[Federal Register Volume 80, Number 214 (Thursday, November 5, 2015)]
[Rules and Regulations]
[Pages 68624-68719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27931]



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Vol. 80

Thursday,

No. 214

November 5, 2015

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 409, 424, and 484





Medicare and Medicaid Programs; CY 2016 Home Health Prospective Payment 
System Rate Update; Home Health Value-Based Purchasing Model; and Home 
Health Quality Reporting Requirements; Final Rule

  Federal Register / Vol. 80 , No. 214 / Thursday, November 5, 2015 / 
Rules and Regulations  

[[Page 68624]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, and 484

[CMS-1625-F]
RIN 0938-AS46


Medicare and Medicaid Programs; CY 2016 Home Health Prospective 
Payment System Rate Update; Home Health Value-Based Purchasing Model; 
and Home Health Quality Reporting Requirements

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

ACTION: Final rule.

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SUMMARY: This final rule will update Home Health Prospective Payment 
System (HH PPS) rates, including the national, standardized 60-day 
episode payment rates, the national per-visit rates, and the non-
routine medical supply (NRS) conversion factor under the Medicare 
prospective payment system for home health agencies (HHAs), effective 
for episodes ending on or after January 1, 2016. As required by the 
Affordable Care Act, this rule implements the 3rd year of the 4-year 
phase-in of the rebasing adjustments to the HH PPS payment rates. This 
rule updates the HH PPS case-mix weights using the most current, 
complete data available at the time of rulemaking and provides a 
clarification regarding the use of the ``initial encounter'' seventh 
character applicable to certain ICD-10-CM code categories. This final 
rule will also finalize reductions to the national, standardized 60-day 
episode payment rate in CY 2016, CY 2017, and CY 2018 of 0.97 percent 
in each year to account for estimated case-mix growth unrelated to 
increases in patient acuity (nominal case-mix growth) between CY 2012 
and CY 2014. In addition, this rule implements a HH value-based 
purchasing (HHVBP) model, beginning January 1, 2016, in which all 
Medicare-certified HHAs in selected states will be required to 
participate. Finally, this rule finalizes minor changes to the home 
health quality reporting program and minor technical regulations text 
changes.

DATES: Effective Date: These regulations are effective on January 1, 
2016.

FOR FURTHER INFORMATION CONTACT: For general information about the HH 
PPS please send your inquiry via email to: 
[email protected]. Michelle Brazil, (410) 786-1648 or 
Theresa White, (410) 786-2394 for information about the HH quality 
reporting program. Lori Teichman, (410) 786-6684, for information about 
HHCAHPS. Robert Flemming, (844) 280-5628, or send your inquiry via 
email to [email protected] for information about the HHVBP 
Model.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Costs and Benefits
II. Background
    A. Statutory Background
    B. System for Payment of Home Health Services
    C. Updates to the Home Health Prospective Payment System
    D. Advancing Health Information Exchange
III. Provisions of the Proposed Rule and Response to Comments
    A. Monitoring for Potential Impacts--Affordable Care Act 
Rebasing Adjustments
    B. CY 2016 HH PPS Case-Mix Weights and Reduction to the 
National, Standardized 60-day Episode Payment Rate to Account for 
Nominal Case-Mix Growth
    1. CY 2016 HH PPS Case-Mix Weights
    2. Reduction to the National, Standardized 60-day Episode 
Payment Rate to Account for Nominal Case-Mix Growth
    3. Clarification Regarding the Use of the ``Initial Encounter'' 
Seventh Character, Applicable to Certain ICD-10-CM Code Categories, 
under the HH PPS
    C. CY 2016 Home Health Rate Update
    1. CY 2016 Home Health Market Basket Update
    2. CY 2016 Home Health Wage Index
    3. CY 2016 Annual Payment Update
    D. Payments for High-Cost Outliers Under the HH PPS
    E. Report to the Congress on the Home Health Study Required by 
Section 3131(d) of the Affordable Care Act and an Update on 
Subsequent Research and Analysis
    F. Technical Regulations Text Changes
IV. Provisions of the Home Health Value-Based Purchasing (HHVBP) 
Model and Response to Comments
    A. Background
    B. Overview
    C. Selection Methodology
    1. Identifying a Geographic Demarcation Area Overview of the 
Randomized Selection Methodology for States
    D. Performance Assessment and Payment Periods
    1. Performance Reports
    2. Payment Adjustment Timeline
    E. Quality Measures
    1. Objectives
    2. Methodology for Selection of Quality Measures
    3. Selected Measures
    4. Additional Information on HHCAHPS
    5. New Measures
    6. HHVBP Model's Four Classifications
    7. Weighting
    F. Performance Scoring Methodology
    1. Performance Calculation Parameters
    2. Considerations for Calculating the Total Performance Score
    3. Additional Considerations for the HHVBP Total Performance 
Scores
    4. Setting Performance Benchmarks and Thresholds
    5. Calculating Achievement and Improvement Points
    6. Scoring Methodology for New Measures
    7. Minimum Number of Cases for Outcome and Clinical Quality 
Measures
    G. The Payment Adjustment Methodology
    H. Preview and Period To Request Recalculation
    I. Evaluation
V. Provisions of the Home Health Care Quality Reporting Program (HH 
QRP) and Response to Comments
    A. Background and Statutory Authority
    B. General Considerations Used for the Selection of Quality 
Measures for the HH QRP
    C. HH QRP Quality Measures and Measures Under Consideration for 
Future Years
    D. Form, Manner, and Timing of OASIS Data Submission and OASIS 
Data for Annual Payment Update
    1. Statutory Authority
    2. Home Health Quality Reporting Program Requirements for CY 
2016 Payment and Subsequent Years
    3. Previously Established Pay-for-Reporting Performance 
Requirement for Submission of OASIS Quality Data
    E. Home Health Care CAHPS Survey (HHCAHPS)
    1. Background and Description of HHCAHPS
    2. HHCAHPS Oversight Activities
    3. HHCAHPS Requirements for the CY 2016 APU
    4. HHCAHPS Requirements for the CY 2017 APU
    5. HHCAHPS Requirements for the CY 2018 APU
    6. HHCAHPS Reconsideration and Appeals Process
    7. Summary
    F. Public Display of Home Health Quality Data for the HH QRP
VI. Collection of Information Requirements
VII. Regulatory Impact Analysis
VIII. Federalism Analysis

Acronyms

    In addition, because of the many terms to which we refer by 
abbreviation in this final rule, we are listing these abbreviations and 
their corresponding terms in alphabetical order below:
ACH LOS Acute Care Hospital Length of Stay
ADL Activities of Daily Living
APU Annual Payment Update
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Pub. L. 106-113
CAD Coronary Artery Disease
CAH Critical Access Hospital
CBSA Core-Based Statistical Area
CASPER Certification and Survey Provider Enhanced Reports

[[Page 68625]]

CHF Congestive Heart Failure
CMI Case-Mix Index
CMP Civil Money Penalty
CMS Centers for Medicare & Medicaid Services
CoPs Conditions of Participation
COPD Chronic Obstructive Pulmonary Disease
CVD Cardiovascular Disease
CY Calendar Year
DM Diabetes Mellitus
DRA Deficit Reduction Act of 2005, Pub. L. 109-171, enacted February 
8, 2006
FDL Fixed Dollar Loss
FI Fiscal Intermediaries
FR Federal Register
FY Fiscal Year
HAVEN Home Assessment Validation and Entry System
HCC Hierarchical Condition Categories
HCIS Health Care Information System
HH Home Health
HHA Home Health Agency
HHCAHPS Home Health Care Consumer Assessment of Healthcare Providers 
and Systems Survey
HH PPS Home Health Prospective Payment System
HHRG Home Health Resource Group
HHVBP Home Health Value-Based Purchasing
HIPPS Health Insurance Prospective Payment System
HVBP Hospital Value-Based Purchasing
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision, 
Clinical Modification
IH Inpatient Hospitalization
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 
2014 (Pub. L. 113-185)
IRF Inpatient Rehabilitation Facility
LEF Linear Exchange Function
LTCH Long-Term Care Hospital
LUPA Low-Utilization Payment Adjustment
MEPS Medical Expenditures Panel Survey
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173, enacted December 8, 2003
MSA Metropolitan Statistical Area
MSS Medical Social Services
NQF National Quality Forum
NQS National Quality Strategy
NRS Non-Routine Supplies
OASIS Outcome and Assessment Information Set
OBRA Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203, 
enacted December 22, 1987
OCESAA Omnibus Consolidated and Emergency Supplemental 
Appropriations Act, Pub. L. 105-277, enacted October 21, 1998
OES Occupational Employment Statistics
OIG Office of Inspector General
OT Occupational Therapy
OMB Office of Management and Budget
MFP Multifactor productivity
PAMA Protecting Access to Medicare Act of 2014
PAC-PRD Post-Acute Care Payment Reform Demonstration
PEP Partial Episode Payment Adjustment
PT Physical Therapy
PY Performance Year
PRRB Provider Reimbursement Review Board
QAP Quality Assurance Plan
RAP Request for Anticipated Payment
RF Renal Failure
RFA Regulatory Flexibility Act, Pub. L. 96-354
RHHIs Regional Home Health Intermediaries
RIA Regulatory Impact Analysis
SAF Standard Analytic File
SLP Speech-Language Pathology
SN Skilled Nursing
SNF Skilled Nursing Facility
TPS Total Performance Score
UMRA Unfunded Mandates Reform Act of 1995.
VBP Value-Based Purchasing

I. Executive Summary

A. Purpose

    This final rule will update the payment rates for HHAs for calendar 
year (CY) 2016, as required under section 1895(b) of the Social 
Security Act (the Act). This reflects the 3rd year of the 4-year phase-
in of the rebasing adjustments to the national, standardized 60-day 
episode payment rate, the national per-visit rates, and the NRS 
conversion factor finalized in the CY 2014 HH PPS final rule (78 FR 
72256), as required under section 3131(a) of the Patient Protection and 
Affordable Care Act of 2010 (Pub. L. 111-148), as amended by the Health 
Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) 
(collectively referred to as the ``Affordable Care Act'').
    This rule will update the case-mix weights under section 
1895(b)(4)(A)(i) and (b)(4)(B) of the Act and provides a clarification 
regarding the use of the ``initial encounter'' seventh character 
applicable to certain ICD-10-CM code categories. This final rule will 
finalize reductions to the national, standardized 60-day episode 
payment rate in CY 2016, CY 2017, and CY 2018 of 0.97 percent in each 
year to account for case-mix growth unrelated to increases in patient 
acuity (nominal case-mix growth) between CY 2012 and CY 2014 under the 
authority of section 1895(b)(3)(B)(iv) of the Act. In addition, this 
rule finalizes our proposal to implement an HH Value-Based Purchasing 
(VBP) model, in which certain Medicare-certified HHAs are required to 
participate, beginning January 1, 2016 under the authority of section 
1115A of the Act. Finally, this rule will finalize changes to the home 
health quality reporting program requirements under section 
1895(b)(3)(B)(v)(II) of the Act and will finalize minor technical 
regulations text changes in 42 CFR parts 409, 424, and 484 to better 
align the payment requirements with recent statutory and regulatory 
changes for home health services.

B. Summary of the Major Provisions

    As required by section 3131(a) of the Affordable Care Act, and 
finalized in the CY 2014 HH final rule, ``Medicare and Medicaid 
Programs; Home Health Prospective Payment System Rate Update for 2014, 
Home Health Quality Reporting Requirements, and Cost Allocation of Home 
Health Survey Expenses'' (78 FR 77256, December 2, 2013), we are 
implementing the 3rd year of the 4-year phase-in of the rebasing 
adjustments to the national, standardized 60-day episode payment 
amount, the national per-visit rates and the NRS conversion factor in 
section III.C.3. The rebasing adjustments for CY 2016 will reduce the 
national, standardized 60-day episode payment amount by $80.95, 
increase the national per-visit payment amounts by 3.5 percent of the 
national per-visit payment amounts in CY 2010 with the increases 
ranging from $1.79 for home health aide services to $6.34 for medical 
social services, and reduce the NRS conversion factor by 2.82 percent.
    In the CY 2015 HH PPS final rule (79 FR 66072), we finalized our 
proposal to recalibrate the case-mix weights every year with more 
current data. In section III.B.1 of this rule, we are recalibrating the 
HH PPS case-mix weights, using the most current cost and utilization 
data available, in a budget neutral manner. In addition, in section 
III.B.2 of this rule, we are finalizing reductions to the national, 
standardized 60-day episode payment rate in CY 2016, CY 2017, and CY 
2018 of 0.97 percent in each year to account for estimated case-mix 
growth unrelated to increases in patient acuity (nominal case-mix 
growth) between CY 2012 and CY 2014. In section III.B.3 of this rule we 
are providing a clarification regarding the use of the ``initial 
encounter'' seventh character, applicable to certain ICD-10-CM code 
categories, under the HH PPS. In section III.C.1 of this rule, we are 
updating the payment rates under the HH PPS by the home health payment 
update percentage of 1.9 percent (using the 2010-based Home Health 
Agency (HHA) market basket update of 2.3 percent, minus 0.4 percentage 
point for productivity as required by section 1895(b)(3)(B)(vi)(I) of 
the Act. In the CY 2015 final rule (79 FR 66083 through 66087), we 
incorporated new geographic area designations, set out in a February 
28, 2013 Office of Management and Budget

[[Page 68626]]

(OMB) bulletin, into the home health wage index. For CY 2015, we 
implemented a wage index transition policy consisting of a 50/50 blend 
of the old geographic area delineations and the new geographic area 
delineations. In section III.C.2 of this rule, we will update the CY 
2016 home health wage index using solely the new geographic area 
designations. In section III.D of this final rule, we discuss payments 
for high cost outliers. In section III.E, we are finalizing several 
technical corrections in 42 CFR parts 409, 424, and 484, to better 
align the payment requirements with recent statutory and regulatory 
changes for home health services. The sections include Sec. Sec.  
409.43(e), 424.22(a), 484.205(d), 484.205(e), 484.220, 484.225, 
484.230, 484.240(b), 484.240(e), 484.240(f), 484.245.
    In section IV of this rule, we are finalizing our proposal to 
implement a HHVBP model that will begin on January 1, 2016. Medicare-
certified HHAs selected for inclusion in the HHVBP model will be 
required to compete for payment adjustments to their current PPS 
reimbursements based on quality performance. A competing HHA is defined 
as an agency that has a current Medicare certification and that is 
being paid by CMS for home health care delivered within any of the 
states selected in accordance with the HHVBP Model's selection 
methodology.
    Finally, section V of this rule includes changes to the home health 
quality reporting program, including one new quality measure, the 
establishment of a minimum threshold for submission of Outcome and 
Assessment Information Set (OASIS) assessments for purposes of quality 
reporting compliance, and submission dates for Home Health Care 
Consumer Assessment of Healthcare Providers and Systems Survey 
(HHCAHPS) Survey through CY 2018.

C. Summary of Costs and Transfers

                 Table 1--Summary of Costs and Transfers
------------------------------------------------------------------------
     Provision description            Costs              Transfers
------------------------------------------------------------------------
CY 2016 HH PPS Payment Rate     .................  The overall economic
 Update.                                            impact of the HH PPS
                                                    payment rate update
                                                    is an estimated -
                                                    $260 million (-1.4
                                                    percent) in payments
                                                    to HHAs.
CY 2016 HHVBP Model...........  .................  The overall economic
                                                    impact of the HHVBP
                                                    model provision for
                                                    CY 2018 through 2022
                                                    is an estimated $380
                                                    million in total
                                                    savings from a
                                                    reduction in
                                                    unnecessary
                                                    hospitalizations and
                                                    SNF usage as a
                                                    result of greater
                                                    quality improvements
                                                    in the HH industry.
                                                    As for payments to
                                                    HHAs, there are no
                                                    aggregate increases
                                                    or decreases to the
                                                    HHAs competing in
                                                    the model.
------------------------------------------------------------------------

II. 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 HH services. Section 4603 of the BBA mandated the development 
of the HH PPS. Until the implementation of the HH PPS on October 1, 
2000, 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 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 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 due to unusual variations in the type or amount of 
medically necessary care. Section 3131(b)(2) 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 total outlier payments in a given year would not exceed 2.5 
percent of total payments projected or estimated. The provision also 
made permanent a 10 percent agency-level outlier payment cap.
    In accordance with the statute, as amended by the BBA, we published 
a final rule in the July 3, 2000 Federal Register (65 FR 41128) to 
implement the 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).

