data
    5. CBSA Nomenclature Changes
    6. Wage Data for Multi-Campus Hospitals
    7. Hospice Payment Rates
II. Summary of Cap Comments Solicited in the FY 2011 Hospice Wage 
Index Notice With Comment Period
III. Provisions of the Proposed Rule
    A. FY 2012 Hospice Wage Index
    1. Background
    2. Areas Without Hospital Wage Data
    3. FY 2012 Wage Index With an Additional 15 Percent Reduced 
Budget Neutrality Adjustment Factor (BNAF)
    4. Effects of Phasing Out the BNAF
    B. Aggregate Cap Calculation Methodology
    1. Cap Determinations for Cap Years Ending On or Before October 
31, 2011
    2. Cap Determinations for Cap Years Ending On or After October 
31, 2012
    3. Patient-by-Patient Proportional Methodology
    4. Streamlined Methodology
    5. Changing Methodologies
    6. Other Issues
    7. Changes to Regulatory Text
    C. Hospice Face-to-Face Requirement
    D. Technical Proposals and Clarification
    1. Hospice Local Coverage Determinations
    2. Definition of Hospice Employee
    3. Timeframe for Face-to-Face Encounters
    4. Hospice Aide and Homemaker Services
    E. Quality Reporting for Hospices
    1. Background and Statutory Authority
    2. Quality Measures for Hospice Quality Reporting Program for 
Payment Year FY 2014
    a. Considerations in the Selection of the Proposed Quality 
Measures

[[Page 26807]]

    b. Proposed Quality Measures for the Quality Reporting Program 
for Hospices
    c. Proposed Timeline for Data Collection Under the Quality 
Reporting Program for Hospices
    d. Data Submission Requirements
    3. Public Availability of Data Submitted
    4. Additional Measures Under Consideration
IV. Updates on Issues Not Proposed for Rulemaking for FY 2012 
Rulemaking
    A. Update on Hospice Payment Reform and Value Based Purchasing
    B. Update on the Redesigned Provider Statistical & Reimbursement 
Report
     (PS&R)
V. Collection of Information Requirements
    A. Structural Measure: Participation in Quality Assessment 
Performance Improvement Program That Includes at Least Three 
Indicators Related to Patient Care
    B. NQF Measure 0209: Percentage of Patients Who Were 
Uncomfortable Because of Pain on Admission to Hospice Whose Pain Was 
Brought Under Control Within 48 Hours
VI. Response to Comments
VII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    4. Detailed Economic Analysis
    a. Effects on Hospices
    b. Hospice Size
    c. Geographic Location
    d. Type of Ownership
    e. Hospice Base
    f. Effects on Other Providers
    g. Effects on the Medicare and Medicaid Programs
    h. Accounting Statement
    i. Conclusion
    B. Regulatory Flexibility Act Analysis
    C. Unfunded Mandates Reform Act Analysis
VIII. Federalism Analysis
Addendum A: FY 2012 Wage Index for Urban Areas
Addendum B: FY 2012 Wage Index for Rural Areas

I. Background

A. General

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

B. Hospice Wage Index

    The hospice wage index is used to adjust payment rates for hospice 
agencies under the Medicare program to reflect local differences in 
area wage levels. Our regulations at Sec.  418.306(c) require each 
hospice's labor market to be established using the most current 
hospital wage data available, including any changes by the Office of 
Management and Budget (OMB) to the Metropolitan Statistical Areas 
(MSAs) definitions. OMB revised the MSA definitions beginning in 2003 
with new designations called the Core Based Statistical Areas (CBSAs). 
For the purposes of the hospice benefit, the term ``MSA-based'' refers 
to wage index values and designations based on the previous MSA 
designations before 2003. Conversely, the term ``CBSA-based'' refers to 
wage index values and designations based on the OMB revised MSA 
designations in 2003, which now include CBSAs. In the August 11, 2004 
Inpatient Prospective Payment System (IPPS) final rule (69 FR 48916, 
49026), revised labor market area definitions were adopted at Sec.  
412.64(b), which were effective October 1, 2004 for acute care 
hospitals. We also revised the labor market areas for hospices using 
the new OMB standards that included CBSAs. In the FY 2006 hospice wage 
index final rule (70 FR 45130), we implemented a 1-year transition 
policy using a 50/50 blend of the CBSA-based wage index values and the 
Metropolitan Statistical Area (MSA)-based wage index values for FY 
2006. The one-year transition policy ended on September 30, 2006. For 
fiscal years 2007 and beyond, we use CBSAs.
    The original hospice wage index was based on the 1981 Bureau of 
Labor Statistics hospital data and had not been updated since 1983. In 
1994, because of disparity in wages from one geographical location to 
another, a committee was formulated to negotiate a wage index 
methodology that could be accepted by the industry and the government. 
This committee, functioning under a process established by the 
Negotiated Rulemaking Act of 1990, comprised representatives from 
national hospice associations; rural, urban, large and small hospices 
and multi-site hospices; consumer groups; and a government 
representative. On April 13, 1995, the Hospice Wage Index Negotiated 
Rulemaking Committee (the Committee) signed an agreement for the 
methodology to be used for updating the hospice wage index.
    In the August 8, 1997 Federal Register (62 FR 42860), we published 
a final rule implementing a new methodology for calculating the hospice 
wage index based on the recommendations of the negotiated rulemaking 
committee. The Committee's statement was included in the appendix of 
that final rule (62 FR 42883).
    The reduction in overall Medicare payments if a new wage index were 
adopted was noted in the November 29, 1995 notice transmitting the 
recommendations of the Committee (60 FR 61264). Therefore, the 
Committee also decided that for each year in updating the hospice wage 
index, aggregate Medicare payments to hospices would remain budget 
neutral to payments as if the 1983 wage index had been used.
    As suggested by the Committee, ``budget neutrality'' would mean 
that, in a given year, estimated aggregate payments for Medicare 
hospice services using the updated hospice values would equal estimated 
payments that would have been made for these services if the 1983 
hospice wage index values had remained in effect. Although payments to 
individual hospice programs would change each year, the total payments 
each year to hospices would not be affected by using the updated 
hospice wage index because total payments would be budget neutral as if 
the 1983 wage index had been used. To implement this policy, a Budget 
Neutrality Adjustment Factor (BNAF) would be computed and applied 
annually to the pre-floor, pre-reclassified hospital wage index when 
deriving the hospice wage index.

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    The BNAF is calculated by computing estimated payments using the 
most recent, completed year of hospice claims data. The units (days or 
hours) from those claims are multiplied by the updated hospice payment 
rates to calculate estimated payments. For the FY 2011 Hospice Wage 
Index Notice with Comment Period, that meant estimating payments for FY 
2011 using FY 2009 hospice claims data, and applying the FY 2011 
hospice payment rates (updating the FY 2010 rates by the FY 2011 
inpatient hospital market basket update). The FY 2011 hospice wage 
index values are then applied to the labor portion of the payment rates 
only. The procedure is repeated using the same claims data and payment 
rates, but using the 1983 BLS-based wage index instead of the updated 
raw pre-floor, pre-reclassified hospital wage index (note that both 
wage indices include their respective floor adjustments). The total 
payments are then compared, and the adjustment required to make total 
payments equal is computed; that adjustment factor is the BNAF.
    The FY 2010 Hospice Wage Index Final Rule (74 FR 39384) finalized a 
provision for a 7-year phase-out of the BNAF, which is applied to the 
wage index values. The BNAF was reduced by 10 percent in FY 2010, an 
additional 15 percent in FY 2011, and will be reduced by an additional 
15 percent in each of the next 5 years, for complete phase out in 2016.
    The hospice wage index is updated annually. Our most recent annual 
hospice wage index Notice with Comment Period, published in the Federal 
Register (75 FR 42944) on July 22, 2010, set forth updates to the 
hospice wage index for FY 2011. As noted previously, that update 
included the second year of a 7-year phase-out of the BNAF, which was 
applied to the wage index values. The BNAF was reduced by 10 percent in 
FY 2010 and by an additional 15 percent in 2011, for a total FY 2011 
reduction of 25 percent.
1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified Hospital Wage 
Index)
    As described in the August 8, 1997 hospice wage index final rule 
(62 FR 42860), the pre-floor and pre-reclassified hospital wage index 
is used as the raw wage index for the hospice benefit. These raw wage 
index values are then subject to either a budget neutrality adjustment 
or application of the hospice floor to compute the hospice wage index 
used to determine payments to hospices.
    Pre-floor, pre-reclassified hospital wage index values of 0.8 or 
greater are currently adjusted by a reduced BNAF. As noted above, for 
FY 2011, the BNAF was reduced by a cumulative total of 25 percent. Pre-
floor, pre-reclassified hospital wage index values below 0.8 are 
adjusted by the greater of: (1) The hospice BNAF, reduced by a total of 
25 percent for FY 2011; or (2) the hospice floor (which is a 15 percent 
increase) subject to a maximum wage index value of 0.8. For example, if 
in FY 2011, County A had a pre-floor, pre-reclassified hospital wage 
index (raw wage index) value of 0.3994, we would perform the following 
calculations using the budget neutrality factor (which for this example 
is an unreduced BNAF of 0.060562, less 25 percent, or 0.045422) and the 
hospice floor to determine County A's hospice wage index:
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the 25 percent reduced BNAF: (0.3994 x 1.045422 = 
0.4175).
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the hospice floor: (0.3994 x 1.15 = 0.4593).
    Based on these calculations, County A's hospice wage index would be 
0.4593.
    The BNAF has been computed and applied annually, in full or in 
reduced form, to the labor portion of the hospice payment. Currently, 
the labor portion of the payment rates is as follows: for Routine Home 
Care, 68.71 percent; for Continuous Home Care, 68.71 percent; for 
General Inpatient Care, 64.01 percent; and for Respite Care, 54.13 
percent. The non-labor portion is equal to 100 percent minus the labor 
portion for each level of care. Therefore the non-labor portion of the 
payment rates is as follows: for Routine Home Care, 31.29 percent; for 
Continuous Home Care, 31.29 percent; for General Inpatient Care, 35.99 
percent; and for Respite Care, 45.87 percent.
2. Changes to Core Based Statistical Area (CBSA) Designations
    The annual update to the hospice wage index is published in the 
Federal Register and is based on the most current available hospital 
wage data, as well as any changes by the OMB to the definitions of 
MSAs, which now include CBSA designations. The August 4, 2005 final 
rule (70 FR 45130) set forth the adoption of the changes discussed in 
the OMB Bulletin No. 03-04 (June 6, 2003), which announced revised 
definitions for Micropolitan Statistical Areas and the creation of MSAs 
and Combined Statistical Areas. In adopting the OMB CBSA geographic 
designations, we provided for a 1-year transition with a blended 
hospice wage index for all hospices for FY 2006. For FY 2006, the 
hospice wage index consisted of a blend of 50 percent of the FY 2006 
MSA-based hospice wage index and 50 percent of the FY 2006 CBSA based 
hospice wage index. Subsequent fiscal years have used the full CBSA-
based hospice wage index.
3. Definition of Rural and Urban Areas
    Each hospice's labor market is determined based on definitions of 
MSAs issued by OMB. In general, an urban area is defined as an MSA or 
New England County Metropolitan Area (NECMA), as defined by OMB. Under 
Sec.  412.64(b)(1)(ii)(C), a rural area is defined as any area outside 
of the urban area. The urban and rural area geographic classifications 
are defined in Sec.  412.64(b)(1)(ii)(A) through (C), and have been 
used for the Medicare hospice benefit since implementation.
    When the raw pre-floor, pre-reclassified hospital wage index was 
adopted for use in deriving the hospice wage index, it was decided not 
to take into account IPPS geographic reclassifications. This policy of 
following OMB designations of rural or urban, rather than considering 
some Counties to be ``deemed'' urban, is consistent with our policy of 
not taking into account IPPS geographic reclassifications in 
determining payments under the hospice wage index.
4. Areas Without Hospital Wage Data
    When adopting OMB's new labor market designations in FY 2006, we 
identified some geographic areas where there were no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the hospice wage index. Beginning in FY 2006, we adopted a policy to 
use the FY 2005 pre-floor, pre-reclassified hospital wage index value 
for rural areas when no hospital wage data were available. We also 
adopted the policy that for urban labor markets without a hospital from 
which a hospital wage index data could be derived, all of the CBSAs 
within the State would be used to calculate a statewide urban average 
pre-floor, pre-reclassified hospital wage index value to use as a 
reasonable proxy for these areas. Consequently, in subsequent fiscal 
years, we applied the average pre-floor, pre-reclassified hospital wage 
index data from all urban areas in that state, to urban areas without a 
hospital. This year the only such CBSA is 25980, Hinesville-Fort 
Stewart, Georgia.
    Under the CBSA labor market areas, there are no hospitals in rural 
locations in Massachusetts and Puerto Rico. Since there was no rural 
proxy for more recent

[[Page 26809]]

rural data within those areas, in the FY 2006 hospice wage index 
proposed rule (70 FR 22394, 22398), we proposed applying the FY 2005 
pre-floor, pre-reclassified hospital wage index value to rural areas 
where no hospital wage data were available. In the FY 2006 final rule 
and in the FY 2007 update notice, we applied the FY 2005 pre-floor, 
pre-reclassified hospital wage index data for areas lacking hospital 
wage data in both FY 2006 and FY 2007 for rural Massachusetts and rural 
Puerto Rico.
    In the FY 2008 final rule (72 FR 50214, 50217) we considered 
alternatives to our methodology to update the pre-floor, pre-
reclassified hospital wage index for rural areas without hospital wage 
data. We indicated that we believed that the best imputed proxy for 
rural areas, would: (1) Use pre-floor, pre-reclassified hospital data; 
(2) use the most local data available to impute a rural pre-floor, pre-
reclassified hospital wage index; (3) be easy to evaluate; and, (4) be 
easy to update from year-to-year.
    Therefore, in FY 2008 through FY 2011, in cases where there was a 
rural area without rural hospital wage data, we used the average pre-
floor, pre-reclassified hospital wage index data from all contiguous 
CBSAs to represent a reasonable proxy for the rural area. This approach 
does not use rural data; however, the approach, which uses pre-floor, 
pre-reclassified hospital wage data, is easy to evaluate, is easy to 
update from year-to-year, and uses the most local data available. In 
the FY 2008 rule (72 FR at 50217), we noted that in determining an 
imputed rural pre-floor, pre-reclassified hospital wage index, we 
interpret the term ``contiguous'' to mean sharing a border. For 
example, in the case of Massachusetts, the entire rural area consists 
of Dukes and Nantucket counties. We determined that the borders of 
Dukes and Nantucket counties are contiguous with Barnstable and Bristol 
counties. Under the adopted methodology, the pre-floor, pre-
reclassified hospital wage index values for the counties of Barnstable 
(CBSA 12700, Barnstable Town, MA) and Bristol (CBSA 39300, Providence-
New Bedford-Fall River, RI-MA) would be averaged resulting in an 
imputed pre-floor, pre-reclassified rural hospital wage index for FY 
2008. We noted in the FY 2008 final hospice wage index rule that while 
we believe that this policy could be readily applied to other rural 
areas that lack hospital wage data (possibly due to hospitals 
converting to a different provider type, such as a Critical Access 
Hospital, that does not submit the appropriate wage data), if a similar 
situation arose in the future, we would re-examine this policy.
    We also noted that we do not believe that this policy would be 
appropriate for Puerto Rico, as there are sufficient economic 
differences between hospitals in the United States and those in Puerto 
Rico, including the payment of hospitals in Puerto Rico using blended 
Federal/Commonwealth-specific rates. Therefore, we believe that a 
separate and distinct policy is necessary for Puerto Rico. Any 
alternative methodology for imputing a pre-floor, pre-reclassified 
hospital wage index for rural Puerto Rico would need to take into 
account the economic differences between hospitals in the United States 
and those in Puerto Rico. Our policy of imputing a rural pre-floor, 
pre-reclassified hospital wage index based on the pre-floor, pre-
reclassified hospital wage index (or indices) of CBSAs contiguous to 
the rural area in question does not recognize the unique circumstances 
of Puerto Rico. While we have not yet identified an alternative 
methodology for imputing a pre-floor, pre-reclassified hospital wage 
index for rural Puerto Rico, we will continue to evaluate the 
feasibility of using existing hospital wage data and, possibly, wage 
data from other sources. For FY 2008 through FY 2011, we have used the 
most recent pre-floor, pre-reclassified hospital wage index available 
for Puerto Rico, which is 0.4047.
5. CBSA Nomenclature Changes
    The OMB regularly publishes a bulletin that updates the titles of 
certain CBSAs. In the FY 2008 Final Rule (72 FR 50218), we noted that 
the FY 2008 rule and all subsequent hospice wage index rules and 
notices would incorporate CBSA changes from the most recent OMB 
bulletins. The OMB bulletins may be accessed at http://www.whitehouse.gov/omb/bulletins/index.html.
6. Wage Data From Multi-Campus Hospitals
    Historically, under the Medicare hospice benefit, we have 
established hospice wage index values calculated from the raw pre-
floor, pre-reclassified hospital wage data (also called the IPPS wage 
index) without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. The wage adjustment 
established under the Medicare hospice benefit is based on the location 
where services are furnished without any reclassification.
    For FY 2010, the data collected from cost reports submitted by 
hospitals for cost reporting periods beginning during FY 2005 were used 
to compute the 2009 raw pre-floor, pre-reclassified hospital wage index 
data, without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. This 2009 raw pre-floor, 
pre-reclassified hospital wage index was used to derive the applicable 
wage index values for the hospice wage index because these data (FY 
2005) were the most recent complete cost data.
    Beginning in FY 2008, the IPPS apportioned the wage data for multi-
campus hospitals located in different labor market areas (CBSAs) to 
each CBSA where the campuses were located (see the FY 2008 IPPS final 
rule with comment period (72 FR 47317 through 47320)). We are 
continuing to use the raw pre-floor, pre-reclassified hospital wage 
data as a basis to determine the hospice wage index values because 
hospitals and hospices both compete in the same labor markets, and 
therefore, experience similar wage-related costs. We note that the use 
of raw pre-floor, pre-reclassified hospital (IPPS) wage data used to 
derive the FY 2012 hospice wage index values, reflects the application 
of our policy to use those data to establish the hospice wage index. 
The FY 2012 hospice wage index values presented in this proposed rule 
were computed consistent with our raw pre-floor, pre-reclassified 
hospital (IPPS) wage index policy (that is, our historical policy of 
not taking into account IPPS geographic reclassifications in 
determining payments for hospice). As implemented in the August 8, 2008 
FY 2009 Hospice Wage Index final rule, for the FY 2009 Medicare hospice 
benefit, the hospice wage index was computed from IPPS wage data 
(submitted by hospitals for cost reporting periods beginning in FY 2004 
(as was the FY 2008 IPPS wage index)), which allocated salaries and 
hours to the campuses of two multi-campus hospitals with campuses that 
are located in different labor areas, one in Massachusetts and another 
in Illinois. Thus, in FY 2009 and subsequent fiscal years, hospice wage 
index values for the following CBSAs have been affected by this policy: 
Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-Falls River, RI-
MA (CBSA 39300), Chicago-Naperville-Joliet, IL (CBSA 16974), and Lake 
County-Kenosha County, IL-WI (CBSA 29404).
7. Hospice Payment Rates
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended 
section 1814(i)(1)(C)(ii) of the Act to establish updates to hospice 
rates for FYs 1998 through 2002. Hospice rates were to be updated by a 
factor equal to the market basket index, minus 1

[[Page 26810]]

percentage point. Payment rates for FYs since 2002 have been updated 
according to section 1814(i)(1)(C)(ii)(VII) of the Act, which states 
that the update to the payment rates for subsequent fiscal years will 
be the market basket percentage for the fiscal year. It has been 
longstanding practice to use the inpatient hospital market basket as a 
proxy for a hospice market basket.
    Historically, the rate update has been published through a separate 
administrative instruction issued annually in the summer to provide 
adequate time to implement system change requirements. Hospices 
determine their payments by applying the hospice wage index in this 
proposed rule to the labor portion of the published hospice rates. 
Section 3401(g) of the Affordable Care Act of 2010 requires that, in FY 
2013 (and in subsequent fiscal years), the market basket percentage 
update under the hospice payment system as described in Section 
1814(i)(1)(C)(ii)(VII) or Section 1814(i)(1)(C)(iii) be annually 
reduced by changes in economy-wide productivity as set out at section 
1886(b)(3)(B)(xi)(II) of the Act. Additionally, Section 3401(g) of the 
Affordable Care Act requires that in FY 2013 through FY 2019, the 
market basket percentage update under the hospice payment system be 
reduced by an additional 0.3 percentage point (although the potential 
reduction is subject to suspension under conditions set out under new 
section 1814(i)(1)(C)(v) of the Act). Congress also required, in 
section 3004(c) of the Affordable Care Act, that hospices begin 
submitting quality data, based on measures to be specified by the 
Secretary, for FY 2014 and subsequent fiscal years. Beginning in FY 
2014, hospices which fail to report quality data will have their market 
basket update reduced by 2 percentage points.

