[Federal Register Volume 76, Number 214 (Friday, November 4, 2011)]
[Rules and Regulations]
[Pages 68525-68607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28416]



[[Page 68525]]

Vol. 76

Friday,

No. 214

November 4, 2011

Part II





Department of Health and Human Services





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





Centers for Medicare & Medicaid Services





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





42 CFR Parts 409, 424, and 484





Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2012; Final Rule

Federal Register / Vol. 76, No. 214 / Friday, November 4, 2011 / 
Rules and Regulations

[[Page 68526]]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, and 484

[CMS-1353-F]
RIN 0938-AQ30


Medicare Program; Home Health Prospective Payment System Rate 
Update for Calendar Year 2012

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

ACTION: Final rule.

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

SUMMARY: This final rule sets forth updates to the home health 
prospective payment system (HH PPS) rates, including: the national 
standardized 60-day episode rates; the national per-visit rates; and 
the low utilization payment amount (LUPA) under the Medicare PPS for 
home health agencies effective January 1, 2012. This rule applies a 1.4 
percent update factor to the episode rates, which reflects a 1 percent 
reduction applied to the 2.4 percent market basket update factor, as 
mandated by the Affordable Care Act. This rule also updates the wage 
index used under the HH PPS, and further reduces home health payments 
to account for continued nominal growth in case-mix which is unrelated 
to changes in patient health status. This rule removes two hypertension 
codes from the HH PPS case-mix system, thereby requiring recalibration 
of the case-mix weights. In addition, the rule implements two 
structural changes designed to decrease incentives to upcode and 
provide unneeded therapy services. Finally, this rule incorporates 
additional flexibility regarding face-to-face encounters with providers 
related to home health care.

DATES: Effective Date: These regulations are effective on January 1, 
2012.

FOR FURTHER INFORMATION CONTACT: 
Elizabeth Goldstein, (410) 786-6665, for CAHPS issues.
Mary Pratt, (410) 786-6867, for quality issues.
Randy Throndset, (410) 786-0131 (overall HH PPS).

Table of Contents

I. Background
    A. Statutory Background
    B. System for Payment of Home Health Services
    C. Updates to the HH PPS
II. Provisions of the Proposed Rule and Response to Comments
    A. Case-Mix Measurement
    B. Case-Mix Revision to the Case-Mix Weights
    1. Hypertension Diagnosis Coding Under the HH PPS
    2. Revision of the Case-Mix Weights
    C. Outlier Policy
    1. Background
    2. Comments and Responses
    D. CY 2012 Rate Update
    1. Home Health Market Basket Update
    2. Home Health Care Quality Reporting Program
    a. Background and Quality Reporting Requirements
    b. OASIS Data
    c. Claims Data, Requirements and Outcome Measure Change
    d. Home Health Care CAHPS Survey (HHCAHPS)
    3. Home Health Wage Index
    4. CY 2012 Annual Payment Update
    a. National Standardized 60-Day Episode Rate
    b. Updated CY 2012 National Standardized 60-Day Episode Payment 
Rate
    c. National Per-Visit Rates Used To Pay LUPAs and Compute 
Imputed Costs Used in Outlier Calculations
    d. LUPA Add-On Payment Amount Update
    e. Nonroutine Medical Supply Conversion Factor Update
    5. Rural Add-On
    E. Therapy Corrections and Clarification
    F. Home Health Face-to-Face Encounter
    G. Payment Reform: Home Health Study and Report
    H. International Classification of Diseases 10th Edition (ICD-
10) Coding
    I. Clarification to Benefit Policy Manual Language on ``Confined 
to the Home'' Definition
III. Collection of Information Requirements
IV. Regulatory Impact Analysis
V. Federalism Analysis
Regulations Text

Acronyms

    In addition, because of the many terms to which we refer by 
abbreviation in this final rule, the following is an alphabetical 
listing of these abbreviations and their corresponding terms:

ADL Activities of daily living
APA Administrative Procedures Act
APU Annual payment update
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Public Law 106-113
CR Cost report
CBSA Core-based statistical area
CBO Congressional Budget Office
CMI Case-mix index
CMS Centers for Medicare and Medicaid Services
CoPs Conditions of participation
DRA Deficit Reduction Act of 2005, Public Law 109-171, enacted 
February 8, 2006
FDL Fixed dollar loss
FI Fiscal intermediaries
FR Federal Register
FY Fiscal year
HCC Hierarchical condition categories
HCIS Health Care Information System
HHCAHPS Home Health Care Consumer Assessment of Healthcare Providers 
and Systems Survey
HH PPS Home Health Prospective Payment System
HHAs Home health agencies
HHRG Home health resource group
HIPPS Health Insurance Prospective Payment System
IRF Inpatient Rehabilitation Facility
LTCH Long-Term Care Hospital
LUPA Low Utilization Payment Amount
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173, enacted December 8, 2003
MSA Metropolitan statistical area
MSS Medical social services
NAHC National Association for Home Care and Hospice
NHLBI National Heart Lung and Blood Institute
NPP Nonphysician practitioner
NRS Non-routine supplies
OBRA Omnibus Reconciliation Act of 1981, Public Law 97-35, enacted 
August 13, 1981
OCESAA Omnibus Consolidated and Emergency Supplemental 
Appropriations Act, Public Law 105-277, enacted October 21, 1998
OES Occupational employment statistics
OIG Office of Inspector General
OT Occupational therapy
OMB Office of Management and Budget
PEP Partial episode payment
POC Plan of care
PT Physical therapy
QAP Quality assurance plan
PRRB Provider Reimbursement Review Board
RAP Request for anticipated payment
RFA Regulatory Flexibility Act, Public Law 96-354
RHHIs Regional Home Health Intermediaries
RIA Regulatory Impact Analysis
SLP Speech Language Pathology Therapy
SNF Skilled Nursing Facility
UMRA Unfunded Mandates Reform Act of 1995

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory Background

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted 
August 5, 1997), significantly changed the way Medicare pays for 
Medicare home health (HH) services. Section 4603 of the BBA mandated 
the development of the home health prospective payment system (HH PPS). 
Until the implementation of a HH PPS on October 1, 2000, home health 
agencies (HHAs) received payment under a retrospective reimbursement 
system.
    Section 4603(a) of the BBA mandated the development of a HH PPS for 
all Medicare-covered HH services provided under a plan of care (POC) 
that were paid on a reasonable cost basis by adding section 1895 of the 
Social

[[Page 68527]]

Security Act (the Act), entitled ``Prospective Payment For Home Health 
Services''. Section 1895(b)(1) of the Act requires the Secretary to 
establish a HH PPS for all costs of HH services paid under Medicare.
    Section 1895(b)(3)(A) of the Act requires the following: (1) The 
computation of a standard prospective payment amount include all costs 
for HH services covered and paid for on a reasonable cost basis and 
that such amounts be initially based on the most recent audited cost 
report (CR) data available to the Secretary; and (2) the standardized 
prospective payment amount be adjusted to account for the effects of 
case-mix and wage levels among HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the HH applicable percentage 
increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
case-mix and geographic differences in wage levels. Section 
1895(b)(4)(B) of the Act requires the establishment of an appropriate 
case-mix change adjustment factor for significant variation in costs 
among different units of services.
    Similarly, section 1895(b)(4)(C) of the Act requires the 
establishment of wage adjustment factors that reflect the relative 
level of wages, and wage-related costs applicable to HH services 
furnished in a geographic area compared to the applicable national 
average level. Under section 1895(b)(4)(c) of the Act, the wage-
adjustment factors used by the Secretary may be the factors used under 
section 1886(d)(3)(E) of the Act.
    Section 1895(b)(5) of the Act gives the Secretary the option to 
make additions or adjustments to the payment amount otherwise paid in 
the case of outliers because of unusual variations in the type or 
amount of medically necessary care. Section 3131(b) of the Patient 
Protection and Affordable Care Act of 2010 (the Affordable Care Act) 
(Pub. L. 111-148, enacted March 23, 2010) revised section 1895(b)(5) of 
the Act so that estimated total outlier payments in a given fiscal year 
(FY) or year may not exceed 2.5 percent of total payments projected or 
estimated. The provision also makes permanent a 10 percent agency level 
outlier payment cap.
    In accordance with section 4603(a) of the BBA, we published a final 
rule in the July 3, 2000 Federal Register (65 FR 41128) to implement 
the HH PPS legislation. The July 2000 final rule established 
requirements for the new HH PPS for HH services as required by section 
4603 of the BBA, as subsequently amended by section 5101 of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act (OCESAA) for 
Fiscal Year 1999, (Pub. L. 105-277, enacted October 21, 1998); and by 
sections 302, 305, and 306 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act (BBRA) of 1999, (Pub. L. 106-113, 
enacted November 29, 1999). The requirements include the implementation 
of a HH PPS for HH services, consolidated billing requirements, and a 
number of other related changes. The HH PPS described in that rule 
replaced the retrospective reasonable cost-based system that was used 
by Medicare for the payment of HH services under Part A and Part B. For 
a complete and full description of the HH PPS as required by the BBA, 
see the July 2000 HH PPS final rule (65 FR 41128 through 41214).
    Section 5201(c) of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171, enacted February 8, 2006) added new section 1895(b)(3)(B)(v) 
to the Act, requiring HHAs to submit data for purposes of measuring 
health care quality, and links the quality data submission to the 
annual applicable percentage increase. This data submission requirement 
is applicable for CY 2007 and each subsequent year. If an HHA does not 
submit quality data, the HH market basket percentage increase is 
reduced 2 percentage points. In the November 9, 2006 Federal Register 
(71 FR 65884, 65935), we published a final rule to implement the pay-
for-reporting requirement of the DRA, which was codified at Sec.  
484.225(h) and (i) in accordance with the statute.
    Section 421(a) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173, enacted December 8, 
2003) provides an increase of 3 percent of the payment amount otherwise 
made under section 1886(d)(2)(D) of the Act for HH services furnished 
in a rural area for episodes and visits ending on or after April 1, 
2010, and before January 1, 2016.

B. System for Payment of Home Health Services

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

C. Updates to the HH PPS

    As required by section 1895(b)(3)(B) of the Act, we have 
historically updated the HH PPS rates annually in the Federal Register. 
The August 29, 2007 final rule with comment period set forth an update 
to the 60-day national episode rates and the national per-visit rates 
under the Medicare prospective payment system for HHAs for CY 2008. The 
CY 2008 rule included an analysis performed on CY 2005 HH claims data, 
which indicated a 12.78 percent increase in the observed case-mix since 
2000. The case-mix represented the variations in conditions of the 
patient population served by the HHAs. Subsequently, a more detailed 
analysis was performed on the 12.78 percent increase in case-mix to 
evaluate if any portion of the increase was associated with a change in 
the actual clinical condition of HH patients. We examined data on 
demographics, family severity, and non-HH Part A Medicare expenditures 
to predict the average case-mix weight for 2005. We identified

[[Page 68528]]

8.03 percent of the total case-mix change as real and decreased the 
12.78 percent of total case-mix change by 8.03 percent to get a final 
nominal case-mix increase measure of 11.75 percent (0.1278 * (1-0.0803) 
= 0.1175).
    To account for the changes in case-mix that were not related to an 
underlying change in patient health status, we implemented a reduction 
over 4 years in the national standardized 60-day episode payment rates 
and the NRS conversion factor. That reduction was to be 2.75 percent 
per year for 3 years beginning in CY 2008 and 2.71 percent for the 
fourth year in CY 2011.
    For CY 2011, we published the November 17, 2010 final rule (75 FR 
70372) (hereinafter referred to as the CY 2011 HH PPS final rule) that 
set forth the update to the 60-day national episode rates and the 
national per-visit rates under the Medicare prospective payment system 
for HH services.
    As discussed in the CY 2011 HH PPS final rule, our analysis 
indicated that there was a 19.40 percent increase in overall case-mix 
from 2000 to 2008 and that only 10.07 percent of that overall observed 
case-mix percentage increase was due to real case-mix change. As a 
result of our analysis, we identified a 17.45 percent nominal increase 
in case-mix. To fully account for the 17.45 percent nominal case-mix 
growth which was identified from 2000 to 2008, we proposed 3.79 percent 
payment reductions in both CY 2011 and CY 2012. However, we deferred 
finalizing a payment reduction for CY 2012 until a further study of the 
case-mix data was completed. Independent review of the case-mix model 
has been conducted and the results were discussed in section II.A. of 
the proposed rule, which was issued on July 12, 2011 (76 FR 40988).

II. Provisions of the Proposed Rule and Response to Comments

A. Case-Mix Measurement

    As stated in the proposed rule issued in the July 12, 2011 Federal 
Register, every year, since the HH PPS CY 2008 proposed rule, we have 
stated in HH PPS rulemaking that we would continue to monitor case-mix 
changes in the HH PPS and to update our analysis to measure change in 
case-mix, both real changes in case-mix and changes which are unrelated 
to changes in patient acuity (nominal). We have continued to monitor 
case-mix changes and our latest analysis continues to support the need 
to make payment adjustments to account for nominal case-mix growth.
    In the CY 2012 HH PPS proposed rule (76 FR 40991), we also stated 
that in response to comments we received on our case-mix measurement 
methodology during CY 2011 rulemaking, we procured an independent 
review of our methodology by a team at Harvard University led by Dr. 
David Grabowski. The review included an examination of the predictive 
regression models and data used in CY 2011 rulemaking, and further 
analysis consisting of extensions of the model to allow a closer look 
at nominal case-mix growth by categorizing the growth according to 
provider types and subgroups of patients. The extensions showed a 
similar rate of nominal case-mix growth from 2000 to 2008 for the 
various categories and subgroups. In addition, when reviewing the 
model, the Harvard team found that overall, our models are robust. 
However, one area of potential refinement to our models that the 
Harvard team suggested was to incorporate variables derived from 
Hierarchical Condition Categories (HCC) data, which is used by CMS to 
risk-adjust payments to managed care organizations in the Medicare 
program.
    Based on Dr. Grabowski and his team's recommendation and our 
previous consideration to incorporate HCC data in our models to assess 
real case-mix change, we decided to explore the effects of adding HCC 
patient classification data into our models. For our analysis of real 
and nominal case-mix growth from 2000 to 2009, we incorporated the HCC 
community scores, HCC demographic variables, and disease indicator 
variables into our models.
    In addition, for our analysis, we used a similar approach to our 
previous methods. The basic method is to estimate a prediction model 
and use coefficients from that model along with predictor variables 
from a different year to predict the average case-mix for that year. It 
should be noted that we chose to enhance our models with HCC data 
starting in 2005 due to the availability of HCC data in our analytic 
files. Therefore, we analyzed real case-mix change for 3 different 
periods, from 2000 to 2005, from 2005 to 2007, and from 2007 to 2009. 
The real case-mix change from 2000 to 2005 was assessed using the same 
variables used in the model described in last year's regulation (75 FR 
43238). The real case-mix change from 2005 to 2007 and from 2007 to 
2009 was assessed using additional information from the HCC variables. 
To determine the amount of real and nominal case-mix change from 2000 
to 2009, we added the change in case-mix units for each of the 3 
periods and compared it to the total change in case-mix from 2000 to 
2009. Based on the results from our models, we estimated 15.76 percent 
of the total case-mix change as real. When taking into account the 
total case-mix change from 2000 to 2009 (22.59 percent) and the 15.76 
percent of total case-mix change estimated as real from 2000 to 2009, 
we obtained a final nominal case-mix change measure of 19.03 percent 
from 2000 to 2009 (0.2259 * (1-0.1576) = 0.1903).
    In each of the years 2008, 2009, and 2010, we reduced payment rates 
by 2.75 percent and in 2011 we reduced payment rates by 3.79 percent to 
account for nominal case-mix change from 2000. In the proposed rule, we 
stated that a payment reduction of 5.06 percent would be needed to 
account for the outstanding amount of nominal case-mix change we 
estimated based on the real case-mix change analysis updated through 
2009 and we proposed to implement a 5.06 percent reduction to the 
national standardized 60-day episode rates to account for the entire 
residual amount of nominal case-mix change through 2009 in one year.
    The following is a summary of the comments we received regarding 
the case-mix measurement proposal.
    Comment: Some commenters stated that CMS should not implement an 
across-the-board punishment but rather target the agencies that have 
high nominal case-mix growth. Other commenters stated that all home 
health providers should not be punished for the actions of the few. 
Many commenters indicated that their agency had case-mix weights below 
the national average and some commenters stated that there has been a 
decline in their case-mix over the years. Commenters suggested that CMS 
limit the case-mix reductions to certain agencies and only apply the 
reduction to agencies whose average case-mix weight reflects high 
nominal case-mix growth.
    Response: For a variety of reasons, as we have noted in previous 
regulations, we have not proposed targeted reductions for nominal case-
mix change. We have not conducted analysis of how and whether 
individual agencies' coding practices have changed over time, because 
this is not feasible. One reason is that many agencies have small 
patient populations, which would make it practically impossible to 
measure nominal case-mix change reliably. Another reason is that we 
believe changes and improvements in coding have been widespread, so 
that such targeting would likely not separate agencies clearly into 
high and low coding-change groups. When performing an independent 
review of

[[Page 68529]]

our case-mix measurement methodology, Dr. Grabowski and his team at 
Harvard University agreed with our reasons for not proposing targeted 
reductions, stating their concerns about the small sample size of many 
agencies and their findings of significant nominal case-mix across 
different classes of agencies (please see the report located at https://www.cms.gov/center/hha.asp).
    We note that although we have stated in past regulations that a 
targeted system would be administratively burdensome, the reasons we 
have just presented go beyond administrative complexity. Certain 
comments seem to assume that the level of case-mix can precisely 
identify those agencies practicing abusive coding. We do not agree with 
the comments which seem to assume that agency-specific case-mix levels 
can precisely differentiate agencies practicing abusive coding from 
others. System wide, case-mix levels have risen over time while patient 
characteristics data indicate little change in patient severity over 
time. That is, the main problem is not the level of case-mix reached 
over a period of time, but the amount of change in the billed case-mix 
weights not attributable to underlying changes in actual patient 
severity.
    In addition, in this final rule, we are finalizing a revision to 
the case-mix weights. As described in Section II.B., we are removing 
two hypertension codes from our case-mix system which are not 
associated with additional resource use and we are reducing weights for 
episodes with high therapy while increasing weights for episodes with 
no or low therapy. This revision to the case-mix weights should slow 
future nominal case-mix growth and provide a more targeted approach for 
addressing overpayment of services, while also improving the accuracy 
of the HH PPS.
    Comment: Some commenters stated that the payment cuts will make it 
difficult for small agencies to exist, leaving a market that will only 
be made up of large for-profit agencies. Other commenters stated that 
from 2000 to 2008, for-profit and free-standing agencies saw their 
nominal case-mix grow by approximately 3.5 percent to 4.0 percent more 
than non-profit, government-owned and facility-based agencies. 
Commenters attributed the difference in nominal case-mix growth to the 
idea that for-profit agencies ``pick and choose'' their patients while 
non-profit and government agencies tend to serve all patients needing 
home health care. Commenters requested that CMS either forego the 
proposed 5.06 percent adjustment or implement a two-tiered adjustment 
factor, with a much lower payment reduction factor for non-profit, 
government-owned and facility-based agencies.
    Response: When looking at the case-mix growth by agency type, our 
data shows high case-mix growth across all agency types. While for-
profit agencies' case-mix grew approximately 22.7 percent, the case-mix 
average for non-profit agencies and government agencies also grew 
considerably (17.8 percent and 17.5 percent). In addition, agencies 
with less than 99 episodes had a case-mix growth of 20.1 percent from 
2000 to 2009 and agencies with 100 or more episodes had a case-mix 
growth of 24.8 percent from 2000 to 2009. These differences are not 
large enough to warrant a tiered approach. We believe our proposal to 
make across the board payment reductions is consistent with the data, 
and making distinctions by type of agency would be inappropriate.
    In addition, we acknowledge that our analyses and the analysis 
conducted by the Harvard team revealed a difference in nominal case-mix 
growth between for-profit agencies and non-profit/government agencies, 
as cited by the commenter. However, all categories exhibited a large 
amount of nominal case-mix growth, and differences among categories 
were not large enough to warrant a tiered approach. In view of that 
fact, making separate adjustments according to ownership category is 
inadvisable because of concerns about equity and administrative 
feasibility. We will continue to analyze the HH PPS to determine where 
it may inadvertently incentivize the sort of selective admissions which 
a commenter described and we will continue to analyze how we can 
strengthen the HH PPS to increase payment accuracy while mitigating 
risks which would incentivize such selective admissions.
    Comment: Commenters stated that we should suspend or drop case-mix 
adjustments because they will cause financial distress/bankruptcy among 
agencies, particularly ``safety-net'' agencies that take patients other 
agencies reject. Commenters further stated that the proposed payment 
reductions will cause ``safety net'' providers to have a ``negative 
operating margin'' and/or cause not-for-profit agencies to go out of 
business.
    Response: Identifying the agencies that commenters call ``safety-
net'' agencies is not feasible with our administrative data, so we 
cannot provide any evidence either to support or refute assertions that 
safety-net agencies are at greatest risk. Our analysis of margins of 
not-for-profit agencies shows that they tend to have lower margins than 
for-profit agencies. However, we do not agree that not-for-profit 
agencies will necessarily be more likely to exit the home health 
business than a for-profit agency. We believe the business decision is 
a complex one with many considerations, such as the organization's 
mission, the availability of alternate sources of funding, and whether 
or not the organization is embedded in a larger one. These influential 
factors are not necessarily associated with the non-profit or for-
profit status of an agency, and therefore, we cannot accurately predict 
the business decision of an agency based solely on their status. In 
addition, we refer the commenters to section IV where we describe the 
impact of the provisions of this rule, including the revision of the 
case-mix weights. Section IV shows that when taking into account all of 
the provisions in this final rule, non-profit providers should 
experience less of a negative impact than for-profit providers. Also, 
in section IV, we describe our rationale why we believe access to 
Medicare home health will not be adversely affected by our policies, 
including the payment reductions.
    Comment: Commenters stated that by implementing an across the board 
payment cut, agencies who have been more profitable may survive while 
agencies that have smaller margins may fail, thus potentially 
preserving those who may be committing abuse.
    Response: Existing information about Medicare margins and the CR 
data we have analyzed suggest that most agencies will continue to have 
positive margins on their Medicare business. With our revisions to the 
case-mix weights, we expect the weight adjustments will reduce the 
incentive to provide more therapy than is clinically indicated. To the 
extent that profits are based on abusive behavior, we believe these 
changes will mitigate the risks of abusive behavior. We also believe 
the changes will result in more equitable revenues and profits.
    Comment: Commenters stated that they believe that the case-mix 
measurement methodology takes on the approach that all case-mix change 
is nominal unless it can be proved otherwise.
    Response: The evidence for nominal case-mix change is based on the 
small amount of change in patients' characteristics generally, as 
measured by patient demographics and information from the National 
Claims History on home health patients. We summarized the change in 
patients' characteristics in terms of the impact on the average case-
mix weight. In this analysis, the remainder of the change in

[[Page 68530]]

average case-mix weights is unexplained, and it is generally believed 
that coding change is responsible. Our method to assess real and 
nominal case-mix change is the most effective method available to us at 
this time. We remind the commenter that we have presented various types 
of other data in previous rulemaking consistent with the model-based 
evidence indicating that home health care patients have not changed 
much since the last 12 months of the Interim Payment System.
    Comment: A commenter suggested that CMS ``adjust out all data from 
active and closed settlement actions'' in their measurement of real and 
nominal case-mix growth.
    Response: We are unclear what the commenter is suggesting. As we 
have noted previously, nominal case-mix growth is an across the board 
issue. If the commenter is referring to recoupments which correspond to 
claims denied after they were reviewed, such would typically be 
reflected in the claims data we use in our case mix analysis. In the 
case where a paid-claim dispute is still active, this data would likely 
not have much effect on our determination of nominal case-mix growth.
    Comment: Commenters requested that CMS increase its program 
integrity efforts to combat fraud, waste, and abuse. Other commenters 
stated that instead of implementing a payment reduction, CMS should 
audit agencies that appear to be manipulating the case-mix system. 
Commenters stated that we should eliminate the proposed payment 
reductions and rather ``conduct targeted claims review and deny payment 
for claims where the case-mix weight is not supported by the plan of 
care.''
    Response: We have taken various measures to reduce payment 
vulnerabilities and the Federal government has launched actions to 
directly identify fraudulent and abusive activities. Commenters should 
be aware of tip lines available that can help support investigative 
efforts of the Federal government. The Office of the Inspector General, 
Department of Health and Human Services Web site at http://oig.hhs.gov/fraud/report-fraud/index.asp, provides information about how to report 
fraud. Another Web site, http://www.stopmedicarefraud.gov/index.html, 
is oriented to Medicare patients and their families and provides 
information about recognizing fraud.
    In addition, while we appreciate the commenters' suggestion about 
the targeted claims review, we cannot perform targeted claim review as 
suggested, because our resources are not sufficient to conduct claims 
review on a scale that would be required to counteract the broad-based 
uptrend in case-mix weights.
    Comment: A commenter stated that if the payment reduction is 
implemented, the base rate will be less than at the start of the HH 
PPS.
    Response: When assessing the impact of the payment reductions, one 
must also consider the effects of the case-mix weights. Section 
1895(b)(3)(B)(iv) of the Act requires that payment adjustments in 
response to nominal case-mix change be made to the rates. As such, we 
must reduce the base rate to account for growth in nominal case-mix. 
However, we note that we have not reduced the average case-mix weight 
and the average case-mix weight has increased since the beginning of 
the HH PPS. Therefore, even with the payment reductions to account for 
nominal case-mix growth since the beginning of the HH PPS, the average 
payment is projected to be higher for CY 2012 than the average payment 
at the beginning of the HH PPS.
    Comment: Commenters mentioned the Affordable Care Act study which 
is investigating access to care issues and stated that the payment cuts 
will only further exacerbate access to care issues for vulnerable 
populations.
    Response: We appreciate the commenter's concerns and wish to note 
that our preliminary analysis suggests that vulnerable populations are 
associated with case-mix groups involving lower levels of therapy, and 
that we have adjusted weights upward for those lower-therapy case-mix 
groups. For example, whereas the average number of therapy visits for 
first episodes overall is 8.2 in 2009, the average for vulnerable 
groups in various classifications (for example, high-poverty counties 
or rural areas) ranged between 7.0 and 7.8. The impact analysis of this 
rule indicates that rural agencies will experience a smaller reduction 
overall than urban agencies. We note that rural agencies will continue 
to receive a 3 percent payment add-on in CY 2012. We anticipate that 
these aspects of the payment proposals will mitigate the risk of access 
issues. We also wish to report that the Affordable Care Act study is 
proceeding as planned. It will involve additional data gathering on 
vulnerable populations and on potential access problems that vulnerable 
beneficiaries may encounter in coming years. We will continue to 
monitor for unintended consequences and we will seek information from 
other government agencies, such as the Office of the Inspector General, 
on access. Finally, we will use Open Door Forums and other venues to 
solicit information from agencies on any actual access issues they 
witness.
    Comment: Commenters stated that the payment cuts will limit access 
to care and hinder the effort to move to more community-based care.
    Response: We do not believe this will be the case because payment 
will remain adequate. Medicare has implemented policies to support 
community-based care in other areas, such as hospital-readmissions and 
transition programs authorized by the Affordable Care Act. We encourage 
HHAs to partner with providers in their community to become a part of 
these efforts, thereby assisting in the movement to more community-
based care.
    Comment: Commenters also thought that the payment reductions would 
lower quality of care.
    Response: Commenters did not provide specific information about why 
they believe payment reductions would lower quality of care. Our 
simulation of margins under the payment policies in this rule suggests 
that margins will remain adequate, and thereby support current levels 
of quality. We also believe that policymaking in the quality 
improvement area should help to ensure quality advances. OASIS-C 
outcome reports and CAHPS data are two important recent developments 
that we anticipate will support high-quality services. Over time, 
value-based purchasing policies will be developed, further enhancing 
quality-related incentives. We encourage agencies to work to their full 
professional potential to deliver a high standard of care to their 
patients.
    Comment: Commenters were concerned that the proposed cuts would 
impede access to home health care because many agencies would be forced 
to close as a result of the lower payments. Commenters stated that if 
the proposed cuts are implemented, many providers will be operating at 
a negative or zero margins. A commenter stated that the reduction to 
payment rates along with other cuts mandated by the Affordable Care Act 
would cause over half of HHAs to be paid less than the cost of care to 
Medicare patients. This commenter provided a chart which forecasts 2012 
profit margins for each State should the proposed 5.06 percent 
reduction to payments be finalized. The commenter further described 
that six States and Guam would have more than 70 percent of their 
agencies with negative margins in CY 2012 as a result of the reduction. 
Specifically, the commenter described the States and the

[[Page 68531]]

corresponding percent of HHAs which would be forced into negative 
margins as: Alaska 80 percent; Idaho 76.9 percent; North Dakota 91.7 
percent; Oregon 96.2 percent; Vermont 70 percent; and Wisconsin 74.5 
percent. Other commenters stated that the payment reductions place more 
of a hardship on certain providers. The commenters stated that rural 
locations would be hit the hardest. Commenters also stated that if the 
proposed cuts take place, over 45 percent of Minnesota providers will 
be operating at a zero or negative margin in 2012 and nearly 60 percent 
in 2017. Other commenters stated that the Northeast has a significantly 
lower rate of increase in case-mix growth than any other region. 
Commenters stated that the payment reductions will differentially 
impact different regions of the country and urged CMS to do a State-by-
State analysis.
    Response: As we have noted in prior rules, we believe that a policy 
of varying payment levels according to regional differences in nominal 
case-mix change would be perceived as inequitable by beneficiaries. 
That is, beneficiaries who might have access only to agencies subject 
to larger payment reductions might believe Medicare's policies 
disadvantage them unfairly.
    Regarding the commenters' concerns about the effect of the proposed 
reductions on providers' viability and the resultant access risks, we 
note that in their March 2011 Report to Congress, MedPAC projected an 
average of 14.5 percent margins for HHAs in 2011, when taking into 
account various payment adjustments such as the CY 2011 payment 
reduction for nominal case-mix growth. We also note that in proposing 
the reductions, we analyzed the combined effects of all of the policies 
proposed and believe that a 5.06 percent reduction would not impede 
access to care. We believe that the margin analysis study submitted by 
one of the commenters, which projected the impact of the proposed 
policies on HHAs on a State-by-State basis, failed to take into account 
the effects of all of the policies in the rule. The payment reduction 
to the base rate is not the only policy affecting payment to HHAs 
described in the proposed rule. The effects of the payment update, wage 
index update and revision of case-mix weights also need to be taken 
into account when assessing the impact of the proposed provisions. We 
also believe that the commenter may have attempted to factor potential 
future reductions to HH PPS payments into the 2012 margin forecast. 
While the Affordable Care Act calls for CMS to rebase home health 
payments beginning in 2014 and apply a productivity adjustment to the 
yearly inflation increases beginning in 2015, the impact of these 
provisions would be impossible to accurately project at this time. 
Additionally, provisions that are targeted for implementation in 2014 
and later would have no effect on CY 2012 provider margins. The 
following discussion describes the impact if we were to implement a 
5.06 percent payment reduction in CY 2012, taking into account all of 
the policies in the rule. In the aggregate, HHAs would receive 3.52 
percent less in payments in CY 2012 when compared to CY 2011 payments, 
reflecting the net effect of a 1.4 percent HH PPS payment update 
increase, a 0.03 percent payment increase resulting from the wage index 
update, and a 5.06 percent reduction in payments to account for nominal 
case-mix growth. We note that not all providers would experience a net 
3.52 percent reduction in their payments if a 5.06 percent reduction in 
payments was finalized for CY 2012. As we described in the proposed 
rule and describe in this final rule, the revision of the case-mix 
weights would have a re-distributional effect which benefits rural and 
non-profit providers, and providers in certain areas of the country. 
For example, in aggregate, if a 5.06 percent reduction in payments was 
implemented for CY 2012, non-profit free-standing providers would 
experience an estimated 0.91 percent reduction and for-profit free-
standing providers would experience an estimated 4.72 percent reduction 
in payments. Rural providers would fare better than urban providers, as 
rural non-profit freestanding providers would see an estimated 0.31 
percent increase in payments. In response to the commenter who was 
concerned about providers in the Northeast, we note that New England 
providers are in an area of the country which would benefit from the 
re-distributional effects of the recalibration. On average, New England 
providers would experience an increase in payments in CY 2012.
    We note that of the six States which the commenter contends would 
have 70 percent or more providers experiencing negative margins as a 
result of the payment reductions, five are in areas of the country 
which would benefit from the re-distributional effect of the case-mix 
weight revisions. In Table 1, we provide the estimated impact if we 
were to finalize a 5.06 percent payment reduction with the other 
policies in this final rule for purposes of addressing this comment.
[GRAPHIC] [TIFF OMITTED] TR04NO11.000


[[Page 68532]]


    As shown in Table 1, the net effect of a 5.06 percent payment 
reduction with all of the other provisions of the rule is that 
providers from North Dakota, Oregon, and Vermont on average would 
experience an estimated increase in payments in CY 2012 of 2.73 
percent, 0.19 percent and 1.45 percent respectively, instead of the 
national average, a 3.52 percent reduction in payments. Furthermore, 
the net effect of a 5.06 percent payment reduction with all of the 
other provisions of the rule is that providers from Guam on average 
would experience an estimated increase in payments in CY 2012 of 0.11 
percent.
    In addition, the net effect of a 5.06 percent payment reduction 
with all of the other provisions of the rule is that Alaska providers 
and Wisconsin providers in the aggregate would experience an estimated 
reduction in payments in CY 2012 of 0.81 percent and 2.68 percent 
respectively, instead of the national average, a 3.52 percent reduction 
in payments.
    Table 1 shows that if we were to finalize a 5.06 percent payment 
reduction, Idaho would experience an estimated 4.54 percent reduction 
in payments in CY 2012, instead of the national average, a 3.52 percent 
reduction in payments. However, the non-profit providers and the rural 
providers in Idaho would experience an estimated reduction in payments 
in CY 2012 of 1.37 percent and 2.06 percent respectively. Regarding the 
commenters who expressed concern that a provider association reported 
that close to half of Minnesota providers would experience negative 
margins as a result of the proposed payment reductions, we disagree 
with the provider association's conclusion. The net effect of a 5.06 
percent payment reduction with all of the other provisions in the rule 
is that Minnesota providers, on average, would experience an estimated 
1.19 percent reduction in payments in CY 2012, instead of the national 
average, a 3.52 percent reduction in payments.
    Furthermore, preliminary 2009 CR analysis along with MedPAC's 
projected margin analysis for 2011 suggest that providers in these 
States have margins which are strong enough to absorb the proposed 5.06 
percent payment reduction.
    As stated above, we have concerns and questions about the 
commenter's analyses. Specifically, we believe the commenter may have 
not taken into consideration all of the provisions of this rule and 
also may have included in the analyses potential future reductions to 
HH PPS payments into the 2012 margin forecast (which are not applicable 
to 2012), and therefore, overestimated the negative impact on 
providers. We would like to note that industry margins have remained in 
the mid-double digits in recent years, even in those years in which we 
implemented similar net payment reductions. We also note that in this 
final rule, as we describe in detail in the following response to a 
comment, we are implementing the payment reduction over 2 years, rather 
than the 1 year we originally proposed. We refer the commenters to 
Section IV for the impacts of the policies we are finalizing in this 
rule.
    In addition, regarding the commenter's suggestion that we provide 
State-level impacts which reflect the provisions of the rule, we again 
refer the commenter to Section IV of this final rule where we describe 
our State-level analysis for the policies we are finalizing in this 
final rule. As we described in section IV, we believe that State-level 
impacts would be misleading unless we also provided breakouts of rural-
verses-urban and ownership status of providers within the State.
    Comment: Commenters described the burden which they have 
experienced as a result of recent regulatory and legislative changes. 
Specifically, commenters described the financial burdens surrounding 
the Affordable Care Act face-to-face encounter mandate imposed on HHAs 
and physicians. The commenters stated that HHAs and physicians have 
needed to hire additional staff to track the face-to-face paperwork. 
Additionally, commenters noted that the staff time spent tracking, 
sending, and routing the required documentation, as well as tracking 
appointments has also been costly for HHAs to absorb. In addition, 
commenters described administrative burdens associated with the CY 2011 
therapy provision which requires a qualified therapist, instead of a 
therapy assistant, to perform the needed therapy service, as well as 
assess, measure, and document the effectiveness of the therapy, at key 
points during a course of therapy treatment. Another commenter stated 
that payment cuts detract from agencies' ability to attract competent 
staff. Other commenters stated that CMS should limit any single-year 
rate reductions to no greater than a combined 2.5 percent. Some 
commenters suggested CMS phase-in the proposed 5.06 percent adjustment 
over a 2- to 3-year period. Commenters stated that a 5.06 percent rate 
reduction is the largest ever imposed in a single year by CMS and 
stated that the pay cut would have a significant impact as earlier 
payment cuts have decreased provider margins. Another commenter was 
concerned that the home health community would not be able to absorb 
the cumulative effect of recent legislative and regulatory reductions.
    Response: Our simulation analysis described in Section II.B, which 
takes into account all of the proposed policies for 2012 (such as a 
5.06 percent payment reduction and the revision of the case-mix 
weights), projects that payment will exceed costs for all episodes, 
except for episodes with 20+ therapy visits, of which more than 60 
percent would have payment that exceeds their costs. We reiterate that 
about 6 percent of episodes nationally in 2009 had 20 or more therapy 
visits. Therefore, we believe that the payment cuts will not detract 
from agencies' ability to attract staff. We also believe the payments 
in excess of estimated costs will allow agencies to adapt to recent 
legislative and regulatory requirements. However, we are sensitive to 
the challenges HHAs may have had in adapting to the Affordable Care Act 
provisions which were implemented in CY 2011, such as the face-to-face 
encounter provision. We also agree that the Affordable Care Act 
provisions and the CY 2011 therapy changes described by commenters 
likely required HHAs to incorporate process changes to adhere to these 
new requirements. As such, we are finalizing a phased-in implementation 
of a 5.06 percent reduction over 2 years, as some commenters suggested. 
We believe that by phasing-in the reductions over CY 2012 and CY 2013, 
we allow HHAs an opportunity to adopt process efficiencies associated 
with the CY 2011 mandates prior to imposing the full 5.06 percent 
payment reduction.
    In CY 2011 rulemaking, we proposed to apply a 3.79 percent 
reduction to payments in CY 2011 and an additional 3.79 percent 
reduction in CY 2012 to account for nominal case-mix growth we 
identified through CY 2008. However, we deferred finalizing the CY 2012 
reduction pending an independent review of our method for identifying 
real case-mix growth. (That independent review has been completed, as 
we reported in the CY 2012 HH PPS proposed rule.) Because we believe 
that providers likely expected and planned for us to impose a 3.79 
percent payment reduction in CY 2012, we are finalizing a 3.79 percent 
reduction in CY 2012 and a 1.32 percent reduction for CY 2013. These 
reductions enable us to account for the nominal case-mix which we have 
identified through CY 2009, to follow through with the planned 3.79 
percent reduction for CY2012, and to allow for HHAs' adopting process 
efficiencies during CY 2012.