[[Page 68627]]

    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 by 2 percentage points. In the November 9, 2006 Federal 
Register (71 FR 65884, 65935), we published a final rule to implement 
the pay-for-reporting requirement of the DRA, which was codified at 
Sec.  484.225(h) and (i) in accordance with the statute. The pay-for-
reporting requirement was implemented on January 1, 2007.
    The Affordable Care Act made additional changes to the HH PPS. One 
of the changes in section 3131 of the Affordable Care Act is the 
amendment to section 421(a) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173, 
enacted on December 8, 2003) as amended by section 5201(b) of the DRA. 
Section 421(a) of the MMA, as amended by section 3131 of the Affordable 
Care Act, requires that the Secretary increase, by 3 percent, the 
payment amount otherwise made under section 1895 of the Act, for HH 
services furnished in a rural area (as defined in section 1886(d)(2)(D) 
of the Act) with respect to episodes and visits ending on or after 
April 1, 2010, and before January 1, 2016. Section 210 of the Medicare 
Access and CHIP Reauthorization Act of 2015 (MACRA) (Public Law 114-10) 
amended section 421(a) of the MMA to extend the rural add-on for two 
more years. Section 421(a) of the MMA, as amended by section 210 of the 
MACRA, requires that the Secretary increase, by 3 percent, the payment 
amount otherwise made under section 1895 of the Act, for HH services 
provided in a rural area (as defined in section 1886(d)(2)(D) of the 
Act) with respect to episodes and visits ending on or after April 1, 
2010, and before January 1, 2018.

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 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 system 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 national per-
visit rates based on 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 Home Health Prospective Payment System

    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 HH PPS for CY 2008. The CY 2008 HH PPS final 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. Case-mix 
represents the variations in conditions of the patient population 
served by the HHAs. Subsequently, a more detailed analysis was 
performed on the 2005 case-mix data to evaluate if any portion of the 
12.78 percent 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 8.03 percent of the 
total case-mix change as real, and therefore, 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, to the national, standardized 60-day episode payment 
rates. 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. 
In the CY 2011 HH PPS final rule (76 FR 68532), we updated our analyses 
of case-mix change and finalized a reduction of 3.79 percent, instead 
of 2.71 percent, for CY 2011 and deferred finalizing a payment 
reduction for CY 2012 until further study of the case-mix change data 
and methodology was completed.
    In the CY 2012 HH PPS final rule (76 FR 68526), we updated the 60-
day national episode rates and the national per-visit rates. In 
addition, as discussed in the CY 2012 HH PPS final rule (76 FR 68528), 
our analysis indicated that there was a 22.59 percent increase in 
overall case-mix from 2000 to 2009 and that only 15.76 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 19.03 percent 
nominal increase in case-mix. At that time, to fully account for the 
19.03 percent nominal case-mix growth identified from 2000 to 2009, we 
finalized a 3.79 percent payment reduction in CY 2012 and a 1.32 
percent payment reduction for CY 2013.
    In the CY 2013 HH PPS final rule (77 FR 67078), we implemented a 
1.32 percent reduction to the payment rates for CY 2013 to account for 
nominal case-mix growth from 2000 through 2010. When taking into 
account the total measure of case-mix change (23.90 percent) and the 
15.97 percent of total case-mix change estimated as real from 2000 to 
2010, we obtained a final nominal case-mix change measure of 20.08 
percent from 2000 to 2010 (0.2390*(1-0.1597)=0.2008). To fully account 
for the remainder of the 20.08 percent increase in nominal case-mix 
beyond that which was accounted for in previous payment reductions, we 
estimated that the percentage reduction to the national, standardized 
60-day episode rates for nominal case-mix change would be 2.18 percent. 
Although we considered proposing a 2.18 percent reduction to account 
for the remaining increase in measured nominal case-mix, we finalized 
the 1.32 percent payment reduction to the national, standardized

[[Page 68628]]

60-day episode rates in the CY 2012 HH PPS final rule (76 FR 68532).
    Section 3131(a) of the Affordable Care Act requires that, beginning 
in CY 2014, we apply an adjustment to the national, standardized 60-day 
episode rate and other amounts that reflect factors such as changes in 
the number of visits in an episode, the mix of services in an episode, 
the level of intensity of services in an episode, the average cost of 
providing care per episode, and other relevant factors. Additionally, 
we must phase in any adjustment over a 4 year period in equal 
increments, not to exceed 3.5 percent of the amount (or amounts) as of 
the date of enactment of the Affordable Care Act, and fully implement 
the rebasing adjustments by CY 2017. The statute specifies that the 
maximum rebasing adjustment is to be no more than 3.5 percent per year 
of the CY 2010 rates. Therefore, in the CY 2014 HH PPS final rule (78 
FR 72256) for each year, CY 2014 through CY 2017, we finalized a fixed-
dollar reduction to the national, standardized 60-day episode payment 
rate of $80.95 per year, increases to the national per-visit payment 
rates per year as reflected in Table 2, and a decrease to the NRS 
conversion factor of 2.82 percent per year. We also finalized three 
separate LUPA add-on factors for skilled nursing, physical therapy, and 
speech-language pathology and removed 170 diagnosis codes from 
assignment to diagnosis groups in the HH PPS Grouper. In the CY 2015 HH 
PPS final rule (79 FR 66032), we implemented the 2nd year of the 4 year 
phase-in of the rebasing adjustments to the HH PPS payment rates and 
made changes to the HH PPS case-mix weights. In addition, we simplified 
the face-to-face encounter regulatory requirements and the therapy 
reassessment timeframes.

  Table 2--Maximum Adjustments to the National Per-Visit Payment Rates
         [Not to exceed 3.5 percent of the amount(s) in CY 2010]
------------------------------------------------------------------------
                                                     Maximum adjustments
                               2010 National per-     per year (CY 2014
                               visit payment rates    through CY 2017)
------------------------------------------------------------------------
Skilled Nursing.............               $113.01                 $3.96
Home Health Aide............                 51.18                  1.79
Physical Therapy............                123.57                  4.32
Occupational Therapy........                124.40                  4.35
Speech-Language Pathology...                134.27                  4.70
Medical Social Services.....                181.16                  6.34
------------------------------------------------------------------------

D. Advancing Health Information Exchange

    HHS has a number of initiatives designed to encourage and support 
the adoption of health information technology and to promote nationwide 
health information exchange to improve health care. As discussed in the 
August 2013 Statement ``Principles and Strategies for Accelerating 
Health Information Exchange'' (available at http://www.healthit.gov/sites/default/files/acceleratinghieprinciples_strategy.pdf), HHS 
believes that all individuals, their families, their healthcare and 
social service providers, and payers should have consistent and timely 
access to health information in a standardized format that can be 
securely exchanged between the patient, providers, and others involved 
in the individual's care. Health IT that facilitates the secure, 
efficient, and effective sharing and use of health-related information 
when and where it is needed is an important tool for settings across 
the continuum of care, including home health. While home health 
providers are not eligible for the Medicare and Medicaid EHR Incentive 
Programs, effective adoption and use of health information exchange and 
health IT tools will be essential as these settings seek to improve 
quality and lower costs through initiatives such as value-based 
purchasing.
    The Office of the National Coordinator for Health Information 
Technology (ONC) has released a document entitled ``Connecting Health 
and Care for the Nation: A Shared Nationwide Interoperability Roadmap'' 
(available at https://www.healthit.gov/sites/default/files/hie-interoperability/nationwide-interoperability-roadmap-final-version-1.0.pdf). In the near term, the Roadmap focuses on actions that will 
enable individuals and providers across the care continuum to send, 
receive, find, and use a common set of electronic clinical information 
at the nationwide level by the end of 2017. The Roadmap's goals also 
align with the Improving Medicare Post-Acute Care Transformation Act of 
2014 (Pub. L. 113-185) (IMPACT Act), which requires assessment data to 
be standardized and interoperable to allow for exchange of the data. 
Moreover, the vision described in the draft Roadmap significantly 
expands the types of electronic health information, information 
sources, and information users well beyond clinical information derived 
from electronic health records (EHRs). The Roadmap identifies four 
critical pathways that health IT stakeholders should focus on now in 
order to create a foundation for long-term success: (1) Improve 
technical standards and implementation guidance for priority data 
domains and associated elements; (2) rapidly shift and align federal, 
state, and commercial payment policies from fee-for-service to value-
based models to stimulate the demand for interoperability; (3) clarify 
and align federal and state privacy and security requirements that 
enable interoperability; and (4) align and promote the use of 
consistent policies and business practices that support 
interoperability, in coordination with stakeholders. In addition, ONC 
has released the draft version of the 2016 Interoperability Standards 
Advisory (available at https://www.healthit.gov/standards-advisory/2016), which provides a list of the best available standards and 
implementation specifications to enable priority health information 
exchange functions. Providers, payers, and vendors are encouraged to 
take these ``best available standards'' into account as they implement 
interoperable health information exchange across the continuum of care, 
including care settings such as behavioral health, long-term and post-
acute care, and home and community-based service providers.
    We encourage stakeholders to utilize health information exchange 
and certified health IT to effectively and efficiently help providers 
improve internal care delivery practices, engage patients in their 
care, support management of care across the continuum, enable the 
reporting of

[[Page 68629]]

electronically specified clinical quality measures (eCQMs), and improve 
efficiencies and reduce unnecessary costs. As adoption of certified 
health IT increases and interoperability standards continue to mature, 
HHS will seek to reinforce standards through relevant policies and 
programs.

III. Provisions of the Proposed Rule and Responses to Comments

    We received 118 timely comments from the public. The following 
sections, arranged by subject area, include a summary of the public 
comments received, and our responses.

A. Monitoring for Potential Impacts--Affordable Care Act Rebasing 
Adjustments

    In the CY 2016 HH PPS proposed rule (80 FR 39840), we provided a 
summary of analysis conducted on FY 2013 HHA cost report data and how 
such data, if used, would impact our estimate of the percentage 
difference between Medicare payments and HHA costs. In addition, we 
also provided a summary of MedPAC's Report to the Congress on home 
health payment rebasing and presented information on Medicare home 
health utilization using CY 2014 HHA claims data (the 1st year of the 4 
year phase-in of the rebasing adjustments mandated by section 3131(a) 
the Affordable Care Act). We will continue to monitor the impact of 
future payment and policy changes and will provide the industry with 
periodic updates on our analysis in future rulemaking and/or 
announcements on the HHA Center Web page at: https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html.

B. CY 2016 HH PPS Case-Mix Weights and Reduction to the National, 
Standardized 60-day Episode Payment Rate to Account for Nominal Case-
Mix Growth

1. CY 2016 HH PPS Case-Mix Weights
    For CY 2014, as part of the rebasing effort mandated by the 
Affordable Care Act, we reset the HH PPS case-mix weights, lowering the 
average case-mix weight to 1.0000. To lower the HH PPS case-mix weights 
to 1.0000, each HH PPS case-mix weight was decreased by the same factor 
(1.3464), thereby maintaining the same relative values between the 
weights. This ``resetting'' of the HH PPS case-mix weights was done in 
a budget neutral manner by inflating the national, standardized 60-day 
episode rate by the same factor (1.3464) that was used to decrease the 
weights. For CY 2015, we finalized a policy to annually recalibrate the 
HH PPS case-mix weights--adjusting the weights relative to one 
another--using the most current, complete data available. To 
recalibrate the HH PPS case-mix weights for CY 2016, we propose to use 
the same methodology finalized in the CY 2008 HH PPS final rule (72 FR 
49762), the CY 2012 HH PPS final rule (76 FR 68526), and the CY 2015 HH 
PPS final rule (79 FR 66032). Annual recalibration of the HH PPS case-
mix weights ensures that the case-mix weights reflect, as accurately as 
possible, current home health resource use and changes in utilization 
patterns.
    To generate the proposed CY 2016 HH PPS case-mix weights, we used 
CY 2014 home health claims data (as of December 31, 2014) with linked 
OASIS data. For this CY 2016 HH PPS final rule, we used CY 2014 home 
health claims data (as of June 30, 2015) with linked OASIS data to 
generate the final CY 2016 HH PPS case-mix weights. These data are the 
most current and complete data available at this time. The tables below 
have been revised to reflect the results using the updated data. The 
process we used to calculate the HH PPS case-mix weights are outlined 
below.
    Step 1: Re-estimate the four-equation model to determine the 
clinical and functional points for an episode using wage-weighted 
minutes of care as our dependent variable for resource use. The wage-
weighted minutes of care are determined using the Bureau of Labor 
Statistics national hourly wage (covering May 2014) plus fringe rates 
(covering December 2014) for the six home health disciplines and the 
minutes per visit from the claim. The points for each of the variables 
for each leg of the model, updated with CY 2014 data, are shown in 
Table 3. The points for the clinical variables are added together to 
determine an episode's clinical score. The points for the functional 
variables are added together to determine an episode's functional 
score.

[[Page 68630]]

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[GRAPHIC] [TIFF OMITTED] TR05NO15.003

    In updating the four-equation model for CY 2016 using 2014 data 
(the last update to the four-equation model for CY 2015 used 2013 
data), there were few changes to the point values for the variables in 
the four-equation model. These relatively minor changes reflect the 
change in the relationship between the grouper variables and resource 
use between 2013 and 2014. The CY 2016 four-equation model resulted in 
124 point-giving variables being used in the model (as compared to the 
120 point-giving variables for the 2015 recalibration). There were 
eight variables that were added to the model and four variables that 
were dropped from the model due to the absence of additional resources 
associated with the variable. The points for 24 variables increased in 
the CY 2016 four-equation model and the points for 38 variables 
decreased in the CY 2016 4-equation model. There were 54 variables with 
the same point values.
    Step 2: Re-define the clinical and functional thresholds so they 
are reflective of the new points associated with the CY 2016 four-
equation model. After estimating the points for each of the variables 
and summing the clinical and functional points for each episode, we 
look at the distribution of the clinical score and functional score, 
breaking the episodes into different steps. The categorizations for the 
steps are as follows:
    In updating the four-equation model for CY 2016 using 2014 data 
(the last update to the four-equation model for CY 2015 used 2013 
data), there were few changes to the point values for the variables in 
the four-equation model. These relatively minor changes reflect the 
change in the relationship between the grouper variables and resource 
use between 2013 and 2014. The CY 2016 four-equation model resulted in 
124 point-giving variables being used in the model (as compared to the 
120 point-giving variables for the 2015 recalibration). There were 
eight variables that were added to the model and four variables that 
were dropped from the model due to the absence of additional resources 
associated with the variable. The points for 24 variables increased in 
the CY 2016 four-equation model and the points for 38 variables 
decreased in the CY 2016 4-equation model. There were 54 variables with 
the same point values.
    Step 2: Re-define the clinical and functional thresholds so they 
are reflective of the new points associated with the CY 2016 four-
equation model. After estimating the points for each of the variables 
and summing the clinical and functional points for each episode, we 
look at the distribution of the clinical score and functional score, 
breaking the episodes into different steps. The categorizations for the 
steps are as follows:
     Step 1: First and second episodes, 0-13 therapy visits.
     Step 2.1: First and second episodes, 14-19 therapy visits.
     Step 2.2: Third episodes and beyond, 14-19 therapy visits.
     Step 3: Third episodes and beyond, 0-13 therapy visits.
     Step 4: Episodes with 20+ therapy visits.
    We then divide the distribution of the clinical score for episodes 
within a step such that a third of episodes are classified as low 
clinical score, a third of episodes are classified as medium clinical 
score, and a third of episodes are classified as high clinical score. 
The same approach is then done looking at the functional score. It was 
not always possible to evenly divide the episodes within each step into 
thirds due to many episodes being clustered around one particular 
score.\1\ Also, we looked at the average resource use associated with 
each clinical and functional score and used that to guide where we 
placed our thresholds. We tried to group scores with similar average 
resource use within the same level (even if it meant that more or less 
than a third of episodes were placed within a level). The new 
thresholds, based off of the CY 2016 four-equation model points are 
shown in Table 4.
---------------------------------------------------------------------------

    \1\ For Step 1, 54% of episodes were in the medium functional 
level (All with score 15). For Step 2.1, 77.2% of episodes were in 
the low functional level (Most with score 2 and 4). For Step 2.2, 
67.1% of episodes were in the low functional level (All with score 
0). For Step 3, 60.9% of episodes were in the medium functional 
level (Most with score 10). For Step 4, 49.8% of episodes were in 
the low functional level (Most with score 2).

[[Page 68634]]



                                                   Table 4--CY 2016 Clinical and Functional Thresholds
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               1st and 2nd Episodes                3rd+ Episodes           All episodes
                                                                         -------------------------------------------------------------------------------
                                                                              0 to 13        14 to 19         0 to 13        14 to 19       20+ therapy
                                                                          therapy visits  therapy visits  therapy visits  therapy visits      visits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Grouping Step:                                                                         1             2.1               3             2.2               4
Equation(s) used to calculate points: (see Table 3).....................               1               2               3               4           (2&4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Dimension.................................  Severity Level..............
Clinical..................................  C1..........................          0 to 1          0 to 1               0          0 to 3          0 to 3
                                            C2..........................          2 to 3          2 to 7               1         4 to 12         4 to 16
                                            C3..........................              4+              8+              2+             13+             17+
Functional................................  F1..........................         0 to 14          0 to 6          0 to 6               0          0 to 2
                                            F2..........................              15         7 to 13         7 to 10          1 to 7          3 to 6
                                            F3..........................             16+             14+             11+              8+              7+
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Step 3: Once the clinical and functional thresholds are determined 
and each episode is assigned a clinical and functional level, the 
payment regression is estimated with an episode's wage-weighted minutes 
of care as the dependent variable. Independent variables in the model 
are indicators for the step of the episode as well as the clinical and 
functional levels within each step of the episode. Like the four-
equation model, the payment regression model is also estimated with 
robust standard errors that are clustered at the beneficiary level. 
Table 5 shows the regression coefficients for the variables in the 
payment regression model updated with CY 2014 data. The R-squared value 
for the payment regression model is 0.4822 (an increase from 0.4680 for 
the CY 2015 recalibration).