II. Summary of Cap Comments Solicited in the FY 2011 Hospice Wage Index 
Notice With Comment Period

    Section 1814(i)(2)(A) through (C) of the Act establishes a cap on 
aggregate payments made to a Medicare hospice provider and prescribes a 
basic methodology for calculating the aggregate cap. The aggregate cap 
limits the total aggregate payment any individual hospice can receive 
in a year. A hospice's ``aggregate cap'' is calculated by multiplying 
the number of beneficiaries who have elected hospice care during an 
accounting year by a per-beneficiary ``cap amount.'' The Act 
established the per-beneficiary cap amount and provides an annual 
increase to the cap amount based on the rate of increase in the medical 
care expenditures category of the Consumer Price Index. The 2010 per-
beneficiary cap amount was $23,874.98.
    A hospice's aggregate cap is compared with the total Medicare 
payments made to the hospice during the same accounting year. Any 
Medicare payments in excess of the aggregate cap are considered 
overpayments and must be returned to Medicare by the hospice.
    CMS' contractors calculate each hospice's aggregate cap every year, 
and establish an overpayment for any hospice that exceeds the aggregate 
cap. For the aggregate cap calculation, regulations at 42 CFR 418.309 
define the total number of beneficiaries as the number of individuals 
who have elected hospice and have not previously been included in any 
cap calculation, reduced to reflect the proportion of hospice care that 
was provided in another hospice. These regulations also define the 
accounting year, or cap year, as the period from November 1st to 
October 31st.
    In the FY 2011 Hospice Wage Index Notice with Comment Period, we 
noted that there have been some technological advances in our data 
systems which we believe might enable us to modernize the aggregate cap 
calculation process while providing information facilitating the 
ability of hospices to better manage their aggregate cap. We provided 
details regarding policy options that we are considering for 
modernizing the aggregate cap calculation methodology and solicited 
comments on those policy options; we also solicited comments or 
suggestions for other possible options/alternatives to modernize the 
cap calculation methodology, to be considered in possible future 
rulemaking.
    In that Notice, we described a policy option that would align the 
cap year with the federal fiscal year and policy options we were 
considering regarding how to count beneficiaries when computing the 
aggregate cap. We also described our plans to redesign the Provider 
Statistical and Reimbursement Report (PS&R) to show a beneficiary's 
full utilization history, and discussed having a uniform schedule for 
mailing cap determination letters.
    The policy options we described regarding how to count 
beneficiaries when computing the aggregate cap were:
     Option 1: In this option, we described several approaches 
where we would apply a patient-by-patient proportional methodology to 
all hospices' aggregate cap calculations. Under the patient-by-patient 
proportional methodology, the number of patients for a given cap year 
and hospice would be the patient-by-patient proportional share of each 
patient's days in that hospice during the cap year, when considering 
the patient's total days of Medicare hospice care in multiple cap years 
and multiple hospices. One approach we described would apportion each 
patient across the year of election and one additional year, as our 
analysis showed that 99.98 percent of patients who died in hospice were 
admitted to hospice either in the year that they died, or in the 
previous year. We also described an approach where a hospice could 
request the Medicare contractor recalculate the hospice's aggregate cap 
using longer timeframes.
     Option 2: In this option, we described an approach which 
would defer across-the-board changes to the aggregate cap calculation 
methodology for all hospices until we implement hospice payment reform, 
but it would allow individual hospices to request the Medicare 
contractor to apply a patient-by-patient proportional methodology to 
its aggregate cap calculations.
    For more information on future hospice payment reform, please see 
section IV.A of this proposed rule. For details on these options or 
issues, please see the July 22, 2010 Hospice Wage Index for Fiscal Year 
2011 Notice with Comment Period (75 FR 42944). We received 27 public 
comments about the aggregate cap, with commenters expressing differing 
views on issues surrounding the aggregate cap. We also received several 
comments which were outside the scope of the solicitation.
    Comment: We received public comments from 27 individuals or groups, 
with 1 missing an attachment, for a total of 26 comments.
    Two commenters supported Option 1, with apportioning of hospice 
beneficiaries across 2 years; one noted that this option covers more 
than two 180-day periods, while providing a fixed end date. The other 
commenter urged us to move forward with Option 1 while additional data 
collection and payment reforms are pending.
    More commenters suggested we choose Option 2 than any other 
approach. Ten commenters supported Option 2, and suggested that we 
defer major changes to the aggregate cap methodology until payment 
reform occurs, unless a hospice requests multi-year apportioning. These 
commenters were concerned about the burden associated with changing the 
aggregate cap methodology now, and preferred that we wait until broader 
payment reform to make a change. They noted that the majority of 
hospices don't exceed their aggregate cap, and therefore don't want to 
change. One commenter

[[Page 26811]]

urged CMS to retain the existing methodology, as creating a 
complicated, open-ended apportioning approach would disadvantage most 
hospices. This commenter stated that very few hospices have an 
aggregate cap liability, and asked that we not create an administrative 
burden for the vast majority of hospices that do not exceed the 
aggregate cap, but instead direct our aggregate cap changes to the 
minority of hospices that have some kind of liability.
    Some felt that Option 2 was simpler and would provide flexibility 
for those who wanted their aggregate cap calculated using a multi-year 
apportionment methodology. The major hospice associations urged CMS to 
defer any major across-the-board changes to the cap calculation 
methodology until the implementation of hospice payment reform, because 
of concerns that any changes to the current methodology would result in 
additional cost and burden to hospices. One association also suggested 
we fully examine the cap and whether other alternatives would better 
address patient needs, suggesting that we address alternatives in the 
context of broader payment reform.
    While these 10 commenters supported allowing individual hospice 
programs the option of requesting a recalculation of their cap 
determination using a multi-year apportionment methodology, some were 
concerned that this could have implications for hospices that had not 
requested a recalculation. A commenter suggested that should CMS re-
open cap determinations for hospices that had not requested a 
recalculation, we could potentially harm hospices and ultimately risk 
access for patients who had been served by more than one hospice. This 
commenter added that CMS should `hold harmless' hospice programs that 
had not requested cap recalculation against overpayments that may occur 
as the result of another hospice program requesting recalculation of 
its cap. This commenter also urged CMS to adopt policies allowing 
greater flexibility with respect to repayment plans for those with cap 
overages.
    In contrast to those supporting Option 2, 9 commenters supported an 
open-ended multi-year apportioning approach. Many of these commenters 
felt that changes to the methodology should be applied to all hospices. 
Several of the commenters cited the lawsuits filed against the 
Secretary which dispute the methodology for counting beneficiaries in 
the aggregate cap calculation. One of these commenters supported 
allowing re-opening of prior years' cap reports in conjunction with a 
revised regulation allowing a ``true'' patient-by-patient proportional 
allocation of beneficiaries' time across all years of service. One 
commenter suggested we allow re-opening of any cap demand which 
occurred after February 13, 2008, noting that this was the first date 
that a court held our regulation to be unlawful. Some of these 
commenters requested that we suspend the use of the existing 
regulation. Some commenters suggested that the existing regulation 
disadvantages patients with non-cancer diagnoses or who are minorities.
    Some of these commenters disputed the statistic that 99.98 percent 
of patients who died in 2007 were admitted in 2006 or 2007, and argued 
that increasing the time limit for a patient-by-patient proportional 
calculation to 2 years, as suggested in our options, would not solve 
the problem. These commenters, who advocated an open-ended patient-by-
patient proportional calculation, suggested we focus on how many 
hospice patients were still alive as of the end of 2007; they stated 
that our statistic was based on the percentage of patients who died 
rather than on those who were alive at the end of 2007. These 
commenters suggested a larger percentage of patients were alive, and 
cited data for patients admitted between 2003 and 2007, who were still 
alive as of December 31, 2007. They believe these patients are harmed 
by our not using an open-ended patient-by-patient proportional 
allocation in computing the aggregate cap. A commenter asked that 
contractors perform the calculation consistently, and be instructed on 
how to handle its detailed mechanics when adjustments occur.
    Some of these 9 commenters felt that the current Local Coverage 
Determinations (LCDs) were of little use in predicting patient 
prognoses, with one noting that the current LCDs led to appropriate but 
sometimes long-stay admissions, which often resulted in reimbursements 
that exceeded the aggregate cap. They argued that the LCDs were not 
evidence-based. One commenter asserted that every patient reviewed for 
appropriateness of admission met his contractor's LCDs, and yet these 
patients had long lengths of stay.
    Also, several of these 9 commenters suggested we support H.R. 3454, 
the Medicare Hospice Reform and Savings Act of 2009, parts of which 
were adopted into section 3132 of the Affordable Care Act. Commenters 
stated that the bill would have resulted in pay-as-you-go reductions in 
reimbursements for patients with lengths of stay exceeding 180 days. 
They stated that H.R. 3454 would have abolished the cap and eliminated 
unintended incentives for long stays, reduced Medicare hospice costs, 
and reduced our administrative burden. Commenters said that this 
legislation would have increased hospice rates by 20 percent for the 
first and last five days of hospice care that ends in the death of the 
patient; these reductions would have been offset by another 3 percent 
reduction in the daily hospice rates for those patients with lengths of 
stay beyond 180 days. They stated that this legislation would have 
updated LCDs or created National Coverage Determinations which would be 
improved, evidence-based formulas for determining eligibility. 
Commenters also stated that this legislation would have paid hospices 
more for the first and last few days of care, and less for the interim 
days.
    Five other commenters chose no option, or presented their own 
alternative approaches. One stated that the existing aggregate cap is 
supposed to represent the ``average'' cost of caring for a patient, not 
the maximum cost, where hospices have a mix of patients with different 
diagnoses and lengths of stay. This commenter felt that the current 
methodology forces hospices to focus on individual patients rather than 
on the average patient mix, and was concerned that some hospices may 
refuse patients with certain diagnoses to avoid exceeding their 
aggregate cap. This commenter also was concerned about the use of new 
patient elections as the methodology for counting the number of 
beneficiaries served in computing the aggregate cap.
    Another commenter recommended that each beneficiary be counted as 1 
every calendar year, because over the years, more non-cancer terminal 
diagnoses have appeared, with unpredictable end-of-life trajectories; 
the commenter stated that these non-cancer patients require higher 
utilization of resources. The commenter suggested that under this 
mentioned scenario, each patient on service would begin a new cap year 
every January 1 and be counted as a new patient for that year.
    A different commenter suggested that we modify the aggregate cap to 
focus on hospices instead of beneficiaries. He suggested that we change 
the aggregate cap calculation to a 180-day aggregate limit per hospice, 
which mirrors the 6 month requirement for hospice benefits to be 
elected. This commenter said that by monitoring an average day limit, 
all of the multi-year apportioning could be discarded, and replaced 
with a simple

[[Page 26812]]

calculation. Another commenter suggested we allow hospices to carry 
forward to the following year any ``cap cushion'' remaining at the end 
of the year.
    Several commenters supported the idea of our aligning the cap year 
with the federal fiscal year, with some noting that the change would be 
appropriate for a multi-year apportioning approach. Other commenters 
stated that we should not change the cap year at this time, and 
recommended that we wait for future payment reform to do this. Many 
commenters asked that cap determination letters be mailed or sent in a 
more timely fashion, and a few said that contractors need to calculate 
caps consistently.
    Commenters applauded efforts by CMS to address the concerns that 
arise when hospices lack access to accurate and timely histories of 
patient care. They suggested that the new PS&R include each patient's 
total days of care, benefit periods by hospice, indicate the initial 
benefit period, and show all benefit periods that have been used. 
Commenters also urged that the systems be as ``real-time'' as possible. 
Another commenter stated that registration into the IVACS [sic] system 
(which is used to access the PS&R) was overly cumbersome, and believed 
that if home care is used as a marker of the success of this new 
registration system, only 20 percent of home health agencies are 
currently registered.
    Those who commented on our discussion about establishing a uniform 
schedule for contractors' mailing cap determination letters were 
supportive of such a process, and felt that this would assist hospices 
in their planning and budgeting. One commenter asked that the cap 
determination letter be considered a final determination.
    A commenter suggested that we factor a hospice's wage index value 
when computing a hospice's aggregate cap. The commenter stated that 
because hospice payments are adjusted by the wage index to account for 
geographic variances in labor costs, a hospice in an area of relatively 
high labor costs would have higher aggregate payments in a given cap 
year than a hospice in an area with relatively low labor costs. Yet, 
the yearly aggregate payments of both hospices are compared to the same 
cap amount. The commenter states that high-wage index hospices are 
unfairly disadvantaged by not factoring in the wage index values to 
their yearly cap amount, and hospices in low-wage index areas are 
unfairly advantaged. The commenter felt that our not wage adjusting the 
cap amount was contrary to the intent of Congress.
    Response: We thank the commenters for their insights on these 
issues. We have considered the comments in developing our proposals 
related to changing the aggregate cap calculation methodology, which 
are described in section III.B in this proposed rule. We will consider 
other comments and suggestions for improvements in the future, as we 
undertake broader payment reform.
    Comment: Some commenters asked for additional data collection on 
hospice claims or through cost reports, so that CMS will have full 
resource utilization data related to providing hospice care when it 
seeks to reform payments. Some commenters stated that they were opposed 
to the BNAF phase-out. Others were concerned that rural hospices had 
similar or greater costs than urban hospices and yet were typically 
paid less due to wage adjustment. A commenter said that the hospital 
wage index used to create the hospice wage index was not accurate, as 
hospital wage patterns do not mirror those of hospices; this commenter 
suggested that we pilot test a hospice-specific wage index. Another 
commenter stated her concerns regarding the wage index value for her 
hospice's CBSA, and said that a neighboring CBSA was much higher. The 
commenter asked to be included in the neighboring CBSA.
    Several commenters stated that the Common Working File (CWF) is 
burdensome and does not provide complete data on a patient's hospice 
history. A commenter added that some information in CWF was pulled from 
hospice cost reports, and was unreliable. She added that an industry 
association had presented us with a prototype cost report to more 
accurately reflect hospice costs rather than trying to force numbers 
from hospices into a home care model cost report, but that CMS has been 
slow in adopting this software.
    One commenter was concerned that CMS waived notice and comment 
rulemaking in our FY 2011 Hospice Wage Index Notice.
    Response: We thank the commenters, but we note that these comments 
are outside the scope of the solicitation.