[[Page 68533]]

    Comment: Commenters stated that HHAs should be allowed to test the 
impact of the rate changes using 2011 data.
    Response: Given the fact that we currently are in CY 2011, there is 
not a full year of data from 2011 and we caution HHAs when using a 
partial year's data in their analysis. In addition, due to the lag in 
receiving claims, we did not have full data from 2010 when developing 
the impacts for the CY 2011 HH PPS proposed rule. Therefore, the data 
used to develop the impacts of our proposed policies are from 2009. We 
plan to continue to assess the impacts of our policies once new 
complete data are available. HHAs are welcome to test the impacts of 
the rate changes on their data; however, when predicting the impacts, 
it should be noted that all of the policies in the rule should be taken 
into account (such as the wage index, rural add-on, and the revision of 
the case-mix weights, and the payment reduction).
    Comment: Commenters stated that the rate reductions may adversely 
affect hospital-based HHAs. They stated that hospital-based HHAs 
represent 80.9 percent of all providers nationwide with margins below 
zero and that the Medicare margins which MedPAC presents, only 
represents freestanding agencies and that hospital-based agencies have 
lower, negative margins. Commenters stated that hospital-based home 
care agencies are currently underpaid.
    Response: Medicare CR data for hospital-based HHAs does indicate 
that Medicare margins are lower than those of freestanding HHAs. 
However, hospital-based HHAs do not account for most of home health 
care, and there are data issues hindering understanding of hospital-
based HHAs' financial status. As stated in their March 2011 Report to 
Congress, MedPAC focuses on freestanding agencies because they are the 
majority of providers and because their costs do not reflect the sort 
of allocation of overhead costs seen in facility-based providers' 
Medicare CRs (MCR), such as hospital-based HHA MCRs. They explain that 
in the case of hospitals, which often provide services that are paid 
for by multiple Medicare payment systems, measures of payments and 
costs for an individual sector could become distorted because of the 
allocation of overhead costs or complementarities of services. Another 
consideration is that Medicare's payment policies should cover the 
costs of efficient providers. Therefore, given that the payment system 
is prospective and not based on a provider's reasonable costs, we have 
reason to question whether the problem, as stated by the commenter, is 
that hospital-based agencies are underpaid.
    Comment: Commenters stated that for those providers who do survive, 
the cuts will hinder their ability to enhance technology and move to 
electronic health records.
    Response: A reduction in margins as a result of our payment changes 
may have an effect on the availability of resources for various types 
of investments. However, our analysis indicates that payments will be 
more than adequate under our payment changes and would still allow for 
investments. We do not have sufficient data to evaluate the effect on 
technology-specific investments from the unusually large margins that 
have been in existence under the HH PPS, but we welcome information 
about whether the numerous agencies that operated with high margins 
under the HH PPS made investments during those years, and the nature of 
those investments.
    Comment: Other commenters stated that CMS should suspend further 
nominal case-mix adjustments until the rebasing of the HH PPS system 
required by the Affordable Care Act. A commenter stated that CMS should 
study the factors driving case-mix growth and analyze the differences 
in growth by provider characteristics.
    Response: We are finalizing payment reductions intended to account 
for overpayments that were made because of nominal case-mix growth. 
Since our analysis indicates that margins will remain adequate, and 
since our analysis of rebasing is still in process, we see no reason to 
defer nominal case-mix adjustments in this rule. We agree that more 
data could be useful in understanding case-mix change, and we will 
continue to solicit suggestions for reliable data that can be 
incorporated in our studies.
    Comment: Commenters urged CMS to commission studies to more 
accurately estimate real and nominal case weight changes and to help 
refine the case-mix to more closely align reimbursement with costs and 
eliminate incentives. Commenters stated that CMS should work on 
implementing a proper case-mix adjuster which accurately pays for all 
home health services before implementing a payment reduction.
    Response: The home health study under section 3131(d) of the 
Affordable Care Act allows CMS to not only look at access for 
vulnerable populations, but also look at other issues with the payment 
system and payment vulnerabilities. In this study, we plan to examine 
issues surrounding nominal case-mix growth and ways to better align 
payment with patient needs. The Report to Congress describing the 
findings of our study is projected to be available March 1, 2014. In 
the meantime, while examining ways to better improve the case-mix 
system, we believe that we need to address previous nominal case-mix 
growth, and therefore, we plan to implement payment reductions.
    Comment: A commenter recommended that CMS seek payment system 
reforms that are value-based rather than implementing payment 
reductions. The commenter noted that CMS should factor in the quality 
of care before implementing payment reductions.
    Response: Medicare's value-based purchasing initiatives in home 
health will build upon current efforts in this area, including Outcome-
Based Quality Improvement and CAHPS, and the Value-based Purchasing 
demonstration. As we develop and refine measures, and incorporate them 
in payment policies, we will involve stakeholders. Further developing 
value-based purchasing will take time, but commenters should be assured 
that it is an important goal for Medicare. However, we cannot ignore 
nominal case-mix growth in the interim and we believe we need to 
account for nominal case-mix growth through 2009.
    Comment: A commenter stated that the proposed payment cuts along 
with the proposed case-mix weight changes will hinder agencies ability 
to calculate their payment.
    Response: We note that we are not making significant, structural 
changes to our case-mix system. We are only revising the case-mix 
weights. Also, we plan to implement a payment reduction similar to 
previous payment reductions and have described the base rate payment in 
the Regulatory Impact Analysis in Section IV of this final rule. 
Therefore, we do not believe that the proposed policies will hinder 
agencies' ability to calculate their payment.
    Comment: Commenters stated that all of the payment adjustments are 
based on a false assumption that clinicians and agencies have gamed the 
system.
    Response: As we have stated in previous regulations, changes and 
improvements in coding are important in bringing about nominal coding 
change. We believe nominal coding change results mostly from changed 
coding practices, including improved understanding of the ICD-9 coding 
system, more comprehensive coding, changes in the interpretation of 
various items on the OASIS and in formal OASIS definitions, and other 
evolving measurement issues. Our view of the causes of nominal coding 
change does

[[Page 68534]]

not emphasize the idea that HHAs or clinicians in general gamed the 
system. However, since our goal is to pay increased costs associated 
with real changes in patient severity, and nominal coding change does 
not demonstrate that underlying changes in patient severity occurred, 
we believe it is necessary to exclude nominal case-mix effects that 
cannot be shown to be related to changes in patient severity.
    Comment: Commenters stated that CMS penalizes providers for 
improved accuracy in patient assessment and coding. The commenters 
contributed the increase in case-mix to increased accuracy of OASIS 
answers and increased coding accuracy as a result of training of their 
staff and/or the use of certified and trained coders.
    Response: Comments referencing coding improvements, such as 
increasing accuracy, do not recognize that such improvements are an 
inappropriate basis for increased payment. We believe that measurable 
changes in patient severity and patient need are appropriate bases for 
changes in payment. Our analysis continues to find only small changes 
in patient severity and need.
    Comment: Commenters stated that the increase in case-mix weights is 
due to HHAs complying with Medicare instructions regarding patient 
coding ``consistent with the 2008 version of the HH PPS.''
    Response: This comment is difficult to address because the 
commenter does not cite specifically which documents constitute CMS-
issued Medicare instructions ``consistent with the 2008 version of the 
HH PPS.'' Nor does the comment explain how the increase in case-mix 
weights was driven by such CMS instructions. However, we believe our 
release in late 2008 of a revision of Attachment D of the OASIS 
Instruction Manual would not have had the effect suggested by the 
comment. (Attachment D was intended to provide guidance on diagnosis 
reporting and coding in the context of the HH PPS.) First, Attachment D 
reiterated traditional CMS guidance about how to select diagnoses in 
home health. Attachment D did not deviate from the fundamental and 
longstanding instruction that reported diagnoses must be relevant to 
the treatment plan and the progress or outcome of care and be 
consistent with coding guidelines.
    Comment: Commenters stated that CMS should look into alternative 
ways to account for nominal case-mix changes. Commenters stated that 
coordinated educations efforts can help control nominal case-mix 
growth.
    Response: Section 1895(b)(3)(B)(iv) of the Act gives CMS the 
authority to implement payment reductions for nominal case-mix growth 
by applying reductions to the base payment. The section does not allow 
CMS the authority to account for nominal growth in ways other than 
through payment reductions. We continue to explore ways to prevent 
future nominal case-mix growth and we welcome any suggestions.
    Comment: A commenter stated that the CMS methodology does not 
recognize home health care's increasing ability to care for more 
serious medical conditions in the home and ignores changes in patient 
severity. We received a number of comments stating that home health 
patients now have more complex conditions than previous populations of 
home health patients and that such patients previously would have been 
referred to health care facilities, but are now being cared for at 
home. Moreover, the commenters stated that other healthcare settings 
have developed stricter admission requirements, thereby increasing the 
number of HHA patients with high severity levels. One commenter cited 
as evidence diversion of patients to home care from inpatient 
rehabilitation facilities (IRFs) due to the CMS 60 percent rule. In 
addition, the commenters cited that there has been a nationwide 
rebalancing of care in favor of community care settings leading to a 
higher severity in home care admissions.
    Response: Data we presented in the CY 2011 HH PPS final rule (75 FR 
70379) indicate that hospital lengths of stay have been declining 
slightly and lengths of stay in residential post-acute settings before 
home health admission have increased between 2001 and 2008. We note 
that the proportion of initial non-LUPA home health episodes preceded 
by acute care within the previous 60 days has declined between 2001 and 
2008, from 70.0 percent to 62.7 percent. This indicates more patients 
are being admitted to HHAs from non-institutional settings (for 
example, from the community). Also, post-acute institutional 
utilization data perhaps consistent with the comment regarding 
diversion of patients to the home care setting suggest a decline in 
IRFs as a source of home health patients, but this decline may have 
been partly offset by an increase in SNF utilization as a source. For 
example, the proportion of initial episodes preceded by an IRF stay 
that ended sometime during the 30 days before home health admission 
declined by more than a percentage point in 2005 and declined another 
1.6 percentage points by 2009, while the percentage preceded by a SNF 
stay increased half a percentage point in 2005 and has remained above 
the 2005 level through 2009, the latest year of complete data available 
(based on a 10 percent beneficiary sample of initial, non-LUPA 
episodes). We also note that in CY 2005, when CMS began enforcing the 
IRF 60 percent rule, we initially saw an increase in knee joint 
replacement patients admitted to home health following hospital 
discharge. The 60 percent rule (previously, the 75 percent rule), is a 
criterion used to define IRFs for them to receive payment as an IRF. 
The rule requires that in at least 60 percent of cases an IRF admits 
must have one or more selected conditions which have been established 
as requiring the intensity of care provided in an IRF. However, more 
current data (2007 and 2009) shows that the prevalence of knee joint 
replacement patients in home health has dropped from the 2005 levels, 
though the prevalence is slightly higher than in 2000. The prevalence 
of hip joint replacement patients has dropped since 2000, as have hip 
and femur fracture patients. Furthermore, we note that acute stays, 
which normally precede stays in institutional post-acute care settings, 
are decreasing in the stay histories of home health patients. 
Therefore, we question whether there is any evidence showing an 
increase in home health patient severity as a result of more patients 
coming to home health as a result of diversion from IRF care.
    Comment: Commenters stated that patient care capabilities are 
changing in home health services and diagnostic-specific care protocols 
allow targeting of patient populations. Commenters cited utilization of 
interdisciplinary care providers to improve patient outcomes and to 
provide best practice interventions, such as the prevention of falls. 
The commenters further expanded on this idea by stating that there is a 
movement towards a multidisciplinary approach to care and utilization 
of broader ranges of therapy services to improve outcomes and that 
evidence based best practices have improved patient outcome scores.
    Response: To the extent that home care agency capabilities are 
improving, we support such developments and we hope to see them 
continue. This is an entirely different issue from whether the patient 
population has changed to the degree as indicated by the nominal coding 
change we isolate in our analysis.
    Comment: Commenters suggested that CMS recognize changes in patient 
severity, improved patient assessment,

[[Page 68535]]

coding and reimbursement changes in their case-mix methodology and work 
with National Association for Home Care and Hospice (NAHC) to uncover 
the reasons for case-mix weight changes and to develop a valid 
methodology for payment reform. Another commenter stated that CMS 
should include industry stakeholders in the analysis and development of 
policies, such as the case-mix adjustment cut, that have a significant 
impact on access to home care services.
    Response: Through the public comment process, we have obtained 
industry views as to the reasons for coding changes. As we have pointed 
out before, reasons offered, such as improved coding, are not a 
sufficient basis for raising payment rates. To the extent case-mix 
change is due to better methods of assessing patients in the home 
health setting, this does not justify making reimbursements as though 
the patients really were different in their case-mix levels of 
severity. We plan to solicit feasible alternative suggestions for 
scientific approaches to measuring real vs. nominal case-mix change in 
the home health study under section 3131(d) of the Affordable Care Act.
    Comment: Some commenters stated that payment rate reductions due to 
case-mix weight changes are not warranted because Medicare expenditures 
on home health are well within budgeted levels, thereby demonstrating 
that aggregate spending has not increased enough to permit CMS to 
exercise its authority to adjust payment rates. Commenters cited budget 
projections of the Congressional Budget Office (CBO). Another commenter 
stated that while therapy services for home health patients have 
increased in volume since the start of the HH PPS in 2000, patient 
outcomes have improved and Medicare spending per patient and in the 
aggregate overall has stayed well below projections by the CBO. Some 
commenters stated that payment reductions in home health will lead to 
more institutional care, for example, by leading to increases in 
hospital readmissions of post-acute patients.
    Response: We have no statutory authority to consider the 
relationship of CBO projections to home health outlays when setting the 
HH PPS payment rates. The Secretary's authority to respond to nominal 
coding change is set out at section 1895(b)(3)(B)(iv) of the Act. As 
stated earlier, we do not believe that the reductions will impede 
access to care, but we will continue to monitor for unintended 
consequences. There is no evidence that improvement in home health 
patient outcomes is related to the level of payments achieved through 
nominal case-mix change. Effects of payment reductions on access and 
patient outcomes are worthy of study, using carefully designed 
research. We are aware of the challenges of conducting conclusive 
research in this area, in part because other policy changes affecting 
the study question may co-occur. We may explore this area of research 
in the home health study under section 3131(d) Affordable Care Act.
    Comment: Commenters stated that CMS should not implement payment 
reductions to address high therapy utilization but rather address it by 
implementing changes to case-mix weights, such as the proposed changes, 
instead.
    Response: We note that we proposed to implement a 5.06 percent 
payment reduction to account for the residual nominal case-mix growth 
from 2000 to 2009. The changes to the case-mix weights were proposed to 
better align payment with costs and to deter incentives which 
contribute to nominal case-mix growth. Therefore, we believe we still 
need to implement payment reductions to account for nominal case-mix 
change from the inception of the HH PPS through 2009.
    Comment: Commenters stated that therapy utilization is a coding 
adjustment that accompanies not only an increase in reimbursement but 
also an increase in provider costs, implying that a rate reduction 
related to increased costs is inappropriate. Another commenter stated 
that a typical case-mix weight change adjustment in other sectors may 
bring a reduction in profit margins only, whereas in home health the 
adjustment occurs where the higher payments from increased case-mix 
weights are offset by increased costs.
    Response: We believe that the goal of the Medicare program is to 
ensure that beneficiaries receive the right care at the right time. The 
evolution of patterns of therapy utilization since the PPS began leaves 
doubt that appropriate care has been provided. In the CY 2008 proposed 
regulation (72 FR 25356), we described a shift in the distribution of 
therapy visits per episode under the HH PPS that caused two peaks: One 
below the therapy threshold of 10 therapy visits; and the other in the 
10 to 13 visit range. Before the HH PPS, the distribution had one peak, 
at 5 to 7 therapy visits, well below the 10-visit therapy threshold in 
use prior to the 2008 refinements to the HH PPS. The distribution of 
episodes (LUPA and non-LUPA) changed again with the implementation of 
the 153-group case-mix system and its revised set of thresholds and 
therapy steps. At the new 7-visit step (7 to 9 visits) there was a 
sudden 50 percent increase in the proportion of episodes, and at the 
new 14-visit therapy threshold, there was a 25 percent increase in the 
proportion of episodes. One commenter in 2010, in writing about the 
questionable prescription of therapy treatment, stated that certain 
agencies have habitually provided therapy to patients whose natural 
course of recuperation would have been the same regardless of receipt 
of therapy. Such prescribing behavior adds to doubts that services are 
always provided appropriately. We also note that we implemented a 
declining payment with each added therapy visit with the 2008 refined 
case-mix system, with the intent to deter inappropriate padding of 
therapy prescriptions to higher and higher numbers of visits, as we 
added new thresholds above 10 visits. However, the pliability of 
therapy prescriptions, the continued growth in the proportion of 
episodes utilizing therapy, and the 25 percent increase in the 
proportion of episodes with high numbers of therapy visits (14 or more) 
in 2008 may be evidence that increased costs are more than offset by 
the increased payment associated with therapy. Furthermore, a Senate 
Finance Committee report concludes that among the major for-profit 
providers, more therapy was often provided than clinically needed in 
order to maximize Medicare reimbursement (Senate Finance Committee 
Staff, ``Staff Report on Home Health and the Medicare Therapy 
Threshold'', U.S. Government Printing Office, Washington: September 
2011). To the extent that unnecessary therapy was provided and 
contributed to nominal case-mix growth, these are overpayments, 
regardless of whether the unnecessary therapy had a cost to the HHA 
that provided it.
    In addition, analysis of profit margins indicates that they remain 
high among HHAs. For example, according to MedPAC's analysis, Medicare 
margins were 17.7 percent in 2009. This situation suggests that higher 
payments are not necessarily being offset by increased costs. In March 
2011, MedPAC estimated that Medicare margins will be 14.5 percent in 
2011, taking into account the then-expected payment reductions (MedPAC, 
Report to Congress: Medicare Payment Policy, March 2010). Our estimates 
suggest aggregate Medicare profit margins in home health will remain 
strong under the payment policies we are finalizing with this rule.
    Comment: Commenters stated that there is an increased volume of 
episodes that have therapy utilization and that there have been 
improved patient

[[Page 68536]]

outcomes. Some of these commenters cited Table 8-5 in the March 2011 
MedPAC Report to Congress. They stated that the beneficiary outcomes 
have greatly improved in all functional measures with the increased 
therapy services.
    Response: There is not yet a body of rigorous literature that 
provides evidence tying improvements in home health outcome measures to 
the increased volume of therapy provided under the HH PPS. The standard 
for such evidence would be stronger than a broad correlation between 
improvement rates in outcomes and amount of therapy provided. In 
addition, we disagree that the March 2011 MedPAC Report to Congress 
implied or concluded that increased therapy utilization has improved 
patient outcomes. Rather, in the March 2011 Report, the Commission 
criticized the home health measures for not capturing changes in 
quality that were related to the patient's need for home health care. 
The Report further described that the improvement in walking measure is 
reported for all patients regardless of whether they needed home health 
to address a mobility condition.
    Comment: A commenter stated the real case-mix change analysis omits 
consideration of increased therapy needs in the population. Other 
commenters stated that therapy use changes were not explained in the 
model and that CMS admitted that it could not explain the correct 
amount of therapy expected for patients. The commenter stated CMS 
should use alternative variables which would be more indicative of the 
changes in therapy use.
    Response: The models were intended to analyze changes in case-mix 
over time and do not distinguish whether these changes are due to 
increases in therapy use or other factors. We do not believe that it 
would be appropriate to include utilization-related variables, such as 
the number of therapy visits, as predictors in the model, as such 
variables are provider-determined. In addition, the goal of these 
analyses was not to develop refinements to the payment system but 
rather to examine changes in measures of patient acuity that are not 
affected by any changes in provider coding practices. For example, the 
models do incorporate information about change in the types of patients 
more likely to use therapy, such as post-acute joint replacement 
patients. CMS has access to the claims histories and other 
administrative data for patients in our samples, and we welcome 
suggestions about how to better use these resources in finding 
alternative variables more indicative of the need for therapy, 
particularly if the suggestions involve the use of data and variables 
that are not HHA-determined.
    Comment: A commenter stated that the model fails to account for any 
changes in HHA behavior related to patient populations served. These 
changes would include a marketing effort targeted to increase the 
proportion of patients who are high users of therapy.
    Response: We disagree with this comment. The predictive model for 
real case-mix was designed in 2007 and includes a comprehensive set of 
variables. We augmented the set of predictor variables this year by 
adding HCC data. The model looks at case-mix change across a large 
sample of providers, rather than considering individual provider 
behavior. If the characteristics of patients have changed due to 
marketing efforts, this should show up as changes in the mean values of 
patient characteristics over time. For example, the increase in knee 
replacement patients since the baseline year causes an increase in the 
predicted case-mix weight. We will continue to research ways to modify 
our models and data for analyzing real case-mix change over time. A 
challenge with using OASIS items is that, for the most part, OASIS 
items associated with case-mix are already used in the grouper and thus 
are not appropriate to use in the case-mix change analyses (since 
changes in case-mix over time may be due to coding changes rather than 
changes in severity).
    Comment: The commenter stated that MedPAC is researching and 
developing revised payment models which could bring therapy 
reimbursement more in line with how other home health services are paid 
for and any dramatic reimbursement changes to the HH PPS should be 
postponed in anticipation of a more complete revision to the payment 
methodology.
    Response: We do not believe our proposals represent dramatic 
reimbursement changes. We have strived to maintain the look and feel of 
the refined system of 2008 in our proposals this year. We agree that 
dramatic changes to the HH PPS system should await the congressionally 
mandated study currently underway, pursuant to Section 3131(d) of the 
Affordable Care Act. This study may be followed by a demonstration to 
test major revisions to the payment methodology.
    Comment: A commenter implied that the industry did not play a role 
in developing the HH PPS and implied that when OASIS was first used, 
there was a significant variation in the reporting and that the 
industry was disadvantaged.
    Response: We followed the Administrative Procedures Act (APA) in 
implementing the HH PPS under the mandate in the Balanced Budget Act of 
1997. Under the APA, we solicited public comments in 1999 on the then-
proposed system. OASIS itself was developed with industry participation 
for the purpose of measuring home health outcomes (see GAO-01-205, 
January 2001, Appendix II). A version of OASIS was used in the original 
case-mix research that led to the design of the HH PPS case-mix system. 
The research results indicated that adequate case-mix adjustment of 
payments could be achieved using OASIS variables. We have noted in 
previous regulations that the average case-mix weight nationally, as 
estimated from OASIS assessments in the 12 months leading up to October 
1, 2000, was about 13 percent higher than the average in the sample of 
agencies whose data were used for the case-mix research. We used the 
estimate from the 12 months leading up to October 1, 2000 as our 
baseline for measuring case-mix change because it represented a very 
large, broad-based set of episodes. It did not reflect the earliest 
days of OASIS use. Given that coding practices continually evolved 
subsequent to the last 12 months ending October 1, 2000, and that 
agencies were not subject to the HH PPS incentives during the 12 months 
ending October 1, 2000, we believe the baseline period that we selected 
is the most appropriate one to use to begin measuring coding change 
that occurred in relation to the introduction of the HH PPS. Any other 
period subsequent to our baseline builds in impacts on coding of the HH 
PPS and is questionable to use from the point of view of responsible 
fiscal stewardship.
    Comment: Commenters stated that the model is based on 
administrative data rather than clinical data.
    Response: The model only includes a few variables that are derived 
from OASIS assessments (measures of patient living arrangement) because 
the OASIS items can be affected by changes in coding practices. It is 
not practical to consider other types of home health clinical data (for 
example, from medical charts) in the model.
    Comment: A commenter wrote that the model relies too heavily on 
assumptions and beliefs rather than empirical evidence. Other 
commenters stated that the implementation of the payment reductions 
should be delayed until the validity of data and methods used to 
calculate the payment reduction can be verified.

[[Page 68537]]

    Response: We disagree. The prediction model for real case-mix is an 
empirical model, the findings of which are based entirely on empirical 
evidence. We also disagree with the commenter's suggestion that we have 
not validated the data or methods used to calculate the payment 
reduction. Over the last several years, we have continued to evaluate 
our data and methods, and this year, we procured a review of our model 
by Dr. Grabowski and his team at Harvard University, who found our 
model robust.
    The real case-mix prediction model and its application account for 
changes in the HH patient population by quantifying the relationship 
between patient demographic and clinical characteristics and case-mix. 
The relationships in conjunction with updated measures of patient 
characteristics are used to quantify real case-mix change. The 
characteristics in the model include proxy measures for severity, 
including a variety of measures, namely, demographic variables, 
hospital expenditures, expenditures on other Part A services, Part A 
utilization measures, living situation, type of hospital stay, severity 
of illness during the stay, and risk of mortality during the stay. This 
year, additional diagnosis data, based on physician and hospital 
diagnoses in the patient's claims history, were added in the form of 
HCC indicators. Measurable changes in patient severity and patient 
need, factors mentioned by commenters, are an appropriate basis for 
changes in payment. Our model of real case-mix change has attempted to 
capture such increases.
    We recognize that models are potentially limited in their ability 
to pick up more subtle changes in a patient population such as those 
alluded to by various commenters. Yet in previous regulations we 
presented additional types of data suggestive of only minor changes in 
the population admitted to home health, and very large changes in case-
mix indices over a short period. We included among these pieces of 
evidence information about the declining proportion of home health 
episodes associated with a recent acute stay for hip fracture, 
congestive heart failure, stroke, and hip replacement, which are four 
situations often associated with high severity and high resource 
intensity. We found declining shares for these types of episodes as of 
2005 (72 FR 49762, 49833 [August 2007]). We presented information 
showing that resource use did not increase along with billed case-mix 
(72 FR 49833); stable resource use data suggest that patients were not 
more in need of services over time, notwithstanding the rising billed 
case-mix weights that suggested they would be. We also analyzed changes 
in OASIS item guidance that clarified definitions and could have led to 
progress in coding practice (72 FR 25356, 25359 [May 2007]). We 
reported rates of OASIS conditions for the year before the beginning of 
the HH PPS and 2003, and found some scattered small changes indicative 
of worsening severity but no dramatic changes commensurate with the 
increase in case-mix weights (72 FR 25359). In our discussion, we cited 
specific instances where agencies' changing understanding of coding 
could have contributed to the adverse changes. However, as previously 
stated, Medicare payments should be based on patient level of severity, 
and not on coding practices.
    In the CY 2011 HH PPS proposed rule, we identified a very large, 
sudden 1-year change (+0.0533) in the average case-mix weight by 
comparing a 2007 sample that we assigned to case-mix groups using the 
new 153-group system and a 2008 sample grouped under the same system. 
It is unlikely that the patient population suddenly worsened in 
severity so as to cause an increase of 0.0533 in the average case-mix 
weight in a single year. Furthermore, we concluded that the large 
change was not due to our use of the new, 153-group case-mix algorithm 
in 2008, because when we applied the previous case-mix system and the 
new system to a sample of 2007 claims, the average weight differed very 
little (the difference was 0.0054). That is, the algorithms in the 
previous and new case-mix systems provided highly similar case-mix 
weights on the sample of 2007 claims. We further examined the diagnosis 
coding on OASIS assessments linked to the 20 percent claims sample and 
found a large increase between 2007 and 2008 in the reporting of 
secondary diagnosis codes (75 FR 43242, July 23, 2010). The use of 
secondary diagnosis codes in the case-mix algorithm was introduced in 
2008 as part of the new case-mix system.
    Comment: A commenter stated CMS should suspend nominal case-mix-
related payment reductions until it develops an accurate and reliable 
model to evaluate changes in case-mix weights consistent with the whole 
nature of patients served in home health care, not just those 
discharged directly from hospitals.
    Response: Many variables in our model are applicable to patients 
who have not used hospitals recently, including variables relating to 
demographic status and post-acute care utilization. Another set of the 
model's variables, used to describe the nature of any previous hospital 
stay, applies to many patients nonetheless, because we searched the 
claims history to find the last hospital stay that occurred before the 
episode. Finally, this year we also added a new source of information 
to the model, physician diagnoses from the claims history of each 
patient and hospital diagnosis information from all hospitalizations 
occurring in the year of the HH PPS episode of the patient. This 
represented a substantial increase in the amount of information 
available about patient health characteristics. We believe that, 
especially since we made this change, the model includes a rich set of 
patient measures. It is important to note that the omission of any 
particular variable is not enough to change estimates of unpredicted 
case-mix change. Variables must have different prevalence rates in the 
initial and later periods. If prevalence rates for such variables were 
the same in both periods, the effects would net out; in other words, 
there would be no systematic difference in the predicted case-mix over 
time.
    Comment: Commenters stated that the Abt report on the real case-mix 
change analysis (``Analysis of 2000-2008 Case-mix Change'', July 2010, 
link at http://www.cms.gov/center/hha.asp) does not discuss what signs 
are consistent with known relationships and, hence, is not in a 
position to judge the signs of the coefficients. Commenters stated that 
the signs for various variables in the model are counterintuitive. 
Commenters stated that while Abt included variables related to 
inpatient stays, the estimated coefficients are not consistent with 
expectations that ``the coefficient for any stay would be positive and 
the coefficient for the number of days would be negative.'' The 
coefficient has an opposite sign than what is expected.
    Response: We thank the commenters for their comments. However, our 
purpose is to predict case-mix weights using all available and relevant 
administrative data, rather than to isolate the impact of individual 
variables. We have noted elsewhere that many coefficients have signs as 
we expect (Abt Associates 2008; 72 FR 49762, 49780, August 29, 2007). 
Contrary to what the commenter states, it is not clear that a 
hospitalization would be associated with higher case-mix; it may be 
that community patients are more clinically complex and have a higher 
case-mix than those who are discharged from a hospital to home health. 
This result is consistent with the impact of pre-admission location 
variables (from OASIS item M0175) in

[[Page 68538]]

the 80-group case-mix model. Furthermore, we believe that often the 
signs that commenters find counterintuitive are not so upon careful 
consideration of the variables already controlled for in the model.
    Comment: Some of the technical concerns are that the model contains 
numerous variables that are not statistically significant and may 
provide spurious results.
    Response: To avoid omitted variable bias, we believe it is prudent 
to include all available variables for which there is good reason to 
believe that they may be causally related to patient case-mix, and 
therefore, the models contained some statistically non-significant 
variables. In addition, the non-significant variables do not 
appreciably alter the results of the case-mix measurement model.
    Comment: Abt does not perform any multicollinearity diagnostic 
statistics or consider the remedy of combining some of the variables. 
The model uses a large number of variables that do not have much 
variation. The close interaction among the variables ``is likely to 
pose problems with the prediction of the dependent variables.''
    Response: Given the objectives of the analysis, we are not 
particularly concerned about redundancy among variables. It is also 
important to note that such redundancy, often called multicollinearity, 
does not actually bias results and may only cause large standard errors 
of the coefficients for variables that are related to one another. 
Standard errors are not used in our case-mix change calculations. The 
Abt Associates report described improvement in the predictive power of 
the model as each set of variables (for example, APR-DRG variables) was 
added beyond demographic variables alone. The addition of Part A 
expenditure variables, the last variable set added to the model (prior 
to the recent addition of HCC variables), led to little improvement in 
predictive power, and for that reason might be considered redundant; 
however, their addition did not change the essential results of the 
analysis (Abt Associates, 2008), which were that only a small 
proportion of the case-mix growth could be attributed to changes in 
patients' characteristics.
    Comment: Commenters stated that they would like the model to meet a 
minimum requirement for a level of accuracy and reliability that is at 
least equivalent to the case-mix adjustment model that it is assessing. 
The commenters stated that the current HH PPS case-mix model had an R-
squared explanatory power of over 40 percent while the case-mix weight 
change assessment model has an R-squared around 10 percent. The 
commenter states that the regression model R-square dropped from 19 
percent to 10 percent in the 2008 analysis and the decrease in the R-
square is ``unclear and unexplored.'' They stated that since the R-
square of the 80 HHRG case-mix model was 0.21 while the R-square of the 
153 model was 0.44, the R-square value for the case-mix measurement 
model should be higher for the model using the 153 grouper.
    Commenters stated that the Abt models are unreliable because 40 
percent of the top variables differ from one model year to the next 
(original IPS model and the model rebased to 2008 data), and 20 percent 
of the variables change signs. The commenter stated the high R-square 
of the current PPS case-mix model suggests that the case-mix weight 
change regression model analysis for 2008 should have had a higher R-
square. The decrease in the R-square is ``unclear and unexplored.''
    Response: We thank commenters for their comments. We note that the 
commenter's comments correspond to the older case-mix prediction model 
(which assessed real case-mix growth from 2000-2007 and from 2007-
2008). We have since updated our case-mix prediction model to include 
HCC data and our case-mix model assesses real case-mix growth from 
2000-2005, 2005-2007 and from 2007-2009.
    We also note that we disagree that the difference in R-squares for 
the models indicates that the prediction model for real case-mix is 
unreliable. Comparing the results for the 2000-2005 and 2005-2007 
periods, four of the top five drivers of predicted case-mix change are 
the same in both models, as are 13 of the top 20. Similarly, 13 of the 
top 20 drivers are the same for results from 2005-2007 and 2007-2009, 
including the HCC community score. Most of the predicted case-mix 
change results from the major ``drivers'' in the model, and, of the top 
50 drivers of case-mix change in the 2000-2005 analyses (which account 
for almost 80 percent of the total predicted change in that time 
period), 48 have the same sign in the 2007 model and 30 also have the 
same sign for the 2009 model.
    We would expect some change over time in the variables that are 
among the top drivers of case-mix change, given the large number of 
variables in the model and the differing dependent variables (the 80 
case-mix weights for the first model, pertaining to the 2000-2005 and 
2005-2007 periods, and the 153 case-mix weights for the second model, 
pertaining to the 2007-2009 period). With regards to the 40 percent R-
squared explanatory power benchmark, given that the goal of the case-
mix change analyses is to determine the extent to which case-mix 
changes observed over time are due to changes in patient acuity or 
other factors (such as coding changes) that are not observed in the 
model, we do not believe that this is an appropriate statistical 
performance benchmark for the model.
    The explanatory power of the current HH PPS case-mix model is as 
high as it is in large part because of the therapy-related variables in 
the model (where a direct measure of resource use is included on the 
right-hand side of the regression model). We do not believe that it is 
appropriate to include these types of variables in the case-mix change 
model because they are provider determined.
    Comment: A commenter stated that no explanation was provided on 
segmented choice of periods of evaluation. This commenter wrote that it 
is unclear why Abt subdivided the 2000-08 period into 2000-2007 and 
2007-2008. To minimize the possibility for shifts in the relationship 
between resource requirements and explanatory variables, Abt could have 
subdivided the 8-year period in half or at least performed some 
sensitivity analysis to choose the time periods.
    Response: The procedure of identifying nominal case-mix change 
relies on subtracting an average of predicted weights from the average 
of actual, billed weights. The case-mix group system changed from one 
of 80 groups to 153 groups in 2008, causing a change in the set of 
weights that could be billed to Medicare. Up until 2008, this was not 
an issue as the same set of weights was used throughout the entire 
history of the PPS up until that year. To be able to bridge the periods 
before and after the 153-group model, in last year's analysis, we 
rebased the prediction model to the 2008 data, the first year that the 
153-group model was used for paying home health providers, creating a 
2007-2008 segment. We combined the results from the original IPS-period 
equation with the results from the rebased 2008 equation for last 
year's analysis. For this year's analysis, again we defined segments to 
accommodate data availability. We defined three segments. We broke the 
2000-2007 period that we previously analyzed into two periods, 2000-
2005 and 2005-2007, because we added several variables derived from HCC 
model to the 80 HHRG model. It was not possible to include HCC 
variables in analyses of years prior to 2005. The third segment covered 
2007-2009 instead of 2007-2008, to update the data to the most

[[Page 68539]]

current year available. This year's analysis used 2009 data, rather 
than 2008 data, for rebasing to the 153-group model.
    Comment: Commenters criticized the model's reliance on hospital DRG 
data stating that over half of all Medicare home health patients are 
admitted to care from a setting other than a hospital and many of the 
patients receive care far extended past an initial episode. Commenters 
stated that the APR-DRG variables are less relevant for multiple 
episode patients. Another concern was that 848 of the 902 variables are 
APR-DRG related to prior use hospitalization.
    Response: We disagree that the utility of the hospital information 
in the case-mix change analysis is so limited, and with the addition of 
HCC data, we have enhanced the robustness of the variable set used for 
the analysis to include physician diagnoses and diagnoses of other 
clinicians, as well as Medicaid eligibility. Regardless of whether the 
patient came directly from a non-hospital-setting (for example, home or 
a post-acute institutional stay), information from a hospital stay 
preceding home health is typically relevant to the type of patient 
being seen by the HHA, and thus can provide information about the PPS 
case-mix measure for the home health episode. A recent hospitalization, 
whether or not there is an intervening period spent in some other 
setting before home health admission, is common before admission to 
home health. The Abt Associates case-mix change report (``Analysis of 
2000-2008 Case-mix Change'', July 2010, link at http://www.cms.gov/center/hha.asp) indicates that about 90 percent of the episodes have a 
hospitalization history in the data, looking back a maximum of 4 years. 
However, from the information we show here about the likelihood of a 
hospital stay before and after home health, relatively few of the 
hospital stays contributing information are as old as 4 years. We also 
note that the remaining 10 percent of episodes are not dropped from the 
analysis; these episodes contribute information for the model, 
specifically, demographic information and various proxy measures 
derived from Part A utilization and expenditure data.
    Comment: Commenters stated that the model should recognize that 
home health patients are often treated in the home for conditions other 
than the primary condition that led to hospitalization and should 
consider that patients may have multiple episodes of care such that a 
prior hospitalization may be of little relevance to the condition of 
the patient.
    Response: We believe our addition of HCC data addresses this 
comment. The data reflect the cumulative diagnostic information from 
the patient's claim history in the year of the episode. We would like 
to remind commenters that the real case-mix prediction model is not 
limited to diagnoses. The model also takes into account demographic 
factors, as well as utilization indicators of health status, such as 
Part A utilization measures. Moreover, the model measures the 
relationship between these factors and case-mix.
    Comment: A commenter stated hospital discharge data demonstrate 
that home health patients are admitted from hospital stays with a 
higher degree of acuity than in the past. ``The acute care (inpatient 
prospective payment system (IPPS)) CMI for cases discharged to HHAs 
reflects the patient severity of the patients discharged to HHAs. As 
one of the measures for patient severity is prior hospitalization, it 
is believed to be unaffected by the home health CMI. The CMI for the 
prior hospitalization can be assumed to be a proxy measure of the 
``real'' case-mix index (CMI). Based on our analyses of the 2007 and 
2008 MedPAR data (Medicare discharges from short term acute care 
hospitals), we found that the CMI (MS DRG-based CMI) of cases 
discharged to HHAs increased by 2.5 percent from 1.588 in 2007 to 1.630 
in 2008. Furthermore, we also found that among the acute care cases 
discharged to HHAs, the proportion of cases categorized as Medicare 
Severity Adjusted Diagnosis Related Groups (MS DRGs) with complications 
and comorbidities increased by 3 percentage points from 25 percent in 
2007 to 28 percent in 2008. This implies that the real CMI due to 
comorbidities most likely increased for the cases discharged to home 
health agencies.''
    Response: The MedPAR data analyzed in this comment cover the period 
when the MS-DRG system was implemented. We analyzed MS-DRG coding and 
found evidence of changes in coding and documentation practices that 
led to increases in billed acute care case-mix weights. CMS actuaries 
estimated that a 2.5 percent increase in case-mix in the hospital IP 
PPS was due to coding and documentation changes occurring in FY 2008 
(75 FR 50355). The results cited by the commenter may have reflected 
the weight-increasing hospital coding behaviors addressed by the CMS 
regulatory analysis. Therefore, we have reason to believe that this 
measure alone is not good evidence for assessing real case-mix change. 
We must also point out that our analyses employing the APR-DRG system 
indicated that the proportion of episodes with a Mortality Risk Level 3 
(Major) diagnosis increased over time while the proportion with 
Mortality Risk Level 2 (Moderate) decreased. However, our regression 
coefficients (for both the IPS and 2008 model) showed a negative 
relationship between being in the moderate or major risk of severity 
groups and case-mix. Thus, the increase in the proportion of patients 
in the highest mortality risk category led to an estimate of lower 
predicted case-mix. Given these types of findings, it is not clear the 
extent to which the CMI changes that the commenter notes, even if they 
represented an accurate measure, would lead to a prediction of higher 
case-mix.
    Comment: The commenters stated that the Harvard team validation 
analysis confirms that patients discharged from a hospital to home 
health services are significantly different in terms of case-mix weight 
changes than those admitted to home health without a prior 
hospitalization. The case-mix weight change increased by 21.16 percent 
for those who were discharged to home health while the case-mix weight 
change increased by only 15.85 percent for those who were discharged to 
home health without a prior hospitalization.
    Response: Both of those case-mix weight change values are 
substantial. In addition, as described in the CY 2012 HH PPS proposed 
rule, the results of the MEPS analysis did not provide evidence to 
suggest that the Medicare home health population has experienced a 
decrease in their health status over time. Given these results along 
with the finding of significant nominal case-mix percentage increases 
for the post-acute and community patients, the Harvard team concluded 
that the current model adequately measures real case-mix growth for 
home health patients, including patients admitted to home health from 
the community. Furthermore, we note our real and nominal case-mix 
change estimated for purposes of arriving at the case-mix change 
adjustment to the rates combine data from both populations.
    Comment: Many commenters suggested that all of the payment 
adjustments are based on a flawed foundation and suggested that CMS 
should not use data from IPS and early PPS years to compare increased 
case-mix weights. Commenters recommend analyzing data with a different 
base year and analyzing case-mix weight changes for 2008 to current to 
see how much increase occurred in more recent years.
    Response: In our May 2007 proposed rule and our August 2007 final 
rule, we described the IPS samples and PPS

[[Page 68540]]

samples that were used to calculate case-mix change. We remind the 
commenter that 313,447 observations is an extremely large sample by 
statistical standards, and that agencies began collecting OASIS data in 
1999, following issuance of a series of regulations beginning on 
January 25, 1999 (64 FR 3764). Most of the data we used for the 
baseline period come from the first 3 quarters of the year 2000--months 
after collection was mandated to begin in August 1999. By 2000 the vast 
majority of agencies were complying with the reporting requirements. 
Indirect evidence that the data from the early years of the HH PPS were 
sufficiently reliable comes from model validation analysis we conducted 
during that period. Validation of the 80-group model on a large 19-
month claims sample ending June 2002 (N = 469,010 claims linked to 
OASIS) showed that the goodness-of-fit of the model was comparable to 
the fit statistic from the original Abt Associates case-mix sample 
(0.33 vs. 0.34), notwithstanding that average total resources per 
episode declined by 20 percent. That analysis also showed that all but 
three variables in the scoring system remained statistically 
significant.
    Comment: Commenters stated that CMS should suspend or drop case-mix 
reductions because the data used to determine the reductions do not 
recognize real increases in severity due to earlier and sicker hospital 
discharges.
    Response: Although we recognize that average lengths of stay in 
acute care settings are in decline, our analysis shows that agencies 
are, in fact, caring for fewer, not more, post-acute patients. Since 
2001, the average length of stay in acute care preceding home health 
has declined by about one day, from 7 days to 6 days. Between 2008 and 
2009, the average length of stay in acute care leading directly to home 
health admission declined from 6.07 days to 5.85 days. However, 
agencies are caring for fewer highly acute patients in their caseloads. 
The proportion of non-LUPA episodes in which the patient went from 
acute care directly to home health within 14 days of acute hospital 
discharge declined substantially between 2001 and 2008, from 32 percent 
to 23 percent. Also, the median acute hospital length of stay for these 
non-LUPA episodes with a 14-day look back period remained unchanged at 
5 days between 2002 and 2008 (see 75 FR 70379). In 2009, the median 
length of stay declined to an estimated four days (see Table 2). The 
distribution of lengths of stay has been fairly stable, with declines 
since 2006 limited to the upper half of lengths of stay.
    We believe the declining prevalence of recent acute discharges is 
due in part to more patients incurring recertifications after admission 
to home health care, and also due to more patients entering care from 
the community. The shortening lengths of stay at the right tail (high 
percentiles) of the distribution may reflect changing utilization of 
long-term-care hospitals during recent years. The conclusion we draw 
from these data is that while patients on average have shorter hospital 
stays, agencies are also facing a smaller proportion of home health 
episodes in which the patient has been acutely ill in the very recent 
past. Also, the detailed data on the distribution of stay lengths 
suggest that for the most part lengths of stay for such patients 
remained fairly stable through 2009.
[GRAPHIC] [TIFF OMITTED] TR04NO11.001

    Furthermore, we think that acuity of patients has been increasingly 
mitigated by lengthening post-acute stays for the substantial number of 
home health patients who use residential post-acute care prior to an 
episode. Our data show that patients who enter residential post-acute 
care before home health admission have experienced increasing lengths 
of stay in post-acute care since 2001. Using a 10 percent random 
beneficiary sample, we computed the total days of stay (including both 
acute and post-acute care days) for home health episodes with common 
patterns of pre-admission utilization during the 60 days preceding the 
beginning of the episode. We included patients whose last stay was 
acute, or whose next-to-last stay was acute with a follow-on 
residential post-acute care stay, or whose third from last stay was 
acute followed by two post-acute care stays. These common patterns 
accounted for 55 percent of the initial episodes in 2001 and 42 percent 
in 2008. We found that total days of stay during the 60 days leading up 
to the episode averaged 12.6 days in 2001, and rose to 12.8 days in 
2008. This small change in total days of stay during a period when 
acute LOS was declining was due to increasing lengths of stay in 
residential post-acute care for these patients. For example, within the 
30 days before admission, an average length of stay in the post-acute 
care setting for episodes preceded by an acute stay that was the next-
to-last stay, and where the post-acute care stay was