                    Table 5--Payment Regression Model
------------------------------------------------------------------------
                                                            New payment
                  Variable description                      regression
                                                           coefficients
------------------------------------------------------------------------
Step 1, Clinical Score Medium...........................          $24.69
Step 1, Clinical Score High.............................          $59.72
Step 1, Functional Score Medium.........................          $76.46
Step 1, Functional Score High...........................         $114.89
Step 2.1, Clinical Score Medium.........................          $68.55
Step 2.1, Clinical Score High...........................         $156.28
Step 2.1, Functional Score Medium.......................          $34.15
Step 2.1, Functional Score High.........................          $87.13
Step 2.2, Clinical Score Medium.........................          $61.06
Step 2.2, Clinical Score High...........................         $211.40
Step 2.2, Functional Score Medium.......................          $10.90
Step 2.2, Functional Score High.........................          $70.39
Step 3, Clinical Score Medium...........................          $10.27
Step 3, Clinical Score High.............................          $91.72
Step 3, Functional Score Medium.........................          $56.53
Step 3, Functional Score High...........................          $87.94
Step 4, Clinical Score Medium...........................          $72.66
Step 4, Clinical Score High.............................         $238.69
Step 4, Functional Score Medium.........................          $15.65
Step 4, Functional Score High...........................          $65.68
Step 2.1, 1st and 2nd Episodes, 14 to 19 Therapy Visits.         $479.21
Step 2.2, 3rd+ Episodes, 14 to 19 Therapy Visits........         $505.35
Step 3, 3rd+ Episodes, 0-13 Therapy Visits..............         -$76.20
Step 4, All Episodes, 20+ Therapy Visits................         $930.06
Intercept...............................................         $391.33
------------------------------------------------------------------------
Source: CY 2014 Medicare claims data for episodes ending on or before
  December 31, 2014 (as of June 30, 2015) for which we had a linked
  OASIS assessment.

    Step 4: We use the coefficients from the payment regression model 
to predict each episode's wage-weighted minutes of care (resource use). 
We then divide these predicted values by the mean of the dependent 
variable (that is, the average wage-weighted minutes of care across all 
episodes used in the payment regression). This division constructs the 
weight for each episode, which is simply the ratio of the episode's 
predicted wage-weighted minutes of care divided by the average wage-
weighted minutes of care in the sample. Each episode is then aggregated 
into one of the 153 home health resource groups (HHRGs) and the ``raw'' 
weight for each HHRG was calculated as the average of the episode 
weights within the HHRG.
    Step 5: The weights associated with 0 to 5 therapy visits are then 
increased by 3.75 percent, the weights associated with 14-15 therapy 
visits are decreased by 2.5 percent, and the weights associated with 
20+ therapy visits are decreased by 5 percent. These adjustments to the 
case-mix weights were finalized in the CY 2012 HH PPS final rule (76 FR 
68557) and were done

[[Page 68635]]

to address MedPAC's concerns that the HH PPS overvalues therapy 
episodes and undervalues non-therapy episodes and to better aligned the 
case-mix weights with episode costs estimated from cost report data.\2\
---------------------------------------------------------------------------

    \2\ Medicare Payment Advisory Commission (MedPAC), Report to the 
Congress: Medicare Payment Policy. March 2011, P. 176.
---------------------------------------------------------------------------

    Step 6: After the adjustments in step 5 are applied to the raw 
weights, the weights are further adjusted to create an increase in the 
payment weights for the therapy visit steps between the therapy 
thresholds. Weights with the same 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 are gradually increased. We do 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 use 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) are constant. This interpolation is the identical to 
the process finalized in the CY 2012 HH PPS final rule (76 FR 68555).
    Step 7: The interpolated weights are then adjusted so that the 
average case-mix for the weights is equal to 1.0000.\3\ This last step 
creates the CY 2016 case-mix weights shown in Table 6.
---------------------------------------------------------------------------

    \3\ When computing the average, we compute a weighted average, 
assigning a value of one to each normal episode and a value equal to 
the episode length divided by 60 for PEPs.

                                 Table 6: Final CY 2016 Case-Mix Payment Weights
----------------------------------------------------------------------------------------------------------------
                                                                                                   Final CY 2016
        Payment group           Step (episode and/or therapy  Clinical and functional levels  (1     case-mix
                                       visit ranges)              = Low; 2 = Medium; 3= High)         weights
----------------------------------------------------------------------------------------------------------------
10111........................  1st and 2nd Episodes, 0 to 5   C1F1S1                                      0.5908
                                Therapy Visits.
10112........................  1st and 2nd Episodes, 6        C1F1S2                                      0.7197
                                Therapy Visits.
10113........................  1st and 2nd Episodes, 7 to 9   C1F1S3                                      0.8485
                                Therapy Visits.
10114........................  1st and 2nd Episodes, 10       C1F1S4                                      0.9774
                                Therapy Visits.
10115........................  1st and 2nd Episodes, 11 to    C1F1S5                                      1.1063
                                13 Therapy Visits.
10121........................  1st and 2nd Episodes, 0 to 5   C1F2S1                                      0.7062
                                Therapy Visits.
10122........................  1st and 2nd Episodes, 6        C1F2S2                                      0.8217
                                Therapy Visits.
10123........................  1st and 2nd Episodes, 7 to 9   C1F2S3                                      0.9372
                                Therapy Visits.
10124........................  1st and 2nd Episodes, 10       C1F2S4                                      1.0527
                                Therapy Visits.
10125........................  1st and 2nd Episodes, 11 to    C1F2S5                                      1.1681
                                13 Therapy Visits.
10131........................  1st and 2nd Episodes, 0 to 5   C1F3S1                                      0.7643
                                Therapy Visits.
10132........................  1st and 2nd Episodes, 6        C1F3S2                                      0.8832
                                Therapy Visits.
10133........................  1st and 2nd Episodes, 7 to 9   C1F3S3                                      1.0021
                                Therapy Visits.
10134........................  1st and 2nd Episodes, 10       C1F3S4                                      1.1210
                                Therapy Visits.
10135........................  1st and 2nd Episodes, 11 to    C1F3S5                                      1.2399
                                13 Therapy Visits.
10211........................  1st and 2nd Episodes, 0 to 5   C2F1S1                                      0.6281
                                Therapy Visits.
10212........................  1st and 2nd Episodes, 6        C2F1S2                                      0.7690
                                Therapy Visits.
10213........................  1st and 2nd Episodes, 7 to 9   C2F1S3                                      0.9098
                                Therapy Visits.
10214........................  1st and 2nd Episodes, 10       C2F1S4                                      1.0507
                                Therapy Visits.
10215........................  1st and 2nd Episodes, 11 to    C2F1S5                                      1.1915
                                13 Therapy Visits.
10221........................  1st and 2nd Episodes, 0 to 5   C2F2S1                                      0.7435
                                Therapy Visits.
10222........................  1st and 2nd Episodes, 6        C2F2S2                                      0.8710
                                Therapy Visits.
10223........................  1st and 2nd Episodes, 7 to 9   C2F2S3                                      0.9985
                                Therapy Visits.
10224........................  1st and 2nd Episodes, 10       C2F2S4                                      1.1259
                                Therapy Visits.
10225........................  1st and 2nd Episodes, 11 to    C2F2S5                                      1.2534
                                13 Therapy Visits.
10231........................  1st and 2nd Episodes, 0 to 5   C2F3S1                                      0.8016
                                Therapy Visits.
10232........................  1st and 2nd Episodes, 6        C2F3S2                                      0.9325
                                Therapy Visits.
10233........................  1st and 2nd Episodes, 7 to 9   C2F3S3                                      1.0633
                                Therapy Visits.
10234........................  1st and 2nd Episodes, 10       C2F3S4                                      1.1942
                                Therapy Visits.
10235........................  1st and 2nd Episodes, 11 to    C2F3S5                                      1.3251
                                13 Therapy Visits.
10311........................  1st and 2nd Episodes, 0 to 5   C3F1S1                                      0.6810
                                Therapy Visits.
10312........................  1st and 2nd Episodes, 6        C3F1S2                                      0.8362
                                Therapy Visits.
10313........................  1st and 2nd Episodes, 7 to 9   C3F1S3                                      0.9913
                                Therapy Visits.
10314........................  1st and 2nd Episodes, 10       C3F1S4                                      1.1465
                                Therapy Visits.
10315........................  1st and 2nd Episodes, 11 to    C3F1S5                                      1.3017
                                13 Therapy Visits.
10321........................  1st and 2nd Episodes, 0 to 5   C3F2S1                                      0.7964
                                Therapy Visits.
10322........................  1st and 2nd Episodes, 6        C3F2S2                                      0.9382
                                Therapy Visits.
10323........................  1st and 2nd Episodes, 7 to 9   C3F2S3                                      1.0800
                                Therapy Visits.
10324........................  1st and 2nd Episodes, 10       C3F2S4                                      1.2218
                                Therapy Visits.
10325........................  1st and 2nd Episodes, 11 to    C3F2S5                                      1.3635
                                13 Therapy Visits.
10331........................  1st and 2nd Episodes, 0 to 5   C3F3S1                                      0.8544
                                Therapy Visits.
10332........................  1st and 2nd Episodes, 6        C3F3S2                                      0.9996
                                Therapy Visits.
10333........................  1st and 2nd Episodes, 7 to 9   C3F3S3                                      1.1449
                                Therapy Visits.
10334........................  1st and 2nd Episodes, 10       C3F3S4                                      1.2901
                                Therapy Visits.
10335........................  1st and 2nd Episodes, 11 to    C3F3S5                                      1.4353
                                13 Therapy Visits.
21111........................  1st and 2nd Episodes, 14 to    C1F1S1                                      1.2351
                                15 Therapy Visits.
21112........................  1st and 2nd Episodes, 16 to    C1F1S2                                      1.4323
                                17 Therapy Visits.
21113........................  1st and 2nd Episodes, 18 to    C1F1S3                                      1.6296
                                19 Therapy Visits.
21121........................  1st and 2nd Episodes, 14 to    C1F2S1                                      1.2836
                                15 Therapy Visits.
21122........................  1st and 2nd Episodes, 16 to    C1F2S2                                      1.4719
                                17 Therapy Visits.

[[Page 68636]]

 
21123........................  1st and 2nd Episodes, 18 to    C1F2S3                                      1.6601
                                19 Therapy Visits.
21131........................  1st and 2nd Episodes, 14 to    C1F3S1                                      1.3588
                                15 Therapy Visits.
21132........................  1st and 2nd Episodes, 16 to    C1F3S2                                      1.5450
                                17 Therapy Visits.
21133........................  1st and 2nd Episodes, 18 to    C1F3S3                                      1.7313
                                19 Therapy Visits.
21211........................  1st and 2nd Episodes, 14 to    C2F1S1                                      1.3324
                                15 Therapy Visits.
21212........................  1st and 2nd Episodes, 16 to    C2F1S2                                      1.5307
                                17 Therapy Visits.
21213........................  1st and 2nd Episodes, 18 to    C2F1S3                                      1.7289
                                19 Therapy Visits.
21221........................  1st and 2nd Episodes, 14 to    C2F2S1                                      1.3809
                                15 Therapy Visits.
21222........................  1st and 2nd Episodes, 16 to    C2F2S2                                      1.5702
                                17 Therapy Visits.
21223........................  1st and 2nd Episodes, 18 to    C2F2S3                                      1.7595
                                19 Therapy Visits.
21231........................  1st and 2nd Episodes, 14 to    C2F3S1                                      1.4560
                                15 Therapy Visits.
21232........................  1st and 2nd Episodes, 16 to    C2F3S2                                      1.6434
                                17 Therapy Visits.
21233........................  1st and 2nd Episodes, 18 to    C2F3S3                                      1.8307
                                19 Therapy Visits.
21311........................  1st and 2nd Episodes, 14 to    C3F1S1                                      1.4569
                                15 Therapy Visits.
21312........................  1st and 2nd Episodes, 16 to    C3F1S2                                      1.6902
                                17 Therapy Visits.
21313........................  1st and 2nd Episodes, 18 to    C3F1S3                                      1.9234
                                19 Therapy Visits.
21321........................  1st and 2nd Episodes, 14 to    C3F2S1                                      1.5053
                                15 Therapy Visits.
21322........................  1st and 2nd Episodes, 16 to    C3F2S2                                      1.7297
                                17 Therapy Visits.
21323........................  1st and 2nd Episodes, 18 to    C3F2S3                                      1.9540
                                19 Therapy Visits.
21331........................  1st and 2nd Episodes, 14 to    C3F3S1                                      1.5805
                                15 Therapy Visits.
21332........................  1st and 2nd Episodes, 16 to    C3F3S2                                      1.8028
                                17 Therapy Visits.
21333........................  1st and 2nd Episodes, 18 to    C3F3S3                                      2.0252
                                19 Therapy Visits.
22111........................  3rd+ Episodes, 14 to 15        C1F1S1                                      1.2722
                                Therapy Visits.
22112........................  3rd+ Episodes, 16 to 17        C1F1S2                                      1.4571
                                Therapy Visits.
22113........................  3rd+ Episodes, 18 to 19        C1F1S3                                      1.6419
                                Therapy Visits.
22121........................  3rd+ Episodes, 14 to 15        C1F2S1                                      1.2877
                                Therapy Visits.
22122........................  3rd+ Episodes, 16 to 17        C1F2S2                                      1.4746
                                Therapy Visits.
22123........................  3rd+ Episodes, 18 to 19        C1F2S3                                      1.6615
                                Therapy Visits.
22131........................  3rd+ Episodes, 14 to 15        C1F3S1                                      1.3721
                                Therapy Visits.
22132........................  3rd+ Episodes, 16 to 17        C1F3S2                                      1.5539
                                Therapy Visits.
22133........................  3rd+ Episodes, 18 to 19        C1F3S3                                      1.7357
                                Therapy Visits.
22211........................  3rd+ Episodes, 14 to 15        C2F1S1                                      1.3589
                                Therapy Visits.
22212........................  3rd+ Episodes, 16 to 17        C2F1S2                                      1.5483
                                Therapy Visits.
22213........................  3rd+ Episodes, 18 to 19        C2F1S3                                      1.7378
                                Therapy Visits.
22221........................  3rd+ Episodes, 14 to 15        C2F2S1                                      1.3743
                                Therapy Visits.
22222........................  3rd+ Episodes, 16 to 17        C2F2S2                                      1.5658
                                Therapy Visits.
22223........................  3rd+ Episodes, 18 to 19        C2F2S3                                      1.7573
                                Therapy Visits.
22231........................  3rd+ Episodes, 14 to 15        C2F3S1                                      1.4587
                                Therapy Visits.
22232........................  3rd+ Episodes, 16 to 17        C2F3S2                                      1.6452
                                Therapy Visits.
22233........................  3rd+ Episodes, 18 to 19        C2F3S3                                      1.8316
                                Therapy Visits.
22311........................  3rd+ Episodes, 14 to 15        C3F1S1                                      1.5722
                                Therapy Visits.
22312........................  3rd+ Episodes, 16 to 17        C3F1S2                                      1.7670
                                Therapy Visits.
22313........................  3rd+ Episodes, 18 to 19        C3F1S3                                      1.9619
                                Therapy Visits.
22321........................  3rd+ Episodes, 14 to 15        C3F2S1                                      1.5876
                                Therapy Visits.
22322........................  3rd+ Episodes, 16 to 17        C3F2S2                                      1.7845
                                Therapy Visits.
22323........................  3rd+ Episodes, 18 to 19        C3F2S3                                      1.9815
                                Therapy Visits.
22331........................  3rd+ Episodes, 14 to 15        C3F3S1                                      1.6721
                                Therapy Visits.
22332........................  3rd+ Episodes, 16 to 17        C3F3S2                                      1.8639
                                Therapy Visits.
22333........................  3rd+ Episodes, 18 to 19        C3F3S3                                      2.0557
                                Therapy Visits.
30111........................  3rd+ Episodes, 0 to 5 Therapy  C1F1S1                                      0.4758
                                Visits.
30112........................  3rd+ Episodes, 6 Therapy       C1F1S2                                      0.6351
                                Visits.
30113........................  3rd+ Episodes, 7 to 9 Therapy  C1F1S3                                      0.7944
                                Visits.
30114........................  3rd+ Episodes, 10 Therapy      C1F1S4                                      0.9536
                                Visits.
30115........................  3rd+ Episodes, 11 to 13        C1F1S5                                      1.1129
                                Therapy Visits.
30121........................  3rd+ Episodes, 0 to 5 Therapy  C1F2S1                                      0.5611
                                Visits.
30122........................  3rd+ Episodes, 6 Therapy       C1F2S2                                      0.7064
                                Visits.
30123........................  3rd+ Episodes, 7 to 9 Therapy  C1F2S3                                      0.8518
                                Visits.
30124........................  3rd+ Episodes, 10 Therapy      C1F2S4                                      0.9971
                                Visits.
30125........................  3rd+ Episodes, 11 to 13        C1F2S5                                      1.1424
                                Therapy Visits.
30131........................  3rd+ Episodes, 0 to 5 Therapy  C1F3S1                                      0.6085
                                Visits.
30132........................  3rd+ Episodes, 6 Therapy       C1F3S2                                      0.7613
                                Visits.
30133........................  3rd+ Episodes, 7 to 9 Therapy  C1F3S3                                      0.9140
                                Visits.
30134........................  3rd+ Episodes, 10 Therapy      C1F3S4                                      1.0667
                                Visits.
30135........................  3rd+ Episodes, 11 to 13        C1F3S5                                      1.2194
                                Therapy Visits.
30211........................  3rd+ Episodes, 0 to 5 Therapy  C2F1S1                                      0.4913
                                Visits.
30212........................  3rd+ Episodes, 6 Therapy       C2F1S2                                      0.6648
                                Visits.
30213........................  3rd+ Episodes, 7 to 9 Therapy  C2F1S3                                      0.8383
                                Visits.
30214........................  3rd+ Episodes, 10 Therapy      C2F1S4                                      1.0118
                                Visits.
30215........................  3rd+ Episodes, 11 to 13        C2F1S5                                      1.1854
                                Therapy Visits.