III. Provisions of the Proposed Rule

A. FY 2012 Hospice Wage Index

1. Background
    As previously noted, the hospice final rule published in the 
Federal Register on December 16, 1983 (48 FR 56008) provided for 
adjustment to hospice payment rates to reflect differences in area wage 
levels. We apply the appropriate hospice wage index value to the labor 
portion of the hospice payment rates based on the geographic area where 
hospice care was furnished. As noted earlier, each hospice's labor 
market area is based on definitions of MSAs issued by the OMB. For this 
proposed rule, we used the pre-floor, pre-reclassified hospital wage 
index, based solely on the CBSA designations, as the basis for 
determining wage index values for the proposed FY 2012 hospice wage 
index.
    As noted above, our hospice payment rules utilize the wage 
adjustment factors used by the Secretary for purposes of section 
1886(d)(3)(E) of the Act for hospital wage adjustments. We are 
proposing again to use the pre-floor and pre-reclassified hospital wage 
index data as the basis to determine the hospice wage index, which is 
then used to adjust the labor portion of the hospice payment rates 
based on the geographic area where the beneficiary receives hospice 
care. We believe the use of the pre-floor, pre-reclassified hospital 
wage index data, as a basis for the hospice wage index, results in the 
appropriate adjustment to the labor portion of the costs. For the FY 
2012 update to the hospice wage index, we propose to continue to use 
the most recent pre-floor, pre-reclassified hospital wage index 
available at the time of publication.
2. Areas Without Hospital Wage Data
    In adopting the CBSA designations, we identified some geographic 
areas where there are no hospitals, and no hospital wage data on which 
to base the calculation of the hospice wage index. These areas are 
described in section I.B.4 of this proposed rule. Beginning in FY 2006, 
we adopted a policy that, for urban labor markets without an urban 
hospital from which a pre-floor, pre-reclassified hospital wage index 
can be derived, all of the urban CBSA pre-floor, pre-reclassified 
hospital wage index values within the State would be used to calculate 
a statewide urban average pre-floor, pre-reclassified hospital wage 
index to use as a reasonable proxy for these areas. Currently, the only 
CBSA that would be affected by this policy is CBSA 25980, Hinesville-
Fort Stewart, Georgia. We propose to continue this policy for FY 2012.
    Currently, the only rural areas where there are no hospitals from 
which to calculate a pre-floor, pre-reclassified hospital wage index 
are Massachusetts and Puerto Rico. In August 2007 (72 FR 50217), we 
adopted a methodology for imputing rural pre-floor, pre-reclassified 
hospital wage index values for areas where no hospital wage data are 
available as an acceptable proxy; that

[[Page 26813]]

methodology is also described in section I.B.4 of this proposed rule. 
In FY 2012, Dukes and Nantucket Counties are the only areas in rural 
Massachusetts which are affected. We are again proposing to apply this 
methodology for imputing a rural pre-floor, pre-reclassified hospital 
wage index for those rural areas without rural hospital wage data in FY 
2012.
    However, as we noted section I.B.4 of this proposed rule, we do not 
believe that this policy is appropriate for Puerto Rico. For FY 2012, 
we again propose to continue to use the most recent pre-floor, pre-
reclassified hospital wage index value available for Puerto Rico, which 
is 0.4047. This pre-floor, pre-reclassified hospital wage index value 
will then be adjusted upward by the hospice 15 percent floor adjustment 
in the computing of the proposed FY 2012 hospice wage index.
3. FY 2012 Wage Index With an Additional 15 Percent Reduced Budget 
Neutrality Adjustment Factor (BNAF)
    The hospice wage index set forth in this proposed rule would be 
effective October 1, 2012 through September 30, 2013. We are not 
proposing any modifications to the hospice wage index methodology. In 
accordance with our regulations and the agreement signed with other 
members of the Hospice Wage Index Negotiated Rulemaking Committee, we 
are continuing to use the most current hospital data available. For 
this proposed rule, the FY 2011 hospital wage index was the most 
current hospital wage data available for calculating the FY 2012 
hospice wage index values. We used the FY 2011 pre-floor, pre-
reclassified hospital wage index data for this calculation.
    As noted above, for FY 2012, the hospice wage index values will be 
based solely on the adoption of the CBSA-based labor market definitions 
and the hospital wage index. We continue to use the most recent pre-
floor and pre-reclassified hospital wage index data available (based on 
FY 2007 hospital cost report wage data). A detailed description of the 
methodology used to compute the hospice wage index is contained in the 
September 4, 1996 hospice wage index proposed rule (61 FR 46579), the 
August 8, 1997 hospice wage index final rule (62 FR 42860), and the 
August 6, 2009 FY 2010 Hospice Wage Index final rule (74 FR 39384).
    The August 6, 2009 FY 2010 Hospice Wage Index final rule finalized 
a provision to phase out the BNAF over 7 years, with a 10 percent 
reduction in the BNAF in FY 2010, and an additional 15 percent 
reduction in FY 2011, over each of the next 5 years, with complete 
phase out in FY 2016. Therefore, in accordance with the August 6, 2009, 
FY 2010 Hospice Wage Index final rule, the BNAF for FY 2012 was reduced 
by an additional 15 percent for a total BNAF reduction of 40 percent 
(10 percent from FY 2010, additional 15 percent from FY 2011, and 
additional 15 percent for FY 2012).
    An unreduced BNAF for FY 2012 is computed to be 0.059061 (or 5.9061 
percent). A 40 percent reduced BNAF, which is subsequently applied to 
the pre-floor, pre-reclassified hospital wage index values greater than 
or equal to 0.8, is computed to be 0.035437 (or 3.5437 percent). Pre-
floor, pre-reclassified hospital wage index values which are less than 
0.8 are subject to the hospice floor calculation; that calculation is 
described in section I.B.1.
    The proposed hospice wage index for FY 2012 is shown in Addenda A 
and B. Specifically, Addendum A reflects the proposed FY 2012 wage 
index values for urban areas under the CBSA designations. Addendum B 
reflects the proposed FY 2012 wage index values for rural areas under 
the CBSA designations.
4. Effects of Phasing Out the BNAF
    The full (unreduced) BNAF calculated for FY 2012 is 5.9061 percent. 
As implemented in the August 6, 2009 FY 2010 Hospice Wage Index final 
rule (74 FR 39384), for FY 2012 we are reducing the BNAF by an 
additional 15 percent, for a total BNAF reduction of 40 percent (a 10 
percent reduction in FY 2010 plus a 15 percent reduction in FY 2011 
plus a 15 percent reduction in FY 2012), with additional reductions of 
15 percent per year in each of the next 4 years until the BNAF is 
phased out in FY 2016.
    For FY 2012, this is mathematically equivalent to taking 60 percent 
of the full BNAF value, or multiplying 0.059061 by 0.60, which equals 
0.035437 (3.5437 percent). The BNAF of 3.5437 percent reflects a 40 
percent reduction in the BNAF. The 40 percent reduced BNAF (3.5437 
percent) was applied to the pre-floor, pre-reclassified hospital wage 
index values of 0.8 or greater in the proposed FY 2012 hospice wage 
index.
    The hospice floor calculation would still apply to any pre-floor, 
pre-reclassified hospital wage index values less than 0.8. Currently, 
the hospice floor calculation has 4 steps. First, pre-floor, pre-
reclassified hospital wage index values that are less than 0.8 are 
multiplied by 1.15. Second, the minimum of 0.8 or the pre-floor, pre-
reclassified hospital wage index value times 1.15 is chosen as the 
preliminary hospice wage index value. Steps 1 and 2 are referred to in 
this proposed rule as the hospice 15 percent floor adjustment. Third, 
the pre-floor, pre-reclassified hospital wage index value is multiplied 
by the BNAF. Fourth, the greater result of either step 2 or step 3 is 
the final hospice wage index value. The hospice floor calculation is 
unchanged by the BNAF reduction. We note that steps 3 and 4 will become 
unnecessary once the BNAF is eliminated.
    We examined the effects of an additional 15 percent reduction in 
the BNAF, for a total BNAF reduction of 40 percent, on the FY 2012 
hospice wage index compared to remaining with the total 25 percent 
reduced BNAF which was used for the FY 2011 hospice wage index. The 
additional 15 percent BNAF reduction applied to the FY 2012 wage index 
resulted in a 0.9 percent reduction in 84.4 percent of hospice wage 
index values, a 0.8 percent reduction in 8.6 percent of hospice wage 
index values, a 0.7 percent reduction in 0.7 percent of wage index 
values, and no reduction in 6.3 percent of wage index values.
    Those CBSAs whose pre-floor, pre-reclassified hospital wage index 
values had the hospice 15 percent floor adjustment applied before the 
BNAF reduction would not be affected by this proposed phase out of the 
BNAF. These CBSAs, which typically include rural areas, are protected 
by the hospice 15 percent floor adjustment. We have estimated that 29 
CBSAs are already protected by the hospice 15 percent floor adjustment, 
and are therefore completely unaffected by the BNAF reduction. There 
are 323 hospices in these 29 CBSAs.
    Additionally, some CBSAs with pre-floor, pre-reclassified wage 
index values less than 0.8 will become newly eligible for the hospice 
15 percent floor adjustment as a result of the additional 15 percent 
reduction in the BNAF applied in FY 2012. Areas where the hospice floor 
calculation would have yielded a wage index value greater than 0.8 if 
the 25 percent reduction in BNAF were maintained, but which will have a 
final wage index value less than 0.8 after the additional 15 percent 
reduction in the BNAF (for a total BNAF reduction of 40 percent) is 
applied, will now be eligible for the hospice 15 percent floor 
adjustment. These CBSAs will see a smaller reduction in their hospice 
wage index values since the hospice 15 percent floor adjustment will 
apply. We have estimated that 3 CBSAs will have their pre-floor, pre-
reclassified hospital wage index value become newly protected by the 
hospice 15 percent floor adjustment due to the additional 15 percent 
reduction in the

[[Page 26814]]

BNAF applied in FY 2012. Because of the protection given by the hospice 
15 percent floor adjustment, these CBSAs will see smaller percentage 
decreases in their hospice wage index values than those CBSAs that are 
not eligible for the hospice 15 percent floor adjustment. This will 
affect those hospices with lower hospice wage index values, which are 
typically in rural areas. There are 44 hospices located in these 3 
CBSAs.
    Finally, the hospice wage index values only apply to the labor 
portion of the payment rates; the labor portion is described in section 
I.B.1 of this proposed rule. Therefore, the projected reduction in 
payments due solely to the additional 15 percent reduction of the BNAF 
applied in FY 2012 is estimated to be 0.6 percent, as calculated from 
the difference in column 3 and column 4 of Table 1 in section VII of 
this proposed rule. In addition, the estimated effects of the phase-out 
of the BNAF will be mitigated by any inpatient hospital market basket 
updates in payments. The estimated inpatient hospital market basket 
update for FY 2012 is 2.8 percent; this 2.8 percent does not reflect 
the provision in the Affordable Care Act which reduces the inpatient 
hospital market basket update for FY 2012 by 0.1 percentage point, 
since that reduction does not apply to hospices. The final update will 
be communicated through an administrative instruction. The combined 
effects of the updated wage data, an additional 15 percent reduction of 
the BNAF, and an estimated inpatient hospital market basket update of 
2.8 percent for FY 2012, are an overall estimated increase in payments 
to hospices in FY 2012 of 2.3 percent (column 5 of Table 1 in section 
VII of this proposed rule).

B. Aggregate Cap Calculation Methodology

    The existing method for counting Medicare beneficiaries in 42 CFR 
418.309 has been the subject of substantial litigation. Specifically, 
the lawsuits challenge the way CMS apportions hospice patients with 
care spanning more than one year when calculating the cap.
    A number of district courts and two appellate courts have concluded 
that CMS' current methodology used to determine the number of Medicare 
beneficiaries used in the aggregate cap calculation is not consistent 
with the statute. We continue to believe that the methodology set forth 
in Sec.  418.309(b)(1) is consistent with the Medicare statute. 
Nonetheless, we have determined that it is in the best interest of CMS 
and the Medicare program to take action to prevent future litigation, 
and alleviate the litigation burden on providers, CMS, and the courts. 
On April 15, 2011, we issued a Ruling entitled ``Medicare Program; 
Hospice Appeals for Review of an Overpayment Determination'' (CMS-1355-
R), related to the aggregate cap calculation for hospices which 
provided for application of a patient-by-patient proportional 
methodology, as defined in the Ruling, to hospices that have challenged 
the current methodology. Specifically, the Ruling provides that, for 
any hospice which has a timely-filed administrative appeal of the 
methodology set forth at Sec.  418.309(b)(1) used to determine the 
number of Medicare beneficiaries used in the aggregate cap calculation 
for a cap year ending on or before October 31, 2011, the Medicare 
contractors will recalculate that year's cap determination using the 
patient-by-patient proportional methodology as set forth in the Ruling.
    We are also making several proposals in this Rule that affect cap 
determinations from two time periods:
     Cap determinations for cap years ending on or before 
October 31, 2011; and
     Cap determinations for cap years ending on or after 
October 31, 2012.
1. Cap Determinations for Cap Years Ending on or Before October 31, 
2011
    By its terms, the relief provided in Ruling 1355-R applies only to 
those cap years for which a hospice has received an overpayment 
determination and filed a timely qualifying appeal. For any hospice 
that receives relief pursuant to Ruling 1355-R in the form of a 
recalculation of one or more of its cap determinations, or for any 
hospice that receives relief from a court after challenging the 
validity of the cap regulation, we propose that the hospice's cap 
determination for any subsequent cap year also be calculated using a 
patient-by-patient proportional methodology as opposed to the 
methodology set forth in 42 CFR 418.309(b)(1). The patient-by-patient 
proportional methodology is defined below in section III.B.3.
    Additionally, there are hospices that have not filed an appeal of 
an overpayment determination challenging the validity of 42 CFR 
418.309(b)(1) and which are awaiting CMS to make a cap determination in 
a cap year ending on or before October 31, 2011. We propose to allow 
any such hospice provider, as of October 1, 2011, to elect to have its 
final cap determination for such cap year(s), and all subsequent cap 
years, calculated using the patient-by-patient proportional 
methodology.
    Finally, we recognize that most hospices have not challenged the 
methodology used for determining the number of beneficiaries used in 
the cap calculation. Therefore, we propose that those hospices which 
would like to continue to have the existing methodology (hereafter 
called the streamlined methodology) used to determine the number of 
beneficiaries in a given cap year would not need to take any action, 
and would have their cap calculated using the streamlined methodology 
for cap years ending on or before October 31, 2011. The streamlined 
methodology is defined in section III.B.4 below.
    We do not see these provisions as being impermissibly retroactive 
in effect. To the extent that these provisions could be considered a 
retroactive application of a substantive change to a regulation, 
section 1871(e)(1)(A) of the Act permits retroactive application of a 
substantive change to a regulation if the Secretary determines that 
such retroactive application is necessary to comply with statutory 
requirements or that failure to apply the change retroactively would be 
contrary to the public interest. We determine that for providers who 
have successfully sought to have the existing cap methodology set aside 
as invalid by the courts, retroactive application of the proposed Rule 
would be necessary to continue to comply with the statutory requirement 
in section 1814(i)(2) that the Secretary apply an aggregate cap to 
these hospices' reimbursements. We also determine that it would be in 
the public interest to calculate the aggregate hospice caps for 
subsequent years for these providers and for other providers that have 
filed appeals challenging the validity of the current methodology using 
the patient-by-patient proportional methodology to prevent the over-
counting of beneficiaries for those years and to prevent repetitive 
litigation. We further determine that it would be in the public 
interest to permit providers that have not appealed their aggregate cap 
determinations to elect to have the patient-by-patient proportional 
methodology applied to aggregate cap determinations that have not been 
issued as of October 1, 2011. Allowing these hospices to elect to use 
the patient-by-patient proportional methodology would alleviate the 
burden on the hospices and the agency of continued appeals and 
litigation regarding the validity of the aggregate hospice cap 
calculation.

[[Page 26815]]

2. Cap Determinations for Cap Years Ending on or After October 31, 2012
    We continue to believe that the methodology set forth in Sec.  
418.309(b)(1) is consistent with the Medicare statute. We emphasize 
that nothing in our proposals in section III.B.1 above constitutes an 
admission as to any issue of law or fact. In light of the court 
decisions, however, we propose to change the hospice aggregate cap 
calculation methodology policy for cap determinations ending on or 
after October 31, 2012 (the 2012 cap year). Specifically, for the cap 
year ending October 31, 2012 (the 2012 cap year) and subsequent cap 
years, we propose to revise the methodology set forth at Sec.  
418.309(b)(1) to adopt a patient-by-patient proportional methodology 
when computing hospices' aggregate caps. We also propose to 
``grandfather'' in the current streamlined methodology set forth in 
Sec.  418.309(b)(1) for those hospices that elect to continue to have 
the current streamlined methodology used to determine the number of 
Medicare beneficiaries in a given cap year, for the following reasons.
    As described in section II of this proposed rule, we solicited 
comments on modernizing the cap calculation in our FY 2011 Hospice Wage 
Index Notice with Comment Period. We summarized those comments in 
section II of this proposed rule, and noted that many commenters, 
including the major hospice associations, were concerned about the 
burden to hospices of changing the cap calculation methodology, and 
urged us to defer across-the-board changes to the cap methodology until 
we analyze the cap in the context of broader payment reform. 
Specifically, commenters urged CMS to retain the current methodology, 
as it results in a more streamlined and timely cap determination for 
providers as compared to other options. Also, commenters noted that 
once made, cap determinations usually remain final. Commenters were 
concerned that a proportional methodology could result in prior year 
cap determination revisions to account for situations in which the 
percentage of time a beneficiary received services in a prior cap year 
declines as his or her overall hospice stay continues into subsequent 
cap years, and these revisions may result in new overpayments for some 
providers. And, commenters noted that the vast majority of providers 
don't exceed the cap, so burdening these providers with an across-the-
board change isn't justified. We also note that on January 18, 2011, 
President Obama issued an Executive Order entitled ``Improving 
Regulation and Regulatory Review'' (E.O. 13563), which instructs 
federal agencies to consider regulatory approaches that reduce burdens 
and maintain flexibility and freedom of choice for the public. We 
believe that offering hospices the option to elect to continue to have 
the streamlined methodology used in calculating their caps is in 
keeping with this Executive Order.
    For these reasons, for the cap year ending October 31, 2012 (the 
2012 cap year) and subsequent cap years, we propose that the hospice 
aggregate cap be calculated using the patient-by-patient proportional 
methodology, but propose to allow hospices the option of having their 
cap calculated via the current streamlined methodology, as discussed 
below. We believe this two-pronged approach is responsive to the 
commenters who do not want to be burdened with a change in the cap 
calculation methodology at this time, while also conforming with 
decisional law and meeting the needs of hospices that would prefer the 
patient-by-patient proportional methodology of counting beneficiaries. 
This grandfathering proposal to allow hospices the option of having 
their caps calculated based on application of the current streamlined 
methodology only applies to currently existing hospices that have, or 
will have, had a cap determination calculated under the streamlined 
methodology. New hospices that have not had their cap determination 
calculated using the streamlined methodology do not fall under this 
proposed ``grandfather'' policy.
    We are in the early stages of the analyses related to payment 
reform. As such, the role of the aggregate cap in the reformed payment 
system is unknown at this time. If the reformed system and statute 
continue to require a limitation on hospice aggregate payments, we 
would look to apply one aggregate cap policy consistently to all 
hospices, and will consider commenters' suggestions for improvements in 
the aggregate cap as we analyze payment reform options.
3. Patient-by-Patient Proportional Methodology
    For the cap year ending October 31, 2012 (the 2012 cap year), and 
for all subsequent cap years (unless changed by future rulemaking), we 
propose that the Medicare contractors would apply the patient-by-
patient proportional methodology (defined below) to a hospice's 
aggregate cap calculations unless the hospice elects to have its cap 
determination for cap years 2012 and beyond calculated using the 
current, streamlined methodology set forth in Sec.  418.309(b)(1).
    Under the proposed patient-by-patient proportional methodology, a 
hospice includes in its number of Medicare beneficiaries only that 
fraction which represents the portion of a patient's total days of care 
in all hospices and all years that was spent in that hospice in that 
cap year, using the best data available at the time of the calculation. 
We propose that the whole and fractional shares of Medicare 
beneficiaries' time in a given cap year would then be summed to compute 
the total number of Medicare beneficiaries served by that hospice in 
that cap year.
    When a hospice's cap is calculated using the patient-by-patient 
proportional methodology and a beneficiary included in that calculation 
survives into another cap year, the contractor may need to make 
adjustments to prior cap determinations, subject to existing re-opening 
regulations.
4. Streamlined Methodology
    As we described above, comments received from hospices and the 
major hospice associations urged CMS to defer across-the-board changes 
to the cap calculation methodology until we reform hospice payments. 
Several of these commenters feared that an across-the-board change in 
methodology now may disadvantage them by potentially placing them at 
risk for incurring new cap overpayments. Additionally, approximately 90 
percent of hospices do not exceed the cap and have not objected to the 
current methodology, and commenters expressed concern that adapting to 
a process change would be costly and burdensome. In response to these 
concerns, we propose that a hospice may exercise a one-time election to 
have its cap determination for cap years 2012 and beyond calculated 
using the current, streamlined methodology set forth in Sec.  
418.309(b). We propose that the option to elect the continued use of 
the streamlined methodology for cap years 2012 and beyond would be 
available only to hospices that have had their cap determinations 
calculated using the streamlined methodology for all years prior to cap 
year 2012. In section III.B.5 (``Changing Methodologies'') below, we 
describe our detailed rationale for limiting the election. Allowing 
hospices which, prior to cap year 2012, have their cap determination(s) 
calculated pursuant to a patient-by-patient proportional methodology to 
elect the streamlined methodology for cap years 2012 and beyond could 
result in over-