[[Page 68541]]

the very last stay before the claim from-date, increased from 12.7 to 
14.3 days. Our interpretation of these statistics is that patient 
acuity has been increasingly mitigated by longer post-acute stays for 
the substantial number of home health patients that use residential 
post-acute care prior to the start of a home health episode. Patient 
acuity also was mitigated by growing numbers of home health 
recertifications.
    Comment: Commenters stated that CMS uses inconsistent approaches in 
estimating the coding adjustment among provider sectors. They cited 
that over the last four years, CMS has used different case-mix change 
assessment models for post-acute providers: IRFs, LTCHs, and HHAs. 
Other commenters stated that the methodology ``used to establish the 
reduction percentage'' in the inpatient system was flawed and were 
concerned that the methodology used to establish the payment reduction 
for home health is flawed as well.
    Response: The payment systems, institutional conditions, data 
resources, case-mix assignment procedures, and many other aspects 
differ across care settings. Therefore, individual case-mix assessment 
methodologies must be developed for each of the post acute care 
sectors. Our general approach is consistent with the original approach 
CMS used to analyze the coding change problem affecting IRFs. Also, in 
terms of evaluating case-mix methodologies in the different settings, 
the methodologies must each be judged on their own individual merits. 
We have explained and justified the methodology in this and in previous 
regulations cited elsewhere in this preamble.
    Comment: Commenters stated that there should be no application of 
the adjustment to medical supplies unless CMS can establish that there 
is a change in case-mix weights specifically regarding medical supplies 
that is not due to real changes in patient characteristics and the 
proposed rule is unclear whether the adjustment factor will apply to 
NRS.
    Response: The 3.79 percent payment reduction in CY 2012 and the 
1.32 percent payment reduction in CY 2013 that we are finalizing in 
this final rule will not be applied to non-routine medical supplies. 
The payment reductions will only be applied to the national 
standardized 60-day episode rates to fully account for growth in 
nominal case-mix from the inception of HH PPS through 2009. We will 
further explore potential payment reductions to non-routine medical 
supplies for future rulemaking.
    Comment: One commenter stated how there is much uncertainty 
surrounding how the ``super committee,'' created as part of the recent 
debt limit deal, will move forward assigning cuts in Federal spending 
over the next ten years and if the committee and/or the Congress fail 
to reach a compromise, there may be cuts to Medicare home health rates 
in conjunction with the regulatory cuts that CMS is proposing. (0038) 
The commenter was concerned with the combined effect of these 
additional cuts along with our payment reduction.
    Response: We will continue to monitor HHA margins and effects of 
payment policies on patients' access to care. CMS also must comply with 
current and any future Medicare laws passed by the Congress. In 
addition, we cannot comment on any potential legislation which the 
Congress may be considering.
    Comment: Commenters stated that we should suspend or drop case-mix 
reductions in favor of the approach in S.2181/H.R. 3865 (110th 
Congress), which involved working with the home health industry to 
develop criteria and evaluating a medical records sample to determine 
reductions, rather than relying on hypothetical extrapolations. Another 
commenter mentioned that the Home Health Care Access Protection Act (S. 
3315/H.R. 5803) was introduced to ``establish a more reliable and 
transparent process for CMS to follow in evaluating Medicare payments 
for home health services.'' The commenter suggested that CMS use this 
more transparent process which would still enable rate adjustments to 
be implemented provided that there is reliable evidence that there are 
higher case-mix scores resulting from factors other than changes in 
patient condition.
    Response: We commissioned a review of the case-mix change 
methodology, as we described in our proposed rule and elsewhere in this 
final rule. The research team of highly qualified personnel determined 
that an examination of the consistency of the results across types of 
episodes and providers, which they conducted themselves, would provide 
information about the reliability of the method. They considered 
information that they developed from the MEPS survey as well. We have 
not commissioned work based on a medical records sample. We note that a 
medical records sample could be used to determine payment reductions; 
however, there are many difficulties and limitations to this analysis. 
First, to produce reliable results, we would need to collect a large 
sample which would require significant financial resources that may not 
be available. We would a need a sizable sample of records from both the 
IPS period and from a follow-up year (for example, 2009). In addition, 
based on our past experience in retrieving old records, it is difficult 
to find enough records to constitute a valid broad-based sample. The 
procedure would have nurses group them into a case-mix group, and 
compare the results with those from a similar procedure performed on 
recent records. Additional potential problems with using medical 
records include the strong possibility that records would have 
insufficient information to allow assignments for the activities of 
daily living (ADL) items of the case-mix system, have insufficient 
information to enable independent staging of pressure ulcers, and other 
kinds of underreporting. It is possible that this procedure might not 
return the findings that the proponents suggest it would, because the 
nominal case-mix change problem partly results from reporting practices 
that have changed through time from a state of underreporting to a 
state of more complete reporting. Therefore, one would expect that the 
source records would likely reflect underreporting in the early years, 
just as the OASIS reflected underreporting in the early years.
    Comment: Commenters criticized the evaluation by the Harvard team. 
They stated that the Harvard team did not attempt to determine if the 
results were accurate and only validated the idea that a method that 
does not rely on home health specific patient data results in similar 
conclusions when reviewed in comparison to alternative methods that do 
not consider home health patient characteristics.
    Response: The Harvard team was asked to review the appropriateness 
and strength of evidence from the case-mix change methodology we used. 
After their examination, they concluded that the methodology was robust 
and valid.
    Comment: One commenter stated that they reviewed the report by Dr. 
Grabowski and his team at Harvard and found it provided compelling 
support for the case-mix measurement methodology used in the proposed 
rule.
    Response: We thank the commenter for the comments and the support.
    Comment: Commenters disagreed with the use of HCC data. The 
commenters stated that the HCC information has no bearing on the home 
health-specific condition of patients nor the condition at any provider 
setting and that an individual may need different levels of care at any 
given point in time. The commenters stated that the reliance on HCC 
does not offer the granular-level review of patient characteristics 
that is needed. Another

[[Page 68542]]

commenter stated that the methodology used to risk adjust for managed 
care is not the same as risk adjusting for home health patients at the 
time they received services and that they thought that this difference 
was not taken into account in the case-mix measurement model.
    Response: We added the HCC data partly as a response to commenters' 
criticisms that the model of real case-mix change was too reliant on 
hospital-generated claims information. We disagree with the statement 
that the HCC information has no bearing on the home health-specific 
condition of patients, because we used the HCC information for the year 
in which the episode took place. The patient's conditions during that 
year, as reflected in all the diagnoses associated with physician 
visits, certain other types of clinician encounters, and hospital stays 
occurring that year, in addition to information such as Medicaid 
enrollment included in the HCC data, provide a relatively comprehensive 
picture from administrative data of the patient's health status. We do 
not find that a granular level review of patient characteristics would 
be feasible, given the immense resources needed for a large set of 
independent reviews.
    Comment: Commenters were concerned with CMS' use of 2009 data, 
stating that home health services have changed from 2009 to today.
    Response: As in previous rulemaking since the start of the HH PPS, 
we continue to use data samples that represent a 2-year lag of the 
service date relative to the year in which we conduct the analysis. The 
2009 claims data matched to OASIS assessments and Part A information, 
as well as HCC information, are a complex set of analytic files that 
should be based on a complete year of data, to assure 
representativeness. If we were to begin file construction before having 
all the claims, we would introduce error into the results (in general, 
more complicated claims take longer to prepare and submit). 
Furthermore, we did not make major changes to the payment system that 
would affect most agencies between 2009 and 2011, and so we do not have 
strong reasons to believe that services patterns have changed 
dramatically. We noted in our proposed rule that in 2009 the major 
outlines of the therapy episode distribution exhibited a continuation 
of the outline established in 2008, the first year under the 
refinements.
    An alternative to using 2009 data to determine nominal case-mix 
growth would be to project the level of nominal case-mix growth for 
2010 and beyond and make payment reductions based on our projections. 
However, these projections may result in payment reductions that are 
larger than those being implemented. We may consider such a methodology 
change in future rulemaking.
    Comment: The commenters stated that the payment reductions fail to 
take into account home health coding policy changes that negate the 
risk of coding weight increases, such as the elimination of 
hypertension from the case-mix system and the re-weighting of therapy 
episodes. Commenters suggested that CMS consider the impact of the 
hypertension adjustment in the overall analysis of nominal case-mix 
growth. Other commenters requested that CMS not make drastic changes to 
the case-mix while implementing the proposed rate reductions.
    Response: We note that when removing the two hypertension codes, we 
reallocated the resources and revised the weights in a budget neutral 
manner so that they would result in the same approximate aggregate 
expenditures as 2009. Therefore, when removing the two hypertension 
codes, we are not taking away money from the case-mix system, and 
therefore, we can fully account for case-mix growth from 2000 to 2009.
    We also note that the payment reductions we have proposed are to 
compensate for nominal coding changes that occurred through 2009 and we 
proposed to implement the elimination of hypertension beginning in 
2012. Based on our analysis discussed in Section II.B, we believe a 
revision in the case-mix weights is warranted and are therefore 
proposing the change to the case-mix weights along with the payment 
reductions.
    Comment: Commenters stated that external data references show 
indications of real changes in patient characteristics. They stated 
that the Medicare Expenditure Panel Survey (MEPS) Data analysis shows 
that patients are getting sicker every year and data may show a higher 
``real'' case-mix change than CMS estimates.
    Response: As stated in the proposed rule, to address the comment 
that a study which used MEPS data showed a higher rate of real case-mix 
growth in the entire Medicare population than our model estimated for 
Medicare home health patients, a more detailed analysis of the MEPS 
data was performed. The trends in health status of four different 
populations from 2000 to 2008 were analyzed. The data for the analysis 
were obtained from the MEPS 2000 and 2008 Full Year Consolidated Data 
files. The four populations that were analyzed were: (1) The full MEPS 
sample; (2) all Medicare beneficiaries, defined as all respondents ever 
having Medicare in a given year; (3) all home health patients, defined 
as having at least one home health provider day in a given year; and 
(4) all home health Medicare beneficiaries, defined as all respondents 
with any Medicare home health charges. Two measures of self-reported 
health status and one measure derived from patient information that 
screened for ADL limitations were used to determine the trends in 
health status. These types of measures have been shown to be highly 
correlated with actual health (Ware and Sherbourne, 1992; McHorney, 
Ware, and Raczek, 1993). The three measures which were analyzed for 
each of the populations were: (1) Whether the respondent indicated 
perceived health status of ``poor'' or ``fair'' as opposed to those 
indicating health status as ``good,'' ``very good'' or ``excellent;'' 
(2) whether the respondent indicated if pain limited normal work 
(including work in the home) in the past 4 weeks ``extremely'' or 
``quite a bit'' as opposed to those indicating pain limited work 
``moderately,'' ``a little bit,'' or ``not at all,'' and (3) whether 
respondents had a positive screen for needing assistance with ADL. In 
all cases, responses such as ``refused,'' ``don't know,'' or ``not 
ascertained'' were omitted from the analysis. The Medicare analysis 
samples consisted of 3,371 and 4,144 beneficiaries in 2000 and 2008, 
respectively. The Medicare home health subsamples consisted of 174 and 
289 beneficiaries in 2000 and 2008, respectively. The survey responses 
were then weighted using pre-constructed MEPS survey weights to 
estimate nationally representative changes in the three health status 
variables.
    All three measures indicated a slight increase in the overall 
health status of the Medicare home health population. Two of these 
results were not statistically significant, but the percent of home 
health Medicare beneficiaries experiencing ``extreme'' or ``quite a 
bit'' of work-limiting pain decreased substantially, from 56.6 percent 
in 2000 to 45.4 percent in 2008 (p=0.039). Unlike Dr. Deb's original 
study, the new MEPS analysis focuses specifically on Medicare home 
health users (as opposed to the entire Medicare population), and it is 
not reliant on expenditure data. A limitation of the Debs case-mix 
measure, which relies on expenditure data, is that it could reflect 
large increases in expenditures, such as drug expenditures, but any 
relationship to actual increases in impairments and other reasons for 
using home health resources is unclear. A possible

[[Page 68543]]

limitation of the new MEPS analysis is that the sample of Medicare home 
health respondents is relatively small, notwithstanding that the result 
of one of the three measures was statistically significant. Also, the 
ADL screening item may not capture a change in the frequency of very 
severe ADL limitations since the measure may be insensitive to changes 
at high levels of disability. However, the Harvard team asserted that 
the methods of the new MEPS analysis are more appropriate for assessing 
whether there are increases in the severity of illness burden that 
would specifically indicate a need for more resources in the Medicare 
home health population. Based on the two kinds of evidence, and a 
recognition of the limitations of both, we conclude that the MEPS data 
provide no evidence of an increase in patient severity from 2000 to 
2008.
    Comment: Commenters stated that the OCS data analysis on OASIS 
measures regarding a patient's functional status unrelated to HH PPS 
HHRG calculations showed that there were declines in all nine 
functional categories and showed increased patient acuity from 2006-
2008 as measured by ADL assessments of decreasing functional 
capabilities of home health patients. They also stated that OCS data 
analysis on OASIS measures of clinical conditions that are unrelated to 
HH PPS HHRG calculations shows a ``large increase'' in acuity as 
measured by changes in clinical conditions and there are increases in 
the number of patients requiring IV therapy, parenteral nutrition and 
those who have urinary tract infections at the start of care. They 
stated that the data also showed an increased inability to manage oral 
and injectable medications. They stated that the OASIS measures are not 
likely to be ``upcoded'' to secure higher reimbursement as none of the 
measures have a direct or indirect impact on payment and that the 
decreases in ADL incapacities are correlated with increase in use of 
therapy services. Further, the decrease in functional capabilities 
could have been easily correlated with increase in the use of therapy 
services as both physical and occupational therapists directly address 
the ADL incapacities that are the focus of these OASIS findings. The 
commenter referred to reports on the July 23, 2010, Proposed Rule 
commissioned by the Home Health Advocacy Coalition and the National 
Association for Home Health and Hospice, saying both documents indicate 
``non-case-mix related OASIS items, such as grooming and light meal 
preparation have shown increasing functional limitations among home 
health patients.'' Commenters stated that other data showed that home 
health care patients have increased functional limitations and more 
complex clinical conditions than in past years.
    Response: Contrary to the trends reported by the commenter 
pertaining to treatments at home, our analysis from a large, random 
sample of OASIS data linked to claims shows that the proportion of 
episodes involving intravenous therapy or infusion therapy has remained 
stable at around 2.2 percent. The proportion of episodes involving 
parenteral nutrition remains at 0.2 percent or less during that period. 
As we have stated in previous regulations, we are reluctant to use 
OASIS data to analyze changes in real case-mix because OASIS measures 
reflect changes in coding practices and payment incentives including 
quality measurement incentives, all of which are not related to real 
changes in patients' acuity. We are also concerned that incentives 
could lead to reports of patient function---whether or not particular 
function-related items are used in the case-mix assignment--that are 
consistent with the therapy visits planned. Unfortunately, this problem 
potentially limits the usefulness of non-case-mix items. We believe 
that independent measures are the best way to assure the reliability of 
our real case-mix methodology. We plan to try to identify independent 
measures, beyond the independent measures we are currently using in our 
methodology, as we go forward.
    Comment: Commenters stated that patients are also taking many more 
medications.
    Response: OASIS-C includes information about medication use, but we 
do not have broad-based information about changes in numbers of 
medications in home health users in recent years. While we intend to 
examine the possible role that new variables in OASIS-C, including 
medication use, can play in case-mix adjustment, whether a trend 
indicative of increased medication use is important for measuring real 
change in case-mix over time depends on the extent to which its effect 
is independent of other factors recognized in our real case-mix change 
analytic procedure. Also, the challenge of obtaining historical data is 
great, but we can at least start tracking medication use with the 
availability of OASIS-C.
    Comment: One commenter was supportive of the payment reduction. The 
commenter stated that they believed that unwarranted overpayments 
attributable to coding practices should be recovered when possible and 
that the reduction is consistent with the experience of other 
prospective payment systems. The commenter stated that the payment 
reduction should not create payment adequacy or access to care issues 
since HHAs are projected to have margins exceeding 14 percent in 2011. 
The commenter stated that CMS should continue to examine nominal case-
mix growth in the future and adjust payments accordingly.
    Response: We thank the commenters and will continue to monitor 
nominal case-mix growth and implement payment adjustments as needed. In 
summary, we thank the commenters for their thoughtful and comprehensive 
comments. As we described above in response to comments, we are 
finalizing a phased-in implementation of a 5.06 percent reduction over 
2 years, as some commenters suggested. We believe that by phasing-in 
the reductions over CY 2012 and CY 2013, we allow HHAs an opportunity 
to adopt process efficiencies associated with the CY 2011 legislative 
and regulatory requirements prior to imposing the full 5.06 percent 
payment reduction.
    In CY 2011 rulemaking, we deferred finalizing a proposed 3.79 
percent reduction to the CY 2012 national standardized 60-day episode 
rates to account for nominal case-mix growth we identified through CY 
2008 pending an independent review of our method for identifying real 
case-mix growth. We believe that providers expected and planned for us 
to impose a 3.79 percent payment reduction in CY 2012. As such, we are 
finalizing a 3.79 percent payment reduction in CY 2012 and a 1.32 
percent payment reduction for CY 2013 to the national standardized 60-
day episode rates. These reductions enable us to account for the 
nominal case-mix which we have identified through CY 2009, to follow 
through with the planned 3.79 percent payment reduction for CY 2012, 
and to allow for HHAs' adopting process efficiencies during CY 2012.

B. Case-Mix Revision to the Case-Mix Weights

1. Hypertension Diagnosis Coding Under the HH PPS
    As stated in the CY 2012 HH PPS proposed rule, in CY 2011 
rulemaking, we proposed to remove ICD-9-CM code 401.1, Benign Essential 
Hypertension, and ICD-9-CM code 401.9, Unspecified Essential 
Hypertension, from the HH PPS case-mix model's hypertension group. 
Beginning with the HH PPS refinements in 2008, hypertension was 
included in the HH PPS system because

[[Page 68544]]

the data used in developing the refinements (data from 2003 and 2005) 
suggested it was associated with elevated resource use. As a result, 
the diagnoses Unspecified Essential Hypertension and Benign Essential 
Hypertension were associated with additional points from the four-
equation model and, therefore, with potentially higher case-mix weights 
in the HH PPS case-mix system. When examining the trends in reporting 
of hypertension codes from 2000 to 2008, our analysis showed a large 
increase in the reporting of codes 401.1 and 401.9 in 2008. However, 
when looking at 2008 claims data, the average number of visits for 
claims with code 401.9 was slightly lower than the average for claims 
not reporting these hypertension codes. In the CY 2011 HH PPS proposed 
rule issued on July 23, 2010, we proposed to remove codes 401.1 and 
401.9 from our case-mix model based on preliminary analysis of the 
trends in coding and resource use of patients with these codes. We 
suspected that the 2008 refinements, which newly awarded points for the 
diagnosis codes 401.1 and 401.9, led to an increase in reporting of 
these codes and that this reporting was a key driver of the high 2008 
growth in nominal case-mix.
    In response to this proposed policy change, we received numerous 
comments, several of which stated that additional analysis was needed 
to substantiate the rationale for removing hypertension codes 401.1 and 
401.9. In the CY 2011 HH PPS final rule, we withdrew our proposal to 
eliminate 401.1 and 401.9 from our model and stated our intention to do 
a more comprehensive analysis of the resource use of patients with 
these two hypertension codes. As noted in our CY 2012 HH PPS proposed 
rule, we have since completed a more thorough analysis. Based on the 
results of our latest analyses, we proposed to remove ICD-9-CM code 
401.1, Benign Essential Hypertension, and ICD-9-CM code 401.9, 
Unspecified Essential Hypertension, from the HH PPS case-mix model's 
hypertension group. Our data showed there continued to be an increase 
in the prevalence of ICD-9-CM code 401.9 from 2008 to 2009. In 
addition, agencies (regardless of ownership type) typically had a 
twofold or higher increase in the prevalence of a 401.9 diagnosis from 
2005 to 2009, with the exception of the East North and the West North 
Central regions, which had an increase of about 1.7- and 1.5- fold, 
respectively. Most compelling, our analysis indicates that currently 
these diagnoses are not predictors of higher home health patient 
resource costs. Rather, current data indicates a lower cost associated 
with home health patients when these codes are reported. The results 
from two regression models testing the impact of the two hypertension 
codes on resource costs provided strong support for removing the 401.1 
and 401.9 diagnoses from the case-mix system. The results showed that 
the presence of these diagnoses is associated with lower costs, when 
controlling for other case-mix related factors. Therefore, we proposed 
to remove codes 401.1 and 401.9 to more accurately align payment with 
resource use.
    In the CY 2011 HH PPS final rule, in response to comments, we 
stated that if we were to finalize removing these codes from our case-
mix system, we would do so in such a way that we would revise our case-
mix weights to ensure that the removal of the codes would result in no 
change in aggregate expenditures. Therefore, we proposed to revise the 
HH PPS case-mix weights in such a manner so as to not reduce aggregate 
home health expenditures. Please see the following section for details 
on our revision to the case-mix weights. The proposed revisions of the 
case-mix weights redistributed HH PPS payments among the case-mix 
groups such that removal of these hypertension codes was budget 
neutral.
2. Revision of the Case-Mix Weights
    As we described in section II.B.1 of this preamble, we proposed to 
revise our HH PPS case-mix weights to remove two hypertension codes 
from our case-mix system while maintaining budget neutrality. In the CY 
2012 HH PPS proposed rule, we also justified another proposal for 
further revisions to the case-mix weights because of incentives that 
exist in the HH PPS to provide unnecessary therapy services. We 
described that our review of HH PPS utilization data shows a shift to 
an increased share of episodes with very high numbers of therapy 
visits. This shift was first observed in 2008 and it continued in 2009. 
In last year's regulation, we described an increase of 25 percent in 
the share of episodes with 14 or more therapy visits. In the 2009 
sample, the share with 14 or more therapy visits continued to increase 
while the share of episodes with no therapy visits continued to 
decrease. The frequencies also indicate that the share of episodes with 
20 or more therapy visits was 6 percent in 2009 (data not shown), which 
is a 50 percent increase from the share of episodes of 2007, when 
episodes with at least 20 therapy visits accounted for only 4 percent 
of episodes.
    Furthermore, we described that in their 2010 and 2011 Reports to 
Congress, MedPAC suggests that the HH PPS contains incentives which 
likely result in agencies providing more therapy than is needed. In 
their March 2010 Report to Congress, MedPAC stated that ``therapy 
episodes appear to be overpaid relative to others and that the amount 
of therapy changed significantly in response to the 2008 revisions to 
the payment system.'' In support of this statement, MedPAC showed that 
in 2008, there was a sudden shift to episodes with therapy services at 
the new therapy thresholds, which suggests inappropriate therapy 
utilization. In their March 2011 Report to Congress, MedPAC stated, 
``The volume data for 2009 indicate that the shifts that occurred in 
2008 are continuing * * * Episodes with 14 or more therapy visits 
increased by more than 20 percent, and those with 20 or more therapy 
visits increased by 30 percent.''
    Also, in their March 2011 Report to Congress, MedPAC suggested that 
the current HH PPS may ``overvalue therapy services and undervalue 
nontherapy services.'' In this report, MedPAC describes that HHA 
margins average 17.7 percent in 2009, with 20 percent of agencies 
achieving an aggregate margin of 37 percent. MedPAC further stated that 
their analysis of high-margin and low-margin agencies suggests that the 
HH PPS overpays for episodes with high case-mix values and underpays 
for episodes with low-case-mix values. Furthermore, MedPAC reported 
that HHAs with high margins had high case-mix values which were 
attributable to the agencies providing more therapy episodes (MedPAC, 
March 2011 Report to Congress). MedPAC went on to assert that ``unless 
the case-mix system is revised, agencies will continue to have 
significant incentives to favor therapy patients, avoid high-cost 
nontherapy patients, and base the number of therapy visits on payment 
incentives instead of patient characteristics.''
    We stated that we concur that the therapy utilization shifts and 
the correlation between high agency margins and high volumes of therapy 
episodes strongly suggest that the costs which the HH PPS assigns to 
therapy services when deriving the relative payment weights are too 
high in comparison to actual costs incurred by agencies for therapy 
services. We believe that one factor which contributes to this 
overpayment for therapy services is the growing use of therapy 
assistants, instead of qualified

[[Page 68545]]

therapists, to provide home health therapy services. Current data 
suggest that the percentage of therapy assistants that is reflected in 
the therapy-wage weighted minutes used in the calculations of HH PPS 
relative resource costs is too low. For our 2008 refinements, to 
construct the relative resource costs for episodes, we used the labor 
mix percentages reported in the Occupational Employment Statistics 
(OES) data by the Bureau of Labor Statistics. In 2005, which is the 
year of data that was used to develop the HH PPS refinements, the OES 
data showed that 15 percent of physical therapy was provided by therapy 
assistants and that 11 percent of occupational therapy was provided by 
therapy assistants. This data was then used to develop the resource 
costs for episodes which were used to develop the current HH PPS 
payment weights. In 2008, the OES data showed that 19 percent of 
physical therapy was provided by therapy assistants and that 13 percent 
of occupational therapy was provided by therapy assistants. In 
addition, by 2009, OES data has shown that the percentage of physical 
therapy provided by therapy assistants was 20 percent and the 
percentage of occupational therapy provided by therapy assistants was 
16 percent. We noted that these statistics reflect the mix for all home 
health providers. We also noted that in CY 2011, we began collecting G-
code data on HH PPS claims which will enable us to quantify the 
percentage of therapy assistants who are providing therapy and to 
assess how the percentages vary relative to the quantity of therapy 
provided and the type of provider. We have since performed some 
preliminary analysis on the G-code data, which is further discussed in 
our responses to comments.
    In the CY 2012 HH PPS proposed rule, we stated that we believe that 
MedPAC has provided strong evidence that our reimbursement for episodes 
with high therapy is too high. Also, based on MedPAC's analysis and our 
own findings, we believe that the resource costs reflected in our 
current case-mix weights for therapy episodes, in particular for those 
episodes with high amounts of therapy, are higher than current actual 
resource costs and that an adjustment to the HH PPS therapy case-mix 
weights is warranted. We noted that fully addressing MedPAC's concerns 
with the way the HH PPS factors therapy visits into the case-mix system 
will be a complex process which will require more comprehensive 
analysis and potentially additional structural changes to the HH PPS. 
While we plan to address their concerns in a more comprehensive way in 
future years, for CY 2012 we proposed to revise the current case-mix 
weights by lowering the relative weights for episodes with high therapy 
and increasing the weights for episodes with little or no therapy. It 
should be noted that we proposed to revise the case-mix weights in a 
budget neutral way. In other words, our proposal redistributed some HH 
PPS dollars from high therapy payment groups to other HH PPS case-mix 
groups, such as the groups with little or no therapy. We believe our 
proposed revision to the payment weights would result in more accurate 
HH PPS payments for targeted case-mix groups while addressing MedPAC 
concerns that our reimbursement for therapy episodes is too high and 
our reimbursement for non-therapy episodes is too low. Also, we believe 
our proposed revision of the payment weights will discourage the 
provision of unnecessary therapy services and will slow the growth of 
nominal case-mix.
    Our detailed approach, analysis, and case-mix revision methodology 
which supported our proposal was described in our CY 2012 HH PPS 
proposed rule. Before we described our approach to revise the case-mix 
weights to address therapy incentives, we first explained the changes 
we made to remove the hypertension diagnoses ICD-9-CM code 401.1, 
Benign Essential Hypertension, and ICD-9-CM code 401.9, Unspecified 
Essential Hypertension from our case-mix system. Our method of 
redistributing the resources started with changes to the four-equation 
model, which is the foundation for the subsequent revised payment 
regression and creation of revised case-mix weights. The changes to the 
four-equation model as described in the proposed rule are reiterated 
below.
    To examine the effects of removing the two hypertension codes 401.1 
and 401.9 from the case-mix system and determine whether the thresholds 
for the clinical severity indicators need to be changed if 401.1 and 
401.9 are removed from the case-mix system, we estimated the four-
equation model with and without codes 401.1 and 401.9 in the 
hypertension group. We used 2005 data for this estimation because we 
wanted to achieve comparability between the current four-equation model 
with the revised four-equation model without the two hypertension codes 
using the same sample upon which we based the 2008 case-mix system 
refinements. We estimated the revised four-equation model to maintain 
the same variables we developed for our current four-equation model and 
thereby minimize changes to our current model and scoring system. The 
adjusted R-squared value for the four-equation model without codes 
401.1 and 401.9 derived from 2005 data was 0.4621. We then used the 
coefficients from the four-equation model without codes 401.1 and 401.9 
to determine the points which would be associated with all the clinical 
and functional severity levels found in our current four-equation 
model, as described on Table 2a of the CY 2008 HH PPS final rule (Table 
3). We note that Table 3 has been updated since the CY 2012 HH PPS 
proposed rule to reflect OASIS-C items.
    When comparing the four-equation model with the two hypertension 
diagnoses (which is equivalent to our current model) to the four 
equation model without the two hypertension diagnoses, there were some 
differences in the points assigned to variables (Table 4). We detailed 
these differences, which were no larger than one point in the 58 (out 
of 225) variables affected. Table 3 shows the points for each variable 
after the re-estimation of the four-equation model.
BILLING CODE 4120-01-P

[[Page 68546]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.002


[[Page 68547]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.003


[[Page 68548]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.004


[[Page 68549]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.005


[[Page 68550]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.006


[[Page 68551]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.007


[[Page 68552]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.008

BILLING CODE 4120-01-C
    In the CY 2012 HH PPS proposed rule, we also stated that we 
examined how episodes in the sample shifted into a different clinical 
severity level when going from a four-equation model that includes 
401.1 and 401.9 to a four-equation model that does not include 401.1 
and 401.9. It should be noted that a small number of episodes also 
changed functional groups. In our analysis, we looked at the 
distribution

[[Page 68553]]

of episodes in each clinical severity level (low, medium, high) by the 
four-equation model indicators (early/late episodes and low/high 
therapy episodes). When comparing the distribution of episodes using 
the four-equation model without the 401.1 and 401.9 hypertension codes 
to the distribution of episodes using the four-equation model with the 
hypertension codes (our current four-equation model), there was a 
similar distribution of episodes between the low, medium and high 
clinical levels, for each of the four-equation model indicators. We 
also looked at the distribution of episodes in each functional severity 
level by the four-equation model indicator. There was also a very 
similar distribution of episodes for the three functional severity 
levels using the four-equation model without the two hypertension codes 
compared to the distribution of episodes using the current four-
equation model, for each of the four-equation model indicators. Since 
the four-equation model without the hypertension codes 401.1 and 401.9 
had similar clinical and functional distributions of episodes as the 
current model, we decided that it was not necessary to change the 
thresholds for the clinical and functional severity levels.
    We revised the payment regression model using the clinical and 
functional severity groups constituted after removal of the 
hypertension codes. In addition, as we described in the proposed rule, 
at this stage of case-mix system redevelopment, we decided to implement 
a revision of the weights using a new method of decelerating therapy 
resources with higher numbers of therapy visits. The new method 
involved the removal of the therapy visit step indicators from the 
payment regression model (a step indicator is a subgroup of episodes 
defined by a range of therapy visits, such as 7 to 9 therapy visits). 
This approach has the advantage of staging the introduction of clinical 
and functional severity levels into the model as a separate step, to 
avoid excessive influence on the clinical and functional effects from 
numerous therapy step variables that would otherwise be simultaneously 
entered into the regression. In other words, we eliminated the therapy 
visit step indicators from the payment regression model to ensure that 
more of the resource use would be captured by clinical and functional 
variables, rather than therapy variables. Later, we implemented a 
method to account for the resource use for the therapy step variables. 
The new payment regression model that was developed estimated the 
relationship between an episode's total resource cost (as measured in 
dollars corresponding to wage weighted minutes) and the clinical 
severity indicators, functional severity indicators, and four-equation 
indicators (early/late episodes and low/high therapy services).
    It should be noted that for the payment regression model, we used 
data from 2007, which is the most recent data available before the 
implementation of the HH PPS refinements. The coefficients for the 
payment regression model using 2007 data can be found in Table 5. The 
adjusted R-squared value for the payment regression model using 2007 
data is 0.3769.
BILLING CODE 4120-02-P

[[Page 68554]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.009

    The raw weights for each of the 153 groups were then calculated 
based on the payment regression model. It should be noted that the raw 
weights do not change across the graduated therapy steps between the 
therapy thresholds. In the next step of weight revision, the weights 
associated with 0 to 5 therapy visits were increased. The weights 
associated with 14-15 therapy visits were decreased and the weights 
associated with 20+ therapy visits were further decreased as well. 
These adjustments were made to discourage inappropriate use of therapy 
while addressing concerns that non-therapy services are undervalued. As 
stated in the CY 2012 HH PPS proposed rule, the larger reduction factor 
for episodes with 20 or more therapy visits compared to the reduction 
factor for episodes with 14 to 15 therapy visits implemented a more 
aggressive deceleration than we used in the current weights. Currently, 
there is a high payment weight associated with the 20 or more therapy 
visit threshold to capture the costs associated with providing 20 
therapy visits, as well as numbers of therapy visits well beyond 20 
therapy visits. As a result, there is a large increase in the payment 
weight between the 18-19 therapy visit step and the 20 or more therapy 
visit threshold. This large increase in the payment weight may create 
incentives for agencies to provide unnecessary therapy visits to reach 
the 20 therapy visit threshold, and may explain MedPAC's observation 
that there was a larger increase in the number of episodes in the 20 or 
more therapy visit group than the 14 or more therapy visit group. By 
implementing a larger reduction to episodes with 20 or more therapy 
visits, we will provide a disincentive for agencies to pad episodes 
just to 20 visits or slightly more, to be able to realize a large 
margin from that threshold, which was designed to pay for not only 
episodes involving 20 or just above 20 therapy visits, but also 
episodes involving considerably more than 20 therapy visits.
    After the adjustments were applied to the raw weights, the weights 
were further adjusted to create an increase in the payment weights for 
the therapy visit steps between the therapy thresholds. Weights with 
the same

[[Page 68555]]

clinical severity level, functional severity level, and early/later 
episode status were grouped together. Then within those groups, the 
weights for each therapy step between thresholds were gradually 
increased. We did this by interpolating between the main thresholds on 
the model (from 0-5 to 14-15 therapy visits, and from 14-15 to 20+ 
therapy visits). We used a linear model to implement the interpolation 
so the payment weight increase for each step between the thresholds 
(such as the increase between 0-5 therapy visits and 6 therapy visits 
and the increase between 6 therapy visits and 7-9 therapy visits) was 
constant. The interpolated weights were then normalized so that the 
average case-mix weight in the 2007 sample was equal to 1.
    After applying the adjustments to the raw weights, applying the 
interpolation between the therapy thresholds, and normalizing the 
weights so that the average case-mix for the weights was equal to 1 in 
the 2007 sample, we applied a budget neutrality factor to the weights 
to ensure that the case-mix weights result in aggregate expenditures in 
2009, which was the most current and complete data available to us, 
equal to expenditures using the current payment weights. It is 
important to note that our authority allows us to reduce home health 
payments only as described in section 1895(b)(3)(B)(iv) of the Act. As 
such, we must revise our payment weights in a budget neutral manner. 
Therefore, after deriving revised relative case-mix weights, we 
increased the weights to achieve budget neutrality to the most current, 
complete data available, which was 2009. In the CY 2012 proposed rule, 
as we described in section A of this final rule, we proposed to reduce 
payments under our authority in section 1895(b)(3)(B)(iv) of the Act to 
reduce the home health base episode payment to account for nominal 
case-mix growth through 2009.
    We also noted that we would continue to evaluate and potentially 
refine the payment weights as new data and analysis became available. 
We discuss our new data, analysis, and changes to the proposed payment 
weights in our comment responses below.
    The following is a summary of the comments we received regarding 
the proposal to revise the HH PPS case-mix weights.
    Comment: Commenters stated that the levels of weight changes are 
more arbitrary than evidence based and it appears that CMS picked a 
level of adjustment rather than develop a real analysis of the 
differences in episode costs/resource use from episode reimbursement 
rates. Commenters stated that the proposal to increase and decrease 
therapy episode case-mix weights is not supported by any evidence that 
the therapy related episode case-mix weights have a different relative 
resource cost today than they did in 2008 when CMS implemented the 
refinements. The commenters also stated that there is no resource cost 
change rationale for the proposed change in case-mix weights. In 
addition, commenters stated that they would like the data to directly 
show that the resource costs justify the specific adjustments proposed. 
Some commenters stated that if the payment model improperly 
incentivizes the provision of therapy care with higher than warranted 
payment rates, there should be data available to show the extent to 
which therapy episodes are overpriced and what level of payment would 
be appropriate. Commenters suggested that CMS undertake a study to 
provide additional rationale for the proposed adjustments to the case-
mix weights.
    Response: As we stated in the CY 2012 HH PPS proposed rule, we 
believe that MedPAC has provided strong evidence that our reimbursement 
for episodes with high therapy is too high. Also, based on MedPAC's 
analysis and our own findings, we believe that the resource costs 
reflected in our current case-mix weights for therapy episodes, in 
particular for those episodes with high amounts of therapy, are too 
high and that an adjustment to the HH PPS therapy case-mix weights is 
warranted.
    In the proposed rule, we stated that we would continue to analyze 
therapy resource costs as more current and complete data became 
available. Since the publication of the proposed rule, complete 2009 CR 
data and partial 2011 claims data, which include the new therapy G-
codes, have become available. These data have enabled us to expand on 
MedPAC's and our analysis for this final rule.
    We performed a variety of analyses to look at the resource costs of 
home health episodes, particularly those episodes with high therapy. As 
part of the analysis, we have developed methods to examine cost data 
from freestanding HHAs' MCRs for FY 2009. The methodology involves an 
initial screening for incomplete and questionable data (for example, 
extreme ratios of payments to costs) similar to MedPAC's ``trimming'' 
methodology and two additional trims, one which excludes providers 
whose Medicare home health outlier payments exceeded 10 percent of 
their total Medicare home health payments and another which trims 
extreme values at the top and bottom 1 percent of the distribution of 
costs per visit for each discipline. We excluded providers whose 
Medicare home health outlier payments exceeded 10 percent of their 
total Medicare home health payments because in CY 2010 rulemaking, we 
found an association between high outlier payments and providers with 
questionable billing practices. We note that since only non-audited 
MCRs are available, we found it necessary to perform trims to ensure 
reasonably accurate cost estimates. Using the trimmed MCRs, we 
developed agency specific costs per visit for each discipline. In the 
sample of 4,309 MCRs, if a particular agency's cost-per-visit for a 
discipline was trimmed out when the trimming methodology was applied to 
the MCRs, the average cost-per-visit for all MCRs in the sample was 
used for that agency. For example, if a MCR had a value for the cost-
per-visit for physical therapy that was in the top or bottom 1 percent 
of the distribution of cost-per-visits for physical therapy, that value 
would be imputed as the average cost-per-visit from values retained in 
the data after trimming. If any agency needed all 6 discipline costs-
per-visits imputed, its MCR was excluded from the dataset. We imputed 
the cost-per-visit using the average cost-per-visit in approximately 10 
percent of instances. Most of the imputations involved occupational 
therapy, speech therapy, and medical social work, which together 
account for a relatively small share of visits. Combined these three 
disciplines accounted for only 1.5 visits out of total visits per 
episode, which averaged 18.8 visits in 2009.
    The file preparation procedure described above resulted in a 
dataset consisting of 4,309 MCRs from freestanding agencies in 2009, 
approximately half the number in the original MCR file. Most of the 
losses occurred at the initial screening stage (incomplete and 
questionable data). We examined characteristics of the agencies 
represented in the final sample, and found that distributions in the 
original and final samples were very similar. Unsurprisingly, however, 
small agencies (with fewer than 95 episodes) were nearly halved as a 
proportion of all agencies represented in the MCRs; they accounted for 
approximately 7.5 percent of the MCRs we used. These agencies tended 
more often to have incomplete or questionable data in their MCRs.
    After developing agency specific costs per visit for each 
discipline, we merged the MCRs with 100 percent of the included 
providers' claims for 2009. We estimated the cost of each provider's

[[Page 68556]]

episodes by multiplying the number of visits, by discipline, by the 
average cost-per-visit, by discipline, calculated from the provider's 
MCR. Due to data incompleteness and reliability issues related to costs 
and payments for non-routine medical supplies (NRS), we did not include 
NRS in our estimate of the costs or payments.
    We compared the costs of these episodes to their Medicare payment. 
Our analysis of the differences in episodes' costs and reimbursements 
suggests that payment on average exceeds costs by about 30-percent for 
normal episodes with 14 or more therapy visits. We defined normal 
episodes as non-LUPA, non-PEP, non-outlier episodes. Because the 
reimbursement for episodes with at least 14 therapy visits is high, the 
30 percent estimate represents a large financial incentive. For 
instance, our analysis shows that in 2009, the average amount that 
payment exceeded cost for a normal episode with 14-19 therapy visits 
was more than $1100 (Table 6) and the average amount that payment 
exceeded costs for a normal episode with 20 or more therapy visits was 
more than $1500 (Table 7). We note that the average amount that payment 
exceeded costs for a normal episode with 1 to 5 therapy visits was 
around $300. Ideally, we wish to avoid marked differences in the amount 
that payment exceeds costs for different types of episodes to lessen 
the incentive to admit certain types of patients to maximize Medicare 
reimbursements.
[GRAPHIC] [TIFF OMITTED] TR04NO11.010

    We conducted a simulation to examine our proposal's impact on 
margins and profit for different categories of episodes, using the data 
from the MCR providers that was also found in the 20 percent sample of 
2009 claims from which we estimate the proposed rule's reimbursement 
impacts. The analysis was based on 3,361 providers whose MCR period was 
precisely matched to the time period covered by the claims (that is, 
MCR periods had to begin and end in 2009). Although this sample was 
smaller than the cleaned CR sample from which we estimated per-episode 
costs and payments in 2009, the distributions of provider 
characteristics were changed little by the reduction in agencies. The 
simulation incorporated the proposed payment weights and the other 
payment parameters in our proposal (that is, a 5.06 percent payment 
reduction due to nominal case-mix growth, the wage index, and rate 
updates). The simulation updated the costs of episodes to 2012 dollars 
using the market basket increase and estimated the payment for episodes 
in terms of 2012 dollars. This analysis suggested that all episodes 
would have payments in excess of estimated costs, except for some 
episodes in the 20 or more therapy visit group. We note that about half 
of the episodes with 20 or more therapy visits would break even or 
retain a positive margin under the proposed revised case-mix weights. 
About 6 percent of episodes nationally in 2009 had 20 or more therapy 
visits. However, the results of this analysis also indicated that the 
revised case-mix weights in the proposed rule would result in episodes 
with 14 or more therapy visits having considerably less payments in 
excess of estimated costs than episodes with less than 14 therapy 
visits.
    We note that our analyses of the costs to reimbursement for high 
therapy episodes clearly indicates that we are currently overpaying for 
these episodes and we believe an adjustment to the case-mix weights for 
high therapy weights is necessary. However, based on the results of our 
simulation analysis on our proposed weights, we decided to test whether 
a different set of payment