[[Page 68637]]

 
30221........................  3rd+ Episodes, 0 to 5 Therapy  C2F2S1                                      0.5766
                                Visits.
30222........................  3rd+ Episodes, 6 Therapy       C2F2S2                                      0.7362
                                Visits.
30223........................  3rd+ Episodes, 7 to 9 Therapy  C2F2S3                                      0.8957
                                Visits.
30224........................  3rd+ Episodes, 10 Therapy      C2F2S4                                      1.0553
                                Visits.
30225........................  3rd+ Episodes, 11 to 13        C2F2S5                                      1.2148
                                Therapy Visits.
30231........................  3rd+ Episodes, 0 to 5 Therapy  C2F3S1                                      0.6241
                                Visits.
30232........................  3rd+ Episodes, 6 Therapy       C2F3S2                                      0.7910
                                Visits.
30233........................  3rd+ Episodes, 7 to 9 Therapy  C2F3S3                                      0.9579
                                Visits.
30234........................  3rd+ Episodes, 10 Therapy      C2F3S4                                      1.1249
                                Visits.
30235........................  3rd+ Episodes, 11 to 13        C2F3S5                                      1.2918
                                Therapy Visits.
30311........................  3rd+ Episodes, 0 to 5 Therapy  C3F1S1                                      0.6143
                                Visits.
30312........................  3rd+ Episodes, 6 Therapy       C3F1S2                                      0.8058
                                Visits.
30313........................  3rd+ Episodes, 7 to 9 Therapy  C3F1S3                                      0.9974
                                Visits.
30314........................  3rd+ Episodes, 10 Therapy      C3F1S4                                      1.1890
                                Visits.
30315........................  3rd+ Episodes, 11 to 13        C3F1S5                                      1.3806
                                Therapy Visits.
30321........................  3rd+ Episodes, 0 to 5 Therapy  C3F2S1                                      0.6996
                                Visits.
30322........................  3rd+ Episodes, 6 Therapy       C3F2S2                                      0.8772
                                Visits.
30323........................  3rd+ Episodes, 7 to 9 Therapy  C3F2S3                                      1.0548
                                Visits.
30324........................  3rd+ Episodes, 10 Therapy      C3F2S4                                      1.2324
                                Visits.
30325........................  3rd+ Episodes, 11 to 13        C3F2S5                                      1.4100
                                Therapy Visits.
30331........................  3rd+ Episodes, 0 to 5 Therapy  C3F3S1                                      0.7470
                                Visits.
30332........................  3rd+ Episodes, 6 Therapy       C3F3S2                                      0.9320
                                Visits.
30333........................  3rd+ Episodes, 7 to 9 Therapy  C3F3S3                                      1.1170
                                Visits.
30334........................  3rd+ Episodes, 10 Therapy      C3F3S4                                      1.3020
                                Visits.
30335........................  3rd+ Episodes, 11 to 13        C3F3S5                                      1.4870
                                Therapy Visits.
40111........................  All Episodes, 20+ Therapy      C1F1S1                                      1.8268
                                Visits.
40121........................  All Episodes, 20+ Therapy      C1F2S1                                      1.8484
                                Visits.
40131........................  All Episodes, 20+ Therapy      C1F3S1                                      1.9176
                                Visits.
40211........................  All Episodes, 20+ Therapy      C2F1S1                                      1.9272
                                Visits.
40221........................  All Episodes, 20+ Therapy      C2F2S1                                      1.9488
                                Visits.
40231........................  All Episodes, 20+ Therapy      C2F3S1                                      2.0180
                                Visits.
40311........................  All Episodes, 20+ Therapy      C3F1S1                                      2.1567
                                Visits.
40321........................  All Episodes, 20+ Therapy      C3F2S1                                      2.1784
                                Visits.
40331........................  All Episodes, 20+ Therapy      C3F3S1                                      2.2475
                                Visits.
----------------------------------------------------------------------------------------------------------------

    To ensure the changes to the HH PPS case-mix weights are 
implemented in a budget neutral manner, we apply a case-mix budget 
neutrality factor to the CY 2016 national, standardized 60-day episode 
payment rate (see section III.C.3. of this final rule). The case-mix 
budget neutrality factor is calculated as the ratio of total payments 
when the CY 2016 HH PPS grouper and case-mix weights (developed using 
CY 2014 claims data) are applied to CY 2014 utilization (claims) data 
to total payments when the CY 2015 HH PPS grouper and case-mix weights 
(developed using CY 2013 claims data) are applied to CY 2014 
utilization data. Using CY 2014 claims data as of December 31, 2014, we 
calculated the case-mix budget neutrality factor for CY 2016 to be 
1.0141. Updating our analysis with 2014 claims data as of June 30, 
2015, we calculated a final case-mix budget neutrality factor for CY 
2016 of 1.0187.
    The following is a summary of the comments and our responses to 
comments on the CY 2016 case-mix weights.
    Comment: One commenter noted that the case-mix weights were 
increased 3.75 percent for 0-5 therapy visits, decreased by 2.5 percent 
for 14-15 therapy visits, and decreased 5 percent for 20+ therapy 
visits to address MedPAC's concerns that the therapy episodes are over-
valued and non-therapy episodes are undervalued, but stated that a 
therapist's salary and benefits costs are higher than those same costs 
for nursing, due to the overall market for therapists and the greater 
difficulty in retaining them in the home health environment versus 
other health care settings. Additionally, the commenter noted that 
patients requiring 20+ therapy visits typically have functional 
deficits in multiple domains, requiring the expertise of multiple 
therapy disciplines (PT/OT/ST) to address, justifying the higher case 
mix.
    Response: As we noted in the CY 2015 HH PPS final rule, these 
adjustments to the case-mix weights are the same adjustments finalized 
in the CY 2012 HH PPS final rule (76 FR 68557). As the commenter 
correctly noted, these adjustments were made, in part, to address 
MedPAC's concerns that the HH PPS overvalues therapy episodes and 
undervalues non-therapy episodes (March 2011 MedPAC Report to the 
Congress: Medicare Payment Policy, p.176). However, we further note 
that these adjustments also better aligned the case-mix weights with 
episode costs estimated from cost report data (79 FR 66061).
    Comment: One commenter stated that they are pleased that CMS used 
updated claims and cost data to recalibrate all of the case-mix 
weights. However, the commenter went on to state that they were 
somewhat confused that high-therapy episodes tend to get increased 
case-mix weights, even though CMS has stated its intention that therapy 
visit volume should have less impact on the weights. One commenter 
noted that CMS did not provide sufficient transparency of the details 
and methods used to recalibrate the HH PPS case-mix weights in its 
discussion in the proposed rule. In addition, CMS provided little 
justification for recalibrating the case-mix weights just 1

[[Page 68638]]

year following the recalibration of case-mix weights in CY 2015 and a 
mere 3 years since the recalibration for the CY 2012 HH PPS final rule. 
The commenter noted that this proposed recalibration reduces the case 
weights for 117 HHRGs or 76 percent of the 153 HHRGs. Another commenter 
stated that analysis of the case mix weight changes from 2014 through 
2016 indicates an average decrease of 1.52 percent in each HIPPS code 
weight. The commenter stated that they believe that these changes alone 
have produced an overall decrease in the case mix scoring of episodes 
since 2013. Specifically, applying the 2016 case mix weights to the 
HHA's 2014 episodes would produce a decrease in overall case mix weight 
of 4.7 percent and from 2014-2016, the overall case-mix weight was 
reduced by 7.2 percent for certain HIPPS codes.
    Response: As stated in the CY 2015 HH PPS final rule, the 
methodology used to recalibrate the weights is identical to the 
methodology used in the CY 2012 recalibration except for the minor 
exceptions as noted in the CY 2015 HH PPS proposed and final rules (79 
FR 38366 and 79 FR 66032). We encourage commenters to refer to the CY 
2012 HH PPS proposed and final rules (76 FR 40988 and 76 FR 68526) and 
the CY 2012 technical report on our home page at: https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html for additional 
information about the recalibration methodology.
    As we noted in the CY 2015 HH PPS final rule (79 FR 66067), 
decreases in the case-mix weights for the low therapy case-mix groups 
and increases in the case-mix weights for the high therapy case-mix 
groups is generally attributable to shifts away from the use of home 
health aides and a shift to either more nursing or more therapy care 
across all therapy groups. While some of the low therapy groups did add 
more skilled nursing visits, most of the high therapy groups added more 
occupational therapy (OT) and speech-language pathology (SLP), which 
have substantially higher Bureau of Labor Statistics (BLS) average 
hourly wage values compared to skilled nursing. In addition, while the 
average number of total visits per episode has decreased overall, it 
decreased disproportionately more for the no/low therapy case-mix 
groups. These utilization changes result in changes to the weights 
observed by the commenter, specifically, the decreases in the case-mix 
weights for the low or no therapy groups and increases in the case-mix 
weights for the high therapy groups.
    Comparing the final CY 2016 HH PPS case-mix weights (Table 5) to 
the final CY 2015 HH PPS case-mix weights (79 FR 66062), the case-mix 
weights change very little, with most case-mix weights either 
increasing or decreasing by 1 to 2 percent with no case-mix weights 
increasing by more than 3 percent or decreasing by more than 4 percent. 
The aggregate decreases in the case-mix weights are offset by the case-
mix budget neutrality factor, which is applied to the national, 
standardized 60-day episode payment rate. In other words, although the 
case-mix weights themselves may increase or decrease from year-to-year, 
we correspondingly offset any estimated decreases in total payments 
under the HH PPS, as result of the case-mix recalibration, by applying 
a budget neutrality factor to the national, standardized 60-day episode 
payment rate. For CY 2016, the case-mix budget neutrality factor will 
be 1.87 percent as described above. For CY 2015, the case-mix budget 
neutrality factor was 3.66 percent (79 FR 66088). In addition, when the 
CY 2014 case-mix weights were reset to 1.0000 by decreasing the case-
mix weights by 1.3464, we correspondingly increased the national, 
standardized 60-day episode payment rate by the same factor (1.3464) as 
part of the rebasing of the HH PPS payment rates required by the 
Affordable Care Act (78 FR 72273). The recalibration of the case-mix 
weights is not intended to increase or decrease overall HH PPS 
payments, but rather is used to update the relative differences in 
resource use amongst the 153 groups in the HH PPS case-mix system and 
maintain the level of aggregate payments before application of any 
other adjustments.
    Final Decision: We will finalize the recalibration of the HH PPS 
case-mix weights as proposed. The CY 2016 scores for the case-mix 
variables, the clinical and functional thresholds, and the case-mix 
weights were developed using complete CY 2014 claims data as of June 
30, 2015. We note that we finalized the recalibration methodology and 
the proposal to annually recalibrate the HH PPS case-mix weights in the 
CY 2015 HH PPS final rule (79 FR 66072). No additional proposals were 
made with regard to the recalibration methodology in the CY 2016 HH PPS 
proposed rule.
2. Reduction to the National, Standardized 60-day Episode Payment Rate 
to Account for Nominal Case-Mix Growth
    Section 1895(b)(3)(B)(iv) of the Act gives the Secretary the 
authority to implement payment reductions for nominal case-mix growth 
(that is, case-mix growth unrelated to changes in patient acuity). 
Previously, we accounted for nominal case-mix growth through case-mix 
reductions implemented from 2008 through 2013 (76 FR 68528-68543). As 
stated in the 2013 final rule, the goal of the reductions for nominal 
case-mix growth is to better align payments with real changes in 
patient severity (77 FR 67077). Our analysis of data from CY 2000 
through CY 2010 found that only 15.97 percent of the total case-mix 
change was real and 84.03 percent of total case-mix change was nominal 
(77 FR 41553). In the CY 2015 HH PPS final rule (79 FR 66032), we 
estimated that total case-mix increased by 2.76 percent between CY 2012 
and CY 2013 and in applying the 15.97 percent estimate of real case-mix 
growth to the estimate of total case-mix growth, we estimated nominal 
case-mix growth to be 2.32 percent (2.76 - (2.76 x 0.1597)). However, 
for 2015, we did not implement a reduction to the 2015 national, 
standardized 60-day episode payment amount to account for nominal case-
mix growth, but stated that we would continue to monitor case-mix 
growth and may consider proposing nominal case-mix reductions in the 
future. Since the publication of 2015 HH PPS final rule (79 FR 66032), 
MedPAC reported on their assessment of the impact of the mandated 
rebasing adjustments on quality of and beneficiary access to home 
health care as required by section 3131(a) of the Affordable Care Act. 
As noted in section III.A.2 of the proposed rule, MedPAC concluded that 
quality of care and beneficiary access to care are unlikely to be 
negatively affected by the rebasing adjustments. For the proposed rule, 
we further estimated that case-mix increased by 1.41 percent between CY 
2013 and CY 2014 using preliminary CY 2014 home health claims data (as 
of December 31, 2014) with linked OASIS data. In applying the 15.97 
percent estimate of real case-mix growth to the total estimated case-
mix growth from CY 2013 to CY 2014 (1.41 percent), we estimated that 
nominal case-mix growth to be 1.18 percent (1.41 - (1.41 x 0.1597)). 
Given the observed nominal case-mix growth of 2.32 percent in 2013 and 
1.18 percent in 2014, we estimated that the reduction to offset the 
nominal case-mix growth for these 2 years would be 3.41 percent (1 - 1/
(1.0232 x 1.0118) = 0.0341).
    We proposed to implement this 3.41 percent reduction in equal 
increments over 2 years. Specifically, we proposed to apply a 1.72 
percent (1 - 1/(1.0232

[[Page 68639]]

x 1.0118) 1/2 = 1.72 percent) reduction to the national, 
standardized 60-day episode payment rate each year for 2 years, CY 2016 
and CY 2017, under the ongoing authority of section 1895(b)(3)(B)(iv) 
of the Act. In the proposed rule, we noted that proposed reductions to 
the national, standardized 60-day episode payment rate in CY 2016 and 
in CY 2017 to account for nominal case-mix growth are separate from the 
rebasing adjustments finalized in CY 2014 under section 
1895(b)(3)(A)(iii) of the Act, which were calculated using CY 2012 
claims and CY 2011 HHA cost report data (which was the most current, 
complete data at the time of the CY 2014 HH PPS proposed and final 
rules).
    In updating our analysis for the final rule and in reassessing our 
methodology in response to comments, as discussed further below in this 
section, we used a more familiar methodology (one used in the past) to 
measure case-mix growth. We first calculated the average case-mix index 
for 2012, 2013, and 2014 before comparing the average case-mix index 
for CY 2012 to CY 2013 and the average case-mix index for CY 2013 to CY 
2014 to calculate the total case-mix growth between the years. To make 
the comparison between the 2013 average case-mix index and the 2014 
average case-mix index, we had to inflate the 2014 average case-mix 
index (multiply it by 1.3464) before doing the comparison. We inflated 
the 2014 average case-mix index by 1.3464 to offset the decrease by 
that same factor when the CY 2014 case-mix weights were reset to 1.0000 
in the CY 2014 HH PPS final rule (78 FR 72256). By first calculating 
the average case-mix index for 2012, 2013, and 2014 before comparing 
the average case-mix index for CY 2012 to CY 2013 and then comparing 
the average case-mix index for CY 2013 to CY 2014 to calculate the 
total case-mix growth between the years, we used a more familiar 
methodology than what was done for the CY 2015 HH PPS final rule and 
the CY 2016 HH PPS proposed rule. In those rules, we instead simulated 
total payments using case-mix weights from 2 consecutive years (used to 
calculate the case-mix budget neutrality factor when recalibrating the 
case-mix weights) and isolated the portion of the budget neutrality 
factor that was due to changes in case-mix. Calculating the average 
case-mix index in a given year, and comparing indices across years, 
better aligns with how CMS historically measured case-mix growth in 
previous years and is a methodology that was thoroughly vetted in 
previous rulemaking. In addition, we believe that this more familiar 
methodology results in a more straightforward measure of case-mix 
growth between 2012 and 2014, given that annual recalibration of the 
case-mix weights did not begin until CY 2015.
    Using this methodology, we estimate that the average case-mix for 
2012 was 1.3610 and that the average case-mix for 2013 was 1.3900.\4\ 
Dividing the average case-mix for 2013 by the average case-mix for 
2012, we obtain a total case-mix growth estimate from 2012 to 2013 of 
2.13 percent (1.3900/1.3610 = 1.0213), compared to 2.76 percent in the 
proposed rule. We estimate that the average case-mix for 2014 was 
1.0465. We note that in 2014, we decreased all of the case-mix weights 
uniformly by 1.3464. Therefore, in order to make a comparison between 
the 2014 average case-mix weight and the 2013 average case-mix weight, 
we multiplied the 1.0465 estimate by 1.3464 (1.0465 x 1.3464 = 1.4090). 
We then divided the average case-mix for 2014 by the average case-mix 
for 2013 to obtain a total case-mix growth estimate from 2013 to 2014 
of 1.37 percent (1.4090/1.3900 = 1.0137), compared to 1.41 percent in 
the proposed rule.
---------------------------------------------------------------------------