[[Page 26816]]

counting patients and introduce a program vulnerability.
    Our current policy set forth in the existing Sec.  418.309(b)(2) 
describes that when a beneficiary receives care from more than one 
hospice during a cap year or years, each hospice includes in its number 
of Medicare beneficiaries only that fraction which represents the 
portion of a patient's total stay in all hospices that was spent in 
that hospice. We propose to revise the regulatory text at Sec.  
418.309(b)(2) to clarify that each hospice includes in its number of 
Medicare beneficiaries only that fraction which represents the portion 
of a patient's total days of care in all hospices and all years that 
was spent in that hospice in that cap year, using the best data 
available at the time of the calculation. We also propose to add 
language to make clear that cap determinations are subject to 
reopening/adjustment to account for updated data.
5. Changing Methodologies
    We believe our proposed policies, described above, provide hospices 
with a reasonable amount of flexibility with regard to their cap 
calculation. However, we believe that if we allowed hospices to switch 
back and forth between methodologies, it would greatly complicate the 
cap determination calculation, would be difficult to administer, and 
might lead to inappropriate switching by hospices seeking merely to 
maximize Medicare payments. Additionally, in the year of a change in 
the calculation methodology, there is a potential for over-counting 
some beneficiaries. Allowing hospices to switch back and forth between 
methodologies would perpetuate the risk of over-counting beneficiaries. 
Therefore, we propose that:
    (1) Those hospices that have their cap determination calculated 
using the patient-by-patient proportional methodology for any cap year 
prior to the 2012 cap year would continue to have their cap calculated 
using the patient-by-patient proportional methodology for the 2012 cap 
year and all subsequent cap years; and,
    (2) All other hospices would have their cap determinations for the 
2012 cap year and all subsequent cap years calculated using the 
patient-by-patient proportional methodology unless they make a one-time 
election to have their cap determinations for cap year 2012 and beyond 
calculated using the streamlined methodology.
    (3) A hospice can elect the streamlined methodology no later than 
60 days following the receipt of its 2012 cap determination.
    (4) Hospices which elect to have their cap determination calculated 
using the streamlined methodology may later elect to have their cap 
determinations calculated pursuant to the patient-by-patient 
proportional methodology by either:
    a. Electing to change to the patient-by-patient proportional 
methodology; or
    b. Appealing a cap determination calculated using the streamlined 
methodology to determine the number of Medicare beneficiaries.
    (5) If a hospice elects the streamlined methodology, and changes to 
the patient-by-patient proportional methodology for a subsequent cap 
year, the hospice's aggregate cap determination for that cap year and 
all subsequent cap years is to be calculated using the patient-by-
patient proportional methodology. As such, past cap year determinations 
may be adjusted to prevent the over-counting of beneficiaries, 
notwithstanding the ordinary limitations on reopening.
6. Other Issues
    Contractors will provide hospices with instructions regarding the 
cap determination methodology election process. Regardless of which 
methodology is used, the contractor will continue to demand any 
additional overpayment amounts due to CMS at the time of the hospice 
cap determination. The contractor will continue to include the hospice 
cap determination in a letter which serves as a notice of program 
reimbursement under 42 CFR 405.1803(a)(3). Cap determinations are 
subject to the existing CMS re-opening regulations.
    In our FY 2011 Hospice Wage Index Notice with Comment Period, we 
discussed aligning the cap year timeframe with that of the federal 
fiscal year. Commenters suggested we not make changes to the cap year 
timeframe at this time, but defer changes until broader payment reform 
occurs. We agree with commenters, and our cap year continues to be 
defined as November 1st to October 31st.
    In that FY 2011 Hospice Wage Index Notice with Comment Period, we 
also discussed the timeframe used for counting beneficiaries under the 
streamlined methodology, which is September 28th to September 27th. 
This timeframe for counting beneficiaries was implemented because it 
allows those beneficiaries who elected hospice near the end of the cap 
year to be counted in the year when most of the services were provided. 
However, for those hospices whose cap determinations are calculated 
using a patient-by-patient proportional methodology for counting the 
number of beneficiaries, we propose to count beneficiaries and their 
associated days of care from November 1st through October 31st, to 
match that of the cap year. This ensures that the proportional share of 
each beneficiary's days in that hospice during the cap year is 
accurately computed.
    Finally, we note that the existing regulatory text at 418.308(b)(1) 
refers to the timeframe for counting beneficiaries as ``(1) * * * the 
period beginning on September 28 (35 days before the beginning of the 
cap period) and ending on September 27 (35 days before the end of the 
cap period).'' The period beginning September 28 is actually 34 days 
before November 1 (the beginning of the cap year), rather than 35 days. 
We propose to correct this in the regulatory text, and to change 
references to the ``cap period'' to that of the ``cap year'' to 
correctly reference the time frame for cap determinations.
7. Changes to Regulatory Text
    As a result of the proposals made in this section, we propose to 
change the regulatory text at 42 CFR 418.309 as follows:
     We propose to change the title of 418.309 from ``Hospice 
Cap Amount'' to ``Hospice Aggregate Cap'' to clarify what this section 
covers. The ``cap amount'' is defined as the per-beneficiary dollar 
amount which is updated annually, and is only one component of the 
aggregate cap calculation. At the beginning of the regulatory text for 
this section, we also propose to revise the existing language to refer 
to the methodologies given in (b) and (c) which follow.
     In Sec.  418.309(b), we propose to add the title 
``Streamlined Methodology Defined'' at the beginning of the regulatory 
text, and to replace ``Each hospice's cap amount'' with ``A hospice's 
aggregate cap.'' In Sec.  418.309(b)(1), we propose to revise the 
language to note that it applied to those beneficiaries who have 
received care from only one hospice. We also propose to correct the 
existing regulatory text which reads ``* * * (35 days before the 
beginning of the cap period) * * *'' to read ``* * * (34 days before 
the beginning of the cap year) * * *'' and change existing regulatory 
text which reads ``* * * and ending on September 27 (35 days before the 
end of the cap period) * * *'' to read ``* * * and ending September 27 
(35 days before the end of the cap year) * * *.''
     We propose to revise Sec.  418.309(b)(2) to describe the 
streamlined methodology for computing fractional shares of a 
beneficiary when a beneficiary has received care from more

[[Page 26817]]

than one hospice, and to note that the computation considers all cap 
years and all hospices, using the best data available at the time of 
the calculation. We also propose to add language that notes that the 
aggregate cap calculation for a given cap year may be adjusted after 
the calculation for that year based on updated data.
     We propose to add Sec.  418.309(c), which would be 
entitled ``Patient-by-Patient Proportional Methodology Defined.'' We 
propose that a hospice's aggregate cap would be calculated by 
multiplying the adjusted cap amount by the number of Medicare 
beneficiaries. For the purposes of the patient-by-patient proportional 
methodology, we propose that a hospice would include in its number of 
Medicare beneficiaries only that fraction which represents the portion 
of a patient's total days of care in all hospices and all years that 
was spent in that hospice in that cap year, using the best data 
available at the time of the calculation. We propose that the total 
number of Medicare beneficiaries for a given hospice's cap year would 
be determined by summing the whole or fractional share of each Medicare 
beneficiary that received hospice care during the cap year, from that 
hospice.
    Finally, we also propose that the aggregate cap calculation for a 
given cap year could be adjusted after the calculation for that year 
based on updated data.
     We propose to add paragraph (d) to section 418.309, which 
would be entitled ``Application of Methodologies.'' We propose that for 
cap years ending October 31, 2011 and for prior cap years, a hospice's 
aggregate cap would be calculated using the streamlined methodology. 
However, we propose that a hospice that has not received a cap 
determination for a cap year ending on or before October 31, 2011 as of 
October 1, 2011, could elect to have its final cap determination for 
such cap years calculated using the patient-by-patient proportional 
methodology. Additionally, we propose that a hospice that has filed a 
timely appeal regarding the methodology used for determining the number 
of Medicare beneficiaries in its cap calculation for any cap year would 
be deemed to have elected that its cap determination for the challenged 
year, and all subsequent cap years, be calculated using the patient-by-
patient proportional methodology.
    We also propose that for cap years ending October 31, 2012, and all 
subsequent cap years, a hospice's aggregate cap would be calculated 
using the patient-by-patient proportional methodology. We also propose 
that a hospice that has had its cap calculated using the patient-by-
patient proportional methodology for any cap year(s) prior to the 2012 
cap year would not be eligible to elect the streamlined methodology, 
and would have to continue to have the patient-by-patient proportional 
methodology used to determine the number of Medicare beneficiaries in a 
given cap year. We propose that a hospice that is eligible to make a 
one-time election to have its cap calculated using the streamlined 
methodology would have to make that election no later than 60 days 
after receipt of its 2012 cap determination. We also propose that a 
hospice's election to have its cap calculated using the streamlined 
methodology would remain in effect unless the hospice subsequently 
would submit a written election to change the methodology used in its 
cap determination to the patient-by-patient proportional methodology; 
or the hospice would appeal the streamlined methodology used to 
determine the number of Medicare beneficiaries used in the aggregate 
cap calculation.
    Finally, we propose that if a hospice that elected to have its 
aggregate cap calculated using the streamlined methodology subsequently 
elected the patient-by-patient proportional methodology or appealed the 
streamlined methodology, the hospice's aggregate cap determination for 
that cap year and all subsequent cap years would be calculated using 
the patient-by-patient proportional methodology. As such, we propose 
that past cap year determinations could be adjusted to prevent the 
over-counting of beneficiaries, notwithstanding the ordinary 
limitations on reopening.
     Throughout Sec.  418.309 we propose to delete references 
to the intermediary, as this terminology is now outdated.

C. Hospice Face-to-Face Requirement

    Section 3132(b) of the Affordable Care Act of 2010 (Pub. L. 111-
148, enacted March 23, 2010) amended section 1814(a)(7) of the Act by 
adding an additional certification requirement that beginning January 
1, 2011, a hospice physician or nurse practitioner (NP) must have a 
face-to-face encounter with every hospice patient prior to the 180-day 
recertification of the patient's terminal illness to determine 
continued eligibility. The statute also requires that the hospice 
physician or NP who performs the encounter attest that such a visit 
took place in accordance with procedures established by the Secretary. 
Although the provision allows an NP to perform the face-to-face 
encounter and attest to it, section 1814(a)(7)(A) of the Act continues 
to require that a hospice physician must certify and recertify the 
terminal illness.
    The requirement for a physician face-to-face encounter for long-
stay hospice patients' was first suggested by Medicare's Payment 
Advisory Commission (MedPAC) in their March 2009 Report to the Congress 
(MedPAC, Report to the Congress: Medicare Payment Policy, Chapter 6, 
March 2009, pp. 365 through 371) (``the MedPAC Report''). MedPAC 
recommended that a hospice physician or advance practice nurse visit 
hospice patients prior to the 180-day recertification of terminal 
illness in order to increase physician accountability in the 
recertification and help ensure appropriate use of the benefit.
    We implemented section 1814(a)(7), as amended by section 3132(b) of 
the Affordable Care Act in the November 17, 2010 final rule (75 FR 
70372), published in the Federal Register, entitled ``Home Health 
Prospective Payment System Rate Update for CY 2011; Changes in 
Certification Requirements for Home Health Agencies and Hospices'', 
hereinafter referred to as the CY 2011 HH PPS Final Rule. The statute 
requires that for hospice recertifications occurring on or after 
January 1, 2011, a face-to-face encounter take place before the 180th-
day recertification. We decided that the 180th-day recertification and 
subsequent benefit periods corresponded to the recertification for a 
patient's third or subsequent benefit period.
    In the CY 2011 HH PPS final rule, we describe our rationale for 
defining the 180th-day recertification as the recertification which 
occurs at the start of the third benefit period (that is, the benefit 
period after the second 90-day benefit period). We considered 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). Our 
regulatory language at Sec.  418.22 requires certifications at the 
beginning of the benefit periods. For these reasons we defined the 
180th-day recertification to be the recertification which occurs at the 
start of the third benefit period (75 FR 70437).
    These new provisions at Sec.  418.22(a) and (b), as set out in the 
CY 2011 HH PPS final rule (75 FR 70463) include the following 
requirements:
     The encounter must occur no more than 30 calendar days 
prior to the start of the third benefit period and no more

[[Page 26818]]

than 30 calendar days prior to every subsequent benefit period 
thereafter.
     The hospice physician or NP who performs the encounter 
attests in writing that he or she had a face-to-face encounter with the 
patient, and includes the date of the encounter. The attestation, which 
includes the physician's signature and the date of the signature, must 
be a separate and distinct section of, or an addendum to, the 
recertification form, and must be clearly titled.
     The physician narrative associated recertifications for 
the third and subsequent benefit period recertifications include an 
explanation of why the clinical findings of the face-to-face encounter 
support a prognosis that the patient has a life expectancy of 6 months 
or less.
     When an NP performs the encounter, the NP's attestation 
must 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 hospice physician or the hospice NP can perform the 
encounter. We define a hospice physician as a physician who is employed 
by the hospice or working under contract with the hospice, and a 
hospice NP must be employed by the hospice.
     The hospice physician who performs the face-to-face 
encounter and attests to it must be the same physician who certifies 
the patient's terminal illness and composes the recertification 
narrative (75 FR 70445).
    In this proposed rule, we would allow any hospice physician to 
perform the encounter and inform the certifying physician for this last 
requirement for the following reasons:
    Since the publication of the CY 2011 HH PPS final rule, we were 
told of the concerns of stakeholders, such as individual hospices, 
major hospice associations, physicians, and patient advocacy groups 
regarding the hospice physician performing both the face-to-face 
encounter and the recertification. Most of the concerns were that this 
requirement could potentially result in a substantial risk of harm to 
terminally ill patients. We find many of these concerns compelling. 
Specifically, stakeholders describe the challenge rural areas and 
medically underserved areas have in employing hospice physicians. 
Often, the physicians employed are part-time, and sometimes several 
part-time physicians are employed by the hospice. These physicians 
furnish medically necessary physician services to hospice patients as a 
team or group practice would, communicating with each other regarding 
the patients' conditions and sharing responsibility for the patients' 
care. In requiring the same physician to perform both the face-to-face 
encounter and the certification, stakeholders argued that we were 
imposing an unnecessary complexity to the face-to-face encounter 
requirement which could disadvantage those patients in areas of the 
country whom they believed were at the greatest risk and could 
negatively affect access-to-care. Many hospices stated that they would 
not find it feasible to meet this strict implementation requirement and 
they would no longer be able to serve patients in the third and later 
benefit periods. In addition, stakeholders stated that when MedPAC 
recommended a face-to-face encounter for long-stay hospice patients, it 
also expressed a concern that the requirement could pose an access risk 
in rural areas (MedPAC Report at 366). To mitigate that risk, MedPAC 
recommended that NPs also be allowed to perform the encounter, and the 
Congress adopted that recommendation. Further, stakeholders stated that 
because the Congress allowed an NP to perform the encounter and inform 
the recertifying physician, it would be illogical for CMS to preclude 
another hospice physician from performing the encounter and informing 
the recertifying physician. The stakeholders stated that in having done 
so, CMS inadvertently created an access to care risk that MedPAC and 
the Congress had tried to prevent. Stakeholders stated that long-stay 
patients in rural and medically underserved areas would be denied 
access during a time when many are in the final stages of their disease 
trajectory and needed hospice care the most. Stakeholders suggested 
that such patients would be denied the pain and symptom management 
control that they require as a result of CMS's regulatory limitation. 
In addition, they stated that hospices in rural and medically 
underserved areas need the flexibility of allowing NPs and any of their 
hospice physicians to perform the required patient encounter in order 
to serve such patients.
    Many stakeholders also stated that requiring the same hospice 
physician to perform both the face-to-face encounter and the 
recertification was contrary to the intent of the statute. They pointed 
out that the statutory language required that a hospice physician or NP 
perform the encounter, but the statute did not mandate that the 
physician who performs the encounter must be the same physician who 
recertifies the patient. In addition, the stakeholders observed that if 
the Congress had intended to require the physician who performed the 
encounter to be the same physician who recertified the patient, then 
the Congress could have included that requirement in the law.
    Stakeholders also stated that MedPAC did not recommend that the 
physician who performed the encounter be the same physician that 
recertified the patient. They referred us to discussions in the MedPAC 
Report, which first recommended the face-to-face encounter. (MedPAC 
Report, 357 through 371.)
    We note that some of these stakeholders were part of the technical 
expert panel which MedPAC convened in 2008 to develop the 
recommendations contained in the MedPAC Report. The report described 
the panel's discussions surrounding the need for more physician 
involvement in hospice/palliative care, and concerns regarding some 
hospices' practices being motivated by financial incentives (MedPAC 
Report, 357 through 367). The report also discussed the panel's concern 
that hospice medical directors could at times be influenced by such 
incentives and should be more accountable for eligibility 
determinations. However, we believe it is possible that the scenario 
where the hospice medical director was the certifying physician and a 
different hospice physician performed the encounter and informed the 
medical director about the patient's condition the result could be 
better physician accountability than if the medical director performed 
the encounter. The physician who performed the encounter would serve as 
an independent assessor of the patient's terminal condition, and would 
provide a check and balance to the medical director's possible 
financial incentive to recertify.
    Stakeholders also asserted that any hospice physician who saw the 
patient could achieve the goals described in the MedPAC report and the 
statute. The report described the tension between hospice physicians 
and non-physician staff and how the emotional attachment to patients of 
non-physician staff could lead to inappropriate recertifications. 
Stakeholders claim that this risk could be mitigated by any hospice 
physician seeing the patient and informing the certifying physician. 
More importantly, the stakeholders referred to the MedPAC report 
discussion regarding concerns that a physician face-to-face encounter 
provision might not be feasible in rural areas where there were 
physician shortages. In recommending that non-