[[Page 68557]]

adjustment factors would result in more even payments in excess of 
estimated costs across therapy and non-therapy episodes. As stated in 
the proposed rule, we examined a number of different sets of 
adjustments when developing the payment weights. One of the sets of 
adjustments was an adjustment where the weights associated with 0 to 5 
therapy visits were increased by 3.75 percent, the weights associated 
with 14-15 therapy visits were decreased by 2.5 percent, and the 
weights associated with 20+ therapy visits were decreased by 5 percent. 
We applied this set of adjustments in the same manner as the 
adjustments we originally proposed. When re-running the simulation 
analysis on these new weights, we saw relatively even payments in 
excess of estimated costs across the various types of episodes, 
including episodes with 14-19 therapy visits, episodes with 20-25 
visits, episodes with low therapy, and non-therapy episodes. It should 
be noted that episodes with 26 or more therapy visits did not have 
payments in excess of estimated costs; however, we believe there are 
efficiencies used when providing these high therapy episodes and that 
the costs we estimated for these episodes are higher than actual costs. 
In addition, some of these high therapy episodes may be eligible for 
outlier payments. As a result of the findings from the simulation 
analysis, which show relatively even payments in excess of estimated 
costs across episodes, we are finalizing these new weights created 
using the new adjustment factors.
    We note that for future rulemaking, we plan to do further analysis 
using audited CRs, if available, and data on the use of therapy 
assistants (G-code data) and we plan to make adjustments accordingly. 
In the CY 2011 HH PPS final rule, we finalized a requirement that HHAs 
report G-codes on the HH PPS claims which differentiate therapy 
provided by a qualified therapist versus therapy provided by a therapy 
assistant. We have preliminary data using claims from early in the 
period after reporting of the G-codes began in 2011. We have assessed 
how the percentages of therapy provided by a therapy assistant vary 
relative to the quantity of therapy provided. In our analysis, we 
looked at claims which had a start date on or after April 1, 2011 and 
examined the percentage of therapy provided by therapy assistants for 
various levels of therapy, such as episodes with 1-5 therapy visits, 6-
9 therapy visits, 10-13 therapy visits, 14-19 therapy visits, and 20+ 
therapy visits. In addition, we looked at the percentages of therapy 
provided by therapy assistants when episodes from all providers were 
included and when episodes from providers in areas where suspect 
billing practices are relatively widespread were excluded. The results 
from these two analyses were similar.
    Table 8 shows the percentage of therapy visits provided by therapy 
assistants when providers in areas associated with suspect billing 
practices are excluded. The overall results suggest that on average our 
assumptions, built into the resource cost estimates concerning the 
share of physical therapy assistants in the labor force are somewhat 
lower than reported so far in the G-code data. In 2007 (the data year 
used to estimate the payment regression leading to the relative 
weights), the assumption concerning the proportion of the labor share 
for physical therapy assistants was 17 percent. The national average in 
the initial G-code data for physical therapy assistants is 22.1 
percent. For occupational therapy, the results were different. The 
assumption concerning the labor share proportion for occupational 
therapy assistants was 12 percent, while the national average in the G-
code data for occupational therapy assistants is very similar, 11.8 
percent.
    Further results from the G-code data show that there is variation 
in the percentage of physical therapy provided by therapy assistants 
and the percentage of occupational therapy provided by therapy 
assistants when different levels of therapy are provided. The initial 
G-code data suggest the percentages of physical therapy visits provided 
by therapy assistants for episodes with 14-19 therapy visits and 20+ 
therapy visits are 25.9 percent and 29.0 percent, respectively. We note 
that these results seem to indicate that providers may be using more 
therapy assistants for episodes with high therapy, and therefore, the 
costs for these high therapy episodes may be even less than what was 
reflected in our earlier cost-to-reimbursement analyses. Furthermore, 
we note that the OES data produced by the Bureau of Labor Statistics 
showed that in 2009, 20 percent of physical therapy was provided by 
therapy assistants and that 16 percent of occupational therapy was 
provided by therapy assistants.
[GRAPHIC] [TIFF OMITTED] TR04NO11.011

    We believe our analysis of the G-codes indicates that the new 
adjustments to the case-mix weights may be conservative. We have 
decided to use a conservative approach while we wait for more complete 
data. We will continue to analyze data as they become available and may 
make further adjustments to the case-mix weights if necessary.
    Comment: Commenters stated that CMS should develop the necessary 
objective clinical and financial data to support any change in case-mix 
weights for therapy related episodes prior to

[[Page 68558]]

implementing any change in the weights. Commenters recommended that CMS 
limit changes to those that have a reliable and transparent base in 
evidence. Another commenter recommended that CMS refrain from 
methodology which only shifts reimbursement to different parts of the 
model and instead focus on working with the industry to make more 
substantive and appropriate changes that stabilize home care 
reimbursement and provides more accurate payment. The commenter stated 
that payment cuts and methodology changes that can influence clinical 
behavior have not been successful at accurately paying for therapy 
services and may have disproportionately harmed providers that are 
providing appropriate levels of care.
    Response: We wish to point out to commenters that our revised 
approach to deriving weights for therapy-related episodes shares a 
fundamental commonality with the method used to derive the weights 
currently. As we described in our CY 2008 proposed and final 
regulations (72 FR 25363 and 72 FR 49764), in the four-equation model 
regression equation, we imposed a deceleration in the marginal increase 
in resources with each added therapy visit. We did this by imposing 
restrictions on the coefficients of the therapy visit variables during 
regression estimation. In fact, data analysis before imposing those 
restrictions showed no clear trend for the trajectory of growth in 
resources as therapy visits increased. Thus, the data did not provide a 
sensible guide. Commenters seem to assume that ``objective'' clinical 
and financial data would provide a clear answer for modeling resources 
in therapy-related episodes, but this isn't necessarily the case. We 
decided that a declining amount for marginal resources is appropriate 
in view of the need to address incentives to overuse therapy. After 
observing unexpected increases in episodes of 14 or more therapy 
visits, as well as other evidence and analysis bearing on the 
profitability of those categories of episodes, we sought a more 
aggressive approach.
    We pursued a data-driven approach at many decision points in this 
year's modeling procedure. We examined the results from various 
perspectives, including graphically. The main impact of the changes to 
our modeling procedure was generally to dampen the upward slope of the 
weights. Please refer to the Abt report ``Revision of the Case-Mix 
Weights for the Home Health Prospective Payment System Report'' located 
at http://www.cms.gov/center/hha.asp for additional information about 
the trends in the weights.
    In addition, our methodology was designed to be budget neutral. Our 
intention was to redirect resources to groups in accordance with 
updated information on resource use, to avoid having therapy resources 
dominate the results of the resource modeling procedure, and to reduce 
incentives to provide higher numbers of therapy visits than would be 
clinically indicated. We would be concerned that an approach which, as 
recommended by commenters, depends on negotiation with providers would 
stray too far from the data in the absence of clear consensus about how 
to treat patients in different situations.
    Our simulation of profits suggests that our proposals move away 
from gross overpayment for high therapy cases to more even payments in 
excess of estimated costs across episodes with varying levels of 
therapy. We understand that in occasional circumstances this approach 
may be interpreted to mean that clinicians no longer would enjoy 
decision-making unfettered by cost considerations when faced with high-
therapy-need patients. We wish to remind providers that utilization and 
cost data in health care contain a large random element; therefore, it 
is not possible to predict the cost of every case with the hoped-for 
precision. We anticipate that our current research, as provided for in 
Section 3131 of the Affordable Care Act, will ultimately advance the 
precision of our payment groups, and this mandate has involved and will 
continue to involve consultation with providers. However, at the 
current time we are obliged to use the data available to increase the 
accuracy of the HH PPS.
    Comment: Commenters stated that CMS failed to take into account the 
greater administrative costs associated with providing high therapy 
visits.
    Response: We do not have data in the MCRs or reliable data from 
commenters allowing us to estimate additional costs as mentioned in the 
comment. At this time, based on our data analysis described earlier in 
this section and MedPAC's analyses, we believe that a substantial 
incentive exists to provide increasing numbers of high-therapy episodes 
and we conclude that high therapy episodes are excessively overpaid.
    Comment: Some commenters stated that they agree that the 
reimbursement for high therapy episodes is too high and that it is 
appropriate to adjust relative case-mix weights to better align 
resource use associated with care plans. Commenters stated that the 
proposed changes to the case-mix weights would improve access for 
patients who need non-therapy services and reduce the incentive to 
manipulate therapy visits to reap higher payments. Also, commenters 
stated that by reducing the overpayment associated with high therapy 
groups and redistributing it to lower therapy and other groups, CMS has 
encouraged more appropriate therapy use based on need. Furthermore, 
commenters stated that the proposed changes in the case-mix weights 
will help to decrease future nominal case-mix growth. Commenters 
believed that the proposed changes to the case-mix weights will reduce 
waste and help assure patients who need therapy will get the 
appropriate amount. Some commenters stated that they value the ongoing 
cooperation and collaboration on policy issues.
    Response: We thank the commenters for their feedback and we 
appreciate the support.
    Comment: Commenters stated that the case-mix weight changes are 
proposed to modify provider behavior by removing ``incentives'' for 
increased therapy utilization. They stated that the adjustments have 
the sole intent of changing clinical behavior for HHAs. Commenters 
stated that CMS should not use a payment model to direct clinical care 
planning and patient admission practices to address any concerns in 
care utilization.
    Response: We disagree that our proposals are intended to force a 
change in clinical behavior. The purpose of the revision to the case-
mix weights is to more accurately pay for services. We also wish to 
discourage provision of unnecessary therapy services and slow nominal 
case-mix growth. When we proposed and finalized the 153-group system, 
we stated our concern that clinical judgment had been overtaken by 
financial incentives. Subsequent utilization data showing a sudden 
shift in the proportion of episodes with very high numbers of therapy 
visits suggested that agencies were providing high amounts of therapy 
to maximize reimbursements. Since our simulations indicate that 
providers will be adequately or more than adequately paid for varying 
numbers of therapy visits within episodes, except perhaps in some cases 
for episodes with the highest numbers of therapy visits, we believe the 
proposed system of weights will be accommodating to clinical judgment.
    Comment: Commenters stated that there should not be an across the 
board reduction in the payment for episodes with high therapy visits 
but rather CMS should conduct targeted medical review

[[Page 68559]]

so that those HHAs that are properly using therapy services are not 
punished for the actions of others. In addition, commenters stated that 
by implementing an across the board payment cut, agencies that have 
been more profitable may survive while agencies that have smaller 
margins may fail, thus potentially preserving those who may be 
committing abuse.
    Response: Although we appreciate the commenters' suggestion, we 
cannot act on it because our resources are not sufficient to conduct 
claims review on a scale that would be required. In addition, we would 
like to clarify that our method of adjusting the therapy-related 
episode weights did not result in an across the board reduction. 
Procedures we followed at the beginning of weight construction, based 
on 2007 data, resulted in a realignment of the weights. At the end of 
the weight construction process, we examined the change in weights and 
noted a wide range of differences in the weights, both positive and 
negative. Furthermore, we do not believe we are punishing agencies for 
the actions of others. The revision of the payment weights should 
result in relatively even payments in excess of estimated costs across 
various types of episodes, and therefore, result in more appropriate 
payment for services.
    Comment: Commenters were concerned by the use of four year old data 
(data from 2007). Commenters stated that just as the 2008 data may be 
tainted due to the impact of the change in therapy thresholds, the 2005 
data may also be tainted due to the impact of the 10-visit single 
therapy utilization threshold.
    Response: We used 2007 data in our payment regression model because 
of our concerns about the reliability of the data from 2008 or later. 
In 2008, we implemented refinements to the HH PPS and our analysis 
showed an increase in nominal case-mix growth of about 4 percent, when 
previous years showed a case-mix growth of only 1 percent. In addition, 
MedPAC commented on a sudden change in the provision of therapy after 
the three therapy thresholds were implemented in 2008 and a decrease in 
episodes with no therapy. Due to these observations, we were concerned 
about using data from 2008 or later. We also described in our proposed 
rule that during the process of revising the case-mix weights, we 
originally re-estimated the payment regression model on 2008 data using 
the same dependent and independent variables as the payment regression 
model in our 2008 refinements and we compared the results to the 
current payment regression, which was based on 2005 data. We saw that 
if we were to use 2008 data in our payment regression to develop the 
weights, the regression would assign a higher relative resource cost to 
high therapy episodes and would assign a lower relative resource cost 
to episodes with little or no therapy than was assigned when deriving 
the current weights. Given MedPAC's conclusion that the payment system 
overvalues therapy and undervalues non-therapy episodes and the sudden 
change in the distribution of therapy episodes, we decided to use the 
most current pre-refinement data in our payment regression model, which 
was from 2007. We believe the 2007 data are more reflective of costs 
associated with patients' actual clinical needs than the 2008 and later 
data.
    Comment: Commenters stated that there is no evidence that the level 
of therapy visits provided to patients is unnecessary. Commenters 
stated that CMS has not reviewed the claims involving the therapy 
visits to see if the level that was provided is unnecessary. Other 
commenters stated that there is no unnecessary utilization of therapy 
services by HHAs in their area and that the overuse of therapy services 
is a perception and not data based. They stated that therapy services 
are limited in their rural community and there are not enough 
therapists for HHAs to overutilize their services.
    Response: The Senate Finance Committee recently performed an 
investigation of the nation's three largest home-health companies and 
found that ``they encouraged employees to make enough home-therapy 
visits to reach thresholds that triggered bonus payments, whether or 
not the visits were medically necessary'' (``Home-Health Firms 
Blasted'', October 3, 2011, Wall Street Journal, p. B1). In addition, 
our analysis showed a 1-year change in the distribution of therapy 
services in 2008 and showed that a significant portion of case-mix 
growth in 2008 and 2009 was due to the increased provision of therapy 
services. Furthermore, our analysis on the costs of high therapy 
services showed that the payment exceeds costs by 30 percent or more. 
Our analysis indicated that the average cost of episodes with 14-19 
therapy visits and the average cost of episodes with 20+ therapy visits 
are more than $1100 and $1500 below Medicare reimbursement levels, 
respectively. Therefore, we believe there is a payment incentive to 
provide high therapy services and that certain agencies may be 
providing more therapy services to maximize reimbursement. The goal of 
the revision to the case-mix weights is to more accurately pay for 
services and since data indicates that we are overpaying for services, 
we are revising our weights to better reflect costs. In addition, based 
on our analysis of the costs and our predictions about the payment with 
the new case-mix weights, almost all episodes with high therapy will 
still be paid above costs and that payment under the new weights will 
result in more similar payments in excess of estimated costs across 
episodes with varying levels of therapy than our current weights, 
thereby encouraging more appropriate therapy use based on patient need 
rather than reimbursement.
    Comment: Commenters suggested that CMS convene a technical expert 
panel of therapists and nurses to examine the appropriate use of all 
therapist assistants and nursing personnel in the home health benefit 
before implementing any changes to the HH PPS based on the premise that 
the utilization of therapy assistants is not clinically appropriate. 
One commenter provided examples of the use of therapy assistants. 
Commenters stated that there is no evidence to suggest that there is 
utilization of therapy assistants to increase the number of visits 
provided. Another commenter stated that the costs for therapy assistant 
services cannot be estimated by only looking at the assistant salary 
levels but also must include supervision time by the therapist and 
other related costs. Other commenters stated that therapy staffing 
agencies charge the same amount for therapist and therapy assistants, 
so some agencies don't see a decrease in costs. The commenter stated 
that since the OES data is not specific to Medicare home health, CMS 
should wait to review the data on G-codes and should wait to collect a 
year's worth of data before implementing any changes.
    Response: Commenters are mistaken in concluding that our proposals 
assume that therapy assistants are inappropriately used in home health 
care. Our concern is that our reimbursement rates are too high in 
comparison to the actual costs incurred by providers, including costs 
related to recent shifts in the labor mix for therapy.
    Our cost-to-reimbursement analysis used the average per-visit 
costs, inclusive of allocated overhead and the other costs of doing 
business for HHAs (except, as noted previously, NRS costs). The data 
available are not detailed enough to discern the drawing of resources 
to therapy assistant services as suggested by the commenter. Our 
analysis indicates that the average cost of episodes with 14-19 therapy 
visits

[[Page 68560]]

and the average cost of episodes with 20+ therapy visits are more than 
$1100 and $1500 below Medicare reimbursement levels, respectively, 
which leads us to believe that even given unrecognized costs for 
therapy assistant services, there would still be an inappropriate 
overpayment. Our OES data are limited to home health services, among 
which Medicare is the dominant payer for skilled services. The elements 
used in our rate-setting process come from national averages for firms 
in North American Industry Classification System (NAICS) Code 621600, 
Home Health Care Services. We do not know whether staffing agency 
practices as described by the commenter are widespread, but the data 
needed to incorporate reliably such information in resource cost 
estimates may be very difficult to develop. Although OES data also 
reflect services beyond Medicare's services, OES offers the most 
representative labor mix data available at this writing. We also note 
that analysis of preliminary G-code data shows a higher percentage of 
physical therapy provided by therapy assistants for episodes with high 
therapy than what is reflected in the OES data, and therefore, resource 
costs for episodes with high therapy may be less than the costs we used 
to develop our current proposed weights. We agree with the commenter 
that more accurate information on therapy labor mix will be available 
as a result of the G-codes and we may consider making future 
adjustments based on G-code information.
    Comment: One commenter stated that there has been an increase in 
the past several years in therapy utilization and that only in recent 
years have they had adequate therapists to meet patient needs. In 
addition, the commenter stated that their HHAs only minimally use 
physical therapist assistants (PTAs) and certified occupational 
therapist assistants (COTAs) and that if CMS implements their new 
policies, their HHAs will be forced to reconsider/increase their use of 
PTAs and COTAs to survive.
    Response: We are primarily concerned with increasing use of high 
numbers of therapy visits that may represent padding of the treatment 
plan to maximize reimbursement. Assuming the commenter's agency is 
meeting patient needs and is cost efficient, we see no reason why they 
would be induced to increase their use of PTAs and COTAs, especially if 
they think it would represent a decline in quality. We reiterate that 
our payment simulations show adequate payment relative to costs for all 
episodes, except for some episodes in the 20+ therapy group, which may 
be eligible for outlier payments.
    Comment: A commenter stated that if CMS moves forward with the 
revision of the case-mix weights, then there should be a three-year 
phase-in to the new weights, beginning in 2012. The commenter stated 
that the phasing in would allow home care providers time to adjust to 
the financial consequences of the revised weights.
    Response: Our analysis of the costs of episodes with high therapy 
suggests that the payments for normal 60-day episodes with 14-19 
therapy visits may average approximately $1,100 more than the costs and 
the payments for normal 60-day episodes with 20+ therapy visits may 
average approximately $1,500 more than the costs. Given the large 
positive payments in excess of estimated costs suggested by these data, 
we believe that an adjustment to the weights is necessary and to phase-
in or defer revising the weights any longer would be wasteful.
    Comment: A commenter recommended that CMS adjust its proposed 
policy and continue to pay the current rates for certain groups such as 
those patients discharged from the hospital and entering their first or 
second episode of home health.
    Response: Our method of weight construction takes account of the 
timing of the episode but it does not consider whether the patient was 
recently discharged from the hospital. We stopped using the patient's 
pre-admission location in the case-mix algorithm in 2008 because of 
difficulties agencies reported in obtaining accurate data and because 
the impact on resources was not clear in the 2005 data used for the 
model. We plan to revisit the role of pre-admission location as part of 
our study mandated by Section 3131 of the Affordable Care Act. This 
will be done in the context of studying various kinds of new data that 
might be used in payment adjustments, to ameliorate possible access 
problems.
    Comment: Commenters stated that CMS has not examined the impact of 
the new proposed rule and cannot predict the effects of the 
implementation of the change in case-mix weights.
    Response: We disagree with the commenter. As we described in 
responses to commenters earlier in this preamble, we have done 
simulations that show that the revised case-mix weights with the new 
adjustments would result in more similar levels of net reimbursements 
(payments in excess of estimated costs) across episodes than the net 
reimbursements resulting from our current weights. In addition, Section 
IV shows the projected impacts of all of our policies (including the 
payment reduction for nominal case-mix growth). These impacts represent 
a negative impact on reimbursements well within the Medicare margins 
that were estimated by MedPAC.
    Comment: A commenter recommended monitoring quality outcomes and 
patient satisfaction after implementing these changes to ensure that 
the changes do not adversely affect patient care.
    Response: We agree that tracking the indicators mentioned by the 
commenter is a good idea. We note that statistical information on 
quality outcomes is publicly available on the CMS Web site for 
commenters to study. We anticipate that patient satisfaction 
information will be added to home health compare data in the future. We 
intend to monitor the effect of all of the provisions of this final 
rule for unintended consequences.
    Comment: Commenters stated that due to the therapy requirements 
implemented on April 1, 2011, there is less flexibility in using the 
therapy assistants.
    Response: The therapy requirements implemented in the CY 2011 HH 
PPS final rule which require an assessment by a qualified therapist at 
the 13th and 19th visit were meant to confirm that the patient needs 
high therapy services and to ensure more involvement of qualified 
therapists in high therapy cases. Research studies conducted by Linda 
Resnick (of Brown University) et al., entitled ``Predictors of Physical 
Therapy Clinic Performance in the Treatment of Patients with Low Back 
Pain Syndromes'' (2008, funded by a grant from the National Institute 
of Child Health) and ``State Regulation and the Delivery of Physical 
Therapy Services'' (2006, funded in part through a grant from the 
Agency for Healthcare Research and Quality) concluded that more therapy 
time spent with a qualified physical therapist, and less time with a 
physical therapy assistant, is more efficient and leads to better 
patient outcomes.
    We note that according to our cost-to-reimbursement analysis, we 
are overpaying for high therapy services and we are finalizing with 
this rule an adjustment to the payment weights to more accurately pay 
for these services. We also note that preliminary analysis of G-code 
data from 2011, the same time period that the therapy requirements were 
implemented, shows a higher percentage of physical therapy provided by 
assistants for high therapy cases than is reflected in our current 
weights. We will be continuing to examine the trends in the G-code 
reporting going forward

[[Page 68561]]

and we plan to use the information in rate setting.
    Comment: Commenters stated that CMS needs to analyze data to see 
whether their previous policies have addressed issues with the use of 
inappropriate therapy services before implementing the change in case-
mix weights to address therapy issues. A commenter stated that it was 
not necessary to implement the payment reductions since CMS implemented 
the outlier policy and enhanced documentation requirements for therapy 
services.
    Response: As stated earlier, the purpose of the revision to the 
case-mix weights is to more accurately pay for services. We customarily 
base payment revisions on the most recent data available, consistent 
with our judgment as to its integrity. At this time, the data indicate 
that CMS is paying for episodes with 14-19 therapy visits by an average 
of more than $1100 over the agencies' costs and is paying for episodes 
with 20+ therapy visits by an average of more than $1500 over the 
agencies' costs, and as such CMS is overpaying for high therapy cases. 
Previously implemented policies were intended to promote appropriate 
use of therapy and to increase the involvement of qualified therapists 
in high therapy cases to ensure that therapy is being provided in an 
efficient and effective manner. We again refer to the studies which 
described the improved patient outcomes with greater qualified 
therapist involvement. However, given that existing data show such high 
payments in excess of estimated costs for high therapy episodes, we 
believe an adjustment to the payment weights is necessary to more 
accurately pay for high therapy services.
    Comment: Commenters stated that the Affordable Care Act provisions 
along with the payment reductions would leave a huge negative impact on 
HHAs and commenters suggested that CMS not implement their proposed 
changes to the case-mix weights.
    Response: Our cost data show that we are paying too much for high 
therapy episodes, as our reimbursement exceeds costs by about 30 
percent. We believe it is necessary to make adjustments to our case-mix 
weights to more accurately pay for high therapy episodes. Our 
simulation analysis indicates that the new, revised weights should 
still result in payments in excess of estimated costs for all high 
therapy episodes, except for some episodes in the 20+ therapy group. In 
addition, the new, revised weights should result in relatively even 
payments in excess of estimated costs across episodes with varying 
levels of therapy, as well as episodes with no therapy. As the 
Affordable Care Act provisions come into play, we will analyze 
reimbursement adequacy, as well as beneficiary access to services and 
make proposals accordingly.
    Comment: Commenters urged CMS to expedite that comprehensive study 
of the case-mix system, to involve home health industry experts in the 
process, and to implement a revamped case-mix system by 2014.
    Response: We have included industry representatives on the 
Technical Expert Panel meetings conducted under the Affordable Care Act 
Section 3131 research and demonstration project. Further data 
collection and analysis will be conducted over the coming two years. 
Please see Section G for an update on the status of the study.
    Comment: Commenters stated that as an alternative to the 
adjustments to the weights, CMS should try to find cost savings by 
stopping overpayment to Medicare Advantage plans and suggested that CMS 
hold them accountable to the same Medicare Compare outcomes that HHAs 
must report.
    Response: We disagree with the commenter's suggestion that CMS find 
cost savings by stopping overpayment to Medicare Advantage plans as an 
alternative to implementing adjustments to the weights. Our goal is to 
address the overpayment for high therapy services and we can only do so 
by adjusting the case-mix weights for high therapy cases. The goal of 
the revision of the case-mix weights is not to achieve a cost savings; 
we reiterate that the change in the case-mix weights is budget neutral. 
(In contrast, the case-mix adjustment to the national standardized 
amounts is intended to recover previous overpayments that resulted from 
coding practice changes.) The goal of the weight adjustments is to more 
appropriately pay for high therapy services given our findings about 
the costs for these services and MedPAC's request to address therapy 
vulnerabilities.
    Comment: Commenters stated that the proposed case-mix weight 
changes would increase the weights assigned to episodes with no therapy 
visits; however, commenters stated that these non-therapy episodes have 
not had an increase in relative resource costs since 2008.
    Response: In their 2011 Report to Congress, MedPAC suggested that 
HH PPS may ``overvalue therapy services and undervalue nontherapy 
services.'' MedPAC also stated that through their analysis of high and 
low margin agencies, they concluded that ``episodes with high case-mix 
values are overpaid and episodes with low case-mix values are 
underpaid.'' We also note that the non-therapy episodes tend to have a 
much higher rate of outlier cases than episodes with therapy, and 
therefore, HH PPS may not be sufficiently paying for some of these 
episodes. In addition, we conducted a preliminary analysis looking at 
the differences in costs relative to reimbursement across different 
types of home health episodes and different agency characteristics. The 
findings suggested that unprofitable episodes on average had 
significantly more skilled nursing, home health aide visits, and total 
visits than average, while they also had fewer therapy visits. 
Furthermore, the results suggested that therapy and post-acute care 
episodes were more likely to be more profitable than mutually exclusive 
subpopulations of non-therapy and community-referred episodes, 
respectively. Moreover, regarding the HHRG, less profitable episodes 
were slightly more likely to be assigned the lowest functional or 
service utilization severity level (that is, C1F1S1, C2F1S1, C3F1S1). 
We note that this analysis did have some limitations. One limitation 
was that nationally aggregated costs were used instead of individual 
agency costs. However, we believe that the findings of the preliminary 
analysis, along with our observations of the incidence of outliers, and 
MedPAC's findings indicate that the current system may undervalue non-
therapy episodes.
    Comment: Commenters stated by increasing the weights for non-
therapy episodes, the proposal discourages HHAs to provide any therapy. 
They stated that the proposal will lead to an adverse discrimination 
against patients in need of therapy at all levels of need and 
utilization. They stated that they are concerned that the change in 
case-mix weights will discourage rehabilitation and patient self-
sufficiency.
    Response: We disagree with the commenters. Our data shows that we 
are currently overpaying for high therapy services. Also, we proposed 
to increase the weights for episodes with low therapy. Therefore, we do 
not believe that we are discouraging HHAs from providing therapy. We 
believe by more appropriately reimbursing for high therapy episodes, we 
are encouraging more appropriate therapy use based on patient need. We 
note that when projecting the payments for episodes with high therapy, 
payments are adequate and result in a profit, except on average for a 
small number of episodes with extreme levels of therapy, which in some 
cases may be eligible for outlier payments.

[[Page 68562]]

    Comment: Commenters stated that there is a movement towards a 
multidisciplinary approach to care and utilization of broader ranges of 
therapy services to improve outcomes and that evidence based best 
practices have improved patient outcome scores. They stated that 
patients need a high number of therapy visits to implement the 
intervention practices, such as fall prevention. In a similar vein, 
other commenters stated that due to the use of interdisciplinary care, 
there is an increase in the provision of therapy and coordination 
between physical therapy, occupational therapy, and speech language 
therapy. They stated that proposed adjustments to the case-mix weights 
do not account for the cost of providing interdisciplinary care and 
they suggested that CMS and the home health community need to work 
together to develop a new system that accounts for the costs of the 
interdisciplinary patient care. Other commenters stated that OASIS data 
shows continued functional improvement in the status of home health 
patients and that HHAs are providing services well in excess of 20 
visits in an episode despite the lack of increase in payment after 20+ 
visits. Commenters stated that CMS should not consider all of the 
change to the higher therapy groups as unnecessary.
    Response: As part of our industry outreach efforts associated with 
the home health access study, we plan to solicit input from the 
industry regarding evidence pointing to the improved outcomes from the 
multidisciplinary approach, so that we can evaluate the strength of it. 
We have noted previously MedPAC's concerns with the validity of outcome 
measurement in home health care. In addition, we reiterate that we do 
not believe the new case-mix weights will disincentivize 
interdisciplinary patient care, as the payments for episodes with high 
therapy are still projected to exceed costs.
    We also note that, as we described in the CY 2011 HH PPS final rule 
(75 FR 70390 through 70391), research shows a direct relationship 
between improved patient outcomes, and the percentage of therapy 
provided by qualified therapists. As previously described, research 
studies conducted by Linda Resnick (of Brown University) et al., 
entitled ``Predictors of Physical Therapy Clinic Performance in the 
Treatment of Patients with Low Back Pain Syndromes'' (2008, funded by a 
grant from the National Institute of Child Health) and ``State 
Regulation and the Delivery of Physical Therapy Services'' (2006, 
funded in part through a grant from the Agency for Healthcare Research 
and Quality) concluded that more therapy time spent with a qualified 
physical therapist, and less time with a physical therapist assistant, 
is more efficient and leads to better patient outcomes. In these 
studies, the lower percentage of time seen by a qualified therapist and 
the greater percentage of time seen by an assistant or aide, the more 
likely a patient would have more visits per treatment per episode. The 
studies also concluded that, although delegation of care to therapy 
support personnel such as assistants may extend the productivity of the 
qualified physical therapist, it appears to result in less efficient 
and effective services.
    The commenter suggests that high therapy cases are the result of 
interdisciplinary care. While interdisciplinary therapy would increase 
the volume of therapy provided, we note that given the apparent high 
percentage of therapy assistants utilized in these episodes when 
compared to other therapy episodes, research would suggest that 
inefficiencies in care may be a factor in high therapy cases as well. 
Our current payments for these episodes would incentivize these 
inefficiencies. Additionally, as we have described in other comment 
responses, our simulation analysis shows that the revised weights will 
result in similar payments in excess of estimated costs for all 
episodes. As such, we believe we are lessening the incentive to provide 
particular types of episodes, while providing adequate reimbursements.
    Comment: Commenters stated that CMS should institute safeguards to 
monitor discriminatory patient admission practices and misguided 
clinical care practices.
    Response: We appreciate this comment but must point out that this 
is a costly and difficult task. Eventually, as a result of research 
mandated by the Congress in section 3131(d) of the Affordable Care Act, 
we hope to modify the HH PPS to lower the risk of discriminatory 
patient admission practices. As part of the outreach efforts for the 
section 3131(d) Affordable Care Act study, we plan to solicit comments 
on how we could launch a cost-effective effort without imposing 
unacceptable burdens on providers and patients. We also encourage 
continued efforts in the home health industry, aided by Medicare 
quality initiatives, to improve the consistency and appropriateness of 
clinical care plans and their implementation. In addition, we reiterate 
that based on our simulation analysis, we expect the new weights to 
result in similar payments in excess of estimated costs episodes and 
should therefore lessen discriminatory patient admission practices in 
home health.
    Comment: Commenters advised CMS to analyze provider costs in 2011 
and 2012 before implementing the change to the case-mix weights.
    Response: Due to the lag in providers' preparation and submission 
of CRs, we do not have a complete set of data on provider costs for any 
given year until more than one year after the end of the year. As a 
result, the 2009 MCR data are the most current, complete cost data 
available. Given our analysis of the costs and payment for high therapy 
episodes using 2009 data, we believe that Medicare is overpaying for 
high therapy services by 30 percent or more. In addition, as we 
mentioned in a previous response, for our simulation analysis, we 
updated the costs of episodes to 2012 dollars using the market basket 
increase and estimated the 2012 payment for episodes. The simulation 
analysis using the new weights suggested that in 2012, the payment for 
episodes will still exceed costs and that there is a relatively even 
payments in excess of estimated costs across episodes, except for some 
episodes in the 20+ therapy group. We note that some of the episodes in 
the 20+ therapy group may be eligible for outlier payments.
    Comment: Some commenters stated that the proposal to change the 
case-mix weights is premature and unproductive. Other commenters stated 
that CMS should dedicate their resources to develop a case-mix adjuster 
that does not use therapy utilization as a variable in determining 
payment; instead CMS should look into using patient characteristics to 
pay for therapy. Commenters stated that they would be supportive of any 
change in the case-mix weights that moves the model away from using 
utilization factors in determining payment.
    Response: In their 2010 and 2011 Reports to Congress, MedPAC has 
urged us to address the therapy incentives in our payment system. We 
note that completely addressing MedPAC's concerns with the way we 
factor therapy services into our reimbursement will be a complex 
process, requiring comprehensive structural changes and a great deal of 
additional research and analysis. However, we believe there is evidence 
that we are overpaying for high therapy services and that it is 
appropriate to revise the case-mix weights now, to mitigate therapy 
vulnerabilities in the short term while we develop a longer term 
solution.
    Comment: Commenters asked how CMS would check that the changes in

[[Page 68563]]

the case-mix weights would in fact be budget neutral. A commenter 
stated that in the past when changes in the HH PPS resulted in profits 
to the industry, CMS implemented a plan to recover the excess 
reimbursement. The commenter asked what would happen if the industry 
was under-reimbursed by the proposed changes, stating that in this 
situation, the proposed changes would not be budget neutral.
    Response: We are uncertain what the commenter's concern is. As we 
described earlier in this section, we applied a budget neutrality 
factor to ensure that the new weights result in approximately the same 
aggregate expenditures as 2009, the most current data that were 
available. We equated the aggregate expenditures by setting the average 
of the case-mix weights under the new revised weights equal to the 
average under the current weights which we reimbursed in 2009. A slight 
difference between the aggregate totals remained, due to the effects of 
outlier payments. However, this difference amounted to only 0.01 
percent. Also we reiterate that data shows that we are overpaying for 
high therapy services and we believe the new weights will more 
accurately align payment with costs. In addition, as stated in Section 
II.A, we will continue to assess real and nominal case-mix growth and 
if we were to see real case-mix growth increase more than the reported 
home health case-mix growth, we would increase payments accordingly. 
Furthermore, since the HH PPS began, the industry has never been under-
reimbursed in the aggregate and when it was determined that certain 
LUPAs were on average under-reimbursed, we implemented the LUPA add-on 
to compensate for the underpayment.
    Comment: A number of commenters stated that a failure to 
recalibrate the whole system weights would result in a change that was 
not budget neutral and Federal law prohibits changes in case-mix that 
are not budget neutral. Another commenter requested that CMS explain in 
detail the methodology used to develop the budget neutrality adjustment 
for the proposed case-mix weights.
    Response: As stated in the proposed rule, to remove the two 
hypertension codes from our case-mix system, we needed to revise our 
case-mix weights to redistribute the dollars without reducing aggregate 
payments. To redistribute the dollars, we re-estimated the four 
equation models without codes 401.1 and 401.9. We then used the results 
from the four equation model to determine the clinical and functional 
severity level groups for each episode. This information was then used 
to estimate the payment regression model, which in turn was used to 
develop the weights. In addition, CMS has applied a budget neutrality 
factor of 1.2832 so that the new case-mix weights result in 
approximately the same aggregate expenditures as 2009. More details 
about the methodology used to ensure budget neutrality can be found in 
an updated version of the Abt Associates report ``Revision of the case-
mix weights for the Home Health Prospective Payment System'' at http://www.cms.gov/center/hha.asp.
    We also note that the payment reductions arising out of the nominal 
case-mix changes we have identified are not intended to be budget 
neutral (discussed in Section II.A). We reduce payment rates to account 
for nominal case-mix change.
    Comment: CMS should publicly disclose the revised formula and 
factors employed in the calculation of a revised budget neutrality 
adjustment and provide an opportunity for public comment prior to 
finalization of the revised case-mix weights.
    Response: We note that the Abt Associates report ``Revision of the 
Case-Mix Weights for the Home Health Prospective Payment System'' 
contains details about the methods used to achieve budget neutrality. 
This Abt Associates report was made publicly available around the same 
time that the CY 2012 HH PPS proposed rule was published. We have 
received comments on our methodology during this comment process. An 
updated version of this report will be made available at http://www.cms.gov/center/hha.asp.
    Comment: Commenters stated that CMS should update its occupational 
mix assumptions in the 2012 refinements and that the increased use of 
therapy assistants should be reflected in the case-mix weights.
    Response: We thank the commenter for their comment and we would 
like to clarify our methodology. As stated in the Abt Associates report 
``Revision of the Case-mix Weights for the Home Health Prospective 
Payment System'' which can be accessed at http://www.cms.gov/center/hha.asp, the payment weights are based on wage-weighted time spent on 
home health visits in our sample. The wages come from estimates of the 
national hourly wage for six disciplines of home health care workers 
(skilled nursing, physical therapist, occupational therapist, speech 
language therapist, medical social services, and home health aides) 
from the Bureau of Labor Statistics Occupational Employment Survey 
(OES). When re-estimating the payment regression model on 2007 data, we 
used the wage-weighted minutes based on the 2007 OES data for average 
labor mix within each discipline and average hourly wages, including 
benefits. The 2007 OES labor mix for physical therapists is composed of 
17 percent physical therapist assistants, 1 percent physical therapy 
aides, and 82 percent physical therapists. The 2007 OES labor mix for 
occupational therapists is composed of 12 percent occupational 
therapist assistants and 88 percent occupational therapists. The 
payment regression is modeling the wage-weighted time (resources) as 
predicted by the severity levels and therapy variables for early and 
later episodes, using 2007 claims. We note that before updating the 
labor mix in the wage-weighted minutes to more current data than 2007, 
we will wait for more complete G-code data. We will continue to assess 
the accuracy of our case-mix weights and may make adjustments in future 
rulemaking as more G-code data becomes available.
    Comment: Commenters stated that CMS should calculate the budget 
neutrality adjustment to equate 2012 expenditures under the current and 
proposed case-mix weight models. Commenters recommended that CMS 
recalculate the budget neutrality adjustment to reflect the idea that 
HHAs have experienced some ``real'' case-mix change in 2010 and 2011 
and will experience more in 2012.
    Response: We applied a budget neutrality factor (1.2832) to the 
weights to ensure that the final proposed weights result in aggregate 
expenditures in 2009 approximately equal to expenditures using the 
current payment weights. We made the weights budget neutral to 2009 
because the data from 2009 were the most current complete data 
available at the time. Using the most complete actual data available to 
achieve budget neutrality is a method consistent with case-mix weight 
recalibration methodology utilized by other Medicare payment systems. 
Similarly, the methodology is consistent with the method we have 
utilized since CY 2008 rulemaking to analyze and account for case-mix 
growth unrelated to real changes in patient acuity (nominal case-mix). 
Our current method assesses case-mix growth and reduces payment rates 
as warranted only after the claims data are complete. This method for 
both establishing budget neutrality in the weights and adjusting for 
nominal case-mix growth confines the correction on account of nominal 
case-mix growth to the rates while allowing the average case-mix level 
to evolve in the claims history without

[[Page 68564]]

intervention. However, the commenter's suggestion to project case-mix 
growth for future years is intriguing and we may consider such a 
methodology change in future rulemaking. Such a methodology change 
would allow us to project changes in case-mix based on expected trends 
in case-mix growth. It would also require us to make projections for 
payment adjustments to account for nominal case-mix growth based on 
trends. This projection method may be preferable to delaying the 
ability to account for future nominal case-mix increase. We believe 
that such a change in long-standing methodology would require 
rulemaking.
    Our continued analyses of current claims data as they become 
available allows us to make adjustments to HH PPS case-mix weights as 
warranted, achieving budget neutrality using the most current complete 
data available, and account for growth in nominal case-mix as 
warranted.
    Comment: Commenters stated that CMS explicitly proposes that the 
case-mix weight changes will affect clinical and patient admission 
behavior of HHAs. They stated that if the case-mix weight changes are 
implemented, the proportion of patient episodes with 14 or more therapy 
visits will decline and the proportion of non-therapy episodes will 
increase.
    Response: Based on observation of sharp changes in distribution of 
episodes by the number of therapy visits, on information coming to us 
about provider practices in the field, as well as on analysis of 
margins in HH PPS, an effect on the behavior of HHAs would not be 
surprising.
    Comment: The commenters stated that the therapy episodes have 
higher case-mix weights on average than non-therapy episodes so the 
reduction in the proportion of therapy episodes will reduce the average 
case-mix weight nationally and that failure to account for this 
behavioral change reduces the budget neutrality adjustment. Other 
commenters stated that the change in case-mix weights does not appear 
to be budget neutral because only 30 of the case-mix weight values 
increased while 123 of the case-mix weight values decreased from the 
current levels.
    Response: To date, we have not incorporated forecasts of the sort 
indicated by the commenter in our budget neutrality adjustments. We may 
consider this for future rulemaking. However, we think that forecasting 
changes in the national case-mix average due to the utilization changes 
mentioned by the commenter would be difficult and perhaps not a 
reliable basis for payment. Regarding the positive and negative changes 
the case-mix weight values, we note that when developing the budget 
neutrality factor, we took into account the number of episodes in each 
HHRG along with the change in weights. We developed the factor so that 
the change in the weights would result in the same aggregate 
expenditures as 2009. One cannot only look at the increases or 
decreases in the case-mix weight values but one must also look at the 
degree of the change in the weights and the number of episodes 
associated with each of the weights when looking at budget neutrality. 
In general, the case-mix weight values that increased had higher 
volumes than the ones that decreased.
    Comment: A commenter appreciated that the proposed changes to the 
case-mix weights are budget neutral.
    Response: We thank the commenter for their support.
    Comment: A commenter asked that CMS identify how the points from 
the hypertension 401.1 and 401.9 codes are reallocated in the proposed 
case-mix weight changes.
    Response: The points are reallocated in the course of estimating 
the four-equation model's regression equation. In Table 3 shown above, 
we show the points associated with various clinical and functional 
variables based on the results of the four-equation model. The four-
equation model is a linear regression explaining an episode's wage 
weighted minutes of care in the home as measured in dollars (the 
dependent variable) as a function of the episode's timing, therapy 
visits, clinical variable indicators (for example, pressure ulcer 
stage), and functional indicators (for example, limitation in bathing). 
After estimating the model, we determine the points associated with 
clinical and functional variables by dividing the coefficients by 10. 
By re-estimating the four-equation model on data without hypertension 
codes 401.1 and 401.9, we redistributed the points which would be 
associated with the two hypertension codes to other variables in the 
model. Table 4 shows the differences in points between the current and 
proposed case-mix adjustment scores. As stated in the proposed rule, 
for 13 of the 33 clinical and functional variables which had a 
different number of points, there was an extra point assigned when the 
two hypertension codes were excluded and for 20 of the 33 clinical and 
functional variables, there was one less point assigned compared to the 
current model.
    Comment: Commenters stated that CMS presented strong and objective 
data indicating that an elimination of hypertension codes 401.1 and 
401.9 was warranted. Commenters stated that they would like to see a 
comparable approach for therapy utilization. Other commenters stated 
that despite the data analysis of the resource costs of patients with 
hypertension codes 401.1 and 401.9, from a clinical viewpoint, there 
are still concerns that the removal of the hypertension codes might 
undervalue the resources need to address the needs of patients with 
hypertension.
    Response: Our past exploration of modeling therapy elements of the 
case-mix in home health showed that predictive power is relatively low. 
MedPAC's recent results in their preliminary models of therapy elements 
are consistent with our experience. We will continue to study this 
issue. We remind the commenters concerned about removal of hypertension 
codes that our analysis showed that after the 153-group system went 
into effect, hypertension was no longer associated with marginal added 
resources. This was probably due to a big change in the frequency of 
reporting hypertension and meant that the average patient with 
hypertension (after accounting for other clinical conditions) was not 
as costly to care for as the average patient reported to have 
hypertension in 2005 (the year of the data that originally used to 
create the 153-group system). The new guidelines developed by the 
National Heart Lung and Blood Institute (NHLBI) concerning the 
appropriate reporting of these hypertension codes were released in late 
2004. It is possible that prior to the NHLBI guidelines, HHAs were 
using codes 401.1 and 401.9 to reflect more severe hypertensive 
conditions. Our 2008 refinements analysis utilized 2003 data (prior to 
the NHLBI guidelines) and 2005 data (shortly after the guidelines 
release and likely prior to widespread adoption of them). As such, one 
probable reason that the 2008 refinements analysis identified these 
codes as more resource intensive, when more current data analysis does 
not, would be HHA use of these codes to reflect more severe 
hypertensive patients.
    Comment: Commenters urged CMS to check that the removal of weights 
for the hypertension codes 401.1 and 401.9 is not premature and based 
on sound methodology. Commenters stated that coding experts believe 
that eliminating the two hypertension codes will result in up to a 7 
percent decrease in coding-related reimbursement.
    Response: In our proposal, we explained that the new point 
allocation from the re-estimated four-equation model redistributed 
resources across the other conditions in the model. Our other 
procedures for deriving the weights