    \4\ We include outlier episodes in the calculation along with 
normal episodes and PEPs. We note that the case-mix for PEP episodes 
are downward weighted based on the length of the home health 
episode.
---------------------------------------------------------------------------

    Using the 2.13 percent estimate of total case-mix growth between CY 
2012 and CY 2013, we estimate nominal case-mix growth to be 1.79 
percent (2.13 - (2.13 x 0.1597) = 1.79). Similarly, using the 1.37 
percent estimate of total case-mix growth between CY 2013 and CY 2014, 
we estimate nominal case-mix growth to be 1.15 percent (1.37 - (1.37 x 
0.1597) = 1.15). Using the updated estimates of case-mix growth between 
2012 and 2013 and between 2013 and 2014, we estimate that the reduction 
to the national, standardized 60-day episode payment rate needed to 
offset the nominal case-mix growth from 2012 through 2014 would be 2.88 
percent (1 - 1/(1.0179 x 1.0115) = 0.0288). If we finalized the 2 year 
phase-in described in the proposed rule, we would need to implement a 
reduction of 1.45 percent to the national, standardized 60-day episode 
payment rate each year for 2 years, CY 2016 and CY 2017, to account for 
nominal case-mix growth from 2012 through 2014 (1 - 1/(1.0179 x 1.0115) 
1/2 = 0.0145).
    In the CY 2016 HH PPS proposed rule, we solicited comments on the 
proposed reduction to the national, standardized 60-day episode payment 
amount in CY 2016 and in CY 2017 to account for nominal case-mix growth 
from CY 2012 through CY 2014 and the associated changes in the 
regulations text at Sec.  484.220 in section VII. The following is a 
summary of the comments and our responses.
    Comment: MedPAC supported the proposed case-mix reductions and 
stated that the Commission has long held that it is necessary for CMS 
to make adjustments to account for nominal case-mix growth to prevent 
overpayments.
    Response: We thank MedPAC for their support.
    Comment: Several commenters expressed concern with the methodology 
used to determine case-mix growth from CY 2012 to CY 2014 and the 
portion of such growth that is nominal versus real. Specifically, 
commenters stated that the percent change in real case-mix used to 
calculate the proposed nominal case-mix reductions is not reflective of 
the real case-mix growth between 2012 and 2014. Commenters stated that 
patients are entering into home health at a much higher acuity level 
than in previous years and cited a number of statistics to support 
their statements. Commenters also disagreed with the use of the percent 
change in real case-mix used in the case-mix reduction calculations as 
it was based on data from 2000-2010 and applied to the total case mix 
growth from 2012 to 2014. They stated that no adjustments should be 
considered until CMS conducts a thorough analysis of real and nominal 
changes in case mix through evaluation of changes that occurred during 
the actual years of concern (2012-2014) with respect to the proposed 
adjustment and any adjustments that might be considered in future 
years. They further stated that CMS should have the data and tools to 
perform an updated analysis of the percentage of real versus nominal 
case-mix growth between 2012 and 2014 and they noted that the 
historical analyses conducted by CMS demonstrate that the level of 
``nominal'' case mix weight change is not consistent from year to year. 
While some commenters urged CMS to update its analysis to determine the 
percentage of real versus nominal case-mix growth for CY 2012 through 
CY 2014, other commenters stated that out of the 921 variables used in 
such analyses, there are only four drivers of real case-mix growth and 
implied that CMS' analysis was not reliable or comprehensive enough. 
Some commenters stated that the adjustments to payments should be based 
on current data informed by clinical evaluation. Finally, one commenter 
stated that CMS should not implement the proposed case-mix reductions 
and not propose

[[Page 68640]]

any additional case-mix reductions in the future.
    Response: We believe the percent change in real case-mix used in 
the case-mix reduction calculations, which is based on analysis of 2000 
through 2010 data, is a stable proxy for the real case-mix growth 
between 2012 and 2014. Our analysis of data has not indicated that real 
case-mix change between 2012 through 2014 is greater than the change in 
real case-mix between 2000 and 2010. In fact, our analysis of claims 
data has shown a decrease in the number of total visits per episode 
between 2012 and 2014. Furthermore, our analysis of 2012 and 2013 cost 
report data showed that the cost per episode has decreased each year.
    In addition, we note that there is prior precedent for applying 
historical estimates of real case-mix growth on more current data to 
set payment rates. In the rate year (RY) 2008 and the RY 2009 LTCH 
final rules, an estimate of the percentage of real case-mix growth from 
a prior time period was applied to the total case-mix growth from FY 
2004 to FY 2005 and from FY2005 to FY 2006 in determining the RY 2008 
and RY 2009 federal rate updates (72 FR 26889 and 73 FR 26805).
    With regard to the recommendation that the estimates should be 
informed by clinical evaluation, we note that CMS' case-mix change 
model, developed by Abt Associates, 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 
given the resources available.
    We note that as a result of the comments we received expressing 
concerns about our methodology and questioning the case-mix growth 
estimates we presented in the proposed rule, we did re-evaluate the 
methodology to determine total case-mix growth and are moving forward 
with a more familiar, and slightly more accurate, methodology (one used 
in the past) to measure case-mix growth (as described above). The 
methodology results in the calculation of a 1.45 percent reduction each 
year in CY 2016 and CY 2017 to account for nominal case-mix growth from 
2012 to 2014 (instead of the 1.72 percent reduction described in the CY 
2016 proposed rule).
    Comment: A commenter stated that their analyses suggest that all of 
the historical increases have been driven by increased therapy 
utilization that is, in turn, based on real needs of the patients. A 
commenter stated that the technical analyses used to conclude that 
case-mix increases are generally ``not real'' have been based on the 
non-case-mix variables and that those non-case-mix variables were found 
to have a lower explanatory value. The commenter expressed concerns 
with CMS' exclusion of the therapy variables in the model to assess 
real case-mix, stating that those have the highest explanatory power. 
The commenter asked that CMS address this question in the final rule to 
better inform their understanding of its conclusions as to how ``real'' 
versus ``nominal'' determinations are made.
    Response: The models to assess real and nominal case-mix growth 
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 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. 
We encourage commenters to review the Analysis of 2000-2009 Home Health 
Case-Mix Change Report, available on the HHA center page at: https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html, in 
order to better understand the models used to assess real and nominal 
case-mix growth.
    Comment: A number of commenters encouraged CMS to seek payment 
system reforms that are value-based rather than implementing payment 
reductions.
    Response: The Home Health Value-Based Purchasing (HHVBP) model will 
be implemented January 1, 2016, as described in section IV of this 
final rule. However, the reductions to account for nominal case-mix 
growth are necessary to prevent overpayments due to coding practices 
that led to increases in payment that are not related to real increases 
in patient acuity.
    Comment: Commenters referenced section 1895(b)(3)(B)(iv) of the 
Act, stating that there has not been an increase in aggregate payments 
that would justify the proposed reductions, and that CMS should 
withdraw its proposal. Commenters stated that there was a decrease in 
spending from 2010 through 2013 and questioned how nominal case-mix 
growth could have increased during the time period. Another commenter 
stated that Medicare data for 2012 to 2014 appear to indicate that the 
per episode payment during this period actually fell below the level 
that would have occurred as a result of any up-coding even though CMS' 
estimates case mix up-coding occurred. Commenters stated that no 
payment reductions should be implemented unless CMS could demonstrate 
that Medicare spending on home health services exceeded the 
Congressional Budget Office's (CBO) forecasted spending.
    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. In 
addition, the reference to ``a change in aggregate payments'' in that 
provision does not mean that overall expenditures under the HH PPS need 
to increase in order to implement reductions for nominal case-mix 
growth. We would also like to note that a decrease in expenditures does 
not mean that there has been no case-mix growth. The case-mix growth 
during this time period may have offset the decrease in expenditures 
that might have otherwise occurred.
    Comment: Commenters stated that the recent recalibrations have 
eliminated the nominal case-mix growth observed from 2012 through 2014. 
Furthermore, commenters stated that the removal of certain ICD-9-CM 
codes included in the HH PPS Grouper for CY 2014 addressed, in part, 
nominal case-mix growth from 2012 through 2014. Commenters stated that 
CMS should fully evaluate the impact of the recalibration on case-mix 
growth and publicly disclose the information.
    Response: While the recent recalibrations (starting in CY 2015) may 
help to reduce future nominal case-mix growth, the proposed reductions 
are addressing the nominal case-mix growth from 2012 through 2014, 
prior to recent efforts to annually recalibrate the HH PPS case-mix 
weights. The reductions to account for nominal case-mix growth ensure 
that payments are not inflated by case-mix changes unrelated to patient 
severity that occurred from 2012 through 2014. This remains important 
even in years when we are annually recalibrating the case-mix weights. 
When CMS recalibrates the case-mix weights, a budget neutrality factor 
is applied to the national, standardized 60-day episode payment rate to 
ensure that

[[Page 68641]]

the recalibration of the case-mix weights result in the same aggregate 
expenditures as the aggregate expenditures using the current payment 
weights. For the recalibration of the weights in this rule, the budget 
neutrality factor is applied to the CY 2016 national, standardized 60-
day episode payment rate to ensure that the recalibration of the case-
mix weights results in the same aggregate expenditures using the 
current CY 2015 payment weights (simulating payments using CY 2014 
utilization data, the most current and complete data available at this 
time). If there is nominal case-mix growth in the data used to 
recalibrate the case-mix weights, the nominal case-mix growth is built 
into the national, standardized 60-day episode rate through the budget 
neutrality factor. Thus nominal case-mix in a given year could result 
in increases to the national, standardized 60-day payment rate that 
would otherwise not have occurred, and future adjustments may be needed 
to better align payment with patient severity.
    In measuring case-mix growth, we are factoring in the removal of 
the ICD-9-CM codes from the CY 2014 HH PPS Grouper into our assessment 
of case-mix growth from 2013 to 2014. We used the 2013 grouper and 2013 
case-mix weights to calculate the average case-mix index for 2013. Then 
we used the 2014 grouper, which excluded ICD-9-CM codes found to be 
rarely used and/or not associated with resource use increases, and 2014 
case-mix weights, to calculate the average case-mix index for 2014. 
Comparing the 2013 average case-mix index to the 2014 average case-mix 
index (multiplied by 1.3464 in order to make the comparison), we 
obtained an estimate of case-mix growth which factors in the removal of 
the ICD-9 codes. We estimated 1.37 percent growth in total case-mix 
even after taking out the ICD-9-CM codes in 2014. We will continue to 
monitor case-mix growth and may examine the effects of the annual 
recalibrations on future case-mix growth.
    Comment: Some commenters questioned why the 2012 recalibration did 
not have a budget neutrality adjustment.
    Response: The 2012 recalibration was implemented in a budget 
neutral manner. While a budget neutrality factor was not applied to the 
national, standardized 60-day episode payment rate, we did apply a 
budget neutrality factor to the weights to ensure that the 
recalibration was implemented in a budget neutral manner (76 FR 68555).
    Comment: A few commenters stated that CMS did not take into 
consideration any probable coding effect in the transition from ICD-9-
CM to ICD-10-CM. The commenters stated that it is highly likely that a 
decrease in productivity will occur due to the implementation of ICD-
10-CM. Commenters also stated that it is also highly likely that ICD-
10-CM will result in coding inaccuracies, which in turn, will lower 
average case mix. The commenters encouraged CMS to reconsider this 
large negative adjustment and at least postpone it until additional 
information and study results are available. A commenter stated that, 
in addition to ICD-10-CM implementation, HHAs are simultaneously facing 
increased costs due to the implementation of the new Department of 
Labor (DOL) rule on minimum wage and overtime for companionship 
providers.
    Response: We note that providers have been aware of the transition 
from ICD-9-CM to ICD-10-CM for some time. The original implementation 
date for ICD-10-CM was October 1, 2013 (74 FR 3328). Therefore, the 
increase in costs due to the ICD-10-CM transition should be reflected 
in the latest cost report data we examined for the rebasing monitoring 
analyses in the proposed rule (that is, CY 2013 cost report data). In 
that analysis we found that an even greater reduction to HHA payments 
would need to occur to better align payments with costs than is 
currently allowed under section 1895(b)(3)(A)(iii) of the Act (80 FR 
39845). We will continue to analyze HHA Medicare cost report data and 
monitor case-mix growth in future rulemaking and may consider revising 
payments accordingly.
    Comment: Many commenters stated that their individual home health 
agencies have consistently had case-mix that was below the national 
average and; therefore, would be disproportionally impacted. Commenters 
suggested that CMS develop program integrity measures to address 
provider-specific up-coding rather than implementing the across-the-
board reductions. A commenter suggested the program integrity efforts 
could be performed through the Recovery Audit Contractors (RACs). 
Another commenter suggested that CMS re[hyphen]introduce the Medicare 
review procedures of the past in both the clinical and financial 
operations of home health with monetary penalties and/or recoupments 
based on those reviews. A third commenter stated that CMS should 
continue utilizing the existing fraud and abuse prevention processes to 
identify and target specific agencies that have excessive profit 
margins rather than impose the across the board reductions for all 
agencies and that CMS should use its enforcement authority to conduct 
targeted claims reviews and deny payment for claims where the case mix 
weight is not supported by the plan of care rather than cut the 
national standardized episode rate for all agencies.
    One commenter stated that the Medicare Administrative Contractors 
(MACs) are tasked with finding instances of inappropriate coding and 
that the industry should not be penalized for inappropriate coding that 
the MACs were unable to find. The commenter also stated that the 
proposed reductions are a ``double whammy'' because the claims that 
were identified as erroneously billed have already been adjusted and 
any identified overpayments have been recovered and that CMS is 
attempting to recover even more than what was in error through the 
proposed reductions. In addition, the commenter questioned why there 
have not been more denials if there has been widespread up-coding, as 
suggested by CMS' analysis.
    Response: For a variety of reasons, as we have noted in previous 
regulations, we have not proposed targeted reductions for nominal case-
mix change. The foremost 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 our case-mix 
measurement methodology, Dr. David Grabowski, Ph.D., a professor of 
health care policy at Harvard Medical School, and his team 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 ``Home Health Study Report--Independent Review 
of the Models to Assess Nominal Case-Mix Growth'', dated June 21, 2011, 
located at: https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html).
    While certain commenters seem to assume that CMS can precisely 
identify those agencies practicing abusive coding, we do not agree that 
agency-specific case-mix levels can precisely distinguish the agencies 
that engage in abusive coding from all others. System wide, case-mix 
levels have risen over time throughout the country, while patient 
characteristics data indicate little real change in patient severity 
over time. That is, the main problem is not the level of case-mix 
billed by any