[[Page 26819]]

physician practitioners be allowed to perform the encounter, MedPAC 
identified a need to allow flexibility regarding the practitioner who 
performs the encounter, especially in rural areas. Commenters stated 
that MedPAC and the Congress intended for long-stay hospice patients to 
be seen by any hospice physician or NP prior to the 180-day 
recertification.
    In this proposed rule, we propose to revise the policy finalized in 
the CY 2011 HH PPS final rule published on November 17, 2010.
    Specifically, in the CY 2011 HH PPS final rule, we implemented 
section 3132(b) of the Affordable Care Act, which requires that 
beginning January 1, 2011, a hospice physician or NP have a face-to-
face encounter with every hospice patient prior to the 180-day 
recertification of the patient's terminal illness to determine 
continued eligibility. In implementing this provision, in response to 
comments in the final rule, we stated that the hospice physician who 
performed the face-to-face encounter must be the same physician who 
recertifies the patient's terminal illness and composes the 
recertification narrative.
    As a result of stakeholders concerns resulting from the final rule 
policy, we propose to remove this limitation in this proposed rule. We 
propose that any hospice physician can perform the face-to-face 
encounter regardless of whether that physician recertifies the 
patient's terminal illness and composes the recertification narrative. 
In keeping with this proposal, we also propose to change the regulatory 
text at 418.22(b)(4) to state that the attestation of the nurse 
practitioner or a non-certifying hospice physician shall state that the 
clinical findings of that encounter were provided to the certifying 
physician, for use in determining continued eligibility for hospice. 
This proposal reflects the Centers for Medicare and Medicaid Services' 
commitment to the general principles of the President's Executive Order 
released January 18, 2011 entitled ``Improving Regulation and 
Regulatory Review'', as it would reduce burden to hospices and hospice 
physicians and increase flexibility in areas of physician shortages. We 
are soliciting public comments on this proposal.

D. Technical Proposals and Clarification

1. Hospice Local Coverage Determinations
    In the November 17, 2010 ``CY 2011 Home Health Prospective Payment 
System Rate Update for Calendar Year 2011; Changes in Certification 
Requirements for Home Health Agencies and Hospices Final Rule'', we 
implemented new requirements for a face-to-face encounter which were 
mandated by the Affordable Care Act of 2010. A commenter asked how the 
face-to-face encounter related to Local Coverage Determinations (LCDs), 
and if the expectation was that the physician would verify the 
patient's condition based on the LCDs. Other commenters asked for 
guidance regarding what the encounter should include (that is, elements 
that make up an encounter) for purposes of satisfying the requirement. 
When describing how to assess patients for recertification, our 
response cited the LCDs of several contractors (see 75 FR 70447-70448). 
The response also included common text from those LCDs related to 
clinical findings to use in making the assessment and determining 
whether a patient was terminally ill. We stated that the clinical 
findings should include evidence from the three following categories: 
(1) Decline in clinical status guidelines (for example, decline in 
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. We would note that 
because the language was not mandatory, there was never any intention 
that this response have a legally binding effect on hospices. These are 
suggestions as to elements of a certification or recertification which 
could be deemed to be indicative of a terminal condition. However, this 
was not meant to be an exhaustive or exclusive list. Because there has 
been some confusion about the extent to which these items exclude other 
possible scenarios, we propose to clarify that the clinical findings 
included in the comment response were provided as an example of 
findings that can be used in determining continued medical eligibility 
for hospice care. The illustrative clinical findings mentioned above 
are not mandatory national policy. We reiterate that certification or 
recertification is based upon a physician's clinical judgment, and is 
not an exact science. Congress made this clear in section 322 of the 
Benefits Improvement and Protection Act of 2000 (BIPA), which says that 
the hospice certification of terminal illness ``shall be based on the 
physician's or medical director's clinical judgment regarding the 
normal course of the individual's illness.''
2. Definition of Hospice Employee
    As noted above, in the November 17, 2010 ``CY 2011 Home Health 
Prospective Payment System Rate Update for Calendar Year 2011; Changes 
in Certification Requirements for Home Health Agencies and Hospices 
Final Rule,'' we implemented new requirements for a face-to-face 
encounter, which were mandated by the Affordable Care Act. As part of 
that implementation, we required that a hospice physician or nurse 
practitioner must perform the face-to-face encounters. Several 
commenters asked us to clarify who is considered a ``hospice physician 
or nurse practitioner'' (see 75 FR 70443-70445). We stated that a 
hospice physician or nurse practitioner must be employed by the 
hospice, and that hospice physicians could also be working under 
arrangement with the hospice (i.e., contracted). We added that Section 
418.3 defines a hospice employee as someone who is receiving a W-2 form 
from the hospice or who is a volunteer. The complete definition of a 
hospice employee at 418.3 is as follows: ``Employee means a person who: 
(1) Works for the hospice and for whom the hospice is required to issue 
a W-2 form on his or her behalf; (2) if the hospice is a subdivision of 
an agency or organization, an employee of the agency or organization 
who is assigned to the hospice; or (3) is a volunteer under the 
jurisdiction of the hospice.'' We received a number of questions from 
the industry about the definition of an employee and whether it 
included personnel who were employed by an agency or organization that 
has a hospice subdivision and who were assigned to that hospice. We are 
clarifying that entire definition of employee given at 418.3 (shown 
above) applies. Therefore, if the hospice is a subdivision of an agency 
or organization, an employee of the agency or organization who is 
assigned to the hospice is a hospice employee.
3. Timeframe for Face-to-Face Encounters
    In the November 17, 2010 ``CY 2011 Home Health Prospective Payment 
System Rate Update for Calendar Year 2011; Changes in Certification 
Requirements for Home Health Agencies and Hospices Final Rule,'' we 
also implemented policies related to the timeframe for performing a 
face-to-face encounter. We cited the statutory language from section 
3132 of the Affordable Care Act, which says that on and after January 
1, 2011, a hospice physician or nurse practitioner must

[[Page 26820]]

have a face-to-face encounter with the beneficiary to determine 
continued eligibility of the beneficiary for hospice care prior to the 
180th-day recertification and each subsequent recertification (see 75 
FR 70435). We also defined the 180th-day recertification to be the 
recertification which occurs at the 3rd benefit period (see 75 FR 
70436-70437). We implemented a requirement that the face-to-face 
encounter occur no more than 30 calendar days prior to the 3rd or later 
benefit periods, to allow hospices flexibility in scheduling the 
encounter (see 75 FR 70437-70439). We emphasized throughout the final 
rule that the encounter must occur ``prior to'' the 3rd benefit period 
recertification, and each subsequent recertification. The regulatory 
text associated with these changes is found at 42 CFR 418.22(a)(4), and 
reads, ``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.'' We believe our final policy 
states clearly that the face-to-face encounter must occur prior to, but 
no more than 30 calendar days prior to, the 3rd benefit period 
recertification and each subsequent recertification. However, we are 
concerned that our regulation text above could lead a hospice to 
believe that the face-to-face encounter could occur in an open-ended 
fashion after the start of a benefit period in which it is required, 
and that the limitation on the time-frame was only on how far in 
advance of the start of the benefit period that the encounter could 
occur. Our policy, as stated in the final rule, is that a face-to-face 
encounter is required prior to the 3rd benefit period recertification 
and each recertification thereafter (75 FR 70454). Therefore, we 
propose to revise the regulation text to more clearly state that the 
encounter is required ``prior to'' the 3rd benefit period 
recertification, and each subsequent recertification. As such, we 
propose to change the regulatory text to read ``(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. The face-to-face encounter must occur prior to 
but no more than 30 calendar days prior to the 3rd benefit period 
recertification, and every benefit period recertification thereafter, 
to gather clinical findings to determine continued eligibility for 
hospice care.''
4. Hospice Aide and Homemaker Services
    The hospice Conditions of Participation (CoPs) were updated in 
2008, after being finalized on June 5, 2008 in the Hospice Conditions 
of Participation Final Rule (73 FR 32088). Those revised CoPs included 
changing the term ``home health aide'' to ``hospice aide''. In our FY 
2010 Hospice Wage Index Final Rule (74 FR 39384), we updated language 
in several areas of our regulatory text to use this new terminology, 
including at 42 CFR 418.202(g). The regulatory text at 418.202(g) 
describes hospice aide and homemaker services. The last sentence of the 
regulatory text that was finalized is about homemaker services, however 
the word ``homemaker'' was inadvertently replaced with ``aide''. The 
revised regulatory text also inadvertently deleted the sentence which 
read ``Aide services must be provided under the supervision of a 
registered nurse.'' Finally, the title of this section of the 
regulatory text continues to refer to section 418.94 of the CoPs. 
However, section 418.94 no longer exists, and was updated in the 2008 
Hospice CoP Final Rule to section 418.76. We propose to correct the 
regulatory text at 418.202(g) to update the CoP reference to show 
section 418.76, to add back the sentence about supervision which was 
deleted, and to correct the last sentence to refer to ``homemakers'' 
rather than ``aides.''

E. Quality Reporting for Hospices

1. Background and Statutory Authority
    CMS seeks to promote higher quality and more efficient health care 
for Medicare beneficiaries. Our efforts are furthered by the quality 
reporting programs coupled with public reporting of that information. 
Such quality reporting programs exist for various settings such as the 
Hospital Inpatient Quality Reporting (Hospital IQR) Program. In 
addition, CMS has implemented quality reporting programs for hospital 
outpatient services, the Hospital Outpatient Quality Data Reporting 
Program (HOP QDRP), and for physicians and other eligible 
professionals, the Physician Quality Reporting System (PQRS). CMS has 
also implemented quality reporting programs for home health agencies 
and skilled nursing facilities that are based on conditions of 
participation, and an end-stage renal disease quality improvement 
program that links payment to performance based on requirements in 
section 153(c) of the Medicare Improvement for Patients and Providers 
Act of 2008.
    Section 3004 of the Affordable Care Act amends the Social Security 
Act to authorize additional quality reporting programs, including one 
for hospices. Section 1814(i)(5)(A)(i) of the Act requires that 
beginning with FY 2014 and each subsequent fiscal year, the Secretary 
shall reduce the market basket update by 2 percentage points for any 
hospice that does not comply with the quality data submission 
requirements with respect to that fiscal year. Depending on the amount 
of annual update for a particular year, a reduction of 2 percentage 
points may result in the annual market basket update being less than 
0.0 percent for a fiscal year and may result in payment rates that are 
less than payment rates for the preceding fiscal year. Any reduction 
based on failure to comply with the reporting requirements, as required 
by section 1814(i)(5)(B) of the Act, would apply only with respect to 
the particular fiscal year involved. Any such reduction will not be 
cumulative and will not be taken into account in computing the payment 
amount for subsequent fiscal years.
    Section 1814(i)(5)(C) of the Act requires that each hospice submit 
data to the Secretary on quality measures specified by the Secretary. 
Such data must be submitted in a form and manner, and at a time 
specified by the Secretary. Any measures selected by the Secretary must 
have been endorsed by the consensus-based entity which holds a contract 
regarding performance measurement with the Secretary under section 
1890(a) of the Act. This contract is currently held by the National 
Quality Forum (NQF). However, Section 1814(i)(5)(D)(ii) provides that 
in the case of a specified area or medical topic determined appropriate 
by the Secretary for which a feasible and practical measure has not 
been endorsed by the consensus-based entity the Secretary may specify a 
measure(s) that is(are) not so endorsed as long as due consideration is 
given to measures that have been endorsed or adopted by a consensus-
based organization identified by the Secretary. Under section 
1814(i)(5)(D)(iii) of the Act, the Secretary must not later than 
October 1, 2012 publish selected measures that will be applicable with 
respect to FY 2014.
    Section 1814(i)(5)(E) of the Act requires the Secretary to 
establish

[[Page 26821]]

procedures for making data submitted under the hospice quality 
reporting program available to the public. The Secretary must ensure 
that a hospice has the opportunity to review the data that is to be 
made public with respect to the hospice program prior to such data 
being made public. The Secretary must report quality measures that 
relate to hospice care provided by hospices on the Internet Web site of 
CMS.
2. Quality Measures for Hospice Quality Reporting Program for Payment 
Year FY 2014
a. Considerations in the Selection of the Proposed Quality Measures
    In implementing these quality reporting programs, CMS envisions the 
comprehensive availability and widespread use of health care quality 
information for informed decision making and quality improvement. We 
seek to collect data in a manner that balances the need for information 
related to the full spectrum of quality performance and the need to 
minimize the burden of data collection and reporting. Our purpose is to 
help achieve better health care and improve health through the 
widespread dissemination and use of performance information. We seek to 
efficiently collect data using valid, reliable and relevant measures of 
quality and to share the information with organizations that use such 
performance information as well as with the public.
    We also seek to align new Affordable Care Act reporting 
requirements with current HHS high priority conditions, topics and 
National Quality Strategy (NQS) goals and to ultimately provide a 
comprehensive assessment of the quality of health care delivered. The 
hospice quality reporting program will align with the HHS National 
Quality Strategy, particularly with the goals of ensuring person and 
family centered care and promoting effective communication and 
coordination of care. One fundamental element of hospice care is 
adherence to patient choice regarding such issues as desired level of 
treatment and location of care provision. This closely aligns with the 
HHS NQS goal of ensuring person and family centered care. Another 
fundamental element of hospice care is the use of a closely coordinated 
interdisciplinary team to provide the desired care. This characteristic 
is closely aligned with the goal of promoting effective communication 
and coordination of care. Patient/family preferences and coordination 
of care will be foci of future hospice quality measure selection. 
Arriving at such a comprehensive set of quality measures that reflect 
high priority conditions and goals of the HHS NQS will be a multi-year 
effort.
    Other considerations in selecting measures include: Alignment with 
other Medicare and Medicaid quality reporting programs as well as other 
private sector initiatives; suggestions and input received on measures 
including, for example, those received during the Listening Session on 
the Hospice Quality Reporting Program held on November 15, 2010; 
seeking measures that have a low probability of causing unintended 
adverse consequences; and considering measures that are feasible (that 
is, measures that can be technically implemented within the capacity of 
the CMS infrastructure for data collection, analyses, and calculation 
of reporting and performance rates as applicable). We also considered 
the burden to hospices when selecting measures to propose. We 
considered the January 18, 2011 Executive Order entitled ``Improving 
Regulation and Regulatory Review'' (E.O. 13563), which instructs 
federal agencies to consider regulatory approaches that reduce burdens 
and maintain flexibility and freedom of choice for the public.
    In our search for measures appropriate for the first year of the 
Hospice Quality Reporting Program, we considered the results of our 
environmental scan, literature search, technical expert panel and 
stakeholder listening sessions that detailed measures developed by 
multiple stewards. Of particular interest were measures from the 
National Hospice and Palliative Care Organization (NHPCO), the PEACE 
Project conducted by The Carolinas Center for Medical Excellence 2006-
2008 and the AIM Project conducted by the New York QIO, IPRO 2009-2010. 
Measures from these three sources can be viewed at the following Web 
sites: http://ww.nhpco.org/files/public/Statistics_Research/NHPCO_research_flier.pdf, http://www.thecarolinascenter.org/default.aspx?pageid=46 and http://www.ipro.org/index/cms-filesystem-action/hospice/1_6.pdf.
    We are investigating expanding our proposed measures to adopt some 
of these measures in the future. However, evaluation of these measures 
revealed unique measurement concerns for hospice services generally. 
Two major issues were identified. First, all of the measures currently 
available for use in measuring hospice quality of care are 
retrospective and have to be collected using a chart abstraction 
approach. This creates a burden for hospice providers. Secondly, there 
is no standardized vehicle for data collection or centralized structure 
for hospice quality reporting. We believe these issues limit our 
options for measure reporting in the first year of the Hospice Quality 
Reporting Program. Our plans to require additional measure reporting 
are described below under section 4. Additional Measures Under 
Consideration.
    We considered measures currently endorsed by NQF that are 
applicable to hospice care. Of the nine measures listed by NQF as 
applicable to end of life care, seven address patients who specifically 
died of cancer and various situations experienced by those patients in 
their last days of life regardless of whether they were cared for by a 
hospice. These seven measures do not address the provision of hospice 
care or the breadth of the hospice patient population. The remaining 
two NQF endorsed hospice-related measures address measurement of the 
quality of care actually provided by hospices. One of the two hospice 
appropriate measures relates to pain control and is discussed below 
under section b. The other hospice appropriate measure, 0208: 
Percentage of family members of all patients enrolled in a hospice 
program who give satisfactory answers to the survey instrument requires 
the hospice to administer the Family Evaluation of Hospice Care (FEHC) 
survey to families of deceased hospice patients. The FEHC survey itself 
contains 54 questions to be returned to the hospice and analyzed/scored 
in order to produce a rating for the measure. Though the FEHC survey is 
available to all hospices, we are unable to determine the number of 
hospices that currently use this survey or the number that analyze the 
responses to determine scoring for this NQF endorsed measure. We 
believe that the efforts required for hospices to set up systems to 
utilize and analyze this survey tool can be burdensome for some 
hospices, and that the timeframe required to put the survey 
administration and evaluation process in place is insufficient. 
Therefore, while we do not propose to use this measure as a requirement 
for the FY 2014 payment update, this measure may be included in future 
quality reporting requirements because, should the level of burden 
prove to be acceptable, the family evaluation of hospice care is an 
important perspective on hospice quality. We are not aware of any other 
measures applicable to hospice care that have been endorsed or adopted 
by a consensus organization other than the NQF.
    The current hospice Conditions of Participation (CoPs) at 42 CFR 
section 418.58 require that hospices develop,