[[Page 68565]]

were designed to maintain the effects of the redistribution. Therefore, 
a change in reimbursement for patients with the hypertension codes 
would in general not be 7 percent. The change for any given patient 
would depend on their combination of case-mix recognized conditions.
    Comment: Commenters stated that CMS proposed to eliminate the codes 
401.1 and 401.9 based on their concerns surrounding the new guidelines 
developed by the NHLBI.
    Response: In addition to our concerns about changes in coding due 
to the new guidelines developed by the NHLBI, which we believe resulted 
in more accurate coding, we have also shown that the two hypertension 
codes are not associated with additional resources, and therefore, we 
are implementing the removal of these codes.
    Comment: Commenters stated that there are certain areas where the 
increase in hypertension makes sense given the high prevalence of heart 
disease and obesity. Another commenter was concerned with the removal 
of hypertension from the case-mix system, stating that there may be 
external factors that CMS has not taken into account and that treatment 
of hypertension is an important part of home health.
    Response: We thank the commenters for their comments. However, we 
note that we presented various analyses which showed that the two codes 
401.1 and 401.9 are not associated with additional resource use. 
Therefore, we believe that the two codes should be removed from our 
case-mix system. However, we would like to clarify that we are not 
completely removing hypertension from our case-mix system; we are only 
removing codes 401.1 and 401.9. Currently, we believe that certain 
types of hypertension, such as hypertensive heart disease and 
hypertensive chronic kidney disease, are associated with additional 
resource use and should be included in our payment system; however, all 
of our analysis confirms that the two hypertension codes for benign 
essential and unspecified essential hypertension on average are not 
associated with additional resource use, and therefore, we are removing 
the codes to more accurately align payment with resource use.
    Comment: Commenters stated that when changing or removing part of 
the model, CMS should perform the same comprehensive approach as it 
used for the 2008 refinements. The commenter stated that we should use 
the same criteria we used for the refinements to determine whether 
certain diagnoses codes and variables should be included in the model.
    Response: As a result of research we are undertaking pursuant to 
Section 3131 of the Affordable Care Act, we plan a comprehensive re-
examination of the variable set that is potentially available to us to 
use for case-mix and other payment adjustments. We decided to defer a 
comprehensive re-modeling effort until new and/or revised variables 
have been researched and can be tested. On OASIS, reported hypertension 
prevalence more than doubled between 2005 and 2008, the first year of 
the refined 153-group system. By 2008, hypertension prevalence was more 
than 60 percent. Given the large amount of coding change associated 
with hypertension, and the resulting extraordinary prevalence, we saw a 
need to revisit its impact on costs. The results indicated that for the 
average hypertension patient, the condition was not associated with a 
statistically significant increase in resources.
    Comment: Commenters stated they would like to see CMS run the full, 
original regression models on test data from 2009 to see whether the 
indicators for hypertension codes 401.1 and 401.9 should be kept in the 
case-mix system. The commenters stated that after running the data, 
they would like to see the coefficients for the indicators for codes 
401.1 and 401.9 from the full regression models for all 4 equations 
using the 2009 data.
    Response: We did not pursue the commenters' suggestion, pending the 
outcome of ongoing research. We previously mentioned in this preamble 
concerns that data from 2008 and later reflect a large amount of 
nominal coding change. Without intensive work developing and reviewing 
current, discarded, and potentially new variables for the model, we 
would not necessarily arrive at an appropriate score for the 
hypertension variables. Also, we believe making significant scoring 
changes piecemeal (before a thorough review of potential variable sets) 
adds unacceptable burdens to administrative and HHA operations. We also 
note that re-estimating the full original regression models is not 
necessary to support our decision to remove the two hypertension codes. 
The reason is that we did re-run one multivariate regression models 
used to test the impact of the hypertension codes in our proposed rule. 
This model isolated the additional resources associated with codes 
401.1 and 401.9 and is an additional analysis to that which we 
described in the proposed rule. When developing the proposed rule, we 
ran the test regression model controlling for the current weights 
because at the time, we had not yet developed the proposed weights. The 
results supported the removal of the codes. Table 9 shows the results 
of an updated test regression model. One can see the coefficients from 
the regression model of total resource use on the case-mix weight 
(using the refined revised case-mix weights that do not include the 
401.1 or 401.9 diagnoses in calculating case-mix weight) and indicator 
variables for the presence of the 401.1 and 401.9 hypertension 
diagnoses. This equation is based on 2009 data with LUPAs and outliers 
excluded. The coefficients show that, controlling for the revised case-
mix weights that we are finalizing in this rule, the presence of either 
a 401.1 or a 401.9 diagnosis is associated with significantly lower 
resource use. The mean value of the dependent variable is 543.17, so 
the magnitude of the coefficients is not particularly large, especially 
for the 401.9 diagnosis, but the results support dropping the two 
diagnoses from the case-mix calculation since they are not associated 
with higher resource use. We believe that this analysis along with the 
other analysis presented in the proposed rule support the removal of 
the two hypertension codes 401.1 and 401.9.
BILLING CODE 4120-01-P

[[Page 68566]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.012

    In summary, as described in our response to comments, we are 
finalizing our proposal to revise the case-mix weights. Based on our 
analyses after the publication of the CY 2012 HH PPS proposed rule, we 
have refined the revision to the case-mix weights and the new 
adjustments to the case-mix weights can be seen in Table 10.
[GRAPHIC] [TIFF OMITTED] TR04NO11.013

    We reiterate that we used the same methodology described in the 
proposed rule when developing the new revised case-mix weights. To 
ensure that the revised weights result in approximately the same 
aggregate expenditures as we incurred in 2009, the budget neutrality 
factor applied to the weights changed slightly from 1.2847 to 1.2832. 
The new revised case-mix weights can be seen in Table 11.
BILLING CODE 4120-01-P

[[Page 68567]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.014


[[Page 68568]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.015


[[Page 68569]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.016


[[Page 68570]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.017


[[Page 68571]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.018


[[Page 68572]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.019

BILLING CODE 4120-01-C
    As stated earlier in our responses to comments, we performed a 
simulation analysis on the new revised weights. When re-running the 
simulation analysis on these new weights, we saw relatively even 
payments in excess of estimated costs across the various types of 
episodes, including but not limited to the episodes with 14-19 therapy 
visits, episodes with 20-25 visits, and non-therapy episodes. We note 
that in our analysis, we looked at various groups of episodes, such as 
non-therapy episodes, episodes with 1-5 therapy visits, episodes with 
6-9 therapy visits, episodes with 10-13 therapy visits, episodes with 
14-19 therapy visits and episodes with 20-25 therapy visits, as well as 
episodes with 26+ therapy visits. The analysis showed an even, similar 
payment in excess of estimated costs between almost all of the groups 
of episodes, except for episodes with 26+ therapy visits. We also note 
that in our sample, episodes with 20-25 visits are 64 percent of all of 
the episodes with 20+ therapy visits.
    In addition, when performing a regression of the episode's total 
resource (dependent variable) using the new revised case-mix weights 
(independent variable), the R-squared value is 0.5436, which is 
slightly higher than the R-squared value for the proposed weights. As 
more data becomes available, such as G-code data and possibly audited 
CR data, we may further implement changes to the weights in future 
rulemaking.

C. Outlier Policy

1. Background
    As we highlighted in our proposed rule (76 FR 41012), section 
1895(b)(5) of the Act allows for the provision of an addition or 
adjustment to the national standardized 60-day case-mix and wage-
adjusted episode payment amounts in the case of episodes that incur 
unusually high costs due to patient home health (HH) care needs. In the 
proposed rule, we noted that prior to the enactment of the Affordable 
Care Act in March 2010, this section of the Act stipulated that 
estimated total outlier payments could not exceed 5 percent of total 
projected or estimated HH payments in a given year. We also provided 
historical milestones for the development of the outlier payment 
policy, including an overview of the July 2000 final rule (65 FR 41188 
through 41190), in which we described the method for determining 
outlier payments.
    As part of our proposed rule (76 FR 41013), we reiterated what was 
said in the CY 2010 HH PPS final rule (74 FR 58080 through 58087), in 
which we discussed excessive growth in outlier payments, the reasons 
for this growth, and our policy changes and methodologies to address 
it, which culminated in a 10 percent agency level outlier cap. We noted 
that this cap was implemented in concert with a reduced fixed dollar 
loss (FDL) ratio of 0.67. These policies resulted in a projected target 
outlier pool of approximately 2.5 percent.
    In our proposed rule (76 FR 41013), we also provided an overview of 
how the outlier payment percentage is determined and the relationship 
between the FDL and loss-sharing ratios.
    At the time of the proposed rule, a preliminary look at partial CY 
2010 Health Care Information System (HCIS) data showed total outlier 
payments to be 1.68 percent of total HH PPS payments. As such, we 
proposed to maintain the current FDL ratio of 0.67 until more recent 
and complete data became available on which to conduct further 
analysis.
    As we stated in the proposed rule (76 FR 41013), we must deliver a 
Report to Congress regarding the results and recommendations of a home 
health study no later than March 1, 2014. Section 3131(d)(1)(A)(iii) of 
the Affordable Care Act requires the Secretary to analyze potential 
revisions to outlier payments to better reflect costs of treating 
Medicare beneficiaries with high levels of severity of illness.
2. Comments and Responses
    The following is a summary of the comments we received regarding 
the outlier policies in the proposed rule.
    Comment: Several commenters expressed general agreement with the 
methodology used to review the outlier policy, including possibly 
adjusting the fixed-dollar loss (FDL) ratio from its current value of 
0.67 based on more current data becoming available. Many of these 
commenters urged CMS to refine its outlier policies to ensure access to 
care for Medicare beneficiaries, and also ensure that the full 2.5 
percent of expected HH expenditures be spent on outlier payments. Some 
of these commenters noted that data presented by CMS showed less than 
2.5 percent of outlier dollars were expended. Commenters also noted 
that outlier expenditures are less than prior years, reflecting that 
the impact of the outlier cap has been successful in addressing abuse 
of this provision of the payment system.
    Response: We thank commenters for their recognition of the need for 
the outlier payment limit and recognize the concerns expressed by many 
to ensure that the 2.5 percent target in outlier payments allowed is 
expended. We agree on the importance of ensuring access to care for 
high cost Medicare beneficiaries. We also agree that the outlier cap 
policy plays an important part in addressing abuse of the payment 
system. As stated in our proposed rule, we will continue to monitor 
outlier payments as a percentage of total HH PPS payments as newer data 
becomes available.

[[Page 68573]]

    At the writing of this final rule, the most current 2010 claims 
data shows the outlier payment outlay has increased from 1.68 to 1.91 
percent of total 2010 HH expenditures. We recognize that this 
percentage still falls below the 2.5 percent outlier target. We believe 
it is necessary to finalize the outlier policy 0.67 FDL ratio and 0.80 
loss-sharing ratio as proposed to ensure we do not violate the 
statutory mandate to not exceed 2.5 percent of expected HH expenditures 
in outlier payments. We also note that an expected correction to a 
claims processing error related to the outlier cap may change the final 
outlier expenditures in CY 2010.
    We assure commenters that we intend to thoroughly analyze ways to 
improve the HH PPS's ability to identify patient severity and cost, 
address possible home health access issues for high cost patients, and 
investigate options for improving the HH PPS outlier policies as part 
of the home health study.
    Comment: A number of commenters specifically suggested that the 
cost sharing ratio of 0.80 be increased rather than lowering the FDL 
and that CMS should move away from using the low utilization payment 
adjustment (LUPA) as the proxy for actual cost in computing the outlier 
payment, believing that actual agency-specific costs subject to a cap 
or a per visit outlier cap would further reduce outlier abuse and 
better compensate agencies that use the outlier provision judiciously. 
Many commenters expressed their belief that outlier payments should 
play an important part in addressing the needs of patients whose 
extraordinary costs are beyond the compensation offered by regular HH 
PPS payments. One of the commenters stated that CMS continues to focus 
on the outlier payment boost as if it were a profit-making tool for 
HHAs even though most outlier episodes lose money. Another commenter 
requested in particular that CMS exempt special needs certified HHAs 
that serve high-cost patients with multiple clinical issues from the 10 
percent outlier cap threshold. One such commenter added that CMS should 
further evaluate the outlier threshold in relationship to non-routine 
supplies (NRS) due to this commenter's concern that patients with 
complex wounds might be adversely impacted.
    Response: We reiterate that we intend to analyze alternatives to 
our current outlier policy as part of the home health study mandated by 
section 3131 of the Affordable Care Act. The study calls for CMS to 
investigate improvements to the HH PPS to account for patients with 
varying severity of illness. We agree with commenters that the current 
HH PPS outlier payments play an important role in addressing the needs 
of patients whose costs are beyond the compensation offered by regular 
HH PPS payments. Regarding possible exemptions for special needs 
certified HHAs that serve high-cost patients with multiple clinical 
issues from the 10 percent outlier cap threshold, we note that section 
3131(b) of the Affordable Care Act does not allow for exceptions to the 
mandate of the outlier policy which reduces estimated aggregate HH 
payments by 5 percent, allows no more than an estimated 2.5 percent of 
aggregate HH payments to be outlier payments, and requires the 10 
percent agency-level outlier cap. We do not have statutory authority to 
exempt any providers from the 10 percent outlier cap. Lastly, we will 
also include the commenter's suggested NRS analysis as part of the 
Affordable Care Act-mandated home health access study.
    In summary, as described above, preliminary analysis of partial 
2010 claims described in the proposed rule indicated outlier payments 
to be approximately 1.68 percent of total HH PPS payments. For this 
final rule, we have updated our analysis with a full year of CY 2010 
data. The data show the outlier payment percentage has increased to 
1.91 percent of total HH PPS payments.
[GRAPHIC] [TIFF OMITTED] TR04NO11.020

    To ensure that we adhere to our statutory mandate to expend no more 
than 2.5 percent of expected total HH PPS payments in outlier payments, 
we are maintaining our current policies of a FDL ratio of 0.67 and a 
loss-sharing ratio of 0.80 for CY 2012. Table 18 from our proposed rule 
has been updated and shows the outlier payment history as a percentage 
of total HH PPS payments between Calendar Years 2004 and 2010.

D. CY 2012 Rate Update

1. Home Health Market Basket Update
    Section 1895(b)(3)(B) of the Act requires that the standard 
prospective payment amounts for CY 2012 be increased by a factor equal 
to the applicable home health market basket update for those HHAs that 
submit quality data as required by the Secretary. Section 3401(e) of 
the Affordable Care Act amended section 1895(b)(3)(B) of the Act by 
adding a new clause (vi) which states, ``After determining the home 
health market basket percentage increase * * * the Secretary shall 
reduce such percentage * * * for each of 2011, and 2012, by 1 
percentage point. The application of this clause may result in the home 
health market basket percentage increase under clause (iii) being less 
than 0.0 for a year,

[[Page 68574]]

and may result in payment rates under the system under this subsection 
for a year being less than such payment rates for the preceding year.''
    In the proposed rule, we proposed a home health (HH) market basket 
update of 2.5 percent for CY 2012. This update was based on IHS Global 
Insight Inc.'s first quarter 2011 forecast, utilizing historical data 
through the fourth quarter of 2010. Since publication of the proposed 
rule, we have a revised HH market basket update of 2.4 percent based on 
IHS Global Insight Inc.'s third quarter 2011 forecast, utilizing 
historical data through the second quarter of 2011. A detailed 
description of how we derive the HH market basket is available in the 
CY 2008 HH PPS proposed rule (72 FR 25356, 25435). Due to the 
requirement in section 1895(b)(3)(B)(vi) of the Act, the CY 2012 HH PPS 
payment update percentage is to be calculated by reducing the CY 2012 
HH market basket update of 2.4 percent by 1 percentage point. In 
effect, the final CY 2012 HH PPS payment update percentage is 
calculated to be 1.4 percent.
    The following is a summary of the comments we received regarding 
the HH market basket update.
    Comment: One commenter objected to CMS decreasing the market basket 
increase.
    Response: Section 3401(e) of the Affordable Care Act mandates the 1 
percentage point decrease to the home health market basket update.
    Comment: One commenter criticized the market basket index, claiming 
that it fails to include consideration of the direct cost increases 
that CMS rules may have on the delivery of care. Instead, it evaluates 
general cost changes such as the cost of caregivers, transportation, 
insurance, and office space.
    The commenter further stated that this approach does not provide 
CMS with the information needed to adjust payment rates in relation to 
regulatory cost increases. When the home health services ``product'' 
changes because of new regulatory or administrative requirements, CMS 
must include an element in the market basket index to address the 
resulting cost changes. Or alternatively, they request CMS adjust base 
payment rates to account for such cost, as it has done in the past for 
costs such as OASIS.
    Finally, the commenter claims the weaknesses in the current market 
basket index calculation method is highlighted this year in the 
significant difference between the index rate applied to hospitals and 
the index rate proposed for HHAs. A difference of 0.5 is, on its face, 
unsupportable, as HHAs have experienced significantly increased 
administrative costs for the face-to-face encounter rule and the 
requirements to greatly increase professional therapist assessments of 
patients along with increases in gas costs for a provider group that 
travels nearly 5 billion miles a year.
    Response: The home health market basket is a fixed-weight 
Laspeyres-type price index. The index is not, nor is it intended to be, 
a cost index. Its weights reflect the cost distribution for a selected 
base year while current-period price changes are measured. As such, the 
index measures ``pure'' price changes only. The effects on total 
expenditures resulting from periodic changes in the quantity or mix of 
goods and services purchased by home health providers are, by design, 
captured in the base year weights (or cost shares), which are updated 
on a recurring basis.
    The 0.5 percentage point difference referenced by the commenter 
(3.0 percent final FY 2012 IPPS market basket update minus the 2.5 
percent proposed CY 2012 HH market basket update [not the 2.4 percent 
final CY 2012 HH market basket update]) between the HHA market basket 
increase and IPPS market basket increase is the result of the 
differences in the inputs that HHAs and IPPS hospitals purchase to 
provide medical care services and the expected price changes associated 
with those inputs. For instance, IPPS hospitals tend to employ a staff 
with a higher skill mix (with the price growth associated with that 
skill mix tending to grow slightly more rapidly). Likewise, a 
significant share of hospital costs is dedicated to prescription drug 
expenses (a category that is projected to experience relatively higher 
price growth in the coming year).
2. Home Health Care Quality Reporting Program
a. Background and Quality Reporting Requirements
    Section 1895(b)(3)(B)(v)(II) of the Act states that ``each home 
health agency shall submit to the Secretary such data that the 
Secretary determines are appropriate for the measurement of health care 
quality. Such data shall be submitted in a form and manner, and at a 
time, specified by the Secretary for purposes of this clause.'' In 
addition, section 1895(b)(3)(B)(v)(I) of the Act dictates that ``for 
2007 and each subsequent year, in the case of a HHA that does not 
submit data to the Secretary in accordance with subclause (II) with 
respect to such a year, the HH market basket percentage increase 
applicable under such clause for such year shall be reduced by 2 
percentage points.'' This requirement has been codified in regulations 
at Sec.  484.225(i). HHAs that meet the quality data reporting 
requirements would be eligible for the full home health market basket 
percentage increase. HHAs that do not meet the reporting requirements 
would be subject to a 2 percent reduction to the home health market 
basket increase.
b. OASIS Data
    Accordingly, for CY 2012, we proposed to continue to use a HHA's 
submission of OASIS data as one form of quality data to meet the 
requirement that the HHA submit data appropriate for the measurement of 
health care quality. We proposed for CY 2012 to consider OASIS 
assessments submitted by HHAs to CMS in compliance with HHA Conditions 
of Participation and Conditions for Payment for episodes beginning on 
or after July 1, 2010 and before July 1, 2011 as fulfilling one portion 
of the quality reporting requirement for CY 2012. This time period 
would allow 12 full months of data collection and would provide us the 
time necessary to analyze and make any necessary payment adjustments to 
the payment rates for CY 2012. We proposed to reconcile the OASIS 
submissions with claims data to verify full compliance with the OASIS 
portion of the quality reporting requirements in CY 2012 and each year 
thereafter on an annual cycle July 1 through June 30 as described 
above.
    As set forth in the CY 2008 final rule, agencies do not need to 
submit OASIS data for those patients who are excluded from the OASIS 
submission requirements under the Home Health Conditions of 
Participation (CoPs) Sec.  484.1-Sec.  484.265, as well as those 
excluded, as described at 70 FR 76202:
     Those patients receiving only nonskilled services;
     Those patients for whom neither Medicare nor Medicaid is 
paying for home health care (patients receiving care under a Medicare 
or Medicaid Managed Care Plan are not excluded from the OASIS reporting 
requirement);
     Those patients receiving pre- or post-partum services; or
     Those patients under the age of 18 years.
    As set forth in the CY 2008 HH PPS final rule (72 FR 49863), 
agencies that become Medicare-certified on or after May 1 of the 
preceding year (2011 for payments in 2012) are excluded from any 
payment penalty for quality reporting purposes for the following CY. 
Therefore, HHAs that are certified on or after May 1, 2011 are excluded 
from the quality reporting requirement for CY

[[Page 68575]]

2012 payments. These exclusions only affect quality reporting 
requirements and do not affect the HHA's reporting responsibilities 
under the Conditions of Participation and Conditions of Payment.
(1) OASIS Data and Annual Payment Update
    HHAs that submit OASIS data as specified above are considered to 
have met one portion of the quality data reporting requirements. 
Additional portions of the quality data reporting requirements are 
discussed below under sections D.2.c and D.2.d.
(2) OASIS Data and Public Reporting
    Section 1895(b)(3)(B)(v)(III) of the Act further states that 
``[t]he Secretary shall establish procedures for making data submitted 
under sub clause (II) available to the public. Such procedures shall 
ensure that a home health agency has the opportunity to review the data 
that is to be made public with respect to the agency prior to such data 
being made public.''
    To meet the requirement for making such data public, we proposed to 
continue using a subset of OASIS data that is utilized for quality 
measure development and reported on the Home Health Compare Web site. 
Currently, the Home Health Compare Web site lists 23 quality measures 
from the OASIS data set as described below. The Home Health Compare Web 
site, which was redesigned in October 2010, is located at http://www.medicare.gov/HHCompare/Home.asp. Each HHA currently has pre-
publication access, through the CMS contractor, to its own quality data 
that the contractor updates periodically. We proposed to continue this 
process, to enable each agency to view its quality measures before 
public posting of data on Home Health Compare.
    The following 13 OASIS-C process measures have been publicly 
reported on Home Health Compare since October 2010:
     Timely initiation of care.
     Influenza immunization received for current flu season.
     Pneumococcal polysaccharide vaccine ever received.
     Heart failure symptoms addressed during short-term 
episodes.
     Diabetic foot care and patient education implemented 
during short-term episodes of care.
     Pain assessment conducted.
     Pain interventions implemented during short-term episodes.
     Depression assessment conducted.
     Drug education on all medications provided to patient/
caregiver during short-term episodes.
     Falls risk assessment for patients 65 and older.
     Pressure ulcer prevention plans implemented.
     Pressure ulcer risk assessment conducted.
     Pressure ulcer prevention included in the plan of care.
    We published information about these new process measures in the 
Federal Register in the CY 2010 HH PPS proposed and final rules (74 FR 
40960 and 74 FR 58096, respectively), and in the CY 2011 HH PPS 
proposed and final rules (75 FR 43250 and 75 FR 70401, respectively). 
We proposed and finalized the decision to update Home Health Compare in 
October 2010 to reflect the addition of the process measures.
    We proposed to continue publicly reporting these 13 process 
measures and consider them as measures of home health quality.HERE
    The following 10 OASIS-C outcome measures are currently listed on 
Home Health Compare:
     Improvement in ambulation/locomotion.
     Improvement in bathing.
     Improvement in bed transferring.
     Improvement in management of oral medications.
     Improvement in pain interfering with activity.
     Acute care hospitalization.
     Emergency Department Use Without Hospitalization.
     Improvement in dyspnea.
     Improvement in status of surgical wounds.
     Increase in number of pressure ulcers.

As proposed and finalized in the CY 2011 HH PPS final rule (75 FR 
70401), these OASIS-C outcome measure calculations were publicly 
reported for the first time in July 2011.
(3) Transition From OASIS-B1 to OASIS-C
    The implementation of OASIS-C on January 1, 2010 impacted the 
schedule of quality measure reporting for CY 2010 and CY 2011. Although 
sufficient OASIS-C data were collected during CY 2010 and early CY 2011 
and risk models were in development, the outcome reports (found on Home 
Health Compare and the contractor outcome reports used for HHA's 
performance improvement activities) remained static with OASIS-B1 data. 
The last available OASIS-B1 reports remained in the system and on the 
Home Health Compare site until they could be replaced with OASIS-C 
reports. Sufficient numbers of patient episodes were needed to report 
measures based on new OASIS-C data. This is important because measures 
based on patient sample sizes taken over short periods of time can be 
inaccurate and misleading due to issues like seasonal variation and 
under-representation of long-stay home health patients. Once sufficient 
OASIS-C data were collected and submitted to CMS's national repository, 
we could begin producing new reports based on OASIS-C.
    December 2009 was the last month for which outcome data were 
calculated for OASIS-B1 data and OASIS-B1 CASPER outcome reports 
continued to be available after March 2010. OASIS-C process measures 
were made available to preview in September 2010 and were publicly 
reported in October 2010. OASIS-C outcome measures were made available 
to preview in June 2011 and were publicly reported in July 2011.
c. Claims Data, Requirements, and Outcome Measure Change
    We proposed to continue to use the aforementioned specified 
measures derived from the OASIS-C data for purposes of measuring home 
health care quality. We proposed to also use measures derived from 
Medicare claims data to measure home health quality. This would also 
ensure that providers would not have an additional burden of reporting 
quality of care measures through a separate mechanism, and that the 
costs associated with the development and testing of a new reporting 
mechanism would be avoided.
    The change to OASIS-C brought about modifications to the OASIS-B1 
measure ``Emergent Care,'' and resulted in the following change to that 
measure:
     Emergency Department Use without Hospitalization: This 
measure replaces the previously reported measure: Emergent care. It 
excludes emergency department visits that result in a hospital 
admission because those visits are already captured in the acute care 
hospitalization measure.
    Upon review of actual claims data for emergency department visits 
and responses to OASIS-C data item M2300, we determined that the claims 
data are a more robust source of data for this measure, therefore the 
OASIS-based measure ``Emergency Department (ED) Use Without 
Hospitalization'' was not publicly reported effective July 2011. The ED 
Use Without Hospitalization measure will be recalculated from claims 
data and we proposed that public reporting of the claims-based measure 
would begin January 2012. We invited comment on the proposed use of 
claims data in the calculation of home health quality measures and as 
an additional measurement of home health quality.

[[Page 68576]]

    To summarize, we proposed that the following 13 process and 9 
outcome measures, which comprise measurement of home health care 
quality, would continue to be publicly reported in July 2011 and 
quarterly thereafter:
     Timely initiation of care.
     Influenza immunization received for current flu season.
     Pneumococcal polysaccharide vaccine ever received.
     Heart failure symptoms addressed during short-term 
episodes.
     Diabetic foot care and patient education implemented 
during short-term episodes of care.
     Pain assessment conducted,
     Pain interventions implemented during short-term episodes.
     Depression assessment conducted.
     Drug education on all medications provided to patient/
caregiver during short-term episodes.
     Falls risk assessment for patients 65 and older.
     Pressure ulcer prevention plans implemented.
     Pressure ulcer risk assessment conducted.
     Pressure ulcer prevention included in the plan of care.
     Improvement in ambulation/locomotion.
     Improvement in bathing.
     Improvement in bed transferring.
     Improvement in management of oral medications.
     Improvement in pain interfering with activity.
     Acute care hospitalization.
     Improvement in dyspnea.
     Improvement in status of surgical wounds.
     Increase in number of pressure ulcers.

We proposed that the claims-based measure ``Emergency Department Use 
without Hospitalization'' would be publicly reported in January 2012.

Increase in Number of Pressure Ulcers Measure

    We did not receive any comment related to the Increase in Number of 
Pressure Ulcers measure. However, as a part of our measure maintenance 
process which was ongoing at the time of the proposed rule, we 
determined that the rates for this measure do not distinguish between 
poor performance and good performance and the risk adjustment model for 
this measure is insufficient. For these reasons, we will not finalize 
this measure for public reporting.
    The following is summary of the comments we received regarding the 
Home Health Care Quality Improvement: OASIS proposal.
    Comment: We received a total of 11 comments pertaining to the home 
health quality reporting program, OASIS section. Ten of those comments 
were supportive of the proposal for continued use of the OASIS based 
process and outcome measures, as well as the use of claims based data 
when claims data are applicable and not burdensome to collect. The 
Emergency Department Use without Hospitalization and the Acute Care 
Hospitalization measures were specifically noted by commenters as 
measures for which claims would be more precise and readily available 
data sources. One commenter requested further clarification of what 
data CMS will use to calculate this quality measure (for example, how 
would observation stays be calculated after a planned procedure and how 
would the agency monitor the timing of when the last OASIS assessment 
was completed as compared to when the ER visit occurred?). Addition of 
a claims-based measure related to observation stays was also suggested.
    Response: We appreciate the positive feedback supporting the 
proposed use of OASIS process and outcome measures and particularly 
those comments supporting the addition of claims as a data source. In 
response to the request for further clarification, CMS is still working 
with the measure developer to determine the precise specifications for 
the claims-based measure of Emergency Department Use Without 
Hospitalization. The specific disposition of observation stays is 
undetermined. Details of the measure specifications will be provided 
when finalized.
    Comment: We received one comment expressing confusion regarding the 
use of claims data, expressing concern that slow claims filing might 
potentially impact the accuracy of the ED Use Without Hospitalization 
measure, noting that using the same data base for all measures makes 
more sense and stating that the fact that CMS has concerns about the 
reliability of OASIS data for one measure suggests concern about the 
reliability of OASIS data overall. This commenter recommends that CMS 
abandon the proposal to substitute hospital claims data as the source 
for the ED Use Without Hospitalization measure.
    Response: In this response, we intend to clarify the reason for use 
of claims data for the ED Use Without Hospitalization measure. OASIS 
item M2300 asks: ``Since the last time OASIS data were collected, has 
the patient utilized a hospital emergency department?'' OASIS data is 
not collected on every home health visit, and M2300 is reported only at 
the time of transfer or discharge. CMS contractors compared responses 
on OASIS item M2300 to submitted outpatient claims for ER visits for 
continuously enrolled Medicare fee-for-service beneficiaries who had a 
home health stay of less than 60 days during 2010. This analysis showed 
that only 25 percent of outpatient ER visits were correctly reported on 
item M2300, implying that a measure of emergency department use without 
hospitalization calculated from M2300 is unreliable. Although there is 
a delay in receiving outpatient claims, 90 percent of outpatient claims 
are received within 2 months of service date and thus utilization 
measures calculated from claims can be reported for the same periods as 
measures calculated from OASIS data. Additionally, as CMS relies on 
submitted outpatient claims for payment purposes, these data are 
already extensively verified.
    Using a single database as the source of all measures is not the 
best approach. It is not feasible to do so because the data collected 
on ED Use Without Hospitalization via OASIS is not reliable and 
enhancing the reliability of this data may impose undue burden on 
providers. The benefits of reliable data outweigh the slight 
complication of drawing quality data from two sources.
    The problem with item M2300 does not necessarily imply there may be 
problems with other OASIS items. Other OASIS items involve a home 
health practitioner reporting direct observation of the patient. M2300, 
however, asks for information that the home health practitioner does 
not directly observe. The decision to visit the emergency room is 
typically made by the patient or by the patient's family or other 
primary care-giver. The HHA's knowledge that an emergency department 
visit occurred is dependent on the patient or caregiver informing the 
HHA about the event.
    Reliance on Medicare outpatient claims is considerably less 
burdensome to HHAs than requiring additional investigation of potential 
emergency department visits. The claims-based measure is still under 
development and will be thoroughly tested and validated prior to public 
reporting. As a result of the comments and ongoing evaluation of the 
proposed measures, we finalize all as we proposed with these 
exceptions:
     Public reporting of the claims-based ED Use Without 
Hospitalization measure will begin as early as January 2012, contingent 
on the measure's readiness for public reporting; and
     The Increase in Number of Pressure Ulcers measure will no 
longer be publicly reported effective as early as October 2011.

[[Page 68577]]

d. Home Health Care CAHPS Survey (HHCAHPS)
    In the CY 2011HH PPS final rule Rate Update for (75 FR 70404 et 
seq.), we stated that the expansion of the HH quality measures 
reporting requirements for Medicare-certified agencies will include the 
Consumer Assessment of Healthcare Providers and Systems (CAHPS[supreg]) 
Home Health Care (HHCAHPS) Survey for the CY 2012 annual payment update 
(APU). We are maintaining our existing policy as issued in the CY 2011 
HH PPS Rate Update, and moved forward to have HHCAHPS linkage to the 
pay-for-reporting (P4R) requirements affecting the HH PPS rate update 
for CY 2012.
(1) Background and Description of HHCAHPS
    As part of the U.S. Department of Health and Human Services' (DHHS) 
Transparency Initiative, we have implemented a process to measure and 
publicly report patient experiences with home health care using a 
survey developed by the Agency for Healthcare Research and Quality's 
(AHRQ's) CAHPS[supreg] program, and endorsed by the National Quality 
Forum (NQF). The HHCAHPS survey is part of a family of CAHPS[supreg] 
surveys that asks patients to report on and rate their experiences with 
health care. The Home Health Care CAHPS (HHCAHPS) survey presents home 
health patients with a set of standardized questions about their home 
health care providers and about the quality of their home health care. 
Prior to this survey, there was no national standard for collecting 
information about patient experiences that would enable valid 
comparisons across all HHAs. The history of the HHCAHPS has been given 
in previous rules, but it also available on our Web site at https://homehealthcahps.org and also, in the HHCAHPS Protocols and Guidelines 
Manual, which is downloadable from our Web site.
    For public reporting purposes, we will report five measures--three 
composite measures and two global ratings of care from the questions on 
the HHCAHPS survey. The publicly reported data will be adjusted for 
differences in patient mix across HHAs. We anticipate that HHCAHPS will 
first be publicly reported in April 2012 on Home Health Compare on 
http://www.medicare.gov. For the HHCAHPS reported measures, each 
composite measure consists of four or more questions regarding one of 
the following related topics:
     Patient care (Q9, Q16, Q19, and Q24);
     Communications between providers and patients (Q2, Q15, 
Q17, Q18, Q22, and Q23);
     Specific care issues on medications, home safety, and pain 
(Q3, Q4, Q5, Q10, Q12, Q13, and Q14);
    The two global ratings are the overall rating of care given by the 
HHA's care providers, and the patient's willingness to recommend the 
HHA to family and friends.
    The HHCAHPS survey is currently available in six languages. At the 
time of the CY 2010 HH PPS final rule, HHCAHPS was only available in 
English and Spanish. In the proposed rule for CY 2010, we stated that 
we would provide additional translations of the survey over time in 
response to suggestions for any additional language translations. We 
now offer HHCAHPS in English, Spanish, Mandarin (Simplified) Chinese, 
Cantonese (Classical) Chinese, Russian, and Vietnamese languages. We 
will continue to consider additional translations of the HHCAHPS in 
response to the needs of the home health patient population.
    All of the requirements about eligibility for HHCAHPS and 
conversely, which home health patients are ineligible for HHCAHPS are 
delineated and detailed in the HHCAHPS Protocols and Guidelines Manual 
which is downloadable from the official Home Health Care CAHPS Web site 
https://homehealthcahps.org. To be eligible, home health patients must 
have received at least two skilled home health visits in the past 2 
months, paid for by Medicare or Medicaid. HHCAHPS surveys will not be 
taken from patients who are:
     Under the age of 18;
     Deceased;
     Receiving hospice care;
     Receiving routine maternity care only;
     Living in a State that restricts the release of patient 
information for a specific condition or illness that the patient has; 
or are
     Requesting that their names not be released to anyone.
    We stated in previous rules that Medicare-certified agencies are 
required to contract with an approved HHCAHPS survey vendor. Beginning 
in summer 2009, interested vendors applied to become approved HHCAHPS 
survey vendors. HHCAHPS survey vendors are required to attend 
introductory and all update trainings conducted by CMS and the HHCAHPS 
Survey Coordination Team, as well as to pass a post-training 
certification test. We now have approximately 40 approved HHCAHPS 
survey vendors. The list of approved vendors is available at https://homehealthcahps.org.
(2) HHCAHPS Requirements for CY 2012
    In the CY 2010 HH PPS final rule (74 FR 58078 et seq.), we stated 
that HHCAHPS would not be required for the APU for CY 2011. We did this 
so that HHAs would have more time to prepare for the implementation of 
HHCAHPS. Therefore, in the CY 2010 HH PPS final rule, we stated that 
data collection should take place beginning in the third quarter of CY 
2010 to meet the HHCAHPS reporting requirements for the CY 2012 APU. In 
the CY 2010 HH PPS final rule, and in the CY 2011 HH PPS final rule, we 
stated that Medicare-certified agencies would be required to 
participate in a dry run for at least 1 month in third quarter of 2010 
(July, August, and/or September), and to begin continuous monthly data 
collection in October 2010 through March 2011, for the CY 2012 APU. The 
dry run data were due to the Home Health CAHPS[supreg] Data Center by 
11:59 p.m., Eastern standard time (e.s.t.) on January 21, 2011. The dry 
run data will not be publicly reported on the CMS Home Health Compare 
Web site. The purpose of the dry run was to provide an opportunity for 
vendors and HHAs to acquire first-hand experience with data collection, 
including sampling and data submission to the Home Health Care CAHPS 
Data Center.
    In the CY 2011 HH PPS final rule, it was stated that the mandatory 
period of data collection for the CY 2012 APU would include the dry run 
data in the third quarter 2010 that were due 11:59 p.m., e.s.t., on 
January 21, 2011, data from each month in the fourth quarter of 2010 
(October, November and December 2010), and data from each month in the 
first quarter 2011 (January, February and March 2011). We previously 
stated that all Medicare-certified HHAs should continuously collect 
HHCAHPS survey data for every month in every quarter beginning October 
2010, and submit these data for the fourth quarter of 2010 to the Home 
Health CAHPS Data Center by 11:59 p.m., Eastern Daylight Time (e.d.t.), 
on April 21, 2011. In the CY 2011 HH PPS final rule, we stated that the 
data collected for the 3 months of the first quarter 2011 would have to 
be submitted to the Home Health CAHPS Data Center by 11:59 p.m., 
e.d.t., on July 21, 2011. We also stated that these data submission 
deadlines would be firm (that is, no late submissions would be 
accepted). HHAs must monitor their HHCAHPS survey vendors to ensure 
that their HHCAHPS data are submitted

[[Page 68578]]

on time to the Home Health Care CAHPS Data Center. HHAs can access and 
review their data submission reports on https://homehealthcahps.org, 
and follow the directions on how to access these reports in their HHA 
account.
    These periods (a dry run in third quarter 2010, and 6 months of 
data from October 2010 through March 2011) were deliberately chosen to 
comprise the HHCAHPS reporting requirements for the CY 2012 APU because 
they coincided with the OASIS-C reporting requirements that would 
already have been due on June 30, 2011 for the CY 2012 APU. We also 
exempted Medicare-certified agencies from the HHCAHPS reporting 
requirements if they had fewer than 60 HHCAHPS-eligible unique patients 
from April 1, 2009 through March 31, 2010. In the CY 2011 HH PPS final 
rule, we stated that by January 21, 2011 HHAs would need to provide CMS 
with patient counts for the period of April 1, 2009 through March 31, 
2010. We posted a form on https://homehealthcahps.org that the HHAs 
needed to use to submit their patient counts. This patient counts 
reporting requirement pertains only to Medicare-certified HHAs with 
fewer than 60 HHCAHPS eligible, unduplicated or unique patients for 
that time period. The aforementioned agencies are exempt from 
conducting the HHCAHPS survey for the APU in CY 2012.
    We stated in the CY 2010 HH PPS final rule (74 FR 58078) and in the 
CY 2011 HH PPS final rule that we would exempt newly Medicare-certified 
HHAs. If an HHA became Medicare-certified April 1, 2010 and after, then 
they would be exempt from participating in HHCAHPS.
    For CY 2012, we maintain our policy that all HHAs, unless covered 
by specific exclusions, must meet the quality reporting requirements or 
be subject to a two (2) percentage point reduction in the HH market 
basket percentage increase, in accordance with section 
1895(b)(3)(B)(v)(I) of the Act.
(3) HHCAHPS Reconsiderations and Appeals Process
    We stated in the CY 2011 HH PPS final rule that we would propose a 
reconsiderations and appeals process for HHAs not meeting the HHCAHPS 
reporting requirements for CY 2012. We are finalizing our proposed 
reconsiderations and appeals process for HHAs that fail to meet the 
HHCAHPS data collection requirements. HHAs that are not compliant with 
OASIS-C and/or HHCAHPS reporting requirements for the CY 2012 APU were 
notified that they were noncompliant with CY 2012 quality reporting 
requirements. We issued a Joint Signature Memorandum to RHHIs/MACs with 
a list of HHAs not compliant with OASIS and/or HHCAHPS (TDL-aa453, 08-
26-2011 in a CMS Memorandum dated September 2, 2011). The September 
Memorandum included language regarding the evidence required for the 
reconsideration process, how to prepare a request for reconsideration 
of the CMS decision, and that HHAs will have 30 days to file their 
requests for reconsiderations to CMS. We will examine each request and 
make a determination about whether we plan to uphold our original 
decision. HHAs will receive CMS' reconsideration decision by December 
31, 2011. HHAs have a right to appeal under 42 CFR part 405, subpart R, 
to the Provider Reimbursement Review Board (PRRB) if they were not 
satisfied with the CMS reconsideration determination.
    The CMS Memorandum dated September 2, 2011 included the TDL-11353, 
and was published in the CMS Manual System, Medicare Claims Processing. 
The CMS Memorandum was sent to Fiscal Intermediaries (FIs), Regional 
Home Health Intermediaries (RHHIs) and/or Carriers. The RHHIs/MACs 
verified the claims submissions for the identified timeframe for the 
2012 APU period, to confirm that the claims match the HHAs we 
identified as noncompliant with OASIS and HHCAHPS. The RHHIs/MACs 
identified and notified the HHAs that they could lose 2 percent of 
their 2012 APU, and provided them with instructions on how to request 
reconsideration of their noncompliant status in respect to reporting 
OASIS and/or HHCAHPS for the CY 2012 APU. If HHAs choose to seek 
reconsideration of the CMS decision (that they did not fulfill the 
HHCAHPS reporting requirements), then HHAs are strongly advised to 
access and review their data submissions reports on https://homehealthcahps.org for information regarding their vendors data 
submission activities for the months comprising the APU period. The 
RHHIs/MACS will forward the HHAs requests for reconsideration of their 
noncompliance status for HHCAHPS and/or OASIS reporting requirements to 
CMS on a flow basis so that CMS can review and prepare recommendations 
for cross component review. The HHAs would be informed about CMS' final 
decisions by December 31, 2011.
(4) HHCAHPS Oversight Activities
    We stated in the CY 2011 HH PPS final rule that vendors and HHAs 
are required to participate in HHCAHPS oversight activities to ensure 
compliance with HHCAHPS protocols, guidelines, and survey requirements. 
The purpose of the oversight activities is to ensure that HHAs and 
approved survey vendors follow the HHCAHPS Protocols and Guidelines 
Manual. As stated, all approved survey vendors must develop a Quality 
Assurance Plan (QAP) for survey administration in accordance with the 
HHCAHPS Protocols and Guidelines Manual. The first QAP must be 
submitted within 6 weeks of the data submission deadline after the 
vendor's first quarterly data submission. The HHCAHPS Coordination Team 
reviews the QAPs and recommends specific revisions. HHCAHPS survey 
vendors must revise their QAP until it is fully satisfactory to the 
HHCAHPS Coordination Team. Once the vendor has a fully acceptable QAP, 
the vendor will submit subsequent updated QAPs to the HHCAHPS 
Coordination Team on an annual basis thereafter, or update the QAP at 
any time that changes occur in staff, vendor capabilities, or systems. 
A model QAP is included in the HHCAHPS Protocols and Guidelines Manual. 
The QAP should include the following:
     Organizational Background and Staff Experience.
     Work Plan.
     Sampling Plan.
     Survey Implementation Plan.
     Data Security, Confidentiality and Privacy Plan.
     Questionnaire Attachments.
    As part of the oversight activities, the HHCAHPS Survey 
Coordination Team conducts on-site visits to the HHCAHPS vendors. The 
purpose of the site visits is to allow the HHCAHPS Coordination Team to 
observe the entire Home Health Care CAHPS Survey implementation 
process, from the sampling stage through file preparation and 
submission, as well as to assess how the HHCAHPS data are stored. The 
HHCAHPS Survey Coordination Team reviews the survey vendor's survey 
systems, and assesses administration protocols based on the HHCAHPS 
Protocols and Guidelines Manual posted at https://homehealthcahps.org. 
The HHCAHPS Survey Coordination Team includes the CMS staff assigned to 
work on HHCAHPS, and the Federal contractor for the HHCAHPS 
implementation. HHCAHPS survey vendors are not part of the HHCAHPS 
Survey Coordination Team. The systems and program review include, but 
are not limited, to the following:
     Survey management and data systems;
     Printing and mailing materials facilities;