[[Page 68642]]

specific HHA 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. We note that 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 terms of recoupments that correspond to claims denied after they 
were reviewed, such would typically be reflected in the claims data we 
used in our case-mix analysis. In the case where a paid-claim dispute 
is still active, because the volume is so low, this data would likely 
have little to no effect on our determination of nominal case-mix 
growth. In addition, while we appreciate the commenters' suggestion, 
targeted claim review on a scale that would be required to counteract 
the broad-based uptrend in case-mix weights would be resource-intensive 
and not feasible.
    Comment: Some commenters stated that the additional payment 
reductions for nominal case-mix growth are based on a subset of the 
same factors used to determine the rebasing adjustment, such as the 
``intensity of services'' factor. The commenters stated that the use of 
an earlier legislative authority to justify an additional type of 
reduction above the legislative cap on rebasing adjustments is contrary 
to congressional intent. The commenters urged CMS to adhere to the 
limits on home health rate rebasing established by Congress and 
recommended that CMS evaluate the impact of the rebasing adjustments 
and consult with Congress before considering additional reductions. 
Other commenters stated that CMS should provide a comprehensive 
explanation as to why it has not determined that the 2014 rate rebasing 
effectively eliminated the impact of any alleged nominal case mix 
weight change that may have occurred in 2013 and 2014. Commenters 
recommended that CMS should hold off on imposing the adjustments until 
the completion of the rebasing in 2017. Alternatively, the commenters 
recommended phasing-in the proposed reductions over more years. A 
commenter stated that this approach would be more consistent with 
approaches used by the agency to implement similar rate reductions in 
the IPPS and would soften the impact for those agencies whose case-mix 
growth was due to changes in patient acuity. Another commenter stated 
that CMS should do further analysis including validation that no 
element of the proposed coding cut would duplicate reductions already 
accounted for in the rebasing adjustments. Another commenter requested 
that CMS provide a discussion of the interaction of the rebasing 
adjustments and the recalibration of case weights on the purported 
nominal case mix growth, stating that they believed that the rebasing 
and recalibration of case weights addressed any nominal case mix growth 
at that time.
    Response: The rebasing adjustments proposed and finalized for CY 
2014 through CY 2017 were based on 2011 cost report data and 2012 
claims data. We compared payment and costs using 2011 cost data and 
2012 claims data and therefore, we did not account for any nominal 
case-mix growth from 2012 to 2014 in the methodology. Specifically, 
using the 2011 cost data, we estimated a 2013 60-day episode cost by 
increasing the 2011 60-day episode cost by the change in the visit data 
between 2011 and 2012 and the full 2012 and 2013 market baskets. We 
calculated payments by taking the 2012 national, standardized 60-day 
payment amount and updating it by the average case-mix weight for 2012 
as well as updating the estimate based on the payment policies 
implemented in CY 2013 to estimate average payments in 2013. In the 
rebasing methodology, we did not factor in future projections of 
nominal case-mix growth from 2012 to 2014 in our analysis. As stated 
previously, the nominal case-mix reductions would allow us to account 
for nominal case-mix growth from 2012 through 2014 and mitigate 
structural overpayments.
    While resetting the weights to 1.0000 and doing annual 
recalibrations may potentially reduce future nominal case-mix growth, 
it does not offset the nominal case-mix growth previously unaccounted 
for, particularly for those last few years before annual recalibrations 
began. We note that there is a two year lag between the data used to 
recalibrate the case-mix weights and the year that the weights will be 
implemented and we use the same claims data when comparing payments and 
developing the budget neutrality factor. If that utilization in the 
claims data is too high, it is built into the payments for both the 
future year's case mix weights and the previous year's case mix weights 
on which the recalibration is based, and so that increased utilization 
ends up being carried forward. In other words, the recalibration is 
adjusting for the next year's case mix change as compared to the 
previous one, but, barring additional action, will not (even in future 
years) adjust for unaccounted nominal case mix growth already built in 
to the system.
    With regard to the commenters' concerns about congressional intent, 
we do not believe that application of the case-mix adjustment is 
contrary to congressional intent. We have received input from 
stakeholders and appreciate their comments but believe our final policy 
is within the authority under the statute and is consistent with 
congressional intent. Moreover, this policy reflects our goal to better 
align Medicare reimbursement with real changes in patient severity. 
With regard to the comment about phasing-in the reductions over more 
years, we note that in response to comments, we are phasing-in the 
case-mix reductions over 3 years (CY 2016, CY 2017, and CY 2018) rather 
than the 2 years (CY 2016 and CY 2017) described in the proposed rule. 
Specifically, we will be finalizing a 0.97 percent reduction each year 
in CY 2016, CY 2017, and CY 2018 to account for nominal case-mix growth 
from CY 2012 through CY 2014 (1 - 1/(1.0179 x 1.0115) 1/3 = 
0.0097). Iteratively implementing the case-mix reduction over three 
years gives home health agencies more time to adjust to the intended 
reduction of 2.88 percent than would be the case were we to account for 
the nominal case-mix growth in two years.
    Comment: Commenters stated that the proposed case-mix reductions 
would disproportionately affect hospital-based agencies and that 
hospital-based HHA's Medicare margins have been negative for the past 
few years. A commenter stated that hospital-based HHAs treat more 
severe patients than freestanding HHAs. Another commenter recommended 
that CMS consider the differences in case-mix across the types of HHAs 
and regions.
    Response: Hospital-based HHAs comprise less than 10 percent of all 
home health agencies in our impact analysis (see section VII of this 
final rule). 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 cost 
reports, such as hospital-based HHA's

[[Page 68643]]

Medicare cost reports. MedPAC explains 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. In addition, MedPAC has 
reported negative Medicare margins for hospital-based HHAs since at 
least 2005,\5\ even though freestanding HHA Medicare margins have been 
around or over 15 percent. We question how hospital-based HHAs can 
still be operating after several years with negative Medicare margins 
and whether those HHAs have incentives to report negative Medicare 
margins (such as cost shifting/allocation by hospitals amongst their 
various units).
---------------------------------------------------------------------------

    \5\ Medicare Payment Advisory Commission (MedPAC), Report to the 
Congress: Medicare Payment Policy. March 2007, P. 194.
---------------------------------------------------------------------------

    In their March 2009 Report to the Congress, MedPAC stated that 
hospital-based providers have a lower case-mix index, which suggests 
that they serve less costly patients.\6\ Similarly, we also examined 
the average case-mix index for freestanding versus facility-based HHAs 
in CY 2014 and found that hospital-based HHAs had an average case-mix 
index that was approximately 6 percent lower than freestanding HHAs. 
However, the report on the independent review of the model used to 
assess real case-mix growth, performed by Dr. David Grabowski from 
Harvard University, stated ``. . . when we re-ran the Abt model by 
ownership type (non-profit, government, for-profit), agency type 
(facility-based, freestanding), region of the country (north, south, 
Midwest, west), agency size (large vs. small; based on number of 
initial episodes) and agency focus (post-acute versus community-
dwelling), the results suggest that--although there is some variation--
a consistent percentage of the growth in case-mix is nominal growth. As 
such, these results do not provide much support for adjusting payments 
by classes of agencies.'' The ``Home Health Study Report--Independent 
Review of the Models to Assess Nominal Case-Mix Growth'', dated June 
21, 2011, is located on our homepage at: https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html.
---------------------------------------------------------------------------

    \6\ Medicare Payment Advisory Commission (MedPAC), Report to the 
Congress: Medicare Payment Policy. March 2009, P. 196.
---------------------------------------------------------------------------

    Comment: Commenters expressed concerns with the impact of the 
proposed reductions on HHA margins and the financial viability of HHAs. 
Commenters stated that CMS estimated that 43 percent of all HHAs would 
face negative margins by 2017 with the impact of rebasing and the 
annual productivity adjustment and provided other information on 
margins. Commenters stated that a recent analysis by NAHC indicates 
that the percentage of impacted HHAs is now forecasted at 53.71 percent 
by 2017 and that, with the addition of the case mix weight adjustment 
proposed by CMS, some states will be impacted to a much higher degree. 
Some other commenters stated that analysis conducted by Avalere Health 
determined that 45.3 percent of all HHAs nationwide will operate at a 
loss by the end of 2017. A commenter stated the MedPAC Medicare Margin 
estimate is not intended to serve as a measure of home health agencies' 
profit/loss, but is often interpreted as such, and an HHA's overall 
margin (rather than just the Medicare margin) is a standard measure of 
a home health company's bottom line/profit (or loss, as applicable). A 
few commenters stated that policymakers may want to consider providers' 
overall margins, as well as the MedPAC Medicare margin, when 
contemplating changes to home health reimbursement. A commenter stated 
that CMS should accurately account for the current costs of providing 
HH services to Medicare beneficiaries and to offer HH agencies a fair 
opportunity to generate a margin needed to make the ongoing investments 
that are necessary to maintain and improve patient care.
    Response: In the CY 2014 final rule, we estimated that 
approximately 40 percent of providers would have negative margins in CY 
2017 and that of the 40 percent of providers predicted to have negative 
margins, 83 percent of these providers already reported negative 
margins in 2011. In their March 2015 Report to the Congress, MedPAC 
estimates that the Medicare margins for freestanding agencies averaged 
12.7 percent in 2013 and averaged 17 percent between 2001 and 2013. The 
Commission estimates that the Medicare margin for 2015 will be 10.3 
percent. In addition, as mandated in section 3131(a) of the Affordable 
Care Act, MedPAC conducted a study on the rebasing implementation, 
which included an impact analysis on access to care, and submitted a 
Report to Congress on their findings. MedPAC's Report to Congress noted 
that the rebasing adjustments are partially offset by the payment 
update each year and across all four years of the phase-in of the 
rebasing adjustments the cumulative net reduction would equal about 2 
percent. MedPAC concluded that, as a result of the payment update 
offsets to the rebasing adjustments, HHA margins are likely to remain 
high under the current rebasing policy and quality of care and 
beneficiary access to care are unlikely to be negatively affected.
    Furthermore, in their 2013 Report to Congress, MedPAC stated ``low 
cost growth or no cost growth has been typical for home health care, 
and in some years we have observed a decline in cost per episode. The 
ability of HHAs to keep costs low has contributed to the high margins 
under the Medicare PPS.'' Our analysis of 2012 and 2013 cost report 
data supports MedPAC's statement about low or no cost growth and 
suggests that the cost of 60 day home health episodes has decreased 
since 2011. In the CY 2014 final rule, we estimated the cost of a 60-
day episode in 2011 to be $2,453.71 using CY 2011 Medicare claims data 
and 2011 Medicare cost report data (78 FR 72277). In the CY 2015 
proposed rule, we estimated the cost of a 60-day episode in 2012 to be 
$2,413.82 using CY 2012 Medicare claims data and FY 2012 Medicare cost 
report data (79 FR 38371). In the CY 2016 proposed rule, we estimated 
the cost of a 60-day episode in 2013 to be $2,402.11 using CY 2013 
Medicare claims data and FY 2013 Medicare cost report data (80 FR 
39846).
    In addition, we note that in their 2013 Report to Congress, MedPAC 
stated that during the interim payment system (1997-2000), when 
payments dropped by about 50 percent in two years, many agencies exited 
the program. However, new agencies entered the program (about 200 new 
agencies a year) and existing agencies expanded their service areas to 
enter markets left by exiting agencies. This is due in part to the low 
capital requirements for home health care services that allow the 
industry to react rapidly when the supply of agencies changes or 
contracts. Reviews of access found that access to care remained 
adequate during this period despite a substantial decline in the number 
of agencies (Liu et al. 2003). In summary, MedPAC's past reviews of 
access to home health care found that access generally remained 
adequate during periods of substantial decline in the number of 
agencies. MedPAC stated that this is due in part to the low capital 
requirements for home health care services that allow the industry to 
react rapidly when the supply of agencies changes or contracts. As 
described in section III.A.3 of the CY 2016 proposed rule, the number 
of HHAs billing Medicare for home health services in CY 2013 was 
11,889, or over 80 percent higher than the 6,511 HHAs billing Medicare 
for home health services in 2001. Even if some HHAs were to exit

[[Page 68644]]

the program due to possible reimbursement concerns, we would expect the 
home health market to remain robust (80 FR 39846).
    With regard to the comments about the overall margin, we note that 
as stated in the CY 2014 final rule, Medicare has never set payments so 
as to cross-subsidize other payers. Indeed, section 1861(v)(1)(A) of 
the Act states ``under the methods of determining costs, the necessary 
costs of efficiently delivering covered services to individuals covered 
by the insurance programs established by this title will not be borne 
by individuals not so covered, and the costs with respect to 
individuals not so covered will not be borne by such insurance 
programs.'' As MedPAC stated in its March 2011 Report to Congress, 
cross-subsidization is not advisable for two significant reasons: 
``Raising Medicare rates to supplement low Medicaid payments would 
result in poorly targeted subsidies. Facilities with high shares of 
Medicare payments--presumably the facilities that need revenues the 
least--would receive the most in subsidies from the higher Medicare 
payments, while facilities with low Medicare shares--presumably the 
facilities with the greatest need--would receive the smallest 
subsidies. Finally, increased Medicare payment rates could encourage 
states to further reduce their Medicaid payments and, in turn, create 
pressure to raise Medicare rates'' (78 FR 72284).
    Comment: A commenter stated that the proposed payment rate 
reductions will create job losses, particularly for people in education 
and quality positions. Commenters expressed concerns that the proposed 
rate reductions may create instability within the industry and impact 
access to care, particularly in underserved communities or for patients 
with higher cost or more complex care needs. Commenters also stated 
that the proposed rate reductions will have a significant impact on 
those home health agencies that serve as the safety-net providers for 
their communities and another commenter stated that the proposed cuts 
will threaten access to care in rural areas stating that patients in 
rural areas tend to be sicker, older, poorer, and require more complex 
care than their urban counterparts. A commenter urge CMS to eliminate 
the proposed case mix cut pending a detailed analysis utilizing current 
data and incorporating an assessment of the impact of such an 
additional cut on Medicare beneficiaries as well as the rural, small, 
and other HHAs who serve them.
    Response: We do not expect the payment reductions for nominal case-
mix growth to have a significant impact, particularly given MedPAC's 
projected margins for 2015; however, we will continue to monitor for 
unintended consequences. As noted above, we are phasing-in the 
reductions over three years, rather than two years as described in the 
proposed rule. Iteratively implementing the case-mix reduction over 
three years gives home health agencies more time to adjust to the 
intended reduction of 2.88 percent than would be the case were we to 
account for the nominal case-mix growth in two years.
    In addition, as described in the CY 2016 proposed rule, CMS has 
awarded a follow-on contract to Abt Associates to further explore 
margin differences across patient characteristics and possible payment 
methodology changes suggested by the results of the home health study. 
We presented several model options under development in the CY 2016 
proposed rule and may consider implementing payment reform to address 
the margin differences across patient characteristics in future 
rulemaking (80 FR 39865). With regard to the comment about patients in 
rural areas, we note that episodes provided in rural areas will 
continue to receive a three percent add-on payment in CY 2016.
    Comment: A commenter stated that the proposed reductions will limit 
services to the homebound population and will lead to increased re-
hospitalization and costs. Another commenter stated that the proposed 
reductions would threaten the efficiency of the health care system and 
will likely increase the likelihood of unnecessary institutional care 
episodes and that this improper utilization may lead to higher costs. 
The commenter urged CMS to consider the role and value of home health 
care in the overall health care system as it makes changes to the home 
health prospective payment system. The commenter asked CMS to consider 
the most vulnerable populations and the demographics of home health 
users when implementing payment adjustments. The commenter urged CMS to 
consider the potential impact of payment adjustments on a generally, 
older, sicker, poorer, and more vulnerable population, and mitigate 
these risks where possible. Commenters also expressed concerns that the 
proposed cuts may impact quality of care.
    Response: We note that we believe the commenter is referring to 
both the rebasing reductions as well as the proposed reductions to 
account for nominal case-mix growth. As described in the CY 2016 
proposed rule, section 3131(a) of the Affordable Care Act required the 
Medicare Payment Advisory Commission (MedPAC) to assess, by January 1, 
2015, the impact of the mandated rebasing adjustments on quality of and 
beneficiary access to home health care. As part of this assessment, the 
statute required MedPAC to consider the impact on care delivered by 
rural, urban, nonprofit, and for-profit home health agencies. MedPAC's 
Report to Congress noted that the rebasing adjustments are partially 
offset by the payment update each year and across all four years of the 
phase-in of the rebasing adjustments the cumulative net reduction would 
equal about 2 percent. MedPAC concluded that, as a result of the 
payment update offsets to the rebasing adjustments, HHA margins are 
likely to remain high under the current rebasing policy and quality of 
care and beneficiary access to care are unlikely to be negatively 
affected \7\ (80 FR 39846). In addition, the overall impact of this 
rule as discussed in section VII of this final rule is smaller than the 
overall impact of previous rules in which reductions for nominal case-
mix growth have been implemented. For instance, we estimated that the 
overall impact of the CY 2011 HH PPS final rule would be -4.89 percent 
and the overall impact of the CY 2012 HH PPS final rule would be -2.31 
percent.
---------------------------------------------------------------------------

    \7\ Medicare Payment Advisory Commission (MedPAC), ``Report to 
the Congress: Impact of Home Health Payment Rebasing on Beneficiary 
Access to and Quality of Care''. December 2014. Washington, DC. 
Accessed on 5/05/15 at: http://www.medpac.gov/documents/reports/december-2014-report-to-the-congress-impact-of-home-health-payment-rebasing-on-beneficiary-access-to-and-quality-of-care.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    Commenters did not provide specific information about why they 
believe payment reductions would reduce the quality of care. MedPAC 
estimates that the Medicare margin for 2015 will be 10.3 percent, which 
should support current levels of quality. We also believe that 
policymaking in the quality improvement area should help to ensure 
quality advances. The HHVBP described in this final rule will be 
implemented on January 1, 2016, further enhancing quality-related 
incentives. While we do not anticipate significant negative impacts of 
this rule, we will continue to closely monitor the effects of the 
payments adjustments on HHAs, as well as on beneficiaries' access and 
quality of care.
    Comment: Commenters stated that the proposed reductions will limit 
home health providers' ability to continue participating in broader 
payment and