[[Page 26822]]

implement, and maintain an effective, ongoing, hospice-wide data-driven 
quality assessment and performance improvement (QAPI) program and that 
the hospice maintain documentary evidence of its quality assessment and 
performance improvement program and be able to demonstrate its 
operation to CMS. In addition, hospices must measure, analyze, and 
track quality indicators, including adverse patient events, and other 
aspects of performance that enable the hospice to assess processes of 
care, hospice services, and operations as part of their QAPI Program.
    Hospices have been required to have QAPI programs in place since 
December 2008 in order to comply with the CoPs. As a part of the QAPI 
regulations, since February 2, 2009, hospices have been required to 
develop, implement, and evaluate performance improvement projects. The 
regulations require that
    (1) The number and scope of distinct performance improvement 
projects conducted annually, based on the needs of the hospice's 
population and internal organizational needs, reflect the scope, 
complexity, and past performance of the hospice's services and 
operations; and
    (2) The hospice document what performance improvement projects are 
being conducted, the reasons for conducting these projects, and the 
measurable progress achieved on these projects.
b. Proposed Quality Measures for the Quality Reporting Program for 
Hospices
Proposed Quality Measures
    To meet the quality reporting requirements for hospices for the FY 
2014 payment determination as set forth in Section 1814(i)(5) of the 
Act, we propose that hospices report the NQF-endorsed measure that is 
related to pain management, NQF 0209: The percentage of 
patients who were uncomfortable because of pain on admission to hospice 
whose pain was brought under control within 48 hours. A primary goal of 
hospice care is to enable patients to be comfortable and free of pain, 
so that they may live each day as fully as possible. The provision of 
pain control to hospice patients is an essential function, a 
fundamental element of hospice care and therefore we believe the pain 
control measure, NQF 0209 is an important and appropriate 
measure for the hospice quality reporting program.
    Additionally, to meet the quality reporting requirements for 
hospices for the FY 2014 payment determination as set forth in Section 
1814(i)(5) of the Act, we propose that hospices also report one 
structural measure that is not endorsed by NQF. Structural measures 
assess the characteristics and capacity of the provider to deliver 
quality health care. The proposed structural measure is: Participation 
in a Quality Assessment and Performance Improvement (QAPI) Program that 
Includes at Least Three Quality Indicators Related to Patient Care. We 
believe that participation in QAPI programs that address at least three 
indicators related to patient care reflects a commitment not only to 
assessing the quality of care provided to patients but also to 
identifying opportunities for improvement that pertain to the care of 
patients. Examples of domains of indicators related to patient care 
include providing care in accordance with documented patient and family 
goals, effective and timely symptom management, care coordination, and 
patient safety.
    Section 1814(i)(5)(D)(ii) provides that ``[i]n the case of a 
specified area or medical topic determined appropriate by the Secretary 
for which a feasible measure has not been endorsed by an entity with a 
contract under section 1890(a), the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary.'' We have proposed to adopt this 
structural measure because we believe it is appropriate for use in 
evaluating the quality of care provided by hospices. As discussed 
above, a majority of the NQF-endorsed measures that relate to end of 
life care are not hospice-specific or, in the case of the FEHC survey 
instrument, that measure is too burdensome for hospices to implement 
for the FY 2014 payment determination. We are also not aware of any 
other measures applicable to the hospice setting that have been adopted 
by another consensus organization. Accordingly, we propose to adopt the 
structural measure under the authority in section 1814(i)(5)(D)(ii).
    We propose that each hospice submit data on the proposed structural 
measure, including the description of each of their patient-care 
focused quality indicators (if applicable) to CMS by January 31, 2013 
on a spreadsheet template to be prepared by CMS. Specifically, hospice 
programs would be required to report whether or not they have a QAPI 
program that addresses at least three indicators related to patient 
care. In addition, hospices would be required to list all of their 
patient care indicators. Hospice programs will be evaluated for 
purposes of the quality reporting program based on whether or not they 
respond, not on how they respond.
    In addition, we propose a voluntary submission of the proposed 
structural measure (not for purposes of a payment determination or 
public reporting), including the description of each of their patient-
care focused quality indicators to CMS by January 31, 2012 on a 
spreadsheet template to be prepared by CMS. Voluntary reporting of the 
structural measure data with specific quality indicators related to 
patient care to CMS will allow us to learn what the important patient 
care quality issues are for hospices and serves to provide useful 
information in the design and structure of the quality reporting 
program. Our intent is to require additional standardized and specific 
quality measures to be reported by hospices in subsequent years. We 
solicit comment on the measures proposed.
    The proposed collection and submission of data on the proposed NQF-
endorsed measure will be a new requirement for hospices. However, since 
the development, implementation and maintenance of an effective, 
ongoing, hospice-wide data driven quality assessment and performance 
improvement program have been requirements in the Medicare CoPs since 
2008, we do not believe that the collection of the proposed structural 
measure on QAPI indicators would be considered new work. There are 
numerous data collection tools and quality indicators that are 
available to hospices through hospice industry associations and private 
companies. In addition to these options, hospices may choose to use the 
CMS-sponsored Hospice Assessment Intervention and Measurement (AIM) 
Project data elements, data dictionary, data collection tool, and 
quality indicator formulas that are freely available to all hospices, 
found at http://www.ipro.org/index/hospice-aim.
    We invite comment on the proposed quality measurement approach 
including whether there are other quality measures currently available 
which may be appropriate and advisable for the hospice quality 
reporting program starting in FY2014. We will review and carefully 
consider the comments that we receive on the proposed measures for the 
first hospice quality reporting cycle as we prepare the final rule. We 
propose that hospices report the structural measure by January 2013 and 
the NQF measure 0209 by April 2013 in order to be used in the 
fiscal year 2014 payment determination. In addition, we propose that 
hospices voluntarily report the structural

[[Page 26823]]

measure by January 2012 for purposes of program development and design. 
It is important to note that the Affordable Care Act allows the 
Secretary until October 1, 2012 to publish the measures required to 
meet the FY 2014 reporting requirement. As such, we have the 
opportunity to also consider commenters' suggestions associated with 
this proposed rule in FY 2013 hospice rulemaking.
c. Proposed Timeline for Data Collection Under the Quality Reporting 
Program for Hospices
    To meet the quality reporting requirements for hospices for the FY 
2014 payment determination as set forth in Section 1814(i)(5) of the 
Act, we propose that the first hospice quality reporting cycle for the 
proposed NQF-endorsed measure and the proposed structural measure will 
consist of data collected from October 1, 2012 through December 31, 
2012. This timeframe will permit us to determine whether each hospice 
is eligible to receive the full market basket update for FY 2014 based 
on a full quarter of data. This also provides sufficient time after the 
end of the data collection period to accurately determine each 
hospice's market basket update for FY 2014. We propose that all 
subsequent hospice quality reporting cycles would be based on the 
calendar-year basis (e.g., January 1, 2013 through December 31, 2013 
for determination of the hospice market basket update for each hospice 
in FY 2015, etc.). We welcome comments on the proposed reporting cycle 
for the hospice quality reporting program.
    To voluntarily submit the structural measure, we propose that the 
hospice voluntary quality reporting cycle will consist of data 
collected from October 1, 2011 through December 31, 2011. This 
timeframe will permit us to analyze the data to learn what the 
important patient care quality issues are for hospices as we enhance 
the quality reporting program design to require more standardized and 
specific quality measures to be reported by hospices in subsequent 
years.
d. Data Submission Requirements
    We generally propose that hospices submit data in the fiscal year 
prior to the payment determination. For the fiscal year 2014 payment 
determination, we propose that hospices submit data for the proposed 
NQF-endorsed measure based on the measure specifications for that 
measure, which can be found at http://www.qualityforum.org, no later 
than April 1, 2013. Data submission for the structural measure would 
include the hospices' report of whether they have a QAPI program that 
addresses at least three indicators related to patient care, and, if 
so, the subject matter of all of their patient care indicators for the 
period October 1, 2012 through December 31, 2012. Submission of these 
reports would be required by January 31, 2013.
    We propose that both measures' data be submitted to CMS on a 
spreadsheet template to be prepared by CMS. We will announce 
operational details with respect to the data submission methods and 
format for the hospice quality data reporting program using this CMS 
Web site http://www.cms.gov/LTCH-IRF-Hospice-Quality-Reporting by no 
later than December 31, 2011 should these measures be finalized.
    For the voluntary submission, we propose that hospices submit data 
for the proposed structural measure based on the spreadsheet template 
to be prepared by CMS, no later than January 31, 2012. Voluntary data 
submission for the structural measure would include the hospices' 
report of whether they have a QAPI program that addresses at least 
three indicators related to patient care, and, if so, the subject 
matter of all of their patient care indicators for the period October 
1, 2011 through December 31, 2011. Submission of these reports would be 
required by January 31, 2012.
3. Public Availability of Data Submitted
    Under section 1814(i)(5)(E) of the Act, the Secretary is required 
to establish procedures for making any quality data submitted by 
hospices available to the public. Such procedures will ensure that a 
hospice will have the opportunity to review the data regarding the 
hospice's respective program before it is made public. Also, under 
section 1814(i)(5)(E) of the Act, the Secretary is authorized to report 
quality measures that relate to services furnished by a hospice on the 
CMS Internet Web site. At the time of the publication of this proposed 
rule, no date has been set for public reporting of data. We recognize 
that public reporting of quality data is a vital component of a robust 
quality reporting program and are fully committed to developing the 
necessary systems for public reporting of hospice quality data.
4. Additional Measures Under Consideration
    As described above, we are considering expanding the proposed 
measures to include measures from the National Hospice and Palliative 
Care Organization (NHPCO), the PEACE Project and the AIM Project. While 
in this first year, we propose to build a foundation for quality 
reporting by requiring hospices to report one NQF endorsed measure and 
one structural measure, we seek to achieve a comprehensive set of 
quality measures to be available for widespread use for informed 
decision making and quality improvement. We expect to explore and 
expand the measures in various ways. Future topics under consideration 
for quality data reporting include patient safety, effective symptom 
management, patient and family experience of care, and alignment of 
care with patient preferences. For quality data reporting in FY2014 or 
FY2015, we are also particularly interested in the development of new 
measures related to these topics and in the further development of 
existing measures that can be found on the following Web sites: http://www.nhpco.org/files/public/Statistics_Research/NHPCO_research_flier.pdf http://www.thecarolinascenter.org/default.aspx?pageid=46 and 
http://www.ipro.org/index/cms-filesystem-action/hospice/1_6.pdf.
    We welcome comments on whether all, some, any, or none of these 
measures should be considered for future rulemaking. We also solicit 
comments on ways which CMS can adopt these measures in a standardized 
way that is not overly burdensome to hospice providers and reflects 
hospice patient input.
    To support the standardized collection and calculation of quality 
measures specifically focused on hospice services, we believe the 
required data elements would potentially require a standardized 
assessment instrument.
    CMS has developed an assessment instrument for the ``Post-Acute 
Care Payment Reform Demonstration Program,'' as required by section 
5008 of the 2005 Deficit Reduction Act (DRA). This is a standardized 
assessment instrument that could be used across all post-acute care 
sites to measure functional status and other factors during treatment 
and at discharge from each provider and to test the usefulness of this 
standardized assessment instrument (now referred to as the Continuity 
Assessment Record & Evaluation, CARE). We believe such an assessment 
instrument would be beneficial in supporting the submission of data on 
quality measures by requiring standardized data with regard to hospice 
patients, similar to the current MDS 3.0 and OASIS-C that support a 
variety of quality measures for nursing homes and home health agencies, 
respectively. The CARE data set used by hospices would require editing 
to

[[Page 26824]]

address the unique and specific assessment needs of the hospice patient 
population. We invite comments on the implementation of a standardized 
assessment instrument for hospices that would similarly support the 
calculation of quality measures.
    We invite public comment on considering modifications to the CARE 
data set to capture information specifically relevant to measuring the 
quality of care and services delivered by hospices such as patient/
family preferences and the degree to which those preferences were met 
for care delivery, symptom management, spiritual needs and other 
aspects of care pertinent to the hospice patient population. The 
current version of the CARE data set can be found at 
www.pacdemo.rti.org.
    Finally, we are also soliciting comments on ways which CMS can 
expand the structural reporting measure to also include hospice 
performance on each QAPI indicator reported in the performance period.

IV. Updates on Issues Not Proposed for Rulemaking for FY 2012 
Rulemaking

A. Update on Hospice Payment Reform and Value Based Purchasing

    Section 3132 of the Affordable Care Act of 2010 (Pub. L. 111-148) 
authorized the Secretary to collect additional data and information 
determined appropriate to revise payments for hospice care and for 
other purposes. The types of data and information described in the 
Affordable Care Act attempt to capture resource utilization, which can 
be collected on claims, cost reports, and possibly other mechanisms as 
we determine to be appropriate. The data collected would be used to 
revise hospice payment methodology or routine home care rates in a 
budget-neutral manner no earlier than October 1, 2013. In order to 
determine the revised hospice payment methodology and types of data to 
be collected, we will consult with hospice programs and the Medicare 
Payment Advisory Commission (MedPAC).
    According to MedPAC's March 2011 ``Report to Congress: Medicare 
Payment Policy'' (available at http://www.medpac.gov/chapters/Mar10_Ch02E.pdf), Medicare expenditures for hospice services exceeded $12 
billion in 2009 and the aggregate Medicare margin in 2008 was 5.1 
percent. In addition, MedPAC found a 50 percent growth in the number of 
hospices from 2000 to 2009, of which a majority were for-profit 
hospices. The growth in Medicare expenditures, margins, and number of 
new hospices raises concern that the current hospice payment 
methodology may have created unintended incentives. Over the past 
several years, MedPAC, the Government Accountability Office (GAO), and 
the Office of Inspector General (OIG) all recommended that CMS collect 
more comprehensive data in order to better assess the utilization of 
the Medicare hospice benefit. MedPAC has also suggested an alternative 
payment model that they believe will address the vulnerabilities in the 
current payment system.
    We are in the early stages of reform analysis. We have conducted a 
literature review, are in the process of conducting initial data 
analysis, and our contractor will convene a technical advisory panel in 
the spring of 2011. We are also working in collaboration with the 
Assistant Secretary of Planning and Evaluation to develop analysis that 
may be used to inform the technical advisory panel discussions. We hope 
to share the study design in future rulemaking to solicit public 
comments on the hospice payment reform methodology.
    Section 10326 of the Affordable Care Act directs the Secretary to 
conduct a pilot program to test a value-based purchasing program for 
hospices no later than January 1, 2016. As described in Section III E. 
Quality Reporting for Hospices above, in this rule we have proposed two 
measures for hospices to report to CMS no later than January 31, 2013. 
We believe that these measures are a quality reporting foundation upon 
which CMS will expand. Over the course of the next few years, no later 
than beginning in FY 2015, CMS will require hospices to report an 
expanded and comprehensive set of quality measures from which CMS can 
select for pilot testing a value-based purchasing program. During the 
FY 2013, FY 2014 and FY 2015 hospice rulemaking, CMS plans to 
iteratively implement the expanded measures, and solicit industry 
comments regarding analysis and design options for a hospice value-
based purchasing pilot which would improve the quality of care while 
reducing spending. We will also consult with stakeholders in developing 
the implementation plan, as well as considering the outcomes of any 
recent demonstration projects related to value-based purchasing which 
we believe might be relevant to the hospice setting. We will provide 
further information on the progress of our efforts in future 
rulemaking.

B. Update on the Redesigned Provider Statistical & Reimbursement Report 
(PS&R)

    In our FY 2011 Hospice Wage Index Notice with Comment Period, we 
solicited comments on a redesigned PS&R system, which would allow 
hospices easy access to national hospice utilization data on their 
Medicare hospice beneficiaries. As described in section II of this 
proposed rule, some commenters were supportive of the idea, and said 
they needed access to each beneficiary's full utilization history to 
better manage their caps and to meet the new face-to-face requirements.
    We are moving forward with this project, and expect the redesigned 
PS&R system to be able to provide complete utilization data needed for 
calculating hospice caps. We believe that the redesigned PS&R system 
will provide hospices with a greater ability to monitor their caps by 
providing readily accessible information on beneficiary utilization. We 
expect it to be available to hospices before year's end. We encourage 
all hospices to become familiar with the redesigned PS&R and to use the 
information it will make available in managing their respective caps. 
In the future, we may consider requiring hospices to self-report their 
caps, using PS&R data.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues in this 
proposed rule.