[[Page 68579]]

     Telephone call center facilities;
     Data receipt, entry and storage facilities; and
     Written documentation of survey processes.
    After the site visits, HHCAHPS survey vendors are given a defined 
time period in which to correct any identified issues and provide 
follow-up documentation of corrections for review. In general, the 
defined time periods will be between 2 weeks to 1 month after these 
issues are stated in the HHCAHPS Coordination Team's site visit report 
to the HHCAHPS survey vendor. HHCAHPS survey vendors will be subject to 
follow-up site visits as needed.
(5) HHCAHPS Requirements for CY 2013
    For the CY 2013 APU, HHCAHPS data collection and reporting are 
required for four continuous quarters. The data collection period 
includes second quarter 2011 through first quarter 2012. HHCAHPS survey 
vendors acting on behalf of their contracted HHAs are required to 
submit HHCAHPS data files quarterly to the Home Health CAHPS Data 
Center on October 21, 2011, January 23, 2012, April 19, 2012, and July 
19, 2012.
    For the CY 2013 APU, HHAs will be required to submit their HHCAHPS 
data files to the Home Health CAHPS Data Center for CY 2013 as follows: 
The data for the second quarter 2011 by 11:59 p.m., e.d.t., on October 
21, 2011; the data for the third quarter 2011 by 11:59 p.m., e.s.t., on 
January 23, 2012; the data for the fourth quarter 2011 by 11:59 p.m., 
e.d.t., on April 19, 2012; and the data for the first quarter 2012 by 
11:59 p.m., e.d.t., on July 19, 2012. Beginning with April 2012 
quarterly data submissions and moving forward, HHCAHPS quarterly data 
submissions will always be the third Thursday of the month (in the 
months of April, July, October, and January). HHAs must monitor their 
HHCAHPS survey vendors to ensure that their HHCAHPS data is submitted 
on time to the Home Health Care CAHPS Data Center. HHAs can access and 
review their data submission reports on https://homehealthcahps.org, 
and follow the directions on how to access these reports on their HHA 
account.
    HHAs that have fewer than 60 HHCAHPS-eligible unduplicated or 
unique patients in the period of April 1, 2010 through March 31, 2011 
are exempt from the HHCAHPS data collection and submission requirements 
for the CY 2013 APU. For the CY 2013 APU, agencies with fewer than 60 
HHCAHPS-eligible, unduplicated or unique patients are required to 
submit their counts on the Participation Exemption Request form posted 
at https://homehealthcahps.org by 11:59 p.m., e.d.t., on April 19, 
2012. This deadline is firm, as are all of the HHCAHPS quarterly data 
submission deadlines.
    HHAs receiving Medicare certification on or after April 1, 2011 are 
exempt from the HHCAHPS data collection and submission requirements for 
the CY 2013 APU, because these HHAs were not Medicare-certified in the 
period of April 1, 2010 and March 31, 2011.
(6) HHCAHPS Codified Criteria
    The following criteria from the CY 2011 HH PPS final rule are now 
revised so that the requirements for OASIS and Home Health CAHPS are 
clearly distinguishable in the Federal regulations. We are revising 
this section to clarify that HHCAHPS is associated with the APU 
described at Sec.  484.225(i) and the quality reporting requirements, 
and not with other payment requirements.
    In the CY 2011 HH PPS final rule (75 FR 70465), we stated for Sec.  
484.250, Patient Assessment Data, that ``An HHA must submit to CMS the 
OASIS-C data described at Sec.  484.55(b)(1) and Home Health Care CAHPS 
data for CMS to administer the payment rate methodologies described in 
Sec.  484.215, Sec.  484.230, and Sec.  484.235 of this subpart, and 
meet the quality reporting requirements of section 1895(b)(3)(B)(v) of 
the Act.''
    We are revising this section to clarify that HHCAHPS is only 
associated with the APU described at Sec.  484.225(i) and the quality 
reporting requirements, and not with other payment requirements.
(7) HHCAHPS Requirements for CY 2014
    For the CY 2014 APU, HHCAHPS data collection and reporting is 
required for four continuous quarters. The data collection period 
includes the second quarter 2012 through the first quarter 2013. HHAs 
are required to submit their HHCAHPS data files to the Home Health 
CAHPS Data Center the third Thursday of the month for the months of 
October 2012, January 2013, April 2013 and July 2013. HHAs are required 
to submit their HHCAHPS data files to the Home Health CAHPS Data Center 
for CY 2014 as follows: For the second quarter 2012 by 11:59 p.m., 
e.d.t., on October 18, 2012; for the third quarter 2012 by 11:59 p.m., 
e.s.t., on January 17, 2013; for the fourth quarter 2012 by 11:59 p.m., 
e.d.t., on April 18, 2013; and for the first quarter 2013 by 11:59 
p.m., e.d.t., on July 18, 2013. HHAs must monitor their HHCAHPS survey 
vendors to ensure that their HHCAHPS data is submitted on time to the 
Home Health Care CAHPS Data Center. HHAs can access and review their 
data submission reports on https://homehealthcahps.org, and follow the 
directions on how to access these reports on their HHA account.
    As noted, we exempt HHAs receiving Medicare certification on or 
after April 1, 2012 from the HHCAHPS data collection and submission 
requirements for the CY 2014 APU, as data submission and analysis will 
not be possible for an agency that late in the reporting period for the 
CY 2014 APU requirements.
    As noted, all HHAs that have fewer than 60 HHCAHPS-eligible 
unduplicated or unique patients in the period of April 1, 2011 through 
March 31, 2012 are exempt from the HHCAHPS data collection and 
submission requirements for the CY 2014 APU. For the CY 2014 APU, 
agencies with fewer than 60 HHCAHPS-eligible, unduplicated or unique 
patients are required to submit their counts on the Participation 
Exemption Request form posted on https://homehealthcahps.org by 11:59 
p.m., e.d.t., on April 18, 2013. This deadline is firm, as are all of 
the HHCAHPS quarterly data submission deadlines.
(8) For Further Information on the HHCAHPS Survey
    We strongly encourage HHAs interested in learning about the survey 
to view the official Web site for the HHCAHPS at https//
homelhealthcahps.org. HHAs can also send an email to the HHCAHPS Survey 
Coordination Team at [email protected]. or telephone toll-free (1-(866) 
354-0985) for more information about HHCAHPS.
    The following is summary of the comments we received regarding the 
HHCAHPS proposal.
    Comment: We received several comments about the proposed 
reconsiderations and appeals process. We were urged not to have the 
process be burdensome to HHAs.
    Response: We agree that the process should not be burdensome to 
HHAs. We have modeled the HHCAHPS reconsiderations and appeals process 
after the one that is used for Hospital CAHPS, which has been in use 
for 6 years. We have described the HHCAHPS requirements in the 
notification memo that the RHHIs/MACs will be sending to the affected 
HHAs, on behalf of CMS. We believe that the HHAs will have enough time 
to prepare their reconsideration appeal to CMS within

[[Page 68580]]

30 days. CMS will fully examine every reconsideration request.
    Comment: We received comments that there are several variables that 
may result in the collection of inaccurate HHCAHPS data that are beyond 
the control of the HHA such as patient confusion on how to complete the 
survey or patient refusal to complete the survey.
    Response: We allow proxies to complete the HHCAHPS survey for home 
health patients who are unable to complete the survey on their own. 
Patient refusal to complete the survey does not result in the 
collection of inaccurate HHCAHPS data.
    As long as the HHCAHPS protocols are followed, HHAs will not be 
penalized. To meet the APU requirements, HHAs must follow the survey 
protocols, which allow for non-response and proxy response.
    Comment: We received comments that recommended that the results of 
the HHCAHPS vendor oversight activities be made available to HHAs so 
they can make informed decisions when selecting or changing their 
HHCAHPS vendors.
    Response: If a vendor has significant issues that would put HHAs at 
risk for not meeting the APU requirements, CMS will immediately alert 
the affected HHAs, thereby providing agencies with sufficient time to 
switch vendors and to ensure that the HHAs will not be penalized if 
their data collection activities are interrupted because of 
circumstances outside of their control. We would also note this next to 
the vendor name on the vendor list that is posted on https://homehealthcahps.org. If we find that a vendor does not comply with 
HHCAHPS protocols and guidelines, or correct in a timely manner any 
deficiencies that are found during oversight activities, then we will 
remove that vendor from the approved list.
    Comment: We received comments that recommended that CMS explicitly 
hold HHAs harmless for any failures of HHCAHPS vendors to comply with 
HHCAHPS protocols and guidelines.
    Response: We believe that HHAs must monitor their vendors to ensure 
that vendors submit data on time, by using the information that is 
available to them on the HHCAHPS Data Submission Reports. This will 
also ensure that data is submitted in the proper format, and will 
subsequently be successfully submitted to the HHCAHPS Data Center.
    Comment: We received comments that recommended that CMS provide 
clear instructions to HHAs on when and what information is appropriate 
for the HHA to share with its patients regarding the HHCAHPS survey. 
While we are aware that some of this information has been provided by 
HHCAHPS contractors, there is still some confusion among providers, and 
therefore, we believe that additional guidance from the Agency is 
warranted.
    Response: HHAs can say to clients that they may receive an HHCAHPS 
survey and that it is a legitimate survey that is implemented and 
sponsored by the Federal government. However, the HHAs should not give 
information that would coach the patients as to how to complete the 
HHCAHPS survey. Also, we are assuming that when the commenters wrote 
that ``we are aware that some of this information has been provided by 
HHCAHPS contractors'' that they were referring to the HHCAHPS survey 
vendors, which are not CMS contractors.
    Comment: We received comments of concern that the HHCAHPS data may 
be more subjective impressions of interpersonal relationships with 
staff than valid measures of clinical and administrative excellence. We 
would urge CMS to work more closely with the members of the home health 
community like us as the data begins to be compiled prior to public 
reporting to prevent possible misunderstanding of these measures by the 
public.
    Response: The HHCAHPS is not supposed to measure the aspects of 
clinical care that can be captured through a medical record. HHCAHPS 
focuses on areas where the patient is the best or only source for the 
information. We believe that the HHCAHPS is a valid measure of 
patient's perspectives of home health care. The developmental work on 
the Home Health Care CAHPS began in mid-2006, and the first survey was 
field-tested (to validate the length and content of the survey) in 2008 
by the AHRQ and the CAHPS grantees, and the final survey was used in a 
national randomized mode experiment in 2009 through 2010.
    A rigorous, scientific process was used in the development of the 
survey, including: A public Call for Measures; literature reviews; 
focus groups with HH patients; cognitive interviews (several rounds in 
2007) with HH patients; extensive stakeholder input; technical expert 
panel reviews in each phase of the developmental work; comprehensive 
assessment review and subsequent endorsement in March 2009 by the 
National Quality Forum. The NQF represents the consensus of many health 
care providers, consumer groups, professional associations, purchasers, 
Federal agencies and research and quality organizations); and public 
responses to Federal Register notices. The survey received OMB 
clearance in July 2009. Key stakeholders and home health experts have 
been regularly providing feedback to CMS about the draft HHCAHPS data 
displays and draft information that is being prepared for the display 
of HHCAHPS data that is being reported on Home Health Compare on http://www.medicare.gov in April 2012 and forward.
    Comment: We received comments that support the implementation of 
HHCAHPS because it will meaningfully reduce the incidence of improper 
home health service use and it will complement the changes approved by 
the Congress.
    Response: We appreciate supportive comments about HHCAHPS. The 
survey will provide an opportunity for patients to share their 
perspective about the care provided, and will complement the changes 
approved by the Congress to expand the quality measures and to increase 
transparency in home health.
    Comment: We received a comment that urged CMS to involve HHA 
representatives in the analysis of CAHPS to determine which measures 
are most appropriate for public reporting before posting them on 
Medicare Compare.
    Response: We are following the precedence of other CAHPS surveys 
that publicly report the data concerning health care providers. We 
tested and analyzed the individual questions and how they are best 
grouped together in the formative and developmental stages of the 
survey that included a national field test. The Technical Expert Panel 
and the public stakeholders for the Home Health Care CAHPS survey chose 
these measures after they reviewed the findings of the research 
grantees that tested the CAHPS survey in the field on behalf of the 
Federal government. The three composite measures and the two global 
overall ratings were chosen to best inform the public about the HHCAHPS 
results for national comparisons.
    Comment: We received a comment that the HHA should receive an 
administrative reimbursement to cover the costs of implementing 
HHCAHPS.
    Response: The collection of the patient's perspectives of care 
quality data for similar CAHPS surveys, such as the Hospital CAHPS 
survey, follow the same model where in the health care providers pay 
the approved survey vendors for the data collection costs and we pay 
for the training, technical assistance, oversight of vendors and data 
analysis costs. HHAs are strongly encouraged to report their respective 
HHCAHPS costs on their CRs but should note that these costs are not

[[Page 68581]]

reimbursable under the HH PPS. It is advised that HHAs ``shop around'' 
for the best cost value for them before contracting with an approved 
HHCAHPS vendor to conduct the survey on their behalf. The HHCAHP 
approved survey vendors list is on https://homehealthcahps.org.
    In summary, we are finalizing the HHCAHPS requirements for the CY 
2012 APU as proposed in the CY 2012 HH PPS proposed rule (76 FR 41051). 
There are no policy changes in HHCAHPS from the proposed rule to the 
final rule regarding HHCAHPS. The same requirements and deadlines stand 
as final. The HHCAHPS data submission due date for the CY 2012 APU are 
in the CY 2011 HH PPS final rule, and they mirror the dates that we 
stated in this CY 2012 HH PPS final rule. All data submission deadlines 
for HHCAHPS are posted on the official Web site for HHCAHPS, https://homehealthcahps.org.
    The periods of a dry run in the third quarter 2010, and monthly 
data collection beginning in October 2010 through March 2011, comprise 
the HHCAHPS reporting requirements for the CY 2012 APU. HHAs with 
patient counts of 59 or fewer patients for the period of April 1, 2009 
through March 31, 2010 are exempt from the HHCAHPS reporting 
requirements for the CY 2012 APU. HHAs that became Medicare-certified 
on April 1, 2010 or later are exempt from the HHCAHPS reporting 
requirements for the CY 2012 APU. Continuous monthly data collection is 
required for HHCAHPS, as the data collection period of April 2011 
through March 2012, comprise the data collection months for the CY 2013 
APU, and the data collection period of April 2012 through March 2013, 
comprise the data collection months for the CY 2014 APU.
3. Home Health Wage Index
    Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the 
Secretary to provide appropriate adjustments to the proportion of the 
payment amount under the HH PPS to account for area wage differences, 
using adjustment factors that reflect the relative level of wages and 
wage-related costs applicable to the furnishing of home health 
services. We apply the appropriate wage index value to the labor 
portion of the HH PPS rates based on the site of service for the 
beneficiary (defined by section 1861(m) of the Act as the beneficiary's 
place of residence). Previously, we determined each HHA's labor market 
area based on definitions of Metropolitan Statistical Areas (MSAs) 
issued by the Office of Management and Budget (OMB). We have 
consistently used the pre-floor, pre-reclassified hospital wage index 
data to adjust the labor portion of the HH PPS rates. We believe the 
use of the pre-floor, pre-reclassified hospital wage index data results 
in an appropriate adjustment to the labor portion of the costs, as 
required by statute.
    In the November 9, 2005 final rule for CY 2006 (70 FR 68132), we 
began adopting revised labor market area definitions as discussed in 
the Office of Management and Budget (OMB) Bulletin No. 03-04 (June 6, 
2003). This bulletin announced revised definitions for MSAs and the 
creation of Micropolitan Statistical Areas and Core-Based Statistical 
Areas (CBSAs). The bulletin is available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB 
published subsequent bulletins regarding CBSA changes, including 
changes in CBSA numbers and titles. This rule incorporates the CBSA 
changes published in the most recent OMB bulletin. The OMB bulletins 
are available at http://www.whitehouse.gov/omb/bulletins/index.html.
    Finally, we continue to use the methodology discussed in the CY 
2007 HH PPS final rule for (71 FR 65884) to address those geographic 
areas in which there are no Inpatient Prospective Payment System (IPPS) 
hospitals and, thus, no hospital wage data on which to base the 
calculation of the HH PPS wage index. For rural areas that do not have 
IPPS hospitals and, therefore, lack hospital wage data on which to base 
a wage index, we use the average wage index from all contiguous CBSAs 
as a reasonable proxy. Since CY 2007, this methodology has been used to 
calculate the wage index for rural Massachusetts. However, as indicated 
in the CY 2012 HH PPS proposed rule (76 FR 41019), there is now a rural 
IPPS hospital with wage data upon which to base a wage index for rural 
Massachusetts. Therefore, it is not necessary to apply this methodology 
to rural Massachusetts for CY 2012.
    For rural Puerto Rico, we do not apply this methodology due to the 
distinct economic circumstances that exist there, but instead continue 
using the most recent wage index previously available for that area 
(from CY 2005).
    For urban areas without IPPS hospitals, we use the average wage 
index of all urban areas within the State as a reasonable proxy for the 
wage index for that CBSA. At the time of the proposed rule, both CBSA 
49700, Yuba City, CA, and CBSA 25980, Hinesville-Fort Stewart, GA, did 
not have IPPS hospital wage data. However, for this final rule, Yuba 
City, CA now has IPPS hospital wage data. Therefore, the only urban 
area without IPPS hospital wage data is Hinesville-Fort Stewart, 
Georgia (CBSA 25980).
    The wage index values are available on the CMS Web site at http://www.cms.gov/HomeHealthPPS/HHPPSRN/list.asp.
    The following is summary of the comments we received regarding the 
home health wage index proposal.
    Comment: A commenter stated that the current method of adjusting 
labor costs using the hospital wage index does not accurately account 
for increased travel costs and lost productivity for time spent 
traveling to provide services in less densely populated/rural areas. 
The commenter believes that, pending development of an industry 
specific wage index, CMS should fully investigate the impact of 
population density on HHAs costs and efficiency. The commenter 
suggested that CMS add a population density factor by zip code during 
calculation of the labor portion of the payment to account for 
increased costs of providing services in less densely populated areas. 
This would provide an incentive to providers to serve patients in rural 
areas while at the same time reducing excess reimbursement for services 
provided in densely populated urban and congregate living facilities. 
The net result of the adjustment should be budget neutral or perhaps 
even result in a cost savings.
    Response: We do not have evidence that a population density 
adjustment is an appropriate adjustment to the wage index. Section 
3131(d) of the Affordable Care Act requires the Secretary to conduct a 
study on HHA costs involved with providing ongoing access to care to 
low-income beneficiaries in medically underserved areas, and in 
treating beneficiaries with varying levels of severity of illness. 
Because medically underserved areas may be associated with population 
density, the purview of the above mentioned study may possibly include 
feasibility of such an adjustment as part of that research. However, we 
note that in setting up the original HH PPS rates in 2000, we were not 
able to find any cost differences between rural and urban HHAs. While 
rural agencies cite the added cost of long distance travel to treat 
their patients, urban/non-rural agencies also cite added costs such as 
needed security measures and the volume of traffic that they must 
absorb. We will consider this suggestion in future research activities.
    Comment: One commenter disagreed with the CMS decision to switch 
from MSAs to CBSAs for the wage index calculation because it had a 
negative

[[Page 68582]]

financial impact on the commenter's geographic area. The commenter 
notes that more than half of the CBSAs in his State will experience a 
decrease in CY 2012.
    Response: We continue to believe that using OMB's CBSA designations 
reflect the most recent available geographic classifications and are a 
reasonable and appropriate way to define geographic areas for purposes 
of determining wage index values.
    Comment: Several commenters expressed concerns about inequities in 
how the wage index is calculated and implemented for HHAs as compared 
to hospitals within the same CBSA. The wage index for HHA's is based on 
pre-floor, pre-reclassified hospital wage data, but hospitals in the 
same geographic area have the ability to apply for reclassification and 
may be eligible for a rural floor wage index. The commenters state that 
this inequity has created a competitive advantage for hospitals in 
recruiting and retaining increasingly scarce nurses and therapists. Any 
wage index deviations available to hospitals should be equally 
available to other types of providers.
    Response: The regulations that govern the HH PPS currently do not 
provide a mechanism for allowing providers to seek geographic 
reclassification. As we have explained in past rulemaking (most 
recently, in the CY 2011 HH PPS final rule (75 FR 70411)), the rural 
floor and geographic reclassification in the IPPS are statutorily 
authorized and are only applicable to hospital payments. The rural 
floor provision is provided at section 4410 of the Balanced Budget Act 
of 1997 (Pub. L. 105-33) (BBA) and is exclusive to hospitals. The 
reclassification provision provided at section 1886(d)(10) of the Act 
is also specific to hospitals.
    Comment: One commenter stated that the hospitals in his area are 
CAHs and are cost reimbursed. The commenter stated that HHAs cannot 
offer competitive wages for caregivers who are paid higher and receive 
better benefits from CAHS in their same service area.
    Response: Section 1895(b)(4)(C) of the Act states that the wage 
adjustment factors used under the HH PPS may be the factors used by the 
Secretary for purposes of section 1886(d)(3)(E) of the Act. 
Accordingly, we continue to believe that the pre-floor/pre-reclassified 
hospice wage index continues to be the appropriate wage index used by 
the HH PPS.
    Comment: Several commenters recommended that CMS overhaul the 
entire wage index system, as recommended by MedPAC in its comments to 
CMS regarding the hospital wage index, to eliminate such inequities in 
the future. The commenters requested CMS to put a freeze on any wage 
index decreases. One commenter believes that the Affordable Care Act 
gives CMS the authority needed to issue the appropriate changes. 
However, the commenter did not support the institution of a new index 
model except when it applies in all provider sectors with whatever 
distinctions are appropriate to a provider's employment mix. Another 
commenter believes that the use of the hospital wage index to adjust 
non-hospital reimbursement rates was originally intended to be an 
interim measure while CMS examined industry-specific wage data for 
post-acute services.
    Response: As several commenters noted, we have research currently 
under way to examine alternatives to the wage index methodology, 
including the issues the commenters mentioned about ensuring that the 
wage index minimizes fluctuations, matches the costs of labor in the 
market, and provides for a single wage index policy. Section 3137 of 
the Affordable Care Act provides that the Secretary of Health and Human 
Services shall submit a report to the Congress by December 31, 2011, 
that includes a plan to reform the hospital wage index system. Section 
3137 of the Affordable Care Act further instructs the Secretary to take 
into account MedPAC's recommendations on the Medicare wage index 
classification system, and to include one or more proposals to revise 
the wage index adjustment applied under section 1886(d)(3)(E) of the 
Act for purposes of the IPPS. The proposal(s) are to consider each of 
the following:
     The use of Bureau of Labor Statistics data or other data 
or methodologies to calculate relative wages for each geographic area.
     Minimizing variations in wage index adjustments between 
and within MSAs and statewide rural areas.
     Methods to minimize the volatility of wage index 
adjustments while maintaining the principle of budget neutrality.
     The effect that the implementation of the proposal would 
have on health care providers in each region of the country.
     Issues relating to occupational mix, such as staffing 
practices and any evidence on quality of care and patient safety, 
including any recommendations for alternative calculations to the 
occupational mix.
     Provide for a transition.
    To assist us in meeting the requirements of section 106(b)(2) of 
the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432, enacted on 
December 20, 2006) (TRHCA), in February 2008, we awarded a Task Order 
under our Expedited Research and Demonstration Contract to Acumen, LLC. 
Acumen, LLC conducted a study of both the current methodology used to 
construct the Medicare wage index and the recommendations reported to 
the Congress by MedPAC. Parts 1 and 2 of Acumen's final report, which 
analyzes the strengths and weaknesses of the data sources used to 
construct the CMS and MedPAC indexes, is available online at http://www.acumenllc.com/reports/cms.
    MedPAC's recommendations were presented in the FY 2009 IPPS final 
rule (available online at http://edocket.access.gpo.gov/2008/pdf/E8-17914.pdf). We plan to monitor these efforts closely, and to determine 
what impact or influence they may have on the HH PPS wage index. At 
this time, we will continue to use the wage index policies and 
methodologies described in this final rule to adjust the HH PPS rates 
for differences in area wage levels. However, we will continue to 
monitor MedPAC and Acumen's progress on any revisions to the IPPS wage 
index to identify any policy changes that may be appropriate for HHAs 
and potential changes may be presented in a future proposed rule. The 
latest information on hospital wage index reform is discussed in the 
``Proposed Changes to the Hospital Inpatient Prospective Payment 
Systems for Acute Care Hospitals and the Long-Term Care Hospital 
Prospective Payment System and Fiscal Year 2012 Rates'' proposed rule, 
published in the May 5, 2011 Federal Register (76 FR 25788).
    Comment: Another commenter objects to the use of the pre-floor, 
pre-reclassified wage index for home health due to the inaccuracy of 
using a mix of hospital costs to measure home health labor costs. 
Problems with the errors and omissions in the hospital cost reporting 
method are well documented.
    Response: We utilize efficient means to ensure and review the 
accuracy of the hospital CR data and resulting wage index. The home 
health wage index is derived from the pre-floor, pre-reclassified 
hospital wage index which is calculated based on CR data from hospitals 
paid under the hospital IPPS. All IPPS hospitals must complete the wage 
index survey (Worksheet S-3, Parts II and III) as part of their 
Medicare CRs. Cost reports will be rejected if Worksheet S-3 is not 
completed. In addition, our intermediaries perform desk reviews on all 
hospitals'

[[Page 68583]]

Worksheet S-3 wage data, and we run edits on the wage data to further 
ensure the accuracy and validity of the wage data. Furthermore, HHAs 
have the opportunity to submit comments on the hospital wage index data 
during the annual IPPS rulemaking period. Therefore, we believe our 
review processes result in an accurate reflection of the applicable 
hospital wages for the areas given. We also believe the use of this 
hospital wage data results in an appropriate adjustment to the labor 
portion of the home health costs, as required by statute.
    Comment: A commenter stated that CMS exacerbates HH wage index 
disparities by changing the methodology used to address geographic 
areas in which there are no IPPS hospitals, and thus, no hospital wage 
data on which to base the calculation of the HH PPS wage index. For 
rural areas that do not have IPPS hospitals, CMS used the average wage 
index from all contiguous CBSAs as a reasonable estimate. This 
methodology was used to calculate the wage index for only one state, 
Massachusetts. It is well documented that two CAHs in Massachusetts 
converted back from CAH status even though doing so would not benefit 
them directly. By giving up their cost based reimbursement, these two 
hospitals increase the home health wage index in Massachusetts. Due to 
the budget neutral nature of this methodology, the HHAs in the other 49 
states will face a reduction in payments. The commenter requested that 
CMS re-evaluate the methodology used to calculate the wage index for 
rural areas that do not have IPPS hospitals such as was the case for 
the State of Massachusetts. The inequitable distribution of Medicare 
payments due to obvious manipulation by specific providers clearly 
represents preferential treatment.
    Response: By nature, the hospital wage index is constructed, in the 
aggregate, to average to 1.0. Therefore, the index is designed to be 
budget neutral in the sense that for areas where wage index values 
increase, those increases are offset by decreases in other areas. The 
hospital wage index is based on hospital cost data and hospital 
utilization, and thus, in the aggregate, when applied to HH utilization 
for the purposes of impacts, the average wage index value may not 
result to be exactly 1.0. For instance, as explained in the impact 
analysis section for this final rule, the new wage index will result in 
an estimated increase of $10 million in aggregate payments to HHAs in 
CY 2012.
    When there is an IPPS hospital in an area, we use the IPPS 
hospital(s) wage data to calculate the pre-floor, pre-reclassified 
hospital wage index which is used for the HH PPS wage index. In the CY 
2007 HH PPS final rule (71 FR 65905), we established a policy to 
address rural areas without an IPPS hospital. We use the average wage 
index from CBSAs which are contiguous to the rural area as an 
acceptable proxy for a rural wage index. Other post acute payment 
systems such as SNF and IRF adopted this policy as well. When an IPPS 
hospital emerges in an area that previously had none, our policy 
requires that we use the CR data from that hospital to compute that 
areas wage index.
    Comment: Beginning in FY 2004, excluding CAH data from the 
calculation of the hospital wage index affects the calculation of the 
HH Wage index. As CAHs are located in rural areas, the absence of CAH 
wage data further compromises the accuracy, and therefore, 
appropriateness, of using a hospital wage index to determine the labor 
costs of HHAs located in rural areas.
    Response: As stated above, beginning with the CY 2007 HH PPS final 
rule (71 FR 65905), we established a policy to address rural areas 
without an IPPS hospital. In that rule, we addressed commenters 
concerns with our former policy of using the last available rural wage 
index for those areas which no longer had an IPPS hospital. We outlined 
four alternatives for imputing a wage index for those rural areas. We 
believe that using the average wage index from CBSAs which are 
contiguous to the rural area as an acceptable proxy for a rural wage 
index is accurate and appropriate.
    Comment: One commenter noted that the wage index is subject to 
swings in area values that are far beyond manageable by providers. With 
a wage index reduction of over 10 points in some cases, it is 
impossible to sensibly budget a fiscal year, particularly when the 
index is not published until a few months before a calendar year. The 
commenter suggested that CMS apply limits on the decreases and 
increases that can occur from one year to the next with the wage index.
    Response: Updating the wage index must be done in a budget neutral 
manner. Establishing limits on how much a particular wage index could 
increase or decrease from one year to another would not be consistent 
with budget neutrality. Consequently, we implement updated versions of 
the wage index, in their entirety.
    Comment: A commenter is concerned that the wage index in his locale 
was proposed to decrease by 4.54 percent from CY 2011 to CY 2012.
    Response: The wage index values are based on hospital cost data. 
Consequently, increases and decreases in the wage index values are 
normal.
4. CY 2012 Annual Payment Update
a. National Standardized 60-Day Episode Rate
    The Medicare HH PPS has been in effect since October 1, 2000. As 
set forth in the July 3, 2000 final rule (65 FR 41128), the base unit 
of payment under the Medicare HH PPS is a national standardized 60-day 
episode rate. As set forth in Sec.  484.220, we adjust the national 
standardized 60-day episode rate by a case-mix relative weight and a 
wage index value based on the site of service for the beneficiary.
    In the CY 2008 HH PPS final rule with comment period, we refined 
the case-mix methodology and also rebased and revised the home health 
market basket. To provide appropriate adjustments to the proportion of 
the payment amount under the HH PPS to account for area wage 
difference, we apply the appropriate wage index value to the labor 
portion of the HH PPS rates. The labor-related share of the case-mix 
adjusted 60-day episode rate is 77.082 percent and the non-labor-
related share is 22.918 percent. The CY 2012 HH PPS rates use the same 
case-mix methodology and application of the wage index adjustment to 
the labor portion of the HH PPS rates as set forth in the CY 2008 HH 
PPS final rule with comment period. Following are the steps we take to 
compute the case-mix and wage adjusted 60-day episode rate:
    (1) Multiply the national 60-day episode rate by the patient's 
applicable case-mix weight.
    (2) Divide the case-mix adjusted amount into a labor (77.082 
percent) and a non-labor portion (22.918 percent).
    (3) Multiply the labor portion by the applicable wage index based 
on the site of service of the beneficiary.
    (4) Add the wage-adjusted portion to the non-labor portion, 
yielding the case-mix and wage adjusted 60-day episode rate, subject to 
any additional applicable adjustments.
    In accordance with section 1895(b)(3)(B) of the Act, this document 
constitutes the annual update of the HH PPS rates. The HH PPS 
regulations at Sec.  484.225 set forth the specific annual percentage 
update methodology. In accordance with Sec.  484.225(i), for a HHA that 
does not submit home health quality data, as specified by the 
Secretary, the unadjusted national

[[Page 68584]]

prospective 60-day episode rate is equal to the rate for the previous 
calendar year increased by the applicable home health market basket 
index amount minus two percentage points. Any reduction of the 
percentage change will apply only to the calendar year involved and 
will not be considered in computing the prospective payment amount for 
a subsequent calendar year.
    For CY 2012, we proposed to base the wage index adjustment to the 
labor portion of the HH PPS rates on the most recent pre-floor and pre-
reclassified hospital wage index. As discussed in the July 3, 2000 HH 
PPS final rule, for episodes with four or fewer visits, Medicare pays 
the national per-visit amount by discipline, referred to as a LUPA. We 
update the national per-visit rates by discipline annually by the 
applicable home health market basket percentage. We adjust the national 
per-visit rate by the appropriate wage index based on the site of 
service for the beneficiary, as set forth in Sec.  484.230. We proposed 
to adjust the labor portion of the updated national per-visit rates 
used to calculate LUPAs by the most recent pre-floor and pre-
reclassified hospital wage index. We also proposed to update the LUPA 
add-on payment amount and the NRS conversion factor by the applicable 
home health market basket update of 1.4 percent for CY 2012.
    Medicare pays the 60-day case-mix and wage-adjusted episode payment 
on a split percentage payment approach. The split percentage payment 
approach includes an initial percentage payment and a final percentage 
payment as set forth in Sec.  484.205(b)(1) and Sec.  484.205(b)(2). We 
may base the initial percentage payment on the submission of a request 
for anticipated payment (RAP) and the final percentage payment on the 
submission of the claim for the episode, as discussed in Sec.  409.43. 
The claim for the episode that the HHA submits for the final percentage 
payment determines the total payment amount for the episode and whether 
we make an applicable adjustment to the 60-day case-mix and wage-
adjusted episode payment. The end date of the 60-day episode as 
reported on the claim determines which calendar year rates Medicare 
would use to pay the claim.
    We may also adjust the 60-day case-mix and wage-adjusted episode 
payment based on the information submitted on the claim to reflect the 
following:
     A low utilization payment provided on a per-visit basis as 
set forth in Sec.  484.205(c) and Sec.  484.230.
     A PEP adjustment as set forth in Sec.  484.205(d) and 
Sec.  484.235.
     An outlier payment as set forth in Sec.  484.205(e) and 
Sec.  484.240.
    HH PPS payment rates are updated, annually, by the HH PPS payment 
update percentage. For CY 2012, the HH PPS payment update percentage is 
the CY 2012 home health market basket update percentage (2.4 percent) 
minus 1 percentage point (per the Affordable Care Act) for a CY 2012 HH 
PPS payment update percentage of 1.4 percent. For HHAs that do not 
submit the required quality data, the CY 2012 HH PPS payment update 
percentage (1.4 percent) is reduced by 2 percentage points for a CY 
2012 HH PPS payment update percentage (for HHAs that do not submit the 
required quality data) of -0.6 percent.
b. Updated CY 2012 National Standardized 60-Day Episode Payment Rate
    In calculating the annual update for the CY 2012 national 
standardized 60-day episode payment rates, we first look at the CY 2011 
rates as a starting point. The CY 2011 national standardized 60-day 
episode payment rate is $2,192.07. Next, we update that payment amount 
by the CY 2012 HH PPS payment update percentage of 1.4 percent.
    As previously discussed in section II.A. of this final rule 
(``Case-Mix Measurement''), our updated analysis of the change in case-
mix that is not due to an underlying change in patient health status 
reveals an additional increase in nominal change in case-mix. 
Therefore, we reduce rates by 3.79 percent in CY 2012, resulting in an 
updated CY 2012 national standardized 60-day episode payment rate of 
$2,138.52. The updated CY 2012 national standardized 60-day episode 
payment rate for an HHA that submits the required quality data is shown 
in Table 13. The updated CY 2012 national standardized 60-day episode 
payment rate for an HHA that does not submit the required quality data 
is updated by the CY 2012 HH PPS payment update percentage (1.4 
percent) minus 2 percentage points and is shown in Table 14.
BILLING CODE 4120-01-P

[[Page 68585]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.021

c. National Per-Visit Rates Used To Pay LUPAs and Compute Imputed Costs 
Used in Outlier Calculations
    In calculating the CY 2012 national per-visit rates used to 
calculate payments for LUPA episodes and to compute the imputed costs 
in outlier calculations, the CY 2011 national per-visit rates for each 
discipline are updated by the CY 2012 HH PPS payment update percentage 
of 1.4 percent. National per-visit rates are not subject to the 3.79 
percent reduction related to the nominal increase in case-mix. The CY 
2012 national per-visit rates per discipline are shown in Table 15. The 
six home health disciplines are as follows:
     Home Health Aide (HH aide);
     Medical Social Services (MSS);
     Occupational Therapy (OT);
     Physical Therapy (PT);
     Skilled Nursing (SN); and
     Speech Language Pathology Therapy (SLP).

[[Page 68586]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.022

d. LUPA Add-On Payment Amount Update
    Beginning in CY 2008, LUPA episodes that occur as the only episode 
or initial episode in a sequence of adjacent episodes are adjusted by 
adding an additional amount to the LUPA payment before adjusting for 
area wage differences. We update the LUPA payment amount by the CY 2012 
HH PPS payment update percentage of 1.4 percent. The LUPA add-on 
payment amount is not subject to the 3.79 percent reduction related to 
the nominal increase in case-mix. For CY 2012, we update the add-on to 
the LUPA payment to HHAs that submit the required quality data by the 
CY 2012 HH PPS payment update percentage of 1.4 percent. The CY 2012 
LUPA add-on payment amount is shown in Table 16. We update the add-on 
to the LUPA payment to HHAs that do not submit the required quality 
data by the CY 2012 HH PPS payment update percentage (1.4 percent) 
minus two percentage points, for a -0.6 percent update.

[[Page 68587]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.023

e. Nonroutine Medical Supply Conversion Factor Update
    Payments for nonroutine medical supplies (NRS) are computed by 
multiplying the relative weight for a particular severity level by the 
NRS conversion factor. We increase CY 2011 NRS conversion factor 
($52.54) by the CY 2012 HH PPS payment update percentage of 1.4 
percent. The final updated CY 2012 NRS conversion factor for 2012 
appears in Table 17. For CY 2012, the NRS conversion factor is $53.28.
[GRAPHIC] [TIFF OMITTED] TR04NO11.024

    Using the NRS conversion factor ($53.28) for CY 2012, the payment 
amounts for the various severity levels are shown in Table 18.