[[Page 68645]]

delivery system reform efforts and in the HHVBP program. Commenters 
stated that the proposal fails to account for significant new cost 
burdens placed on agencies since 2010 and fails to take into account 
the current and future healthcare environment, such as the reform 
initiatives underway. Another commenter stated that the payment cuts 
should be delayed until their impact on HHAs can be more fully 
understood in light of the dynamics that the Bundled Payment for Care 
Improvement Initiative (BPCI), the proposed Comprehensive Care for 
Joint Replacement (CCJR) model, Accountable Care Organizations (ACOs) 
and various other healthcare delivery and payment reform initiatives 
are creating for the home health sector, including shifting more 
medically complex functional impaired patients into HHAs.
    Response: While there may be increased costs associated with 
implementing the broader payment and delivery system reform 
initiatives, we expect that providers will be rewarded for efficient 
care or higher quality of care and will receive a return on their 
investment for investing in the payment reform efforts. The initiatives 
cited by the commenters offer financial rewards for high quality of 
care and/or efficient care.
    Comment: A commenter stated that the proposed reductions will 
threaten the ability of home health agencies to reduce re-
hospitalization rates and requested that CMS re-consider the 
reductions, given the current reductions due to sequestration and 
rebasing. Another commenter stated that they disagree with the 
rationale used to justify the proposed case-mix reductions. The 
commenter stated that the logic is ill-conceived and implies that 
Medicare home health services have increased due to overutilization. 
Another commenter stated that the proposed reductions assume that 
providers ``gamed the system.'' A commenter stated that the proposed 
reductions are based on the fact that CMS believes that the industry 
has profit margins that are too high and has inflated the case-mix of 
the patients served.
    Response: The goal of the reductions for nominal case-mix growth is 
to better align payment with real changes in patient severity. The 
reductions would adjust the national, standardized 60-day episode 
payment rate to account for nominal case-mix growth between CY 2012 and 
CY 2014 and mitigate overpayments. As we have stated in previous 
regulations, we believe nominal coding change results mostly from 
changed coding practices, including improved understanding of the ICD-9 
coding system, more comprehensive coding, changes in the interpretation 
of various items on the OASIS and in formal OASIS definitions, and 
other evolving measurement issues. Our view of the causes of nominal 
coding change does not emphasize the idea that HHAs or clinicians in 
general ``gamed the system'' or over-provided services or the idea that 
HHAs have high profit margins. However, since our goal is to pay only 
for increased costs associated with real changes in patient severity, 
and because 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 are unrelated to changes in 
patient severity. We note that we will continue to monitor for any 
unintended consequences of the payment reductions.
    Comment: One commenter stated that the starting point in the real 
and nominal case-mix growth analysis should have been 2002 or 2003, not 
2000. Another commenter stated that the original baseline of a case-mix 
weight of 1.000 in 2000 was incorrect and that the analysis is flawed 
because the foundation or baseline is incorrect. Commenters cited 
multiple examples to support their statements that 2000 should not have 
been used as a baseline. For instance, they stated that in the first 
couple of years of the HH PPS, many industry participants were 
struggling with the transition to the new payment system and the 
submission of OASIS data. They also stated that the OASIS document has 
changed over time and that staff in 2000 had inadequate training on the 
OASIS. A commenter stated that the OASIS does not adequately capture 
the level of illness of the population being served.
    Response: We followed the Administrative Procedure 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, the selected baseline period 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.
    We note that 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 found only small changes in patient 
severity and need.
    With regard to the comments about the baseline, we note that in our 
May 2007 proposed rule and our August 2007 final rule, we described the 
IPS samples and PPS samples that were used to calculate case-mix 
change. We remind the commenters 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

[[Page 68646]]

also showed that all but three variables in the scoring system remained 
statistically significant.
    Comment: A commenter questioned CMS' ability to be able to 
statistically infer the difference between increases in real changes in 
case-mix vs. nominal case-mix growth to the degree that the estimate 
was used in developing the proposed reductions, i.e., a hundredth of a 
percentage point. Some commenters stated that the home health payment 
system itself is flawed and cited the Report to Congress on the home 
health study on access to care for vulnerable populations. The 
commenter implied that since the payment system is flawed, the analysis 
to assess real and nominal case-mix is also flawed. Commenters stated 
that the proposed rule relies heavily on a case-mix methodology that 
CMS itself found requires ``additional analysis'' and ``potential 
modifications''. A commenter stated that the proposed case-mix creep 
adjustments should be suspended pending the development of a new case-
mix model.
    Response: As described in the CY 2012 final rule and discussed 
above, we procured an independent review of our methodology by a team 
at Harvard University led by Dr. David Grabowski (``Home Health Study 
Report--Independent Review of the Models to Assess Nominal Case-Mix 
Growth'', dated June 21, 2011). When reviewing the model, the Harvard 
team found that overall, our models were robust. As stated previously, 
we would like to account for nominal case-mix growth from 2012 through 
2014 and mitigate overpayments. We note that, as described in the CY 
2016 proposed rule, we have several model options under development and 
may implement payment reform in the future. However, while we are 
currently in the process of developing payment reform options to the 
case-mix methodology, we think it is appropriate to account for the 
nominal case-mix growth from 2012 to 2014.
    Final Decision: After considering the comments received in response 
to the CY 2016 HH PPS proposed rule (80 FR 39840) and for the reasons 
discussed above, we are finalizing a 0.97 percent reduction to the 
national, standardized 60-day episode payment rate each year in CY 
2016, CY 2017, and CY 2018 to account for nominal case-mix growth from 
2012 to 2014.
    3. Clarification Regarding the Use of the ``Initial Encounter'' 
Seventh Character, Applicable to Certain ICD-10-CM Code Categories, 
under the HH PPS
    The ICD-10-CM coding guidelines regarding the seventh character 
assignment for diagnosis codes under Chapter 19, Injury, poisoning, and 
certain other consequences of external causes (S00-T88), were revised 
in the Draft 2015 ICD-10-CM, The Completed Official Draft Code Set. 
Based upon the 2015 revised coding guidance above, certain initial 
encounters are appropriate when the patient is receiving active 
treatment during a home health episode.
    Comment: A commenter requested clarification on the use of the 
seventh character for ``initial encounters'' in the home health 
setting. The commenter agrees that it seems reasonable that traumatic 
injury codes with the initial encounter extension may not be 
appropriate. However, the commenter contends that certain initial 
encounter extensions may be appropriate if the patient is still 
receiving active treatment. The commenter provided an example of active 
treatment whereby the patient is receiving active treatment with the 
continuation of antibiotics for treatment of a postoperative infection. 
Based upon this example of active treatment, the commenter recommends 
that CMS revise the home health grouper to allow the reporting of the 
initial encounter seventh character for the ICD-10-CM codes for those 
conditions that could reasonably continue to receive active treatment 
in the home health setting. A couple of other commenters noted similar 
concerns regarding initial encounters.
    Response: While this comment is outside the scope of this rule, we 
recognize that in the CY 2014 HH PPS final rule (78 FR 72271), we 
discussed the decision to eliminate codes with initial encounter 
extensions, listed in the GEMs translation for ICD-10-CM codes, that 
began with S and T that are used for reporting traumatic injuries 
(e.g., fractures and burns) as part of our ICD-10 grouper conversion 
effort. Codes beginning with S and T have a seventh character that 
indicates whether the treatment is for an initial encounter, subsequent 
encounter or a sequela (a residual effect (condition produced) after 
the acute phase of an illness or injury has terminated).
    The decision to eliminate the seventh character initial encounter 
for the S and T ICD-10-CM codes from the HH PPS ICD-10-CM translation 
list was based, not only on the most current coding conventions and 
guidelines that were available at that time, but also in collaboration 
with the cooperating parties of the ICD-10 Coding Committee (the 
American Health Information Management Association, the American 
Hospital Association, the Centers for Disease Control and Prevention's 
National Center for Health Statistics, and CMS) who confirmed that 
initial encounter extensions were not appropriate for care in the home 
health setting. Code extensions D, E, F, G, H, J, K, M, N, P, Q and R 
indicate the patient is being treated for a subsequent encounter (care 
for the injury during the healing or recovery phase) and were included 
in the translation list in place of the initial encounter extensions. 
CMS provided the draft translation list to the public on the CMS Web 
site at https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html?redirect=/center/hha.asp. We did not receive any 
comments on the ICD-10-CM draft translation list and the elimination of 
initial encounter seventh character extension.
    Since the publication of the CY 2014 HH PPS final rule, the ICD-10-
CM coding guidelines regarding the use of the seventh character 
assignment for diagnosis codes under Chapter 19, Injury, poisoning, and 
certain other consequences of external causes (S00-T88), were revised 
in the Draft 2015 ICD-10-CM, The Completed Official Draft Code Set. 
Specifically, in March of 2015, the coding guidelines were revised to 
clarify that the designation of an initial encounter is based on 
whether a patient is receiving active treatment for the condition for 
which the code describes. Initial encounters are not based on 
chronology of care or whether the patient is seeing the same or a new 
provider for the same condition. Examples of active treatment are: 
Surgical treatment, emergency department encounter, and evaluation and 
continuing treatment by the same or a different physician. Based on 
these revisions, it is possible for a home health agency to use a 
diagnosis code with a seventh character ``A'' (an initial encounter) 
for certain conditions. A clinical example of this could include a 
patient who was in the acute care hospital for IV antibiotics for a 
post-surgical wound infection and who is discharged to home health on 
IV antibiotics for ongoing treatment of the surgical wound infection. 
This would be considered active treatment as the surgical wound 
infection requires continued IV antibiotics.
    The coding guidelines state to assign the seventh character ``D'', 
indicating a subsequent encounter, for encounters after the patient has 
received active treatment of the condition and is receiving routine 
care for the condition during the healing or recovery phase. Examples 
of subsequent care include: cast change or removal, an x-ray to check 
healing status of fracture, removal of external or internal fixation 
device,

[[Page 68647]]

medication adjustment, other aftercare and follow up visits following 
treatment of the injury or condition. Therefore, it is also possible 
for home health encounters to be designated as subsequent encounters 
based on services that are provided during healing and recovery, after 
treatment of the condition described by the code is completed. A 
clinical example of this could include a patient who was in the acute 
care hospital for a traumatic hip fracture that was surgically repaired 
and the patient is discharged to home health for rehabilitation 
services. This would be considered a subsequent encounter as the hip 
fracture has been repaired and the patient is now in the healing and 
recovery phase.
    We recognize that this revision may have caused some confusion 
among home health providers and that there may be subtle clinical 
differences between what is considered active treatment of a condition 
versus routine care during the healing and recovery phase of a 
condition in the home health setting. The assignment of the seventh 
character should be based on clinical information from the physician 
and depends on whether the individual is receiving active treatment for 
the condition in which the code describes, or if the individual is 
receiving ongoing care for that condition during the healing and 
recovery stage. In determining which diagnosis codes would be 
appropriate for an HHA to indicate that the care is for an initial 
encounter, CMS developed and shared a draft list of codes with the 
cooperating parties. Agreement was reached between CMS and the 
cooperating parties and a revised translation list effective January 1, 
2016 will be posted on the CMS Web site. Also effective, January 1, 
2016, the Home Health Prospective Payment System Grouper logic will be 
revised to award points for certain initial encounter codes based upon 
the revised ICD-10-CM coding guidelines for M0090 dates on or after 
October 1, 2015.

C. CY 2016 Home Health Rate Update

1. CY 2016 Home Health Market Basket Update
    Section 1895(b)(3)(B) of the Act requires that the standard 
prospective payment amounts for CY 2015 be increased by a factor equal 
to the applicable HH market basket update for those HHAs that submit 
quality data as required by the Secretary. The HH market basket was 
rebased and revised in CY 2013. A detailed description of how we derive 
the HHA market basket is available in the CY 2013 HH PPS final rule (77 
FR 67080- 67090). The HH market basket percentage increase for CY 2016 
is based on IHS Global Insight Inc.'s (IGI) third quarter forecast with 
historical data through the second quarter of 2015. The HH market 
basket percentage increase for CY 2016 is 2.3 percent.
    Section 3401(e) of the Affordable Care Act, adding new section 
1895(b)(3)(B)(vi) to the Act, requires that the market basket 
percentage under the HHA prospective payment system as described in 
section 1895(b)(3)(B) of the Act be annually adjusted by changes in 
economy-wide productivity for CY 2015 and each subsequent calendar 
year. The statute defines the productivity adjustment, described in 
section 1886(b)(3)(B)(xi)(II) of the Act, to be equal to the 10-year 
moving average of change in annual economy-wide private nonfarm 
business multifactor productivity (MFP) (as projected by the Secretary 
for the 10-year period ending with the applicable fiscal year, calendar 
year, cost reporting period, or other annual period) (the ``MFP 
adjustment''). The Bureau of Labor Statistics (BLS) is the agency that 
publishes the official measure of private nonfarm business MFP. Please 
see http://www.bls.gov/mfp to obtain the BLS historical published MFP 
data.
    Multifactor productivity is derived by subtracting the contribution 
of labor and capital input growth from output growth. The projections 
of the components of MFP are currently produced by IGI, a nationally 
recognized economic forecasting firm with which CMS contracts to 
forecast the components of the market basket and MFP. As described in 
the CY 2015 HH PPS proposed rule (79 FR 38384 through 38386), in order 
to generate a forecast of MFP, IGI replicated the MFP measure 
calculated by the BLS using a series of proxy variables derived from 
IGI's U.S. macroeconomic models. In the CY 2015 HH PPS proposed rule, 
we identified each of the major MFP component series employed by the 
BLS to measure MFP as well as provided the corresponding concepts 
determined to be the best available proxies for the BLS series.
    Beginning with the CY 2016 rulemaking cycle, the MFP adjustment is 
calculated using a revised series developed by IGI to proxy the 
aggregate capital inputs. Specifically, IGI has replaced the Real 
Effective Capital Stock used for Full Employment GDP with a forecast of 
BLS aggregate capital inputs recently developed by IGI using a 
regression model. This series provides a better fit to the BLS capital 
inputs as measured by the differences between the actual BLS capital 
input growth rates and the estimated model growth rates over the 
historical time period. Therefore, we are using IGI's most recent 
forecast of the BLS capital inputs series in the MFP calculations 
beginning with the CY 2016 rulemaking cycle. A complete description of 
the MFP projection methodology is available on our Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. In the 
future, when IGI makes changes to the MFP methodology, we will announce 
them on our Web site rather than in the annual rulemaking.
    Using IGI's third quarter 2015 forecast, the MFP adjustment for CY 
2016 (the 10-year moving average of MFP for the period ending CY 2016) 
is 0.4 percent. The CY 2016 HH market basket percentage of 2.3 percent 
will be reduced by the MFP adjustment of 0.4 percent. The resulting HH 
payment update percentage is equal to 1.9 percent, or 2.3 percent less 
0.4 percentage point.
    Section 1895(b)(3)(B) of the Act requires that the HH update be 
decreased by 2 percentage points for those HHAs that do not submit 
quality data as required by the Secretary. For HHAs that do not submit 
the required quality data for CY 2016, the HH payment update will be -
0.1 percent (1.9 percent minus 2 percentage points).
2. CY 2016 Home Health Wage Index
a. Background
    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 that account for area wage differences, 
using adjustment factors that reflect the relative level of wages and 
wage-related costs applicable to the furnishing of HH services. Since 
the inception of the HH PPS, we have used inpatient hospital wage data 
in developing a wage index to be applied to HH payments.
    We will 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).
    We will continue to use the same methodology discussed in the CY 
2007 HH PPS final rule (71 FR 65884) to address those geographic areas 
in which there are no inpatient hospitals, and thus, no hospital wage 
data on which to base the calculation of the CY 2015 HH PPS wage index. 
For rural areas that do