Proposed Quality Measures for the Quality Reporting Program for 
Hospices

    Section 1814(i)(5)(C) of the Social Security Act requires that each 
hospice

[[Page 26825]]

must submit data to the Secretary on quality measures specified by the 
Secretary. Such data must be submitted in a form and manner, and at a 
time specified by the Secretary. Under section 1814(i)(5)(D)(iii) of 
the Act, the Secretary must not later than October 1, 2012 publish 
selected measures that will be applicable with respect to FY 2014.
    In implementing the Hospice quality reporting program, CMS seeks to 
collect measure information with as little burden to the providers as 
possible and which reflects the full spectrum of quality performance. 
Our purpose in collecting this data is to help achieve better health 
care and improve health through the widespread dissemination and use of 
performance information.
A. Structural Measure: Participation in a Quality Assessment 
Performance Improvement Program That Includes at Least Three Indicators 
Related to Patient Care
    Consistent with this proposed rule, hospices will voluntarily 
report to CMS by January 31, 2012 their participation in a QAPI program 
that includes the hospices' report of whether they have a QAPI program 
that addresses at least three indicators related to patient care, and 
if so, the subject matter of all of their patient care indicators 
during the time frame October 1 through December 31, 2011. Data 
submitted for the last quarter of calendar year 2011 shall be voluntary 
on the part of hospice providers and shall not impact their fiscal year 
2014 payment determination.
    The information that hospices will be required to report, in both 
the voluntary and mandatory phases of reporting, consists of stating 
whether or not they participate in a QAPI program that includes at 
least three indicators related to patient care and if so, the subject 
matter of all of their patient care indicators. Expectations of the 
QAPI programs are set forth in the Hospice Conditions of Participation 
(CoPs) at 42 CFR 418.58(a) through 418.58(e). These conditions of 
participation require that hospices must develop, implement, and 
maintain an effective, ongoing, hospice-wide, data-driven QAPI program 
and that the hospice must maintain documentary evidence of its QAPI 
programs. Hospices have been required to meet all of the standards set 
forth in 42 CFR 418.58(a) through 418.58(e) as a condition of 
participation in the Medicare and Medicaid programs since 2008. 
Therefore, the identification of quality indicators related to patient 
care, will not be considered new or additional work.
    Under the proposed quality reporting program, hospices will 
voluntarily report to CMS by no later than January 31, 2012, data that 
would include whether they have a QAPI program that addresses at least 
three indicators related to patient care, and if so, the subject matter 
of all of their patient care indicators during the time frame via a 
CMS-prepared spreadsheet template. CMS anticipates that this reporting 
will take no more than 15 minutes of time to prepare the structural 
measure report.
    Thereafter, each of the 3,531 hospices in the United States will be 
required to submit this structural measure information to CMS one time 
per year. CMS estimates that it will take approximately 15 minutes to 
prepare and complete the submission of this structural measure report. 
Therefore, the estimated number of hours spent by all hospices in the 
U.S. preparing and submitting such data totals 883 hours. CMS believes 
that the compilation and transmission of the data can be completed by 
data entry personnel. We have estimated a total cost impact of $18,163 
to all hospices for the implementation of the hospice structural 
measure quality reporting program, based on 883 total hours for a 
billing clerk at $20.57/hour (which includes 30 percent overhead and 
fringe benefits, using most recent BLS wage data). We have developed an 
information collection request for OMB review and approval.
B. NQF Measure 0209: Percentage of Patients Who Were 
Uncomfortable Because of Pain on Admission to Hospice Whose Pain Was 
Brought Under Control Within 48 Hours
    At this time, CMS has not completed development of the information 
collection instrument that Hospices would have to submit in order to 
comply with the NQF measure 0209 reporting requirements as 
discussed earlier in this proposed rule. Because the instrument for the 
reporting of this measure is still under development, we cannot assign 
a complete burden estimate at this time. Once the instrument is 
available, we will publish the required 60-day and 30-day Federal 
Register notices to solicit public comments on the data submission form 
and to announce the submission of the information collection request to 
OMB for its review and approval. The data collection of the NQF measure 
0209 for the fiscal year 2014 payment determination is for the 
time period from October 1, 2012 to December 31, 2012.
    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-1355-P, Fax: (202) 395-6974; or E-mail: [email protected].

VI. Response to Comments

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

VII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 30, 1993, Regulatory Planning and 
Review), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (September 
19, 1980; Pub. L. 96-354) (RFA), section 1102(b) of the Social Security 
Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
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 Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has not been designated an ``economically'' 
significant rule, under section 3(f)(1) of Executive Order 12866. 
However, we have voluntarily prepared a Regulatory Impact Analysis that 
to the best of our ability presents the costs and benefits of this 
proposed rule.

[[Page 26826]]

2. Statement of Need
    This proposed rule follows Sec.  418.306(c) which requires annual 
publication, in the Federal Register, of the hospice wage index based 
on the most current available CMS hospital wage data, including any 
changes to the definitions of Metropolitan Statistical Areas (MSAs). 
Also, it implements Section 3004 of the Affordable Care Act of 2010, 
which directs the Secretary to specify quality measures for the hospice 
program. Lastly, this proposed rule includes proposed changes to the 
aggregate cap calculation, to requirements related to physicians who 
perform face-to-face encounters, and offers several clarifying 
technical corrections.
3. Overall Impacts
    The overall impact of this proposed rule is an estimated net 
decrease in Federal payments to hospices of $80 million for fiscal year 
2012. We estimated the impact on hospices, as a result of the changes 
to the FY 2012 hospice wage index and of reducing the BNAF by an 
additional 15 percent, for a total BNAF reduction of 40 percent (10 
percent in FY 2010, 15 percent in FY 2011, and 15 percent in FY 2012). 
The BNAF reduction is part of a 7-year BNAF phase-out that was 
finalized in previous rulemaking (74 FR 39384 (August 6, 2009)), and is 
not a policy change.
    As discussed previously, the methodology for computing the hospice 
wage index was determined through a negotiated rulemaking committee and 
promulgated in the August 8, 1997 hospice wage index final rule (62 FR 
42860). The BNAF, which was promulgated in the August 8, 1997 rule, is 
being phased out. This rule updates the hospice wage index in 
accordance with the 2010 Hospice Wage Index final rule, which finalized 
a 10 percent reduced BNAF for FY 2010 as the first year of a 7-year 
phase-out of the BNAF, to be followed by an additional 15 percent per 
year reduction in the BNAF in each of the next 6 years. Total phase-out 
will be complete by FY 2016.
4. Detailed Economic Analysis
    Column 4 of Table 1 shows the combined effects of the updated wage 
data (the 2011 pre-floor, pre-reclassified hospital wage index) and of 
the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 40 percent), comparing estimated payments for FY 2012 to 
estimated payments for FY 2011. The FY 2011 payments used for 
comparison have a 25 percent reduced BNAF applied. We estimate that the 
total hospice payments for FY 2012 will decrease by $80 million as a 
result of the application of the updated wage data ($+10 million) and 
the total 40 percent reduction in the BNAF ($-90 million). This 
estimate does not take into account any inpatient hospital market 
basket update, which is estimated to be 2.8 percent for FY 2012. This 
estimated 2.8 percent does not reflect the provision in the Affordable 
Care Act which reduces the inpatient hospital market basket update for 
FY 2012 by 0.1 percentage point, since that reduction does not apply to 
hospices. The final inpatient hospital market basket update and 
associated payment rates will be communicated through an administrative 
instruction in the summer. The effect of an estimated 2.8 percent 
inpatient hospital market basket update on payments to hospices is 
approximately $390 million. Taking into account an estimated 2.8 
percent inpatient hospital market basket update (+$390 million), in 
addition to the updated wage data ($+10 million) and the total 40 
percent reduction in the BNAF ($-90 million), it is estimated that 
hospice payments would increase by $310 million in FY 2012 ($390 
million + $10 million -$90 million = $310 million). The percent change 
in payments to hospices due to the combined effects of the updated wage 
data, the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 40 percent), and the inpatient hospital market basket 
update of 2.8 percent is reflected in column 5 of the impact table 
(Table 1).
a. Effects on Hospices
    This section discusses the impact of the projected effects of the 
hospice wage index, including the effects of an estimated 2.8 percent 
inpatient hospital market basket update for FY 2012 that will be 
communicated separately through an administrative instruction. This 
proposed rule continues to use the CBSA-based pre-floor, pre-
reclassified hospital wage index as a basis for the hospice wage index 
and continues to use the same policies for treatment of areas (rural 
and urban) without hospital wage data. The proposed FY 2012 hospice 
wage index is based upon the 2011 pre-floor, pre-reclassified hospital 
wage index and the most complete claims data available (FY 2009) with 
an additional 15 percent reduction in the BNAF (combined with the 10 
percent reduction in the BNAF taken in FY 2010, and the additional 15 
percent taken in 2011, for a total BNAF reduction of 40 percent in FY 
2012). The BNAF reduction is part of a 7-year BNAF phase-out that was 
finalized in previous rulemaking, and would not be a policy change.
    For the purposes of our impacts, our baseline is estimated FY 2011 
payments with a 25 percent BNAF reduction, using the 2010 pre-floor, 
pre-reclassified hospital wage index. Our first comparison (column 3, 
Table 1) compares our baseline to estimated FY 2012 payments (holding 
payment rates constant) using the updated wage data (2011 pre-floor, 
pre-reclassified hospital wage index). Consequently, the estimated 
effects illustrated in column 3 of Table 1 show the distributional 
effects of the updated wage data only. The effects of using the updated 
wage data combined with the additional 15 percent reduction in the BNAF 
are illustrated in column 4 of Table 1.
    We have included a comparison of the combined effects of the 
additional 15 percent BNAF reduction, the updated wage data, and an 
estimated 2.8 percent inpatient hospital market basket update for FY 
2012 (Table 1, column 5). Presenting these data gives the hospice 
industry a more complete picture of the effects on their total revenue 
of the hospice wage index discussed in this proposed rule, the BNAF 
phase-out, and the estimated FY 2012 inpatient hospital market basket 
update. Certain events may limit the scope or accuracy of our impact 
analysis, because such an analysis is susceptible to forecasting errors 
due to other changes in the forecasted impact time period. The nature 
of the Medicare program is such that the changes may interact, and the 
complexity of the interaction of these changes could make it difficult 
to predict accurately the full scope of the impact upon hospices.

[[Page 26827]]



  Table 1--Anticipated Impact on Medicare Hospice Payments of Updating the Pre-Floor, Pre-Reclassified Hospital
   Wage Index Data, Reducing the Budget Neutrality Adjustment Factor (BNAF) by an Additional 15 Percent (for a
  Total BNAF Reduction of 40 Percent) and Applying an Estimated 2.8 Percent [dagger] Inpatient Hospital Market
  Basket Update to the FY 2012 Hospice Wage Index, Compared to the FY 2011 Hospice Wage Index With a 25 Percent
                                                 BNAF Reduction
----------------------------------------------------------------------------------------------------------------
                                                                                                       Percent
                                                                                                      change in
                                                                                          Percent      hospice
                                                                                         change in     payments
                                                                            Percent       hospice    due to wage
                                                             Number of     change in   payments due     index
                                                Number of     routine       hospice       to wage      change,
                                                 hospices    home care   payments due      index      additional
                                                              days in      to FY2012    change, and      15%
                                                             thousands    wage index    additional    reduction
                                                                            change          15%        in BNAF,
                                                                                       reduction in   and market
                                                                                           BNAF         basket
                                                                                                        update
                                                       (1)          (2)           (3)           (4)          (5)
----------------------------------------------------------------------------------------------------------------
ALL HOSPICES.................................        3,440       74,900          0.1          (0.5)          2.3
    URBAN HOSPICES...........................        2,388       64,816          0.1          (0.5)          2.3
    RURAL HOSPICES...........................        1,052       10,084         (0.2)         (0.6)          2.2
BY REGION--URBAN:
    NEW ENGLAND..............................          133        2,425         (0.7)         (1.3)          1.5
    MIDDLE ATLANTIC..........................          239        7,131         (0.3)         (0.9)          1.9
    SOUTH ATLANTIC...........................          347       14,247          0.3          (0.3)          2.5
    EAST NORTH CENTRAL.......................          328        9,191          0.2          (0.4)          2.4
    EAST SOUTH CENTRAL.......................          177        4,420         (0.1)         (0.6)          2.2
    WEST NORTH CENTRAL.......................          180        4,280         (0.3)         (0.8)          1.9
    WEST SOUTH CENTRAL.......................          461        8,657          0.1          (0.4)          2.4
    MOUNTAIN.................................          222        5,633         (0.0)         (0.6)          2.2
    PACIFIC..................................          264        7,606          0.6          (0.0)          2.8
    OUTLYING.................................           37        1,227         (0.4)         (0.4)          2.4
BY REGION--RURAL:
    NEW ENGLAND..............................           26          193         (0.1)         (0.6)          2.1
    MIDDLE ATLANTIC..........................           45          517          0.4          (0.2)          2.6
    SOUTH ATLANTIC...........................          136        2,106         (0.7)         (1.1)          1.6
    EAST NORTH CENTRAL.......................          147        1,706         (0.6)         (1.1)          1.6
    EAST SOUTH CENTRAL.......................          153        1,958          0.1          (0.1)          2.7
    WEST NORTH CENTRAL.......................          194        1,085         (0.5)         (0.9)          1.9
    WEST SOUTH CENTRAL.......................          189        1,498          0.8           0.4           3.2
    MOUNTAIN.................................          109          585          0.3          (0.1)          2.7
    PACIFIC..................................           52          428         (0.7)         (1.3)          1.5
    OUTLYING.................................            1           10          0.0           0.0           2.8
ROUTINE HOME CARE DAYS:
    0-3499 DAYS (small)......................          621        1,077         (0.1)         (0.6)          2.2
    3500-19,999 DAYS (medium)................         1716       17,231         (0.1)         (0.6)          2.2
    20,000+ DAYS (large).....................         1103       56,591          0.1          (0.5)          2.3
TYPE OF OWNERSHIP:
    VOLUNTARY................................         1172       29,742          0.0          (0.5)          2.3
    PROPRIETARY..............................         1796       38,047          0.1          (0.4)          2.4
    GOVERNMENT...............................          472        7,111         (0.1)         (0.7)          2.1
HOSPICE BASE:
    FREESTANDING.............................         2340       58,510          0.1          (0.5)          2.3
    HOME HEALTH AGENCY.......................          555        9,922          0.1          (0.5)          2.3
    HOSPITAL.................................          526        6,272         (0.0)         (0.6)          2.2
    SKILLED NURSING FACILITY.................           19          196          0.2          (0.4)          2.4
----------------------------------------------------------------------------------------------------------------
BNAF = Budget Neutrality Adjustment Factor.
Comparison is to FY 2011 data with a 25 percent BNAF reduction.
* OSCAR data as of January 6, 2011 for hospices with claims filed in FY 2009.
** In previous years, there was also a category labeled ``Other''; these were Other Government hospices, and
  have been combined with the ``Government'' category.
[dagger] The estimated 2.8 percent inpatient hospital market basket update for FY 2012 does not reflect the
  provision in the Affordable Care Act which reduces the inpatient hospital market basket update by 0.1
  percentage point since that reduction does not apply to hospices.
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.

    Table 1 shows the results of our analysis. In column 1, we indicate 
the number of hospices included in our analysis as of January 6, 2011 
which had also filed claims in FY 2009. In column 2, we indicate the 
number of routine

[[Page 26828]]

home care days that were included in our analysis, although the 
analysis was performed on all types of hospice care. Columns 3, 4, and 
5 compare FY 2012 estimated payments with those estimated for FY 2011. 
The estimated FY 2011 payments incorporate a BNAF which has been 
reduced by 25 percent. Column 3 shows the percentage change in 
estimated Medicare payments for FY 2012 due to the effects of the 
updated wage data only, compared with estimated FY 2011 payments. The 
effect of the updated wage data can vary from region to region 
depending on the fluctuations in the wage index values of the pre-
floor, pre-reclassified hospital wage index. Column 4 shows the 
percentage change in estimated hospice payments from FY 2011 to FY 2012 
due to the combined effects of using the updated wage data and reducing 
the BNAF by an additional 15 percent. Column 5 shows the percentage 
change in estimated hospice payments from FY 2011 to FY 2012 due to the 
combined effects of using updated wage data, an additional 15 percent 
BNAF reduction, and an estimated 2.8 percent inpatient hospital market 
basket update.
    Table 1 also categorizes hospices by various geographic and hospice 
characteristics. The first row of data displays the aggregate result of 
the impact for all Medicare-certified hospices. The second and third 
rows of the table categorize hospices according to their geographic 
location (urban and rural). Our analysis indicated that there are 2,388 
hospices located in urban areas and 1,052 hospices located in rural 
areas. The next two row groupings in the table indicate the number of 
hospices by census region, also broken down by urban and rural 
hospices. The next grouping shows the impact on hospices based on the 
size of the hospice's program. We determined that the majority of 
hospice payments are made at the routine home care rate. Therefore, we 
based the size of each individual hospice's program on the number of 
routine home care days provided in FY 2009. The next grouping shows the 
impact on hospices by type of ownership. The final grouping shows the 
impact on hospices defined by whether they are provider-based or 
freestanding.
    As indicated in Table 1, there are 3,440 hospices. Approximately 48 
percent of Medicare-certified hospices are identified as voluntary 
(non-profit) or government agencies. Because the National Hospice and 
Palliative Care Organization estimates that approximately 83 percent of 
hospice patients in 2009 were Medicare beneficiaries, we have not 
considered other sources of revenue in this analysis.
    As stated previously, the following discussions are limited to 
demonstrating trends rather than projected dollars. We used the pre-
floor, pre-reclassified hospital wage indexes as well as the most 
complete claims data available (FY 2009) in developing the impact 
analysis. The FY 2012 payment rates will be adjusted to reflect the 
full inpatient hospital market basket update, as required by section 
1814(i)(1)(C)(ii)(VII) of the Act. As previously noted, we publish 
these rates through administrative instructions rather than in a 
proposed rule. The FY 2012 estimated inpatient hospital market basket 
update is 2.8 percent. This 2.8 percent does not reflect the provision 
in the Affordable Care Act which reduces the inpatient hospital market 
basket update by 0.1 percentage point since that reduction does not 
apply to hospices. Since the inclusion of the effect of an inpatient 
hospital market basket increase provides a more complete picture of 
projected total hospice payments for FY 2012, the last column of Table 
1 shows the combined impacts of the updated wage data, the additional 
15 percent BNAF reduction, and the estimated 2.8 percent inpatient 
hospital market basket update. As discussed in the FY 2006 hospice wage 
index final rule (70 FR 45129), hospice agencies may use multiple 
hospice wage index values to compute their payments based on 
potentially different geographic locations. Before January 1, 2008, the 
location of the beneficiary was used to determine the CBSA for routine 
and continuous home care and the location of the hospice agency was 
used to determine the CBSA for respite and general inpatient care. 
Beginning January 1, 2008, the hospice wage index CBSA utilized is 
based on the location of the site of service. As the location of the 
beneficiary's home and the location of the facility may vary, there 
will still be variability in geographic location for an individual 
hospice. We anticipate that the CBSA of the various sites of service 
will usually correspond with the CBSA of the geographic location of the 
hospice, and thus we will continue to use the location of the hospice 
for our analyses of the impact of the changes to the hospice wage index 
in this rule. For this analysis, we use payments to the hospice in the 
aggregate based on the location of the hospice.
    The impact of hospice wage index changes has been analyzed 
according to the type of hospice, geographic location, type of 
ownership, hospice base, and size. Our analysis shows that most 
hospices are in urban areas and provide the vast majority of routine 
home care days. Most hospices are medium-sized followed by large 
hospices. Hospices are almost equal in numbers by ownership with 1,644 
designated as non-profit or government hospices and 1,796 as 
proprietary. The vast majority of hospices are freestanding.
b. Hospice Size
    Under the Medicare hospice benefit, hospices can provide four 
different levels of care days. The majority of the days provided by a 
hospice are routine home care (RHC) days, representing about 97 percent 
of the services provided by a hospice. Therefore, the number of RHC 
days can be used as a proxy for the size of the hospice, that is, the 
more days of care provided, the larger the hospice. As discussed in the 
August 4, 2005 final rule, we currently use three size designations to 
present the impact analyses. The three categories are: (1) Small 
agencies having 0 to 3,499 RHC days; (2) medium agencies having 3,500 
to 19,999 RHC days; and (3) large agencies having 20,000 or more RHC 
days. The FY 2012 updated wage data without any BNAF reduction are 
anticipated to decrease payments to small and medium hospices by 0.1 
percent and increase payments to large hospices by 0.1 percent (column 
3); the updated wage data and the additional 15 percent BNAF reduction 
(for a total BNAF reduction of 40 percent) are anticipated to decrease 
estimated payments to small and medium hospices by 0.6 percent, and to 
large hospices by 0.5 percent (column 4); and finally, the updated wage 
data, the additional 15 percent BNAF reduction (for a total BNAF 
reduction of 40 percent), and the estimated 2.8 percent inpatient 
hospital market basket update are projected to increase estimated 
payments by 2.2 percent for small and medium hospices, and by 2.3 
percent for large hospices (column 5).
c. Geographic Location
    Column 3 of Table 1 shows updated wage data without the BNAF 
reduction. Urban hospices are anticipated to experience an increase of 
0.1 percent, while rural hospices will experience a decrease of 0.2 
percent. Urban hospices can anticipate a decrease in payments in five 
regions; ranging from 0.7 percent in the New England region to 0.1 
percent in the East South Central region. Payments in the Mountain 
region are estimated to stay stable. Urban hospices are anticipated to 
see an increase in payments in four regions; ranging from 0.1 percent 
in the West South Central