[[Page 68588]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.025

    For HHAs that do not submit the required quality data, we again 
begin with the CY 2011 NRS conversion factor. We increase the CY 2011 
NRS conversion factor ($52.54) by the CY 2012 HH PPS payment update 
percentage of 1.4 percent minus 2 percentage points, or -0.6 percent. 
The CY 2012 NRS conversion factor ($52.22) for HHAs that do not submit 
quality data is shown in Table 19.
[GRAPHIC] [TIFF OMITTED] TR04NO11.026

    The payment amounts for the various severity levels based on the 
updated conversion factor ($52.22) for HHAs that do not submit quality 
data are calculated in Table 20.
[GRAPHIC] [TIFF OMITTED] TR04NO11.027

5. Rural Add-On
    Section 421(a) of the Medicare Prescription Drug, Improvement, and 
Modernization Act (MMA) of 2003 (Pub. L. 108-173, enacted on December 
8, 2003 and as amended by section 3131(c) of the Affordable Care Act) 
provides an increase of 3 percent of the payment amount otherwise made 
under section 1895 of the Act for home health services furnished in a 
rural area (as defined in section 1886(d)(2)(D) of the Act), for 
episodes and visits ending on or after April 1, 2010 and before January 
1, 2016. The statute waives budget neutrality related to this 
provision, as the statute specifically states that the Secretary shall 
not reduce the standard prospective payment amount (or amounts) under 
section 1895 of the Act applicable to home health services furnished 
during a period to offset the increase in payments resulting in the 
application of this section of the statute.
    The 3 percent rural add-on is applied to the national standardized 
60-day episode rate, national per-visit rates, LUPA add-on payment, and 
NRS conversion factor when home health services are provided in rural 
(non-CBSA) areas. Refer to Tables 21 thru 25 for these payment rates.
BILLING CODE 4120-01-P

[[Page 68589]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.028


[[Page 68590]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.029

BILLING CODE 4120-01-C

E. Therapy Corrections and Clarifications

1. Therapy Technical Correction to Regulation Text
    In the CY 2012 HH PPS proposed rule (76 FR 41023 through 41024), we 
noted that regulation text at Sec.  409.44(c)(2)(i)(D)(2) associated 
with changes we made to our regulations for CY 2011 required a 
technical correction. This technical correction was to change the word 
``before'' in this regulation to the phrase ``no later than'' such that 
the final wording would read, ``Where more than one discipline of 
therapy is being provided, the qualified therapist from each discipline 
must provide the therapy service and functionally reassess the patient 
in accordance with Sec.  409.44(c)(2)(i)(A) during the visit which 
would occur close to but no later than the 19th visit per the plan of 
care.''
2. Occupational Therapy Policy Clarifications
    We also proposed (76 FR 41024) to clarify when occupational therapy 
would be considered a dependent service versus when it would be 
considered a qualifying service under the Medicare home health benefit, 
explaining the history of occupational therapy as a skilled yet 
dependent service under the benefit. We highlighted key regulations 
that explain the status of occupational therapy and clarified the 
status of when occupational therapy becomes a qualifying service by 
proposing to change the regulation text at Sec.  409.42(c)(4) to 
establish exactly when occupational therapy becomes a qualifying 
service. We proposed to amend Sec.  409.42(c)(4) to state that 
occupational therapy services that meet the requirements of Sec.  
409.44(c) initially qualify for home health coverage as a dependent 
service as defined in Sec.  409.45(d) if the beneficiary's eligibility 
for home health services was established by virtue of a prior need for 
intermittent skilled nursing care, speech-language pathology services, 
or physical therapy in the current or prior certification period. 
Subsequent to an initial covered occupational therapy service, 
continuing occupational therapy services which meet the requirements of 
Sec.  409.44(c) would be considered qualifying services.
    We also proposed a change to Sec.  409.44(c) to include a technical 
correction to this regulation text. We proposed to correct ``(c)(1) 
through (4)'' to, ``(c)(1) and (2),'' which is the correct reference.
    The following is a summary of the comments we received regarding 
the therapy corrections and clarifications.
    Comment: All commenters were supportive of or neutral toward the 
policy clarification regarding when occupational therapy becomes a 
qualifying service. Among these comments, some requested we further 
clarify whether occupational therapy can continue to be the qualifying 
service when the need for occupational therapy spans into a subsequent 
episode. One commenter asked for further clarification regarding when 
occupational therapy must be followed by a skilled nursing, physician 
therapy, or speech therapy service. Another commenter urged CMS to 
follow up this policy clarification with detailed explanations in the 
Medicare Benefit Policy Manual, including through the use of examples. 
Another commenter expressing agreement with our policy clarification, 
equated the clarifying policy with the elimination of the requirement 
that an original qualifying service must complete at least one covered 
visit after the initial dependent occupational therapy visit.
    Response: We thank commenters for their positive response to our 
clarification of when occupational therapy becomes a qualifying 
service.
    Because some commenters have suggested that the regulation text 
could be clarified for episodes beyond the initial episode for patients 
receiving more than one episode of home health, we are revising Sec.  
409.42(c)(4) to further clarify the regulation text in this final rule.
    In response to the commenter who stated that the proposed policy 
removed the requirement that an original qualifying service must 
complete at least one covered visit after the initial dependent 
occupational therapy visit, we note that the commenter's interpretation 
of the proposed policy is not accurate as we will describe below. In 
response to the commenter who requested further clarification regarding 
when occupational therapy must be followed by a skilled nursing, 
physician therapy, or speech therapy service, we clarify that the 
initial occupational therapy service must be followed by another 
qualifying service to be covered. Subsequent occupational therapy 
services, however, do not require another qualifying service to follow 
them. Specifically, we are clarifying that once a beneficiary's 
eligibility for home

[[Page 68591]]

health services has been established by virtue of a prior need for an 
intermittent skilled service (that is, skilled nursing care, physical 
therapy, or speech-language pathology therapy), and the beneficiary 
also meets each of the criteria specified in Sec.  409.44(c), the first 
occupational therapy service provided to the patient is considered a 
dependent service. We note that Sec.  409.45(a) describes that in order 
for Medicare to cover a dependent service, the service must be followed 
by a qualifying skilled service, which meets the criteria in Sec.  
409.44(c), except when certain unexpected circumstances occur, such as 
an unexpected inpatient admission or the death of the beneficiary. As 
such, the first occupational therapy service, which is a dependent 
service, is covered only when followed by an intermittent skilled 
nursing care service, speech-language pathology service, or physical 
therapy service which meet the criteria in Sec.  409.44(c), unless the 
exceptional circumstance criteria is met. Once that requirement for 
covered occupational therapy has been met, all subsequent occupational 
therapy services that meet the criteria in Sec.  409.44(c) are 
considered to be qualifying, both in the current and in subsequent 
certification periods (subsequent adjacent episodes). Once occupational 
therapy has become a qualifying service, it remains a qualifying 
service from that point on as long as the services continue to meet the 
criteria in Sec.  409.44(c). Therefore, there is no need for another 
qualifying skilled service to follow a covered qualifying occupational 
therapy service at the end of a home health episode. It is possible for 
covered qualifying occupational therapy services to exist at the end of 
an initial episode for a given beneficiary, if all of the above 
described requirements/criteria are met, without additional qualifying 
skilled nursing care, physical therapy, or speech-language pathology 
services following that covered qualifying occupational service. We 
plan to include these clarifications in Pub. 100-02, Chapter 7, 
Medicare Benefit Policy Manual.
    Comment: We received several comments regarding the therapy 
reassessment requirements finalized with the CY 2011 HH PPS final rule. 
Some commenters called for CMS to stop all or part of the requirements. 
A number of commenters expressed their belief that with the 13th and 
19th reassessment visit requirement, the 30-day reassessment 
requirement is not needed. These commenters stated the same exceptions 
permitted for the 13th and 19th-reassessment visit policy should apply 
to the 30-day reassessment policy as well to make it more flexible. A 
few commenters gave hospitalizations as an example of when there should 
be an exception to the 30-day reassessment requirement, noting that 
sometimes when home health patients are admitted to the hospital, the 
hospital might be delayed several days in contacting the HHA or not 
contact the HHA at all. One commenter questioned the logic of these 
therapy regulations, suggesting that they decrease the productivity of 
therapists and other home health staff, leading to agencies having to 
hire more staff to cover the needs of the aging population. Many 
commenters stated the therapy requirements are causing an undue burden 
on agencies while interfering with quality therapy care that a patient 
receives. Another commenter suggested that these therapy policies have 
had the opposite effect of what we intended because agencies that 
previously did not use therapy assistants are now using them more due 
to the increased costs associated with our policies. Among the 
alternatives that commenters proposed were to have reassessments 
required every 14 days, every 12-15 days for the first 30 days and then 
at least every 30 days, and between days 15-21 and 29-35 (that is, 
within the 3rd and 5th weeks of the episode).
    Among those commenters who referred to the issues of administrative 
burden and inefficiency, especially in light of State licensure 
requirements for therapists (for example, New York requires PTAs must 
be supervised every 6 visits or every 30 days, whichever comes first), 
one commenter mentioned adding a 0.5 full time equivalent (FTE) for 
clinical auditing and 1 FTE as a scheduler to assure appropriate 
scheduling and track compliance. Some commenters suggested that the 
policy requires too many assessments; speaking of multiple-therapy 
cases, one commenter stated that these excessive assessments lead to 
lumping back-to-back assessments by multiple therapists. The commenter 
also suggested that due to our recalibration of therapy weights that 
de-emphasize high-therapy episodes less than before, these 13th and 
19th-reassessment visits are no longer needed. One commenter stated 
that a physical therapist is expected to document for an occupational 
therapist. Another commenter recommended that we reconvene a technical 
expert panel to examine the appropriate use of therapy assistants and 
nursing personnel under the benefit to verify whether use of therapy 
assistants in particular is clinically inappropriate. The commenter 
also provided detailed explanations on the role of therapists and 
therapy assistants and how they interact with one another in such areas 
as communication, decision-making, and patient care delivery. The 
commenter also provided detailed recommendations on how the therapy CY 
2011 policies can be better communicated, including through manual 
additions and revisions, and additional Questions and Answers. This 
commenter noted that some of the confusion over the 13th and 19th-visit 
requirements has to do with whether the ``count'' includes both covered 
and non-covered visits. Last, this commenter suggested that no 
additional changes to our therapy policies be made until a technical 
evaluation panel (TEP) can develop an alternate payment system for 
therapy alone. This commenter and another requested that CMS provide 
additional training for therapists and HHAs regarding these therapy 
requirements.
    Response: We thank the commenters for their feedback, but note that 
the comments regarding the therapy reassessment requirements from the 
CY 2011 HH PPS final rule (75 FR 70372) are outside of the scope of 
this rule. However, we are further clarifying our policies and respond 
to comments regarding the administrative burden of these requirements 
and the suggestion that due to our recalibration of therapy weights 
that these requirements are no longer needed. We respectfully remind 
commenters that our reasons for the therapy reassessments outlined in 
the CY 2011 HH PPS final rule were not only to address payment 
vulnerabilities that have led to high use and sometimes overuse of 
therapy services, but also to ensure more qualified therapist 
involvement for beneficiaries receiving high amounts of therapy which 
evidence shows results in better patient outcomes. We note again, as we 
did in the CY 2011 HH PPS final rule (75 FR 70390 through 70391), that 
research studies conducted by Linda Resnick (of Brown University) et 
al., entitled ``Predictors of Physical Therapy Clinic Performance in 
the Treatment of Patients with Low Back Pain Syndromes'' (2008, funded 
by a grant from the National Institute of Child Health) and ``State 
Regulation and the Delivery of Physical Therapy Services'' (2006, 
funded in part through a grant from the Agency for Healthcare Research 
and Quality) provide support for our therapy policies. Both studies 
concluded that more therapy time spent with a qualified physical 
therapist, and less time with a physical therapist assistant, is more 
efficient and leads to better patient outcomes. In these

[[Page 68592]]

studies, the lower percentage of time seen by a qualified therapist and 
the greater percentage of time seen by an assistant or aide, the more 
likely a patient would have more visits per treatment per episode. The 
studies also concluded that, although delegation of care to therapy 
support personnel such as assistants may extend the productivity of the 
qualified physical therapist, it appears to result in less efficient 
and effective services. We believe that by requiring regular visits by 
a qualified therapist during a course of treatment, we will achieve 
more appropriate and efficient provision of therapy services while also 
achieving better therapy outcomes.
    We also note that even with reductions in payments for high-therapy 
episodes, HHAs receive higher payments for these episodes than other 
episodes. We continue to believe that the requirement for a qualified 
therapist (instead of an assistant) to perform the needed therapy 
service at key points in a patient's course of treatment, as well as to 
assess, measure and document the effectiveness of the therapy provided 
promotes more effective and efficient care. Regarding the issue of the 
at least every 30-days reassessment requirement and hospitalizations, 
we also note that through a recently-posted Question and Answer, 
available at http://www.cms.gov/HomeHealthPPS/Downloads/Therapy_Questions_and_Answers.pdf, we have allowed for one exception to the 
30-day reassessment requirement (that is, when there is a hold on 
therapy due to the patient's hospitalization for an unexpected change 
in the patient's condition). As we stated in this question and answer, 
we believe that the policy that requires a qualified therapist to 
perform the necessary therapy service, assess the patient, measure, and 
document the effectiveness of the therapy at least once every 30 days 
during a course of therapy treatment is essential to ensuring that 
effective, reasonable, and necessary therapy services are being 
provided to the patient. In the case of a home health patient where the 
therapy goals in the plan of care have not been met, but the doctor has 
instead ordered a temporary interruption in therapy, we would usually 
expect that the unique clinical condition of the patient would enable 
the HHA to anticipate that an interruption in therapy may be needed. In 
such cases, the HHA should ensure that the requirements are met earlier 
than the end of the 30-day period to ensure the HHA meets the 30-day 
requirement.
    Where unexpected sudden changes in the patient's condition result 
in a need to stop therapy, we would expect to see documentation and 
evidence in the medical record which would support an unexpected change 
in the patient's condition which precludes delivery of the therapy 
service. We will modify our manual to describe that in such documented 
cases, the 30-day qualified therapist visit/assessment/measurement 
requirement can be delayed until the patient's physician orders therapy 
to resume.
    We also note in response to the commenter that stated a physical 
therapist would be asked to do the assessment for an occupational 
therapist that, as we stated in the CY 2011 HH PPS final rule (75 FR 
70392), inSec.  409.44(c)(2)(i)(A), we clarified that our expectation 
is that only the therapist of his or her own corresponding discipline 
should complete the reassessment for that therapy discipline. Because 
we recognize that agencies and therapists continue to have questions on 
how to count therapy visits to determine when the required therapy 
assessment visits (which are to occur close to both the 14th and 20th 
Medicare-covered therapy visits but no later than the 13th and 19th 
Medicare-covered therapy visits) should occur, we have provided a 
clarification in Sec.  409.44(c)(2)(i)(C)(2) and Sec.  
409.44(c)(2)(i)(D)(2) that from a Medicare payment perspective, only 
Medicare-covered visits are to be considered and counted. Specifically, 
to reflect that Medicare payment policy recognizes only Medicare-
covered visits, we are inserting the words, ``Medicare-covered'' before 
the words, ``therapy-visit'' in both these regulations related to 
multiple therapy disciplines being provided because commenters have 
expressed confusion over the process of counting at both of these 
junctures. We have also inserted the words, ``the 14th Medicare-covered 
therapy visit'' at Sec.  409.44(c)(2)(i)(C)(2) and the words, ``the 
20th Medicare-covered therapy visit'' at Sec.  409.44(c)(2)(i)(D)(2) to 
further reinforce that the counting of therapy visits for Medicare 
payment purposes should include only those Medicare-covered visits 
which are close to the 14th and 20th Medicare-covered therapy visits, 
but no later than the 13th and 19th Medicare-covered therapy visit. 
Last, to further address commenters' confusion, we have made minor 
changes to the regulation text to make the language between Sec.  
409.44(c)(2)(i)(C)(2) and 409.44(c)(2)(i)(D)(2) consistent.
    We note that the counting of therapy visits for Medicare payment 
purposes might differ from how agencies and therapists would count 
therapy visits for a patient's plan of care. Consequently, we have also 
removed the references to the patient's ``plan of care'' in Sec.  
409.44(c)(2)(i)(C)(2) and Sec.  409.44(c)(2)(i)(D)(2). We also note 
that both Medicare-covered and non-covered visits are included on the 
Medicare home health claim forms, where they should continue to be 
designated as covered or non-covered. We conclude by stating that we 
are committed to continuing our provider education efforts related to 
these therapy policies.
    Comment: Another commenter stated that there are situations in 
which a 30-day skilled therapist visit for assessment of therapy must 
be followed by yet another skilled therapist visit for reassessment 
based on the therapy threshold.
    Response: Again, while this comment is outside of the scope of this 
rule, we would like to note that every time a qualified therapist 
performs the therapy service, assesses the patient, measures and 
documents the effectiveness of the therapy service for that therapy 
discipline, the 30-day clock is `reset'. As such, a qualified therapist 
visit/assessment/measurement and documentation which satisfies the 
threshold requirement could also satisfy the 30-day requirement.
    Comment: We received one comment from a physical therapist who 
provided an overview of the profession from the commenter's 
perspective, highlighting payment trends for therapists, depending on 
which type of entity therapists work for (for example, directly for a 
HHA or as a contractor or subcontractor). The commenter provided 
examples of personal employment experiences that substantiate our 
concerns regarding intentional overprescribing of therapy and 
inappropriate use of therapy assistants. Consequently, the commenter 
recommended program integrity policies for CMS' consideration.
    Response: We thank this commenter for taking the time to provide 
such a thoughtful response and will share this commenter's suggestions 
with our program integrity colleagues.
3. Summarization of Final Policies
    As a result of the comments we received, we will finalize our 
technical corrections to Sec.  409.44(c) and Sec.  
409.44(c)(2)(i)(D)(2). We will also finalize our regulation text at 
Sec.  409.42(c)(4) to reflect that subsequent to an initial covered 
occupational therapy service, continuing occupational therapy services 
which meet the requirements of Sec.  409.44(c) are considered to be 
qualifying services. In addition, we further clarify the intent of

[[Page 68593]]

this policy on when occupational therapy becomes a qualifying service 
by making the following change to Sec.  409.42(c)(4) as it appeared in 
our proposed rule: We are adding the phrase, ``in the current and 
subsequent adjacent certification periods (subsequent adjacent 
episodes)'' to the first line of this regulation text after the words, 
``Occupational therapy services.''. Last, as we summarized above, we 
further clarify the method for counting visits for the 13th and 19th 
reassessment visit requirements by adding the words, ``Medicare-
covered'' and deleting the words, ``per the plan of care,'' at Sec.  
409.44(c)(2)(i)(C)(2) and Sec.  409.44(c)(2)(i)(D)(2).

F. Home Health Face-to-Face Encounter

    As described in the CY 2011 HH PPS final rule (75 FR 70427), 
section 6407(a) of the Patient Protection and Affordable Care Act, as 
amended by section 10605 of the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), amended the requirements 
for physician certification of home health services contained in 
sections 1814(a)(2)(C) and 1835(a)(2)(A) of the Act by requiring that, 
as a condition for payment, prior to certifying a patient's eligibility 
for the home health benefit, the physician must document that the 
physician himself or herself or a permitted nonphysician practitioner 
(NPP) has had a face-to-face encounter with the patient.
    However, we believe that the statute does not preclude a patient's 
acute or post-acute physician from informing the certifying physician 
regarding their experience with the patient for the purpose of the 
face-to-face encounter requirement, as an NPP can. Instead, we believe 
that for patients admitted to home health following discharge from an 
acute or post-acute stay, the statutory language contains an 
unintentional gap in that it does not explicitly include language which 
allows the acute or post-acute attending physician to inform the 
certifying physician regarding his or her face-to-face encounters with 
the patient.
    Therefore, for patients admitted to home health upon discharge from 
a hospital or post-acute facility, we proposed to allow the physician 
who cared for the patient in an acute or post-acute facility to inform 
the certifying physician regarding their encounters with the patient to 
satisfy the face-to-face encounter requirement, much like an NPP 
currently can.
    The following is a summary of the comments we received regarding 
the home health face-to-face encounter proposal.
    Comment: Several commenters expressed concern regarding scenarios 
where a face-to-face encounter occurs late. Specifically, commenters 
believe that when the encounter occurs more than 30 days after the 
episode start, that CMS should allow providers the flexibility to 
restart the episode with the start of care date within 30 days of the 
face-to-face encounter. Commenters described longstanding CMS policy 
that has allowed such restarting of the episode for Medicare payment 
purposes in certain situations beyond the agency's control. Commenters 
described that longstanding claims processing manual guidance has 
always allowed some flexibility in the OASIS completion in targeted 
scenarios, such as when a patient's payer source changes from Managed 
Care to Medicare fee-for-service (FFS). At times, the HHA is not 
notified timely that such a payer change has occurred. Commenters 
described that this same payer change scenario may result in a late 
face-to-face encounter, which is a Medicare FFS requirement. Allowing 
OASIS flexibility in targeted scenarios enables the provider to begin 
to bill Medicare at the point in time when all Medicare eligibility 
criteria are met.
    Response: We thank the commenters for their comment and while this 
comment is outside the scope of this rule, we are taking this 
opportunity to clarify the policy. Conditions of participation 
regulations at Sec.  484.55 require HHAs to complete a comprehensive 
assessment for each patient no later than 5 days after the start of 
care. In the scenarios described by the commenter, there exists a 
comprehensive assessment which includes the OASIS assessment which was 
completed within 5 days of the agency providing care to the patient. 
However, Medicare FFS eligibility was not met until later. We 
acknowledge that longstanding guidance in Section 80 of Chapter 10 of 
the Medicare Claims Processing Manual states that if a Medicare 
beneficiary changes from a different pay source to Medicare FFS, a new 
start of care OASIS assessment must be completed that reflects a start 
of care date equal to the start of the beneficiary's change to Medicare 
FFS. The manual allows for this OASIS completion flexibility in 
targeted situations, to meet both Medicare billing and eligibility 
rules. In these cases, the OASIS which was completed to satisfy the 
Medicare billing and eligibility requirement could have a completion 
date which is later than 5 days after the start of care date. We 
believe a late face-to-face encounter is another of these targeted 
situations which justifies OASIS completion flexibility. Specifically, 
where a face-to-face encounter did not occur within the 90 days prior 
to the start of care or within 30 days after the start of care, a 
provider may complete another OASIS with a start of care date equal to 
the date when all Medicare eligibility is met. However, Medicare will 
not pay for services provided before the date of eligibility.
    Comment: Some commenters suggested that, if a face-to-face 
encounter does not occur within 30 days of the start of care, CMS 
should shift the burden of responsibility away from the HHA for 
financial loss and include physician communication requirements as a 
component of the CMS initiatives associated with the transition of 
care. Commenters suggested that the financial burden of the face-to-
face documentation alone has significantly added to HHAs' operating 
costs. Other commenters stated the face-to-face requirement presents 
such an administrative burden that HHAs have had to add full-time staff 
to track the documentation requirements.
    Response: We thank the commenters for their comments but these 
comments are outside the scope of this rule. However, we would like to 
remind commenters that we do not have the statutory authority to exempt 
HHAs from responsibility for the face-to-face encounter requirement, as 
the Affordable Care Act mandates that it is a condition for payment.
    Comment: Some commenters requested that, due to difficulties 
securing documentation and physician refusal to write a narrative 
documenting why the patient needs skilled services and why the patient 
is homebound, the face-to-face documentation requirement should be 
limited to the statements that the patient needs skilled services and 
is homebound, and that the primary reason for home health services was 
addressed in the encounter, accompanied by the physician's signature 
and date. Another commenter suggested that CMS allow NPPs to document 
and sign the face-to-face documentation. Some commenters asked CMS to 
allow the narrative on a patient's plan of care to satisfy the 
documentation requirement. Other commenters suggested that CMS require 
a universal format of documentation to prevent Medicare contractor 
payment denials. Commenters requested that the face-to-face 
documentation be reduced to a check box on the plan of care or the Form 
485. One commenter suggested that a separate, single certification form

[[Page 68594]]

be used for patients referred from the hospital to home care.
    Response: We thank the commenters for their comments but these 
comments are outside the scope of this rule. However, we will briefly 
respond to the commenters' questions to ensure that commenters clearly 
understand the law and the policy. We would like to remind commenters 
that the law requires the certifying physician to document that the 
physician or an allowed NPP has had a face-to-face encounter with the 
patient. As such, a change in the statute would be required to allow an 
NPP to document the encounter. In response to the commenters who 
suggested that a standard form which contains checkboxes should be 
allowed to satisfy the documentation requirement and the commenter who 
asked CMS to allow the physician to simply sign a standard statement 
that the patient needs skilled services and is homebound, in our view, 
these suggestions would not satisfy the statutory requirement that the 
certifying physician document the encounter itself. We have reviewed 
forms which contained generic questions with checkboxes for the 
physician to simply check off and sign. We believe that such a form 
would not satisfy the documentation mandate in the law. Similarly, we 
believe a form that contains a pre-printed statement that the patient 
is homebound and needs skilled services which the physician would sign, 
as one commenter suggested, would also not meet the statutory 
requirement. Further, documentation which was drafted by another 
commenter which the physician would sign also would not meet the 
requirement. In using the words ``document the encounter'' in the 
statute instead of ``attest to the encounter,'' we believe that the 
Congress intended the certifying physician to include factual 
information about the patient's condition as seen during the encounter 
which would support the physician's certification of the patient's 
eligibility (homebound status and the need for skilled services).
    We have provided certifying physicians the flexibility to generate 
the documentation from their electronic medical record entries 
concerning the patient. The physician's own medical record entries 
would contain the factual information about the patient's condition as 
seen during the encounter. We also allow the physician's support staff 
to extract the documentation from the physician's medical record 
entries for the physician's signature. We accept documentation which 
was generated or extracted from a physician's medical record, assuming 
it contains all the required content, regardless of what format it is 
in, even when that generated format contains checkboxes. Additionally, 
as we describe in more detail later in this section, if an allowed 
practitioner other than the certifying physician performs the 
encounter, the certifying physician may incorporate the practitioner's 
communication regarding the patient's clinical condition as part of the 
certifying physician's documentation.
    In response to the commenter who requested that the physician's 
narrative on the plan of care satisfy the documentation requirement, we 
note that this would be acceptable in certain cases. As described 
above, we do not mandate that the documentation be in any particular 
format. We do require that the content requirements be met. We would 
expect that a physician's orders referring the patient to home health 
could satisfy some or all of the documentation content requirements. 
However, as stated above, we believe the law would not allow an HHA to 
draft the documentation for the physician to sign. CMS is aware that 
often HHAs will draft the plan of care narrative for the physician to 
sign. In these cases, the plan of care narrative would not satisfy the 
documentation requirement because the narrative is drafted by the HHA 
instead of the physician, and is based on the HHA's assessment of the 
patient, not the physician's encounter.
    In response to the commenters who requested that CMS require a 
universal format for the documentation, we note that since 2002, we 
have not mandated the use of a specific form when physicians certify a 
patient's eligibility for Medicare's home health benefit. Instead, we 
allow physicians and HHAs to meet the certification documentation 
requirements in a way that utilizes their respective practice 
documentation system, and gives providers flexibility to use electronic 
medical record software.
    Comment: We received comments that the face-to-face requirement 
presents an unnecessary barrier to care for all patients, but 
especially for bed bound patients who need ambulance transportation to 
physician appointments. Also, a commenter suggested that the Affordable 
Care Act be revised to expand the definition of telehealth services to 
allow individuals to meet the face-to-face requirements through 
technologies available in their homes. A commenter suggested that 
telehealth could be used to satisfy the face-to-face encounter, and 
asked CMS to revise its regulations so that the patient's home could be 
a telehealth originating site. Further, some commenters requested that 
CMS immediately halt the face-to-face requirement. Some commenters 
requested that the requirement be revised to establish exemptions to 
the face-to-face encounter for post-acute home health patients or those 
patients with barriers to physician care. We also received comments 
asking CMS to expand the current face-to-face timeframes.
    Response: We thank the commenters for their input but these 
comments are outside the scope of this rule. However, we will take the 
opportunity to briefly respond to the commenters to ensure better 
understanding of the statute. We would like to remind commenters that 
the face-to-face requirement is only required for initial 
certifications, not recertifications. In response to the commenters who 
asked us to halt or change the provision, we would not have the 
authority to do so. In response to the commenter who asked CMS to 
revise its regulation to add the home as a telehealth originating site, 
we note that section 1834(m) of the Act limits those sites where a 
telehealth service can be provided. Regarding the timeframe of the 
face-to-face requirement, we believe the current timeframe of 90 days 
prior to the start of care and 30 days after the start of care is 
appropriate and best meets the program integrity and quality goals 
associated with the provision.
    Comment: Some commenters requested the elimination of the face-to-
face requirement for patients admitted to home health within certain 
timeframes of hospital discharges. Commenters stated that patients who 
are discharged from a hospital have clearly seen a physician and 
discharge planning team who determined home health to be an appropriate 
post-discharge follow-up. Commenters believed that the intent of this 
provision, which is a program integrity provision, is to ensure that 
the patient recently saw his or her physician.
    Response: We thank the commenters for their suggestions. However, 
this exemption would violate the statutory mandate. We do not have the 
authority to exempt post-acute home health admissions from the face-to-
face encounter requirement.
    Comment: We received comments questioning whether or not the acute 
or post-acute physician will still be allowed to initiate the plan of 
care, perform and document the face-to-face encounter, certify the 
patient's home health eligibility, and ``hand off'' the plan of care to 
the patient's community physician. Commenters were confused by the 
proposed regulation text language

[[Page 68595]]

at Sec.  424.22(a)(1)(v)(A) stating that the acute or post-acute 
physician ``must'' inform the certifying physician of the face-to-face 
encounter clinical findings. As the proposed regulatory text reads, 
commenters believed the use of ``must'' indicated that an attending 
acute or post-acute physician must inform the certifying physician of 
the findings from the face-to-face encounter rather than being able to 
perform the encounter, document the encounter and certify home health 
eligibility himself or herself.
    Response: We thank the commenters for their comments. The physician 
who cared for the patient in an acute or post-acute facility prior to 
the patient's home health admission can perform and document the face-
to-face encounter and certify the patient's home health eligibility, 
initiate the plan of care, and hand off the plan of care to the 
patient's community physician. These physicians often complete the 
certification of home health eligibility for a patient, which now 
includes the face-to-face documentation. In this rule, we simply 
proposed additional flexibility for the physician who cared for the 
patient in an acute or post-acute facility to inform the certifying 
physician of the patient's need for skilled services and homebound 
status in the same manner that an NPP can. To address any confusion 
that may exist, we will revise Sec.  424.22(a)(1)(v)(A) to only require 
the physician who cared for the patient in the acute or post-acute 
facility to inform the certifying physician when the physician who 
cared for the patient in the acute or post-acute facility is not the 
certifying physician.
    Comment: A commenter suggested that in an acute or post-acute 
facility, a patient is often seen by many physicians and any of those 
physicians should be able to inform the certifying physician. 
Therefore, the commenter suggested that CMS consider removing the word 
``attending'' from the regulation text and use the term ``acute'' or 
``post-acute'' physician instead. The commenter described how a 
patient's home health initiation and supervision may be most 
appropriately managed by a specialist, primary care physician, 
hospitalist, or surgeon, irrespective of who is the attending 
physician.
    Response: We found the comment compelling and will remove 
``attending'' from the regulatory text. Instead, we will describe that 
a physician who cared for the patient in an acute or post-acute 
facility and who has privileges at the facility can inform the 
certifying physician regarding the patient's clinical condition. The 
certifying physician can use that information to document the face-to-
face encounter.
    Comment: Many commenters disagreed with the proposed rule to 
require a face-to-face encounter and supporting documentation for 
Medicaid patients.
    Response: These comments are outside the scope of this rule. The 
Medicaid face-to-face provision was proposed in the Face-to-Face 
Requirements for Home Health Services; Policy Changes and 
Clarifications Related to Home Health proposed rule published in the 
July 12, 2011 Federal Register (76 FR 41032).
    Comment: We received comments supporting the added flexibility 
associated with the face-to-face encounter provision, given that 
physicians who care for the patient in an acute or post-acute facility 
are the most familiar with the patient's condition upon discharge, yet 
may not want the burden of designing a plan of care and certifying 
eligibility, and should be allowed to inform the physician as an NPP.
    Response: We thank the commenters for their support.
    Comment: We received a comment asking for CMS to include language 
in the final rule that clearly outlines that the HHA may assist with 
the communication between the physician who cared for the patient in an 
acute or post-acute facility, who performed the face-to-face encounter, 
and the certifying physician. We received comments asking CMS to 
clarify whether verbal and/or written or typed documentation qualifies 
as communication between the physician who cared for the patient in an 
acute or post-acute facility and the patient's certifying physician. 
Other commenters questioned whether the documentation of the face-to-
face encounter must be in the HHA record.
    Response: We thank the commenters for their comments. The HHA may 
facilitate communication between the physician who cared for the 
patient in an acute or post-acute facility and the patient's community 
physician. We note that this would be considered a part of the 
patient's care coordination. However, we reiterate that the HHA cannot 
draft the encounter documentation for the certifying physician to sign. 
Similarly, we note that the information flow/communications from the 
allowed NPP or physician who cared for the patient in an acute or post-
acute facility to the certifying physician concerning the patient's 
condition cannot be altered by the HHA. For example, in most cases we 
would expect the patient's discharge plan to contain the information, 
from the allowed NPP or the physician caring for the patient in the 
acute or post-acute facility, needed by the certifying physician to 
document the encounter. We would expect that both the HHA and the 
patient's community physician (certifying physician) would receive the 
patient's discharge plan. When this does not occur, or it does not 
occur in a timely manner, the HHA can send a copy of the discharge plan 
to the certifying physician to expedite the information exchange. 
However, it would be unacceptable for the HHA to fill in missing 
clinical information concerning the patient, based on the HHA's 
assessment of the patient. The documentation must reflect the 
physician's (or NPP's) experience with the patient, not the HHA's. 
Regarding the commenters who asked for guidance on what sort of 
communication CMS expects would occur between the physician who cared 
for the patient in the acute or post-acute facility and the certifying 
physician, we do not require a specific communication protocol to occur 
between an NPP, or a physician who cared for the patient in an acute or 
post-acute facility, and the certifying physician. We intend for the 
communication between an NPP, or a physician who cared for the patient 
in an acute or post-acute facility, and the certifying physician to 
occur in a way that works best for the two health care professionals 
involved. We would expect that often the patient's discharge summary, 
even if not in the form of a discharge plan, with the information flow/
communications from the allowed NPP or the physician who cared for the 
patient in the acute or post-acute facility, can serve as the face-to-
face documentation so long as it includes the signature of the 
certifying physician and the required content. To address the commenter 
who asked whether or not the HHA needs to have the face-to-face 
encounter documentation on record, we remind the commenter that the 
face-to-face encounter documentation is part of the certification of 
eligibility and as such must be in the HHA's records.
    Comment: Commenters stated that the face-to-face documentation is 
redundant, given the documentation of a patient's needs on the 
discharge plan and/or plan of care. Commenters questioned whether a 
certifying physician would need to rewrite the documentation of the 
face-to-face encounter rather than just review the information 
documented by the physician who cared for the patient in an acute or 
post-acute facility regarding the encounter. Commenters also

[[Page 68596]]

expressed concern that in the case of hospital support staff assisting 
in the documentation, the level of detail on a hospital patient's post-
acute needs that is typically available in standard hospital medical 
record notes is not adequate to satisfy the face-to-face documentation 
requirements. Furthermore, commenters suggested that hospital-based 
physicians typically lack information on the criteria related to 
Medicare's homebound status and are not trained to make judgments on 
homebound status following discharge. Commenters suggested that the 
proposed additional flexibility needs to be integrated with existing 
discharge processes. Other commenters suggested that once the patient 
is discharged from the hospital, the hospitalist no longer feels 
accountable for the patient. Commenters were concerned that patients 
may be denied access to home health services in cases where 
collaboration between the physician who cared for the patient in an 
acute or post-acute facility and the certifying physician is not 
timely, because the certifying physician might be unable to obtain the 
needed documentation information. We also received comments that this 
added flexibility will add to an already strained relationship between 
the acute or post-acute physician and the community physician since 
they will be doing each other's work. Commenters suggested that the 
proposed flexibility will add a new burden to community physicians 
since they will not be paid for certifying the patient's eligibility 
for home health. Other commenters asked that CMS allow for community 
physicians to bill G0180 if the patient's physician who cared for the 
patient in an acute or post-acute facility is performing the face-to-
face encounter and certifying home health eligibility.
    Response: We thank the commenters for their comments. Regarding the 
commenter who asked whether the certifying physician must retype the 
acute or post-acute physician's documentation on the certification 
form, we note that we allow for the face-to-face documentation to be 
part of the certification or an addendum to it. Therefore, it would be 
acceptable for the certifying physician (or his or her support staff) 
to attach a communication (such as a discharge summary) from an allowed 
NPP, or a physician who cared for the patient in an acute or post-acute 
facility, who performed the encounter to the certification as an 
addendum. If, for example, a discharge summary from a physician who 
cared for the patient in an acute or post-acute facility contains all 
of the needed documentation content, the certifying physician would 
simply need to sign and date the discharge summary and ensure it is 
attached as an addendum to the certification.
    In response to the commenter who was concerned that acute 
physicians may not communicate a patient's homebound status to the 
certifying physician, we note that this additional flexibility does not 
change the documentation content requirements or change the requirement 
that the certifying physician must document the encounter. If the 
information sent to the certifying physician does not explicitly 
contain statements which describe why the patient requires skilled 
services and how the patient's condition supports homebound status, we 
would expect it to contain enough information regarding the patient's 
clinical condition for the certifying physician (or his or her support 
staff) to complete the documentation. A typical discharge summary would 
contain enough clinical information to enable the certifying physician 
to assess homebound status, for example. Where the information lacks 
the clinical detail which would enable the certifying physician to 
complete the documentation, we would expect the certifying physician or 
the physician's support staff to obtain the additional information from 
the physician who cared for the patient in an acute or post-acute 
facility, discharge planner, or the acute or post-acute physician's 
support staff. We would expect that most of the time, a phone call or 
electronic mail exchange between the physicians' support staffs would 
address gaps in information. In response to the commenters who were 
concerned that the information sharing might not occur in a timely 
manner or the information exchange would be burdensome to the community 
physician and may strain the community physician and acute or post-
acute physician relationship, we note that we believe that this 
information sharing between the physician who cared for the patient in 
an acute or post-acute facility and the community physician who assumes 
care for the patient upon discharge (certifying physician) for the 
purposes of documenting the face-to-face encounter, is consistent with 
the sort of communication which occurs when any patient is discharged 
from an inpatient setting to the community. Discharge procedures 
generally require that the discharge plan includes the patient's 
clinical condition and that the discharge plan and supporting 
documentation be shared with the patient's follow-up care provider. 
Where the discharge plan is not sent to the certifying physician and 
instead is sent to the HHA, the HHA would forward a copy of the 
discharge plan to the certifying physician. We also note that the 
physician who completes and signs the certification of eligibility can 
bill Medicare using the G0180 code.
    Comment: Commenters suggested that CMS should allow any physician 
to work with another physician colleague sharing the face-to-face 
encounter and documentation responsibilities, as well as the 
certification. Commenters also asked CMS to expand the physicians who 
may perform the face-to-face encounter to include partners or 
colleagues of the certifying physician or urgent care center physicians 
for non-acute inpatient settings. Further, a commenter stated that if a 
patient goes to an outpatient clinic appointment and sees an alternate 
physician, the alternate physician should be allowed to perform the 
encounter and inform the certifying physician of the patient's clinical 
condition, homebound status, and need for skilled services.
    Response: We thank the commenters for their suggestions. While we 
are sensitive to the scenarios which the commenters describe, we do not 
believe we would have a strong justification to assert that the 
Congress intended to allow any physician to inform the certifying 
physician and as such, we believe we would not have the statutory 
authority to allow this additional flexibility. We note that the 
Medicare home health benefit relies on the patient's physician to 
determine eligibility for home health services. This type of physician 
involvement is critical from both a quality of care and program 
integrity perspective. Prior to enactment of the face-to-face encounter 
provision, the patient's physician often relied on information provided 
by an HHA when making decisions about patient care. The Affordable Care 
Act established the requirement for a physician face-to-face encounter 
prior to certifying a patient's eligibility for home health services, 
along with other program integrity provisions, to address concerns 
surrounding ineligible patients receiving home health services and 
concerns that physicians who had no firsthand knowledge of the 
patient's clinical condition were certifying the patient's eligibility 
for home health. Additionally, in the CY 2011 HH PPS final rule, we 
described research which showed fewer re-hospitalizations when the home 
health patient had a recent encounter with the physician responsible 
for the home health care plan. We also refer the commenters to

[[Page 68597]]

the CY 2012 HH PPS proposed rule (76 FR 41024 through 41025), where we 
described our reasons for believing that the Congress did not intend to 
exclude physicians who care for the patient in an acute or post-acute 
facility from informing the certifying physician regarding their recent 
encounters with the patient as the Congress allowed certain NPPs to do. 
We described why we believed that in adding this flexibility, we are 
increasing communication between HHAs and physicians, why we believed 
that adopting this flexibility introduced no program integrity risks or 
quality concerns and why we believed the flexibility is consistent with 
the goals of the law, including the goal of achieving more physician 
involvement with the patient when ordering home health services. If the 
hospital physician is unwilling to certify a patient's eligibility for 
home health, the hospital discharge plan sent to the certifying 
physician would contain current clinical information regarding the 
patient, enabling the certifying physician to make determinations 
regarding the patient care. However, we do not believe that a similar 
strong argument exists that the Congress intended to allow any 
physician to inform the certifying physician. As such, we would not 
have the statutory authority to allow this additional flexibility.
    Comment: Commenters suggested that CMS study transitions from 
hospitals to home care to evaluate whether the face-to-face improves 
care coordination, discourages home health utilization by patients who 
do not qualify for Medicare-covered home health services, or 
contributes to preventing or delaying access to medically necessary 
home care. Other commenters suggested that CMS regularly meet with the 
NAHC for industry input. Commenters also suggested that CMS has not 
provided adequate education to the physician community and should 
consider initiatives such as Patient Care Transitions and Accountable 
Care to manage a more widespread effort for physician communication. 
Another commenter noted that CMS' Web-based ``Frequently Asked 
Questions'' (FAQ) for provider clarity are sporadically updated without 
notice and are seemingly ad hoc policy developments. A commenter also 
suggested that CMS date its policy guidance so that providers know 
which guidance is most recent.
    Response: We thank the commenters for their comments but these 
comments are outside the scope of this rule. However, we will continue 
to work with the industry to educate providers and we will continue to 
monitor the effects of the face-to-face requirement.
    Comment: We received a comment that a major issue with the face-to-
face requirement is that patients should have the right to refuse a 
clinic visit that is not medically necessary.
    Response: We thank the commenter for the comment but this comment 
is outside the scope of this rule. We would like to clarify, however, 
that the face-to-face requirement is a statutory requirement for 
payment. Further, we would expect that practitioners would typically be 
conducting a medically necessary service to the patient, and this 
service would also meet the face-to-face encounter requirement. We also 
remind the commenter that, to be eligible for the Medicare home health 
benefit, a patient must be under the care of a physician. Should a 
patient refuse to have a face-to-face encounter with the physician 
responsible for care, we would question whether the patient was 
legitimately under the care of the physician.
    As a result of the comments, we will finalize the proposed 
implementation approach with the following revisions:
     We will remove ``attending'' from the regulatory language 
and add additional language at Sec.  424.22(a)(1)(v) to describe 
physicians who qualify as the physician who cared for the patient in an 
acute or post-acute facility.
     We will revise Sec.  424.22(a)(1)(v) so that the 
certifying physician's documentation of the face-to-face encounter 
clearly states that either the certifying physician himself or herself, 
the allowed NPP, or, for patients admitted to home health immediately 
after an acute or post-acute stay, a physician who cared for the 
patient in an acute or post-acute facility, has had a face-to-face 
encounter with the patient.
     We will add clarifying language to Sec.  
424.22(a)(1)(v)(A) to address scenarios where the physician who cared 
for the patient in an acute or post-acute facility performing the face-
to-face encounter is also the certifying physician. We will revise 
Sec.  424.22(a)(1)(v)(A) to describe that the NPP or the physician who 
cared for the patient in an acute or post-acute facility performing the 
face-to-face encounter must communicate the clinical findings of the 
encounter to the certifying physician, unless the physician who cared 
for the patient in an acute or post-acute facility is also the 
certifying physician.
    We will finalize the above face-to-face encounter provisions for 
starts of care beginning January 1, 2012 and later.

G. Payment Reform: Home Health Study and Report

    As we noted in our proposed rule (76 FR 41025), section 3131(d) of 
the Affordable Care Act requires the Secretary to conduct a study on 
HHA costs of providing access to care to low-income Medicare 
beneficiaries or beneficiaries in medically underserved areas, and in 
treating beneficiaries with varying levels of severity of illness 
(specifically, patients with ``high levels of severity of illness''). 
In our proposed rule, we provided a completed description of the varied 
areas for which we have the authority to explore as part of our payment 
reform activities (76 FR 41025 through 41026). We continue to plan for 
the study to evaluate the current HH PPS and develop payment reform 
options which might minimize vulnerabilities and more accurately align 
payment with patient resource costs to prepare the Report to Congress 
regarding the study that we must deliver no later than March 1, 2014.
    In our proposed rule, we also highlighted multiple activities that 
included those associated with the development of a study analytic 
approach (76 FR 41025), as well as our progress to date. We have held a 
second technical evaluation panel (TEP) since publishing our proposed 
rule and plan to publish the TEP proceedings on the CMS Web Site in the 
coming weeks.
    As we announced in the proposed rule, we anticipate awarding 
another contract that will build upon the foundation established. 
Specifically, this contract will include refinement of the analytic 
plan performance of the detailed analysis, and ultimately 
recommendations for payment model options. We will provide updates 
regarding our progress in future rulemaking and open door forums.
    The following is a summary of the comments we received regarding 
this study and report.
    Comment: We received a number of comments expressing appreciation 
for the status report on our progress and future plans for the payment 
reform study. Commenters' specific suggestions for topics to 
incorporate into the study design and plan included the following: 
analysis and revisions for the HH PPS to more appropriately capture and 
align resource costs to payment among all the different service groups; 
research on the underutilization of therapy services in rural and 
underserved areas; and ways of improving physician interaction with 
home health patients separate from the face-to-face requirement. A few 
commenters expressed particular concern that the study explore the

[[Page 68598]]

hypothesis that a subset of HHAs, concentrated in the non-profit 
sector, have become safety net providers, continuing to offer access to 
those vulnerable patients that can be challenging and costly to serve, 
relative to HH PPS payments.
    Response: We thank commenters for their expressed support of our 
efforts to date. We will attempt to include as many of the recommended 
areas of study as part of the final study design as possible, including 
those suggestions related to the outlier policy as we noted above in 
that section (see II.C. Outlier Policy). We will continue to solicit 
input from stakeholders as we develop the final study plan and provide 
periodic updates on our progress through multiple avenues such as the 
CMS Web Site and Open Door Forums.
    Finally, we will continue to provide periodic updates on our 
progress.

H. International Classification of Diseases 10th Edition (ICD-10) 
Coding

    In the CY 2012 HH PPS proposed rule, we discussed our preliminary 
plans to transition to the use of ICD-10-CM codes in October 2013. 
Based upon experience gained in our review of the ICD-10-CM codes we 
are striving to have the draft code lists out in the spring of 2012 
versus October 2011. In addition, based upon comments received on our 
transition plans we are aiming to get the draft ICD-10-CM HHRG out on 
or before April 2013 versus the proposed July 2013 target contained in 
the proposed rule.
    Effective March 17, 2009, we finalized our policies for the Health 
Insurance and Portability Accountability Act Administrative 
Simplification: Modifications to the Medical Data Code Set Standards to 
Adopt ICD-10-CM and ICD-10-PCS (74 FR 3328). The March 17, 2009 final 
rule modifies the standard medical data code sets for coding diagnoses 
by adopting the International Classification of Disease, 10th Revision, 
Clinical Modification (ICD-10-CM) for diagnosis coding, including the 
Official ICD-10-CM Guidelines for Coding and Reporting. These new codes 
replace the International Classification of Diseases, 9th Revision, 
Clinical Modification, Volumes 1 and 2, including the Official ICD-9-CM 
Guidelines for Coding and Reporting. Entities are required to have 
implemented the adopted policies by October 1, 2013. On October 1, 
2013, the ICD-9 code sets used to report medical diagnoses will be 
replaced by the ICD-10 code sets. In preparation for the transition to 
use of ICD-10-CM codes, CMS is currently undergoing extensive efforts 
to update the Medicare payment systems.
    One of the key activities identified under this transition to ICD-
10-CM codes is the need for CMS to review and update the payment 
systems which currently use ICD-9-CM codes. Home health agencies report 
ICD-9-CM codes for their patients through OASIS-C. The HHAs enter data 
(including the ICD-9-CM codes) collected from their patients' OASIS 
assessments into a data collection software tool. For Medicare 
patients, the data collection software invokes HH PPS Grouper software 
to assign a Health Insurance Prospective Payment System (HIPPS) code on 
the Medicare HH PPS bill, ultimately enabling CMS' claims processing 
system to reimburse the HHA for services provided to patients receiving 
Medicare's home health benefit. The HH PPS Grouper currently utilizes 
ICD-9-CM codes to calculate the HIPPS code. Effective October 1, 2013, 
the HH PPS Grouper will utilize the ICD-10-CM codes to calculate the 
HIPPS code.
    We have been working with the HHRG maintenance contractor to revise 
the HHRG to accommodate ICD-10-CM codes, as well as identify the 
appropriate ICD-10-CM codes to be included in each diagnosis group 
within the HHRG. In addition, we have also contracted with Abt 
Associates to assist with resolving the transition of certain codes 
that may be mapped to more than one diagnosis code under ICD-10-CM.
    To assist HHAs and their vendors in preparing for this transition, 
the Agency is committed to providing information for transitioning the 
HHRG to accommodate ICD-10-CM codes effective October 1, 2013. The 
Agency will update providers and vendors through the ICD-10-CM National 
Provider outreach calls on our conversion plans. Additional detail 
concerning teleconference registration is available at http://www.cms.gov/ICD10/Tel10/list.asp?intNumPerPage=20&submit=Go. Further 
details pertaining to our plans will be announced through the National 
Provider outreach calls.
    We will provide a draft list of ICD-10-CM codes for the HHRG 
through the ICD-10 section of the Web site. Specific dates regarding 
our roll-out plans will be announced through the National Provider 
outreach calls. The preliminary plans include publishing the draft list 
of ICD-10-CM codes for the HHRG by the spring of 2012, for industry 
review, as well as describing our testing approach for the HHRG to 
accommodate and process ICD-10-CM codes through the ICD-10 section of 
the CMS Web site. In reviewing the list of proposed ICD-10-CM codes we 
have identified that more time is needed to complete our review and 
develop a draft lists for industry review. However, the release of the 
draft list in early 2012 permits ample time for consideration of any 
comments received to be taken into consideration during our development 
of the CY 2013 HH PPS proposed rule. The objective of the ICD-10-CM 
HHRG testing is to verify that all properly formatted input data 
containing ICD-10-CM diagnosis codes will produce the expected output. 
The HHRG maintenance contractor will convert current OASIS-C records to 
their translated ICD-10-CM codes to determine that appropriate outputs 
are achieved. CMS and the HHRG maintenance contractor will review the 
results of the testing to determine if additional testing is required.
    In addition, in April 2013, we plan to share the ICD-10-CM HHRG 
software with those vendors and HHAs that have agreed to serve as Beta 
Testers and get their feedback regarding the software's functionality. 
We may expand the release of this draft version by releasing the draft 
ICD-10 HHRG to all interested parties. We are pursuing a wider release 
of the draft HHRG based upon comments received requesting that the 
agency release the draft HHRG to all interested parties. Issues and 
concerns noted will be reviewed and addressed by the HHRG Maintenance 
Contractor in consultation with CMS.
    We plan to release the final version of the ICD-10-CM HHRG in July 
2013 (or earlier if feasible) to permit HHAs and their vendors 
sufficient time to install the software. We will strive to release the 
final version of the ICD-10-CM HHRG as early as possible based upon 
comments received from the industry requesting an earlier release date.
    The following is summary of the comments we received regarding the 
International Classification of Diseases 10th Edition (ICD-10) Coding.
    Comment: One commenter suggested that CMS should consider an 
earlier release of the HHRG software which was proposed to be released 
to Beta Testers in April 2013. In addition, the commenter suggested 
that CMS should publish and make available the draft HHRG available to 
the entire industry for their review versus the current approach of 
soliciting input from vendors that have volunteered to review our HHRG.
    Response: We appreciate the feedback provided and are committed to 
developing an earlier release of the HHRG if possible and will take 
into consideration the suggestion concerning industry wide release of 
the draft October 2013 ICD-10-CM HHRG. Final details concerning our 
implementation plans will be released through the scheduled Provider 
Outreach

[[Page 68599]]

teleconferences and posted on the ICD-10 section of the CMS Web site.
    Comment: Several commenters' suggested that CMS has committed to 
publishing this information in a format that crosswalks the ICD-9-CM to 
ICD-10 codes.
    Response: We have not reached any decisions regarding the format of 
the code lists. Additional information concerning the format will be 
provided through the ICD-10-CM provider outreach teleconferences and 
posted on the ICD-10 section of the CMS Web site.
    Comment: Several commenter's noted their appreciation of our plans 
to release the proposed lists of ICD-10-CM codes as early as October 1, 
2011.
    Response: Based upon our current progress in reviewing the code 
lists developed by our support contracts and resolving potential 
conflicts, we will be revising the language in our final regulation. 
The regulation will reflect that the proposed lists of ICD-10-CM codes 
may be made available on the ICD-10 section of the CMS Web site in the 
spring of 2012.
    As a result of the comments, we have made modifications to the 
language to indicate that we will take into consideration a commenters' 
suggestion that all interested parties should be included in the review 
of the draft ICD-10-CM HHRG. A final decision will be announced in a 
future ICD-10 Provider Outreach teleconference and posted on the ICD-10 
section of the CMS Web site. In addition, the agency will consider the 
suggestion surrounding the format of the ICD-10 translation list and a 
final decision will be announced as outlined earlier in this section. 
Lastly, based upon our current experience in reviewing the ICD-10-CM 
codes we believe that the draft code list will not be made available on 
the ICD-10 section of the CMS Web site until early 2012.

I. Clarification To Benefit Policy Manual Language on ``Confined to the 
Home'' Definition

    To address the recommended changes of the Office of Inspector 
General (OIG) to the home health benefit policy manual, CMS proposed to 
clarify its ``confined to the home'' definition to more accurately 
reflect the definition as articulated in the Act. We proposed to move 
the requirements that the patient require physical assistance to leave 
the home or if leaving home is medically contraindicated, and that the 
condition of the patient should be such that there exists a normal 
inability to leave home and, consequently, leaving the home would 
require a considerable and taxing effort to the beginning of section 
30.1.1 of the Chapter 7 Home Health Benefit Policy Manual as necessary 
requirements to be considered ``confined to the home.'' Further, we 
proposed to remove vague terms from section 30.1.1, such as ``generally 
speaking,'' to ensure clear and specific requirements for the 
definition. These changes present the requirements first and more 
closely align our policy manual with the Act to prevent confusion and 
promote a clearer enforcement of the statute and more definitive 
guidance to HHAs for compliance. As such, we proposed that section 
30.1.1 begin with the following, revised language:
``30.1.1--Patient Confined to the Home
    For a patient to be eligible to receive covered home health 
services under both Part A and Part B, the statute requires that a 
physician certify in all cases that the patient is confined to his/her 
home. For purposes of the statute, an individual shall be considered 
``confined to the home'' (that is, homebound) if the following exist:
    (1) The individual has a condition due to an illness or injury that 
restricts his or her ability to leave their place of residence except 
with: the aid of supportive devices such as crutches, canes, 
wheelchairs, and walkers; the use of special transportation; or the 
assistance of another person; or if leaving home is medically 
contraindicated.
    (2) The individual does not have to be bedridden to be considered 
``confined to the home''. However, the condition of the patient should 
be such that there exists a normal inability to leave home and, 
consequently, leaving home would require a considerable and taxing 
effort.
    If the patient does in fact leave the home, the patient may 
nevertheless be considered homebound if the absences from the home are 
infrequent or for periods of relatively short duration, or are 
attributable to the need to receive health care treatment. Absences 
attributable to the need to receive health care treatment include, but 
are not limited to:
     Attendance at adult day centers, licensed or certified by 
a State or accredited to furnish adult day-care services in the State, 
to receive therapeutic, psychological, or medical treatment;
     Ongoing receipt of outpatient kidney dialysis; or
     The receipt of outpatient chemotherapy or radiation 
therapy.
    Any absence of an individual from the home attributable to the need 
to receive health care treatment, including regular absences for the 
purpose of participating in therapeutic, psychosocial, or medical 
treatment in an adult day-care program that is licensed or certified by 
a State, or accredited to furnish adult day-care services in a State, 
shall not disqualify an individual from being considered to be confined 
to his home. Any other absence of an individual from the home shall not 
so disqualify an individual if the absence is of an infrequent or of 
relatively short duration. For purposes of the preceding sentence, any 
absence for the purpose of attending a religious service shall be 
deemed to be an absence of infrequent or short duration. It is expected 
that in most instances, absences from the home that occur will be for 
the purpose of receiving health care treatment. However, occasional 
absences from the home for nonmedical purposes, for example, an 
occasional trip to the barber, a walk around the block or a drive, 
attendance at a family reunion, funeral, graduation, or other 
infrequent or unique event would not necessitate a finding that the 
patient is not homebound if the absences are undertaken on an 
infrequent basis or are of relatively short duration and do not 
indicate that the patient has the capacity to obtain the health care 
provided outside rather than in the home.
    Some examples of homebound patients that illustrate the factors 
used to determine whether a homebound condition exists would be: * * 
*''
    The following is a summary of the comments we received regarding 
clarification to benefit policy manual language on ``confined to the 
home'' definition.
    Comment: Commenters were not clear on whether the individual needs 
to meet both of the requirements of (1) needing physical assistance to 
leave the home or if leaving home is medically contraindicated and (2) 
the condition of the patient being such that there exists a normal 
inability to leave home and, consequently, leaving the home would 
require a considerable and taxing effort; or if meeting either one of 
the requirements is acceptable. A commenter recommended adding ``and'' 
at the end of statement ``1'' to clarify.
    Response: As the statute is written, statement ``1'' must first be 
met and then statement ``2'' must also be true about a patient to be 
considered homebound. We found this comment compelling and will add 
``and'' to the end of statement ``1'' to better match the manual 
guidance to the statutory language and to more clearly distinguish the 
requirements. Therefore, it will be clear that, to be considered 
``confined to the home'' a patient must first meet one of the 
requirements within statement ``1'' (if the patient requires physical 
assistance to leave the home or if

[[Page 68600]]

leaving home is medically contraindicated), and the individual must 
then also meet both of the requirements of statement ``2'' (the 
condition of the patient should be such that there exists a normal 
inability to leave home and, consequently, leaving the home would 
require a considerable and taxing effort).
    Comment: Several commenters suggested that CMS add clarifying 
language differentiating absences from the home for entertainment 
versus those required to preserve independent living to prevent 
premature disqualification of otherwise eligible patients. Commenters 
also stated that the vagueness of the definition forces HHAs to submit 
post-payment demand bills to Medicare for Medicare/Medicaid dually 
eligible patients, even when the patient may not be confined to the 
home, causing administrative burden and waste. Further, commenters 
suggested that CMS provide guidance about this provision to State 
Medicaid offices to prevent inconsistent application and better control 
the administrative burdens. Still other commenters recommended removing 
the ``confined to the home'' definition to align with Medicaid. A 
commenter stated that the statement about not being bedridden is 
confusing.
    Response: We believe the comments are out of the scope of the 
proposed rule. We only proposed to align the manual language with the 
statutory language at this time. Further clarification of the 
definition would need to be proposed through the rulemaking process. 
However, we will continue to work with the industry to better inform 
and educate about the requirements of the benefit.
    Comment: We received comments suggesting that CMS leave the current 
definition in place so as to prevent the definition from becoming 
narrower and arbitrary. Further, commenters stated that the need for 
aid of a supportive device, the use of special transportation or the 
assistance of another person does not necessarily entail a normal 
inability to leave home and requiring a considerable and taxing effort 
to do so, which could lead to further misapplication of the benefit.
    Response: We proposed to align the manual language to better mirror 
the statutory language with regard to the ``confined to the home'' 
definition, thereby intending to make the definition clearer and more 
consistent. However, we do not believe that the proposed clarification 
makes the homebound definition narrower and more arbitrary. Rather, the 
clarification moves the two requirements (one of which must be met) to 
the beginning of the manual guidance before further description of 
examples and exceptions.
    Comment: We received support for the proposed clarification, 
maintaining that the clarification better addresses providers' concerns 
about how patients' occasional absences from the home affect their 
homebound status and eligibility for the home health benefit.
    Response: We thank the commenters for their support.
    As a result of the comments, we will finalize the proposed 
clarification of the manual language with the following exceptions: We 
are adding ``and'' to the end of statement ``1'' of the two 
requirements for homebound status to more clearly convey that to be 
considered ``confined to the home,'' the patient first must meet one of 
the following two requirements. The patient must either need physical 
assistance leaving the home or leaving is medically contraindicated. If 
the patient meets one of those requirements, the patient must then also 
meet the two additional requirements as follows: There must also be a 
normal inability to leave home and leaving the home must require a 
considerable and taxing effort.

III. Collection of Information Requirements

    This document does not impose any new information collection and 
recordkeeping requirements. The information collection requirements 
discussed in proposed Sec.  424.22 are currently approved under OMB 
control number 0938-1083. The information collection requirements 
discussed in proposed Sec.  484.250, the OASIS-C and Home Health Care 
CAHPS, are currently approved under OMB control numbers 0938-0760 and 
0938-1066, respectively. Consequently, it need not be reviewed by the 
Office of Management and Budget under the authority of the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35).

IV. Regulatory Impact Analysis

A. Introduction

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
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. A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any 1 year). This final rule has been designated an ``economically 
significant'' rule under section 3(f)(1) of Executive Order 12866 and a 
major rule under the Congressional Review Act. Accordingly, the rule 
has been reviewed by the Office of Management and Budget.

B. Statement of Need

    This final rule adheres to the following statutory requirements. 
Section 4603(a) of the BBA mandated the development of a HH PPS for all 
Medicare-covered HH services provided under a plan of care (POC) that 
were paid on a reasonable cost basis by adding section 1895 of the Act, 
entitled ``Prospective Payment For Home Health Services''. Section 
1895(b)(1) of the Act requires the Secretary to establish a HH PPS for 
all costs of HH services paid under Medicare. In addition, section 
1895(b)(3)(A) of the Act requires (1) the computation of a standard 
prospective payment amount include all costs for HH services covered 
and paid for on a reasonable cost basis and that such amounts be 
initially based on the most recent audited CR data available to the 
Secretary, and (2) the standardized prospective payment amount be 
adjusted to account for the effects of case-mix and wage levels among 
HHAs. Section 1895(b)(3)(B) of the Act addresses the annual update to 
the standard prospective payment amounts by the HH applicable 
percentage increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
case-mix and geographic differences in wage levels. Section 
1895(b)(4)(B) of the Act requires the establishment of appropriate 
case-mix adjustment factors for significant variation in costs among 
different units of services. Lastly, section 1895(b)(4)(C) of the Act 
requires the establishment of wage adjustment factors that reflect the 
relative level of wages, and wage-related costs applicable to HH 
services

[[Page 68601]]

furnished in a geographic area compared to the applicable national 
average level.
    Section 1895(b)(5) of the Act, as amended by section 3131 of the 
Affordable Care Act, gives the Secretary the option to make changes to 
the payment amount otherwise paid in the case of outliers because of 
unusual variations in the type or amount of medically necessary care. 
Section 1895(b)(3)(B)(v) of the Act requires HHAs to submit data for 
purposes of measuring health care quality, and links the quality data 
submission to the annual applicable percentage increase. Also, section 
3131 of the Affordable Care Act requires that HH services furnished in 
a rural area (as defined in section 1886(d)(2)(D) of the Act) for 
episodes and visits ending on or after April 1, 2010, and before 
January 1, 2016, receive an increase of 3 percent the payment amount 
otherwise made under section 1895 of the Act.

C. Overall Impact

    The update set forth in this final rule applies to Medicare 
payments under HH PPS in CY 2012. Accordingly, the following analysis 
describes the impact in CY 2012 only. We estimate that the net impact 
of the proposals in this rule is approximately $430 million in CY 2012 
savings. The $430 million impact due to the proposed CY 2012 HH PPS 
rule reflects the distributional effects of an updated wage index ($10 
million increase) plus the 1.4 percent HH PPS payment update percentage 
($280 million increase), for a total increase of $290 million. The 3.79 
percent case-mix adjustment applicable to the national standardized 60-
day episode rates ($720 million decrease) plus the combined wage index 
and HH PPS payment update percentage ($290 million increase) results in 
a total savings of $430 million in CY 2012. The $430 million in savings 
is reflected in the first row of column 3 of Table 26 as a 2.31 percent 
decrease in expenditures when comparing the current CY 2011 HH PPS to 
the CY 2012 HH PPS.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of less than $7.0 million to $34.5 million in any 1 year. For 
the purposes of the RFA, our updated data show that approximately 98 
percent of HHAs are considered to be small businesses according to the 
Small Business Administration's size standards with total revenues of 
$13.5 million or less in any 1 year. Individuals and States are not 
included in the definition of a small entity. The Secretary has 
determined that this final rule would have a significant economic 
impact on a substantial number of small entities. We define small HHAs 
as those with total revenues of $13.5 million or less in any 1 year. 
Analysis reveals a 2.62 percent decrease in estimated payments to small 
HHAs in CY 2012.
    A discussion on the alternatives considered is presented in section 
V.E. below. The following analysis, with the rest of the preamble, 
constitutes our final RFA analysis.
    In this final rule, we have stated that our analysis reveals that 
nominal case-mix continues to grow under the HH PPS. Specifically, 
nominal case-mix has grown from the 17.45 percent growth identified in 
our analysis for CY 2011 rulemaking to 19.03 percent for this year's 
rulemaking (see further discussion in sections II.A. and II.B.). 
Nominal case-mix is an increase in case-mix that is not due to an 
increase in patient acuity. We believe it is appropriate to reduce the 
HH PPS rates to account for the increase in nominal case-mix, so as to 
move towards more accurate payment for the delivery of home health 
services. Our analysis shows that smaller HHAs are impacted slightly 
more than are larger HHAs by the provisions of this rule.
    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 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 final rule applies 
only to HHAs. Therefore, the Secretary has determined that this final 
rule would not have a significant economic impact on the operations of 
small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2011, that 
threshold is approximately $136 million. This final rule is not 
anticipated to impose spending costs on State, local, or Tribal 
governments in the aggregate, or by the private sector, of $136 million 
or more.

D. Detailed Economic Analysis

    This final rule sets forth updates to the HH PPS rates contained in 
the CY 2011 HH PPS final rule. The impact analysis of this final rule 
presents the estimated expenditure effects of policy changes proposed 
in this rule. We use the latest data and best analysis available, but 
we do not make adjustments for future changes in such variables as 
number of visits or case-mix.
    This analysis incorporates the latest estimates of growth in 
service use and payments under the Medicare home health benefit, based 
on Medicare claims from 2009. We note that certain events may combine 
to limit the scope or accuracy of our impact analysis, because such an 
analysis is future-oriented and, thus, susceptible to inaccuracies 
resulting from other changes in the impact time period assessed. Some 
examples of such possible events are newly-legislated general Medicare 
program funding changes made by the Congress, or changes specifically 
related to HHAs. In addition, changes to the Medicare program may 
continue to be made as a result of the Affordable Care Act, or new 
statutory provisions. Although these changes may not be specific to the 
HH PPS, the nature of the Medicare program is such that the changes may 
interact, and the complexity of the interaction of these changes could 
make it difficult to predict accurately the full scope of the impact 
upon HHAs.
    Comment: A commenter recommended that we modify our impact analysis 
approach. The commenter states that the proposed rule simply quantifies 
the percentage cut in rates on a geographic basis and broadly evaluates 
the impact of the changes on home health categories such as 
freestanding, hospital-based, nonprofits, and urban and rural 
providers.
    Response: We believe that State-level impacts would be misleading 
unless we also provided break-outs of rural-verses-urban and ownership 
status of providers within the State. While we believe that our impact 
analysis is reflective of how HHAs are impacted by the provisions of 
this rule in that we provide impacts by type of facility, urban/rural, 
regions and other areas of the country, and facility size, we did 
perform a State-level analysis as the commenters suggested. That 
analysis shows similar results in that States estimated to see the more 
significant negative impacts, as a result of the provisions of this 
rule, are located in those areas of the country that are

[[Page 68602]]

estimated to see the most significant negative impact (that is, East 
South Central, West South Central, South Atlantic, East North Central, 
and Mountain). Analysis shows, for the States hit hardest in these 
areas of the country, not-for-profit HHAs and HHAs in rural areas are 
somewhat protected by provisions of this rule such as the 
redistributional effects of decreasing case-mix weights for high 
therapy cases and increasing case-mix weights for low and non-therapy 
cases, and the 3 percent rural add-on update.
    In addition, for States in which significant negative impacts exist 
for non-profit and/or rural HHAs, we performed a preliminary analysis 
using 2009 freestanding Medicare cost report data (MCR). This analysis 
indicates a more than adequate volume of providers with margins strong 
enough to absorb the payment reductions to account for nominal case-mix 
growth. For example, our State-level analysis shows that Tennessee is 
the hardest hit State by the provisions of this rule, and is estimated 
to see a -6.18 percent decrease in payments from CY 2011 to CY 2012. 
While the impact on rural and not-for-profit HHAs in Tennessee is 
somewhat lessened for the reasons described above, they are still 
estimated to see significant decreases in payments in CY 2012. However, 
our preliminary analysis of 2009 freestanding MCR data indicate that 
Tennessee providers, including rural and not-for-profit HHAs, are 
experiencing margins which would enable them to absorb the reductions. 
Our analysis shows similar results in several other States in these 
areas of the country which are estimated to see relatively significant 
negative impacts as a result of the provisions of this rule. As such, 
since our analysis of freestanding HHA MCR data shows strong positive 
margins in these areas of the country, we believe that the provisions 
of this rule, should not lead to access to access to care issues. That 
being said, we would like to note that predicting agencies' margins 
(particularly, the increase in the number of agencies with negative 
margins) as a result of the provisions of this rule is difficult to do 
because many agencies may find ways to cut costs so that margins remain 
strong. This is supported by the fact that Medicare margins have 
remained strong since PPS implementation even with reductions in 
payments similar to the reduction being finalized in this final rule. 
We also understand that our analyses has limitations since it is based 
on 2009 MCR data, the latest complete MCR data at the time of 
preparation of this rulemaking. However, in their March 2011 Report to 
Congress, MedPAC projected an average of 14.5 percent margins for HHAs 
in 2011, when taking into account various payment adjustments such as 
the CY 2011 payment reduction for nominal case-mix growth.
    To supplement the above described analysis, similar to analysis 
that we have performed in previous rulemaking when the issue of 
``access to care'' was a concern, we also looked at estimated margins 
of HHAs, by county after estimating the impact of the provisions of 
this rule. We performed this analysis for the purposes of possibly 
identifying potential access risks associated with this rule. In 
particular, we looked to identify whether the finalized policies of 
this rule might increase the number of counties not served by at least 
one HHA with a positive margin. The analysis demonstrated that the 
occurrence of such counties was very infrequent. Looking further, we 
also identified that the counties we identified as not having at least 
one HHA with a positive margin did have at least one HHA in a 
contiguous county with a positive margin, or at a minimum it was 
determined that the provisions of this rule did not create a scenario 
where, for a county without at least one HHA with a positive margin, 
that county did not have a contiguous county with at least one HHA with 
a positive margin.
    As we have previously described, our preliminary analyses indicate 
HH industry margins are sufficient to support a rate reduction of this 
size. We note that margin analysis alone is not an accurate access to 
care indicator. Many factors affect whether agencies with low or 
negative margin would close or not, such as the organization's mission, 
the availability of alternate sources of funding, and whether or not 
the organization is embedded in a larger one. We would also like to 
note that the number of agencies continues to grow, totaling around 
11,000 in 2010, a 65 percent increase since 2002 and that access to 
care was not found to be inadequate in 2002, when the number of 
agencies nationally was much lower than it is today. Thus, given these 
reasons along with our described analysis above we do not believe that 
the finalized policies in this rule should result in access to care 
issues. At the core of our policies is our objective to pay 
appropriately for the efficient delivery of reasonable and necessary 
home health services. As always, we will, of course, continue to 
monitor for unintended consequences of the final policies of this rule.
    Table 26 represents how HHA revenues are likely to be affected by 
the policy changes proposed in this rule. For this analysis, we used 
linked home health claims and OASIS assessments; the claims represented 
a 20-percent sample of 60-day episodes occurring in CY 2009. The first 
column of Table 26 classifies HHAs according to a number of 
characteristics including provider type, geographic region, and urban 
and rural locations. The second column shows the payment effects of the 
wage index only. The third column shows the payment effects of all the 
proposed policies outlined earlier in this rule. For CY 2012, the 
average impact for all HHAs due to the effects of the wage index is a 
0.03 percent increase in payments. The overall impact for all HHAs, in 
estimated total payments from CY 2011 to CY 2012, is a decrease of 
approximately 2.31 percent.
    As shown in Table 26, the combined effects of all of the changes 
vary by specific types of providers and by location. Rural and 
voluntary non-profit agencies fare considerably better than urban and 
proprietary agencies as a result of the proposed provisions of this 
rule. We believe this is due mainly to the distributional effects of 
the recalibration of the case-mix weights as described in section II.A 
of the proposed rule. Essentially, these impacts suggest that under the 
current case-mix system, rural and voluntary non-profit agencies bill 
less for high therapy episodes than do urban and proprietary agencies.
    There is not much difference in the estimated impact (2.79 to 2.98 
percent decreases) on HHAs when looking at the facility size based on 
the number of first episodes, with the lone exception being that the 
largest HHAs are estimated to see a 1.88 percent decrease in payments 
in CY 2012. There is considerable variation in the estimated impacts 
depending on the region of the country in which the HHA is located. 
HHAs in the North are estimated to see a 1.31 percent increase in 
payments while HHAs in other regions are estimated to receive between a 
0.09 percent increase in payments (West) and a 3.83 percent decrease 
(South). HHAs in the New England, Mid Atlantic, and Pacific areas of 
the country are estimated to receive increases of 1.37 percent, 1.27 
percent and 1.33 percent, respectively. However, HHAs in the South 
Atlantic, East South Central, West South Central, East North Central, 
West North Central, and Mountain areas of the country are estimated to 
receive decreases in payments ranging from 0.50 percent to 4.78 
percent. Freestanding HHAs are estimated to see a 2.73 percent decrease 
in payments while facility-based HHAs

[[Page 68603]]

are estimated to see a 0.53 percent increase in payments. Voluntary 
not-for-profit HHAs are estimated to see a 0.52 percent increase in 
payments, while for-profit HHAs are estimated to see a 3.49 percent 
decrease in payments in CY 2012. Rural agencies are estimated to see a 
1.52 percent decrease in payments in CY 2012, while urban agencies are 
estimated to see a 2.45 percent decrease in payments. Rural, 
freestanding, voluntary not-for-profit HHAs are estimated to see a 1.56 
percent increase in payments. As described above, we believe the 
considerable variation in some of the estimated impacts is due mainly 
to the distributional effects of the recalibration of the case-mix 
weights.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR04NO11.030


[[Page 68604]]


[GRAPHIC] [TIFF OMITTED] TR04NO11.031

BILLING CODE 4120-01-C

E. Alternatives Considered

    As described in section V.C. above, implementing the case-mix 
adjustment for CY 2012 along with the HH PPS payment update percentage 
and the updated wage index, the aggregate impact would be a net 
decrease of $430 million in payments to HHAs, resulting from a $290 
million increase due to the updated wage index and the HH PPS payment 
update percentage and a $720 million reduction from the 3.79 percent 
case-mix adjustment. If we were to not implement the case-mix 
adjustment for CY 2012, Medicare would pay an estimated $720 million 
more to HHAs in CY 2012, for a net increase in payments

[[Page 68605]]

to HHAs in CY 2012 of $290 million (HH PPS payment update percentage 
and updated wage index). We believe that not implementing a case-mix 
adjustment, and paying out an additional $720 million to HHAs when 
those additional payments are not reflective of HHAs treating sicker 
patients, would not be in line with the intent of the HH PPS, which is 
to pay accurately and appropriately for the delivery of home health 
services to Medicare beneficiaries. If we were to implement a 5.06 
case-mix adjustment for CY 2012 along with the HH PPS payment update 
percentage and the updated wage index, the aggregate impact would be a 
net decrease of $670 million in payment to HHAs, resulting from a $290 
million increase due to the updated wage index and the HH PPs payment 
update percentage and a $960 million reduction from a 5.06 percent 
case-mix adjustment. As we stated in our response to comments in 
Section II.A. of this rule, we are sensitive to the challenges HHAs may 
have had in adapting to the Affordable Care Act provisions which were 
implemented in CY 2011, such as the face-to-face encounter provision. 
We also agree that the Affordable Care Act provisions and the CY 2011 
therapy changes described by commenters likely required HHAs to 
incorporate process changes to adhere to these new requirements. As 
such, we are finalizing a phased-in implementation of the 5.06 percent 
reduction over 2 years, as some commenters suggested. We believe that 
by phasing-in the reductions over CY 2012 and CY 2013, we allow HHAs an 
opportunity to adopt process efficiencies associated with the CY 2011 
mandates prior to imposing the full 5.06 percent payment reduction.
    Section 1895(b)(3)(B)(iv) of the Act gives CMS the authority to 
implement payment reductions for nominal case-mix growth, changes in 
case-mix that are unrelated to actual changes in patient health status. 
We are committed to monitoring the accuracy of payments to HHAs, which 
includes the measurement of the increase in nominal case-mix, which is 
an increase in case-mix that is not due to patient acuity. As discussed 
in section II.A. of this rule, we have determined that there is a 19.03 
percent nominal case-mix change from 2000 to 2009. To account for the 
remainder of the 19.03 percent residual increase in nominal case-mix 
beyond that which was has been accounted for in previous payment 
reductions (2.75 percent in CY 2008 through CY 2010 and 3.79 percent in 
CY 2011),), as described in the proposed rule and restated in Section 
II.A. of this rule, we have estimated that the percentage reduction to 
the national standardized 60-day episode rates for nominal case-mix 
change for CY 2012 would be 5.06 percent. As described in a comment and 
response in Section II.A. of this rule, commenters expressed concern 
that the proposed cut of 5.06 percent would impede access to home 
health care. Some commenters stated that rural areas would be hit the 
hardest by a case-mix reduction to payments. One commenter described 
his analysis which concluded that over 55 percent of agencies would be 
forced into negative margins as a result of the reductions. The 
commenter further stated that six States and Guam would have more than 
70 percent of their agencies with negative margins in CY 2012 as a 
result of the proposed 5.06 percent reduction. In response to these 
comments, we noted that the effects of the payment update, the wage 
index update, and the revision of case-mix weights must also be taken 
into account when assessing the impact of a 5.06 percent reduction and 
that we believe the commenter did not do consider these in his 
analysis. We described our analysis which showed that the revision of 
the case-mix weights would have a re-distributional effect on HH PPS 
payments which benefit rural and non-profit HHAs, and HHAs in certain 
areas of the country. Our analysis showed that some rural and non-
profit HHAs, as well as HHAs in certain areas of the country, were 
estimated to see an increase in payments in CY 2012, even with a 5.06 
percent nominal case-mix reduction. We described our analysis of the 
combined effects of all the policies in the proposed rule, our 
preliminary analysis of Medicare CRs, and MedPAC's margin projections, 
and we concluded that Medicare margins are strong enough to absorb a 
5.06 percent reduction to account for growth in nominal case-mix 
without impeding access. However, for the reasons described in section 
II.A. in this final rule, we are phasing-in the implementation of a 
5.06 percent reduction over 2 years, finalizing a 3.79 percent 
reduction in CY 2012 and a 1.32 percent reduction in CY 2013.
    We believe that the alternative of not implementing a case-mix 
adjustment to the payment system in CY 2012 to account for the increase 
in case-mix that is not real would be detrimental to the integrity of 
the PPS. As discussed in section II.A. of this rule, because nominal 
case-mix continues to grow (about 1 percent each year in 2006 and 2007, 
4 percent in 2008, and 2 percent in 2009), and thus to date we have not 
accounted for all the increase in nominal case-mix growth, we believe 
it is appropriate to reduce HH PPS rates now, thereby paying more 
accurately for the delivery of home health services under the Medicare 
home health benefit. The other reduction to HH PPS payments, a 1.0 
percentage point reduction to the proposed CY 2012 home health market 
basket update, is discussed in this rule and is not discretionary as it 
is a requirement in section 1895(b)(3)(B)(vi) of the Act (as amended by 
the Affordable Care Act).

F. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 27, we have 
prepared an accounting statement showing the classification of the 
transfers associated with the provisions of this final rule. This table 
provides our best estimate of the decrease in Medicare payments under 
the HH PPS as a result of the changes presented in this final rule.
[GRAPHIC] [TIFF OMITTED] TR04NO11.032

G. Conclusion

    In conclusion, we estimate that the net impact of the proposals in 
this rule is approximately $430 million in CY 2012 savings. The $430 
million impact to the final CY 2012 HH PPS reflects the distributional 
effects of an updated wage index ($10 million increase), the 1.4 
percent HH PPS payment update

[[Page 68606]]

percentage ($280 million increase), and the 3.79 percent case-mix 
adjustment applicable to the national standardized 60-day episode rates 
($720 million decrease). This analysis, together with the remainder of 
this preamble, provides a Regulatory Impact Analysis.

V. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) 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 
final rule under the threshold criteria of Executive Order 13132, 
Federalism, and have determined that it would not have substantial 
direct effects on the rights, roles, and responsibilities of States, 
local or Tribal governments.

List of Subjects

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 424

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

42 CFR Part 484

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

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

PART 409--HOSPITAL INSURANCE BENEFITS

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

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

Subpart E--Home Health Services Under Hospital Insurance

0
2. Section 409.42 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  409.42  Beneficiary qualifications for coverage of services.

* * * * *
    (c) * * *
    (4) Occupational therapy services in the current and subsequent 
certification periods (subsequent adjacent episodes) that meet the 
requirements of Sec.  409.44(c) initially qualify for home health 
coverage as a dependent service as defined in Sec.  409.45(d) if the 
beneficiary's eligibility for home health services has been established 
by virtue of a prior need for intermittent skilled nursing care, 
speech-language pathology services, or physical therapy in the current 
or prior certification period. Subsequent to an initial covered 
occupational therapy service, continuing occupational therapy services 
which meet the requirements of Sec.  409.44(c) are considered to be 
qualifying services.
* * * * *

0
3. Section 409.44 is amended by revising paragraphs (c) introductory 
text, (c)(2)(i)(C)(2), and (c)(2)(i)(D)(2) to read as follows:


Sec.  409.44  Skilled services requirements.

* * * * *
    (c) Physical therapy, speech-language pathology services, and 
occupational therapy. To be covered, physical therapy, speech-language 
pathology services, and occupational therapy must satisfy the criteria 
in paragraphs (c)(1) and (2) of this section.
* * * * *
    (2) * * *
    (i) * * *
    (C) * * *
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide all of the 
therapy services and functionally reassess the patient in accordance 
with paragraph (c)(2)(i)(A) of this section during the visit associated 
with that discipline which is scheduled to occur close to the 14th 
Medicare-covered therapy visit, but no later than the 13th Medicare-
covered therapy visit.
    (D) * * *
    (2) Where more than one discipline of therapy is being provided, 
the qualified therapist from each discipline must provide all of the 
therapy services and functionally reassess the patient in accordance 
with paragraph (c)(2)(i)(A) of this section during the visit associated 
with that discipline which is scheduled to occur close to the 20th 
Medicare-covered therapy visit, but no later than the 19th Medicare-
covered therapy visit.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

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

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

Subpart B--Certification and Plan Requirements

0
5. Section 424.22 is amended by revising paragraphs (a)(1)(v) 
introductory text and (a)(1)(v)(A) to read as follows:


Sec.  424.22  Requirements for home health services.

* * * * *
    (a) * * *
    (1) * * *
    (v) The physician responsible for performing the initial 
certification must document that the face-to-face patient encounter, 
which is related to the primary reason the patient requires home health 
services, has occurred no more than 90 days prior to the home health 
start of care date or within 30 days of the start of the home health 
care by including the date of the encounter, and including an 
explanation of why the clinical findings of such encounter support that 
the patient is homebound and in need of either intermittent skilled 
nursing services or therapy services as defined in Sec.  409.42(a) and 
(c) of this chapter, respectively. The face-to-face encounter must be 
performed by the certifying physician himself or herself, by a nurse 
practitioner, a clinical nurse specialist (as those terms are defined 
in section 1861(aa)(5) of the Act) who is working in collaboration with 
the physician in accordance with State law, a certified nurse midwife 
(as defined in section 1861(gg)of the Act) as authorized by State law, 
a physician assistant (as defined in section 1861(aa)(5) of the Act) 
under the supervision of the physician, or, for patients admitted to 
home health immediately after an acute or post-acute stay, the 
physician who cared for the patient in an acute or post-acute facility 
and who has privileges at the facility. The documentation of the face-
to-face patient encounter must be a separate and distinct section of, 
or an addendum to, the certification, and must be clearly titled, dated 
and signed by the certifying physician.
    (A) If the certifying physician does not perform the face-to-face 
encounter himself or herself, the nonphysician practitioner or the 
physician who cared for the patient in an acute or post-acute facility 
performing the face-to-face encounter must communicate the clinical 
findings of that face-to-face patient encounter to such certifying 
physician.
* * * * *

[[Page 68607]]

PART 484--HOME HEALTH SERVICES

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

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

Subpart E--Prospective Payment System for Home Health Agencies

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


Sec.  484.250  Patient assessment data.

    (a) Data submission. An HHA must submit the following data to CMS:
    (1) The OASIS-C data described at Sec.  484.55(b)(1) of this part 
for CMS to administer the payment rate methodologies described in 
Sec. Sec.  484.215, 484.230, and 484.235 of this subpart, and to meet 
the quality reporting requirements of section 1895(b)(3)(B)(v) of the 
Act.
    (2) The Home Health Care CAHPS survey data for CMS to administer 
the payment rate methodologies described in Sec.  484.225(i) of this 
subpart, and to meet the quality reporting requirements of section 
1895(b)(3)(B)(v) of the Act.
    (b) Patient count. An HHA that has less than 60 eligible unique 
HHCAHPS patients annually must annually submit to CMS their total 
HHCAHPS patient count to CMS to be exempt from the HHCAHPS reporting 
requirements for a calendar year period.
    (c) Survey requirements. An HHA must contract with an approved, 
independent HHCAHPS survey vendor to administer the HHCAHPS Survey on 
its behalf.
    (1) CMS approves an HHCAHPS survey vendor if such applicant has 
been in business for a minimum of 3 years and has conducted surveys of 
individuals and samples for at least 2 years.
    (i) For HHCAHPS, a ``survey of individuals'' is defined as the 
collection of data from at least 600 individuals selected by 
statistical sampling methods and the data collected are used for 
statistical purposes.
    (ii) All applicants that meet these requirements will be approved 
by CMS.
    (2) No organization, firm, or business that owns, operates, or 
provides staffing for a HHA is permitted to administer its own Home 
Health Care CAHPS (HHCAHPS) Survey or administer the survey on behalf 
of any other HHA in the capacity as an HHCAHPS survey vendor. Such 
organizations will not be approved by CMS as HHCAHPS survey vendors.

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

    Dated: October 13, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 25, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-28416 Filed 10-31-11; 4:15 pm]
BILLING CODE 4120-01-P