[[Page 26829]]

region to 0.6 percent in the Pacific region.
    Column 3 shows estimated percentages for rural hospices. Rural 
hospices are estimated to see a decrease in payments in five regions, 
ranging from 0.7 percent in the South Atlantic and Pacific regions to 
0.1 percent in the New England region. Rural hospices can anticipate an 
increase in payments in four regions, ranging from 0.1 percent in the 
East South Central region to 0.8 percent in the West South Central 
region. There is no change in payments for Outlying regions due to FY 
2012 Wage Index change.
    Column 4 shows the combined effect of the updated wage data and the 
additional 15 percent BNAF reduction on estimated payments, as compared 
to the FY 2011 estimated payments using a BNAF with a 25 percent 
reduction. Overall urban are anticipated to experience a 0.5 percent 
decrease in payments while rural hospices are anticipated to experience 
a 0.6 percent decrease in payments. Nine regions in urban areas are 
estimated to see decreases in payments, ranging from 1.3 percent in the 
New England region to 0.3 percent in the South Atlantic region. 
Payments for the Pacific region are estimated to be relatively stable.
    Rural hospices are estimated to experience a decrease in payments 
in eight regions, ranging from 1.3 percent in the Pacific region to 0.1 
percent in the East South Central and Mountain regions. While the 
estimated effect of the additional 15 percent BNAF reduction decreased 
payments to rural hospices in the West South Central region, hospices 
in this region are still anticipated to experience an estimated 
increase in payments of 0.4 percent due to the net effect of the 
reduced BNAF and the updated wage index data. Payments to rural 
outlying regions are anticipated to remain relatively stable.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction, and the estimated 2.8 percent 
inpatient hospital market basket update on estimated payments as 
compared to the estimated FY 2011 payments. Note that the FY 2011 
payments had a 25 percent BNAF reduction applied to them. Overall, 
urban hospices are anticipated to experience a 2.3 percent increase in 
payments and rural hospices are anticipated to experience a 2.2 percent 
increase in payments. Urban hospices are anticipated to experience an 
increase in estimated payments in every region, ranging from 1.5 
percent in the New England region to 2.8 percent in the Pacific region. 
Rural hospices in every region are estimated to see an increase in 
payments, ranging from 1.5 percent in the Pacific region to 3.2 percent 
in the West South Central region.
d. Type of Ownership
    Column 3 demonstrates the effect of the updated wage data on FY 
2012 estimated payments, versus FY 2011 estimated payments. We 
anticipate that using the updated wage data would decrease estimated 
payments to government hospices by 0.1 percent and payments to 
voluntary (non-profit) hospices would remain relatively unchanged. We 
estimate an increase in payments for proprietary (for-profit) hospices 
of 0.1 percent.
    Column 4 demonstrates the combined effects of the updated wage data 
and of the additional 15 percent BNAF reduction. Estimated payments to 
voluntary (non-profit) hospices are anticipated to decrease by 0.5 
percent, while government hospices are anticipated to experience a 
decrease of 0.7 percent. Estimated payments to proprietary (for-profit) 
hospices are anticipated to decrease by 0.4 percent.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 40 
percent), and an estimated 2.8 percent inpatient hospital market basket 
update on estimated payments, comparing FY 2012 to FY 2011 (using a 
BNAF with a 25 percent reduction). Estimated FY 2012 payments are 
anticipated to increase 2.3 percent for voluntary (non-profit), 2.1 
percent for government hospices, and 2.4 percent for proprietary (for-
profit) hospices.
e. Hospice Base
    Column 3 demonstrates the effect of using the updated wage data, 
comparing estimated payments for FY 2012 to FY 2011. Estimated payments 
are anticipated to increase by 0.1 percent for freestanding hospices 
and home health agency based hospices, and 0.2 percent for hospices 
based out of a skilled nursing facility. Payments to hospital based 
hospices are estimated to remain relatively unchanged.
    Column 4 shows the combined effects of the updated wage data and 
reducing the BNAF by an additional 15 percent, comparing estimated 
payments for FY 2012 to FY 2011. All hospice facilities are anticipated 
to experience decrease in payments ranging from 0.4 percent for skilled 
nursing facility based hospices, to 0.6 percent for hospital based 
hospices.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction, and an estimated 2.8 percent 
inpatient hospital market basket update on estimated payments, 
comparing FY 2012 to FY 2011. Estimated payments are anticipated to 
increase for all hospices, ranging from 2.2 percent for hospital based 
hospices to 2.4 percent for skilled nursing facility based hospices.
f. Effects on Other Providers
    This proposed rule only affects Medicare hospices, and therefore 
has no effect on other provider types.
g. Effects on the Medicare and Medicaid Programs
    This proposed rule only affects Medicare hospices, and therefore 
has no effect on Medicaid programs. As described previously, estimated 
Medicare payments to hospices in FY 2012 are anticipated to increase by 
$10 million due to the update in the wage index data, and to decrease 
by $90 million due to the total 40 percent reduction in the BNAF. 
However, the estimated market basket update of 2.8 percent is 
anticipated to increase Medicare payments by $390 million. Therefore, 
the total effect on Medicare hospice payments is estimated to be a $310 
million increase. Note that the final market basket update and 
associated FY 2012 payment rates will be officially communicated this 
summer through an administrative instruction.
h. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 2 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this proposed rule. This 
table provides our best estimate of the decrease in Medicare payments 
under the hospice benefit as a result of the changes presented in this 
proposed rule using data for 3,440 hospices in our database.

Table 2--Accounting Statement: Classification of Estimated Expenditures,
                         From FY 2011 to FY 2012
                              [In $millions]
------------------------------------------------------------------------
               Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.......  $-80. *

[[Page 26830]]

 
From Whom to Whom....................  Federal Government to Hospices.
------------------------------------------------------------------------
* The $80 million reduction in transfers includes the additional 15
  percent reduction in the BNAF and the updated wage data. It does not
  include the hospital market basket update, which is estimated at 2.8
  percent for FY 2012. This estimated 2.8 percent does not reflect the
  provision in the Affordable Care Act (ACA) which reduced the hospital
  market basket update by 0.1 percentage point since that reduction does
  not apply to hospices.

i. Conclusion
    In conclusion, the overall effect of this proposed rule is 
estimated to be the $80 million reduction in Federal payments due to 
the wage index changes (including the additional 15 percent reduction 
in the BNAF). Furthermore, the Secretary has determined that this will 
not have a significant impact on a substantial number of small 
entities, or have a significant effect relative to section 1102(b) of 
the Act.

B. Regulatory Flexibility Act Analysis

    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, we estimate that 
almost all hospices are small entities as that term is used in the RFA. 
The great majority of hospitals and most other health care providers 
and suppliers are small entities, either by being nonprofit 
organizations or by meeting the Small Business Administration (SBA) 
definition of a small business (having revenues of less than $7.0 
million to $34.5 million in any 1 year). While the SBA does not define 
a size threshold in terms of annual revenues for hospices, it does 
define one for home health agencies ($13.5 million; seehttp://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=2465b064ba6965cc1fbd2eae60854b11&rgn=div8&view=text&node=13:1.0.1.1.16.1.266.9&idno=13). For the purposes of this proposed rule, 
because the hospice benefit is a home-based benefit, we are applying 
the SBA definition of ``small'' for home health agencies to hospices; 
we will use this definition of ``small'' in determining if this 
proposed rule has a significant impact on a substantial number of small 
entities (for example, hospices). Using 2009 Medicare hospice claims 
data, we estimate that 96 percent of hospices have Medicare revenues 
below $13.5 million and are considered small entities. As indicated in 
Table 1 below, there are 3,440 hospices with 2009 claims data as of 
January 6, 2011. Approximately 48 percent of those 3,440 Medicare 
certified hospices are identified as voluntary or government agencies 
and, therefore, are considered small entities. Most of these and most 
of the remainder are also small hospice entities because, as noted 
above, their revenues fall below the SBA size thresholds.
    The effects of this rule on hospices are shown in Table 1. Overall, 
Medicare payments to all hospices would decrease by an estimated 0.5 
percent over last year's payments in response to the policies that we 
are proposing in this NPRM, reflecting the combined effects of the 
updated wage data and the additional 15 percent reduction in the BNAF. 
The combined effects of the updated wage data and additional 15 percent 
reduction in the BNAF on small or medium sized hospices (as defined by 
routine home care days rather than by the SBA definition), is -0.6 
percent. However, when including the estimated inpatient hospital 
market basket update of 2.8 percent into these estimates, the combined 
effects on Medicare payment to all hospices would result in an 
estimated increase of approximately 2.3 percent. For small and medium 
hospices (as defined by routine home care days), the estimated effects 
on revenue when accounting for the updated wage data, the additional 15 
percent BNAF reduction, and the estimated inpatient hospital market 
basket update are increases in payments of 2.2 percent. Overall average 
hospice revenue effects will be slightly less than these estimates 
since according the National Hospice and Palliative Care Organization, 
about 17 percent of hospice patients are non-Medicare.
    HHS's practice in interpreting the RFA is to consider effects 
economically ``significant'' only if they reach a threshold of 3 to 5 
percent or more of total revenue or total costs. As noted above, the 
combined effect of only the updated wage data and the additional 15 
percent reduced BNAF (for a total BNAF reduction of 40 percent) for all 
hospices is -0.5 percent. Since, by SBA's definition of ``small'' (when 
applied to hospices), nearly all hospices are considered to be small 
entities, the combined effect of only the updated wage data and the 
additional 15 percent reduced BNAF (-0.5 percent) does not exceed HHS's 
3.0 percent minimum threshold. However, HHS's practice in determining 
``significant economic impact'' has considered either total revenue or 
total costs. Total hospice revenues include the effect of the market 
basket update. When we consider the combined effect of the updated wage 
data, the additional 15 percent BNAF reduction, and the estimated 2.8 
percent FY 2012 inpatient hospital market basket update, the overall 
impact is an increase in estimated hospice payments of 2.3 percent for 
FY 2012. Therefore, the Secretary has determined that this proposed 
rule would not create a significant economic impact on a substantial 
number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This proposed rule only 
affects hospices. Therefore, the Secretary has determined that this 
proposed rule would not have a significant impact on the operations of 
a substantial number of small rural hospitals.

C. Unfunded Mandates Reform Act Analysis

    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 2011, that 
threshold is approximately $136 million. This proposed rule with 
comment period is not anticipated to have an effect on State, local, or 
tribal governments, in the aggregate, or on the private sector of $136 
million or more.

VIII. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this proposed rule under the threshold 
criteria of Executive Order 13132, Federalism, and have determined that 
it would not have an impact on the rights, roles, and responsibilities 
of State, local, or tribal governments.

[[Page 26831]]

List of Subjects in 42 CFR Part 418

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

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:
    1. The authority citation for part 418 continues to read as 
follows:

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

Subpart G--Payment for Hospice Care

    2. In Sec.  418.22, paragraphs (a)(4) and (b)(4) are revised to 
read as follows:


Sec.  418.22  Certification of terminal illness.

    (a) * * *
    (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. The face-to-
face encounter must occur prior to but no more than 30 calendar days 
prior to the 3rd benefit period recertification, and every benefit 
period recertification thereafter, to gather clinical findings to 
determine continued eligibility for hospice care.
    (b) * * *
    (4) The physician or nurse practitioner who performs the face-to-
face encounter with the patient described in paragraph (a)(4) of this 
section 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 or a non-certifying hospice 
physician shall state that the clinical findings of that visit were 
provided to the certifying physician for use in determining continued 
eligibility for hospice care.
* * * * *
    3. Section 418.202 (g) is revised to read:


Sec.  418.202  Covered services.

* * * * *
    (g) Home health or hospice aide services furnished by qualified 
aides as designated in Sec.  418.76 and homemaker services. Home health 
aides (also known as hospice aides) may provide personal care services 
as defined in Sec.  409.45(b) of this chapter. Aides may perform 
household services to maintain a safe and sanitary environment in areas 
of the home used by the patient, such as changing bed linens or light 
cleaning and laundering essential to the comfort and cleanliness of the 
patient. Aide services must be provided under the general supervision 
of a registered nurse. Homemaker services may include assistance in 
maintenance of a safe and healthy environment and services to enable 
the individual to carry out the treatment plan.
* * * * *
    4. In Sec.  418.309, the introductory text and paragraph (b) are 
revised, and new paragraphs (c) and (d) are added, to read:


Sec.  418.309  Hospice Aggregate Cap.

    A hospice's aggregate cap is calculated by multiplying the adjusted 
cap amount (determined in paragraph (a) of this section) by the number 
of Medicare beneficiaries, as determined by one of two methodologies 
for determining the number of Medicare beneficiaries for a given cap 
year described in paragraphs (b) and (c) of this section:
* * * * *
    (b) Streamlined Methodology Defined. A hospice's aggregate cap is 
calculated by multiplying the adjusted cap amount determined in 
paragraph (a) of this section by the number of Medicare beneficiaries 
as determined in paragraphs (b)(1) and (2) of this section. For 
purposes of the streamlined methodology calculation--
    (1) In the case in which a beneficiary received care from only one 
hospice, the hospice includes in its number of Medicare beneficiaries 
those Medicare beneficiaries who have not previously been included in 
the calculation of any hospice cap, and who have filed an election to 
receive hospice care in accordance with Sec.  418.24 during the period 
beginning on September 28 (34 days before the beginning of the cap 
year) and ending on September 27 (35 days before the end of the cap 
year), using the best data available at the time of the calculation.
    (2) In the case in which a beneficiary received care from more than 
one hospice, each hospice includes in its number of Medicare 
beneficiaries only that fraction which represents the portion of a 
patient's total days of care in all hospices and all years that was 
spent in that hospice in that cap year, using the best data available 
at the time of the calculation. The aggregate cap calculation for a 
given cap year may be adjusted after the calculation for that year 
based on updated data.
    (c) Patient-by-Patient Proportional Methodology Defined. A 
hospice's aggregate cap is calculated by multiplying the adjusted cap 
amount determined in paragraph (a) of this section by the number of 
Medicare beneficiaries as described in paragraphs (c)(1) and (2) of 
this section. For the purposes of the patient-by-patient proportional 
methodology--
    (1) A hospice includes in its number of Medicare beneficiaries only 
that fraction which represents the portion of a patient's total days of 
care in all hospices and all years that was spent in that hospice in 
that cap year, using the best data available at the time of the 
calculation. The total number of Medicare beneficiaries for a given 
hospice's cap year is determined by summing the whole or fractional 
share of each Medicare beneficiary that received hospice care during 
the cap year, from that hospice.
    (2) The aggregate cap calculation for a given cap year may be 
adjusted after the calculation for that year based on updated data.
    (d) Application of Methodologies. (1) For cap years ending October 
31, 2011 and for prior cap years, a hospice's aggregate cap is 
calculated using the streamlined methodology described in paragraph (b) 
of this section, subject to the following:
    (i) A hospice that has not received a cap determination for a cap 
year ending on or before October 31, 2011 as of October 1, 2011, may 
elect to have its final cap determination for such cap years calculated 
using the patient-by-patient proportional methodology described in 
paragraph (c) of this section; or
    (ii) A hospice that has filed a timely appeal regarding the 
methodology used for determining the number of Medicare beneficiaries 
in its cap calculation for any cap year is deemed to have elected that 
its cap determination for the challenged year, and all subsequent cap 
years, be calculated using the patient-by-patient proportional 
methodology described in paragraph (c) of this section.
    (2) For cap years ending October 31, 2012, and all subsequent cap 
years, a hospice's aggregate cap is calculated using the patient-by-
patient proportional methodology described in paragraph (c) of this 
section, subject to the following:
    (i) A hospice that has had its cap calculated using the patient-by-
patient proportional methodology for any cap year(s) prior to the 2012 
cap year is not eligible to elect the streamlined methodology, and must 
continue to have the patient-by-patient proportional methodology used 
to determine the number of Medicare beneficiaries in a given cap year.
    (ii) A hospice that is eligible to make a one-time election to have 
its cap calculated using the streamlined

[[Page 26832]]

methodology must make that election no later than 60 days after receipt 
of its 2012 cap determination. A hospice's election to have its cap 
calculated using the streamlined methodology would remain in effect 
unless:
    (A) The hospice subsequently submits a written election to change 
the methodology used in its cap determination to the patient-by-patient 
proportional methodology; or
    (B) The hospice appeals the streamlined methodology used to 
determine the number of Medicare beneficiaries used in the aggregate 
cap calculation.
    (3) If a hospice that elected to have its aggregate cap calculated 
using the streamlined methodology under paragraph (d)(2)(ii) of this 
section subsequently elects the patient-by-patient proportional 
methodology or appeals the streamlined methodology, under paragraph 
(d)(2)(ii)(A) or (B) of this section, the hospice's aggregate cap 
determination for that cap year and all subsequent cap years is to be 
calculated using the patient-by-patient proportional methodology. As 
such, past cap year determinations may be adjusted to prevent the over-
counting of beneficiaries, notwithstanding the ordinary limitations on 
reopening.

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

    Dated: April 14, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 19, 2011.
Kathleen Sebelius,
Secretary.

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

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[FR Doc. 2011-10689 Filed 4-28-11; 4:15 pm]
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