[[Page 68648]]

not have inpatient hospitals, we will use the average wage index from 
all contiguous CBSAs as a reasonable proxy. For FY 2016, there are no 
rural geographic areas without hospitals for which we would apply this 
policy. For rural Puerto Rico, we will not apply this methodology due 
to the distinct economic circumstances that exist there (for example, 
due to the close proximity to one another of almost all of Puerto 
Rico's various urban and non-urban areas, this methodology would 
produce a wage index for rural Puerto Rico that is higher than that in 
half of its urban areas). Instead, we will use the most recent wage 
index previously available for that area. For urban areas without 
inpatient 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. For CY 2016, the only urban area without inpatient hospital wage 
data is Hinesville, GA (CBSA 25980).
b. Update
    On February 28, 2013, OMB issued Bulletin No. 13-01, announcing 
revisions to the delineations of MSAs, Micropolitan Statistical Areas, 
and CBSAs, and guidance on uses of the delineation of these areas. This 
bulletin is available online at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. This bulletin states that 
it ``provides the delineations of all Metropolitan Statistical Areas, 
Metropolitan Divisions, Micropolitan Statistical Areas, Combined 
Statistical Areas, and New England City and Town Areas in the United 
States and Puerto Rico based on the standards published on June 28, 
2010, in the Federal Register (75 FR 37246-37252) and Census Bureau 
data.''
    In the CY 2015 HH PPS final rule (79 FR 66085 through 66087), we 
finalized changes to the HH PPS wage index based on the newest OMB 
delineations, as described in OMB Bulletin No. 13-01, including a 1-
year transition with a blended wage index for CY 2015. Because the 1-
year transition period expires at the end of CY 2015, the final HH PPS 
wage index for CY 2016 will be fully based on the revised OMB 
delineations adopted in CY 2015. The final CY 2016 wage index is 
available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices.html
3. CY 2016 Annual Payment Update
    a. Background
    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 payment rate. As set forth in 42 CFR 484.220, we adjust the 
national, standardized 60-day episode payment rate by a case-mix 
relative weight and a wage index value based on the site of service for 
the beneficiary.
    To provide appropriate adjustments to the proportion of the payment 
amount under the HH PPS to account for area wage differences, 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 78.535 percent and the non-labor-related share is 21.465 
percent as set out in the CY 2013 HH PPS final rule (77 FR 67068). The 
CY 2016 HH PPS rates will use the same case-mix methodology as set 
forth in the CY 2008 HH PPS final rule with comment period (72 FR 
49762) and will be adjusted as described in section III.C. of this 
rule. The 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 (78.535 
percent) and a non-labor portion (21.465 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. Section 484.225 sets 
forth the specific annual percentage update methodology. In accordance 
with Sec.  484.225(i), for a HHA that does not submit HH quality data, 
as specified by the Secretary, the unadjusted national prospective 60-
day episode rate is equal to the rate for the previous calendar year 
increased by the applicable HH market basket index amount minus two 
percentage points. Any reduction of the percentage change will apply 
only to the calendar year involved and would not be considered in 
computing the prospective payment amount for a subsequent calendar 
year.
    Medicare pays the national, standardized 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 (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 adjustment (LUPA) is provided on 
a per-visit basis as set forth in Sec.  484.205(c) and Sec.  484.230.
     A partial episode payment (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.
b. CY 2016 National, Standardized 60-Day Episode Payment Rate
    Section 1895(3)(A)(i) of the Act required that the 60-day episode 
base rate and other applicable amounts be standardized in a manner that 
eliminates the effects of variations in relative case mix and area wage 
adjustments among different home health agencies in a budget neutral 
manner. To determine the CY 2016 national, standardized 60-day episode 
payment rate, we will apply a wage index standardization factor, a 
case-mix budget neutrality factor described in section III.B.1, a 
nominal case-mix growth adjustment described in section III.B.2, the 
rebasing adjustment described in section II.C, and the HH payment 
update as discussed in section III.C.1 of this final rule.
    To calculate the wage index standardization factor, henceforth 
referred to as the wage index budget neutrality factor, we simulated 
total payments for non-LUPA episodes using the 2016 wage index and 
compared it to our simulation of total payments for non-LUPA episodes 
using the 2015 wage index. By dividing the total payments for non-LUPA 
episodes using the 2016 wage index by the total payments for non-LUPA 
episodes using the 2015 wage index, we obtain a wage index budget 
neutrality factor of 1.0011. We will apply the wage index budget 
neutrality factor of 1.0011 to the CY

[[Page 68649]]

2016 national, standardized 60-day episode rate.
    As discussed in section III.B.1 of this final rule, to ensure the 
changes to the case-mix weights are implemented in a budget neutral 
manner, we will apply a case-mix weight budget neutrality factor to the 
CY 2016 national, standardized 60-day episode payment rate. The case-
mix weight budget neutrality factor is calculated as the ratio of total 
payments when CY 2016 case-mix weights are applied to CY 2014 
utilization (claims) data to total payments when CY 2015 case-mix 
weights are applied to CY 2014 utilization data. The case-mix budget 
neutrality factor for CY 2016 will be 1.0187 as described in section 
III.B.1 of this final rule.
    Next, as discussed in section III.B.2 of this final rule, we will 
apply a reduction of 0.97 percent to the national, standardized 60-day 
episode payment rate in CY 2016 to account for nominal case-mix growth 
between CY 2012 and CY 2014. Then, we will apply the -$80.95 rebasing 
adjustment finalized in the CY 2014 HH PPS final rule (78 FR 72256) and 
discussed in section II.C. Lastly, we will update the payment rates by 
the CY 2016 HH payment update of 1.9 percent (MFP-adjusted home health 
market basket update) as described in section III.C.1 of this final 
rule. The CY 2016 national, standardized 60-day episode payment rate is 
calculated in Table 7.

                                          Table 7--CY 2016 National, Standardized 60-Day Episode Payment Amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             CY 2016
                                                       Wage index        Case-mix      Nominal case-       CY 2016         CY 2016 HH       National,
  CY 2015 National, standardized 60-day  episode         budget      weights  budget     mix growth        Rebasing     payment  update    standardized
                      payment                          neutrality       neutrality     adjustment (1-     adjustment       percentage    60-day  episode
                                                         factor           factor           .0097)                                            payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
$2,961.38.........................................        x 1.0011         x 1.0187         x 0.9903          -$80.95          x 1.019        $2,965.12
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The CY 2016 national, standardized 60-day episode payment rate for 
an HHA that does not submit the required quality data is updated by the 
CY 2016 HH payment update (1.9 percent) minus 2 percentage points and 
is shown in Table 8.

                   Table 8--For HHAs That Do Not Submit the Quality Data--CY 2016 National, Standardized 60-Day Episode Payment Amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           CY 2016 HH
                                                       Wage index        Case-mix      Nominal  case-                   payment  update      CY 2016
   CY 2015 National, standardized 60-day episode         budget      weights  budget     mix growth        CY 2016         percentage       National,
                      payment                          neutrality       neutrality     adjustment (1-      Rebasing         minus 2        standardized
                                                         factor           factor           .0097)         adjustment       percentage    60-day  episode
                                                                                                                             points           payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
$2,961.38.........................................         x1.0011          x1.0187          x0.9903          -$80.95           x0.999        $2,906.92
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. CY 2016 National Per-Visit Rates
    The national per-visit rates are used to pay LUPAs (episodes with 
four or fewer visits) and are also used to compute imputed costs in 
outlier calculations. The per-visit rates are paid by type of visit or 
HH discipline. The six HH disciplines are as follows:
     Home health aide (HH aide);
     Medical Social Services (MSS);
     Occupational therapy (OT);
     Physical therapy (PT);
     Skilled nursing (SN); and
     Speech-language pathology (SLP).
    To calculate the CY 2016 national per-visit rates, we start with 
the CY 2015 national per-visit rates. We then apply a wage index budget 
neutrality factor to ensure budget neutrality for LUPA per-visit 
payments and increase each of the six per-visit rates by the maximum 
rebasing adjustments described in section II.C. of this rule. We 
calculate the wage index budget neutrality factor by simulating total 
payments for LUPA episodes using the 2016 wage index and comparing it 
to simulated total payments for LUPA episodes using the 2015 wage 
index. By dividing the total payments for LUPA episodes using the 2016 
wage index by the total payments for LUPA episodes using the 2015 wage 
index, we obtain a wage index budget neutrality factor of 1.0010. We 
will apply the wage index budget neutrality factor of 1.0010 to the CY 
2016 national per-visit rates.
    The LUPA per-visit rates are not calculated using case-mix weights. 
Therefore, there is no case-mix weight budget neutrality factor needed 
to ensure budget neutrality for LUPA payments. Then, we apply the 
rebasing adjustments finalized in the CY 2014 HH PPS final rule (78 FR 
72280) to the per-visit rates for each discipline. Finally, the per-
visit rates are updated by the CY 2016 HH payment update of 1.9 
percent. The national per-visit rates are adjusted by the wage index 
based on the site of service of the beneficiary. The per-visit payments 
for LUPAs are separate from the LUPA add-on payment amount, which is 
paid for episodes that occur as the only episode or initial episode in 
a sequence of adjacent episodes. The CY 2016 national per-visit rates 
are shown in Tables 9 and 10.

[[Page 68650]]



                          Table 9--CY 2016 National Per-Visit Payment Amounts for HHAs That DO Submit the Required Quality Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Wage index
                                                                      CY 2015  Per-        budget          CY 2016         CY 2016 HH      CY 2016 Per-
                         HH discipline type                           visit  payment     neutrality        Rebasing     payment  update   visit  payment
                                                                                           factor         adjustment       percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
Home health aide...................................................          $57.89         x 1.0010           +$1.79          x 1.019           $60.87
Medical Social Services............................................          204.91         x 1.0010          + $6.34          x 1.019           215.47
Occupational Therapy...............................................          140.70         x 1.0010          + $4.35          x 1.019           147.95
Physical Therapy...................................................          139.75         x 1.0010          + $4.32          x 1.019           146.95
Skilled Nursing....................................................          127.83         x 1.0010          + $3.96          x 1.019           134.42
Speech-Language Pathology..........................................          151.88         x 1.0010           + 4.70          x 1.019           159.71
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The CY 2016 per-visit payment rates for HHAs that do not submit the 
required quality data are updated by the CY 2016 HH payment update of 
1.9 percent minus 2 percentage points (which is equal to -0.1 percent) 
and is shown in Table 10.

                       Table 10--CY 2016 National Per-Visit Payment Amounts for HHAs That DO NOT Submit the Required Quality Data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           CY 2016 HH
                                                                                         Wage index                     payment  update
                                                                      CY 2015  Per-        budget          CY 2016         percentage     CY 2016  Per-
                         HH discipline type                            visit rates       neutrality        Rebasing         minus 2        visit rates
                                                                                           factor         adjustment       percentage
                                                                                                                             points
--------------------------------------------------------------------------------------------------------------------------------------------------------
Home Health Aide...................................................          $57.89         x 1.0010          + $1.79          x 0.999           $59.68
Medical Social Services............................................          204.91         x 1.0010          + $6.34          x 0.999           211.24
Occupational Therapy...............................................          140.70         x 1.0010          + $4.35          x 0.999           145.05
Physical Therapy...................................................          139.75         x 1.0010          + $4.32          x 0.999           144.07
Skilled Nursing....................................................          127.83         x 1.0010          + $3.96          x 0.999           131.79
Speech-Language Pathology..........................................          151.88         x 1.0010           + 4.70          x 0.999           156.58
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. Low-Utilization Payment Adjustment (LUPA) Add-On Factors
    LUPA episodes that occur as the only episode or as an initial 
episode in a sequence of adjacent episodes are adjusted by applying an 
additional amount to the LUPA payment before adjusting for area wage 
differences. In the CY 2014 HH PPS final rule, we changed the 
methodology for calculating the LUPA add-on amount by finalizing the 
use of three LUPA add-on factors: 1.8451 for SN; 1.6700 for PT; and 
1.6266 for SLP (78 FR 72306). We multiply the per-visit payment amount 
for the first SN, PT, or SLP visit in LUPA episodes that occur as the 
only episode or an initial episode in a sequence of adjacent episodes 
by the appropriate factor to determine the LUPA add-on payment amount. 
For example, for LUPA episodes that occur as the only episode or an 
initial episode in a sequence of adjacent episodes, if the first 
skilled visit is SN, the payment for that visit would be $248.02 
(1.8451 multiplied by $134.42), subject to area wage adjustment.
e. CY 2016 Non-routine Medical Supply (NRS) Payment Rates
    Payments for NRS are computed by multiplying the relative weight 
for a particular severity level by the NRS conversion factor. To 
determine the CY 2016 NRS conversion factor, we start with the 2015 NRS 
conversion factor ($53.23) and apply the -2.82 percent rebasing 
adjustment described in section II.C. of this rule (1 - 0.0282 = 
0.9718). We then update the conversion factor by the CY 2016 HH payment 
update of 1.9 percent. We do not apply a standardization factor as the 
NRS payment amount calculated from the conversion factor is not wage or 
case-mix adjusted when the final claim payment amount is computed. The 
NRS conversion factor for CY 2016 is shown in Table 11.

            Table 11--CY 2016 NRS Conversion Factor for HHAs That DO Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                   CY 2016         CY 2016 HH      CY 2016 NRS
                CY 2015 NRS conversion factor                      Rebasing     payment  update     conversion
                                                                  adjustment       percentage         factor
----------------------------------------------------------------------------------------------------------------
$53.23.......................................................        x 0.9718          x 1.019           $52.71
----------------------------------------------------------------------------------------------------------------

    Using the CY 2016 NRS conversion factor, the payment amounts for 
the six severity levels are shown in Table 12.

[[Page 68651]]



             Table 12--CY 2016 NRS Payment Amounts for HHAs That DO Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                    Points                         CY 2016 NRS
                        Severity level                            (scoring)     Relative weight  payment amounts
----------------------------------------------------------------------------------------------------------------
1............................................................               0           0.2698           $14.22
2............................................................         1 to 14           0.9742            51.35
3............................................................        15 to 27           2.6712           140.80
4............................................................        28 to 48           3.9686           209.18
5............................................................        49 to 98           6.1198           322.57
6............................................................             99+          10.5254           554.79
----------------------------------------------------------------------------------------------------------------

    For HHAs that do not submit the required quality data, we again 
begin with the CY 2015 NRS conversion factor ($53.23) and apply the -
2.82 percent rebasing adjustment as discussed in section II.C of this 
final rule (1 - 0.0282 = 0.9718). We then update the NRS conversion 
factor by the CY 2016 HH payment update of 1.9 percent minus 2 
percentage points. The CY 2016 NRS conversion factor for HHAs that do 
not submit quality data is shown in Table 13.

          Table 13--CY 2016 NRS Conversion Factor for HHAs That DO NOT Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                                   CY 2016 HH
                                                                                payment  update
                                                                   CY 2016         percentage      CY 2016 NRS
                CY 2015 NRS conversion factor                      rebasing         minus 2         conversion
                                                                  adjustment       percentage         factor
                                                                                     points
----------------------------------------------------------------------------------------------------------------
$53.23.......................................................        x 0.9718          x 0.999           $51.68
----------------------------------------------------------------------------------------------------------------

    The payment amounts for the various severity levels based on the 
updated conversion factor for HHAs that do not submit quality data are 
calculated in Table 14.

           Table 14--CY 2016 NRS Payment Amounts For HHAs That DO NOT Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                                                   CY 2016 NRS
              Severity level                         Points (scoring)           Relative weight  payment amounts
----------------------------------------------------------------------------------------------------------------
1.........................................  0.................................          0.2698           $13.94
2.........................................  1 to 14...........................          0.9742            50.35
3.........................................  15 to 27..........................          2.6712           138.05
4.........................................  28 to 48..........................          3.9686           205.10
5.........................................  49 to 98..........................          6.1198           316.27
6.........................................  99+...............................         10.5254           543.95
----------------------------------------------------------------------------------------------------------------

f. Rural Add-On
    Section 421(a) of the MMA requires, for HH services furnished in a 
rural area (as defined in section 1886(d)(2)(D) of the Act), for 
episodes or visits ending on or after April 1, 2010, and before January 
1, 2018, that the Secretary increase the payment amount that otherwise 
would have been made under section 1895 of the Act for the services by 
3 percent. Section 421 of the MMA waives budget neutrality related to 
this provision, as the statute specifically states that the Secretary 
shall not reduce the standard prospective payment amount (or amounts) 
under section 1895 of the Act applicable to HH services furnished 
during a period to offset the increase in payments resulting in the 
application of this section of the statute.
    For CY 2016, home health payment rates for services provided to 
beneficiaries in areas that are defined as rural under the OMB 
delineations will be increased by 3 percent as mandated by section 
421(a) of the MMA. The 3 percent rural add-on is applied to the 
national, standardized 60-day episode payment rate, national per visit 
rates, and NRS conversion factor when HH services are provided in rural 
(non-CBSA) areas. Refer to Tables 15 through 18 for these payment 
rates.

[[Page 68652]]



                               Table 15--CY 2016 Payment Amounts for 60-Day Episodes for Services Provided in a Rural Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
                       For HHAs that DO submit quality data                                       For HHAs that DO NOT submit quality data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    CY 2016 rural                                                         CY 2016 rural
                                                  Multiply by the     national,                                         Multiply by the     national,
  CY 2016 national, standardized 60-day episode   3 percent rural  standardized 60- CY 2016 national, standardized 60-  3 percent rural  standardized 60-
                  payment rate                         add-on        day episode         day episode payment rate            add-on        day episode
                                                                     payment rate                                                          payment rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
$2,965.12.......................................          x 1.03        $3,054.07   $2,906.92.........................          x 1.03        $2,994.13
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                        Table 16--CY 2016 Per-Visit Amounts for Services Provided in a Rural Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           For HHAs that DO submit quality data             For HHAs that DO NOT submit quality data
                                                   -----------------------------------------------------------------------------------------------------
                HH Discipline type                                   Multiply by the                                    Multiply by the
                                                      CY 2016 per-   3 percent rural   CY 2016 rural     CY 2016 per-   3 percent rural   CY 2016 rural
                                                       visit rate         add-on      per-visit rates     visit rate         add-on      per-visit rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
HH Aide...........................................          $60.87           x 1.03           $62.70           $59.68           x 1.03           $61.47
MSS...............................................          215.47           x 1.03           221.93           211.24           x 1.03           217.58
OT................................................          147.95           x 1.03           152.39           145.05           x 1.03           149.40
PT................................................          146.95           x 1.03           151.36           144.07           x 1.03           148.39
SN................................................          134.42           x 1.03           138.45           131.79           x 1.03           135.74
SLP...............................................          159.71           x 1.03           164.50           156.58           x 1.03           161.28
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                      Table 17--CY 2016 NRS Conversion Factor for Services Provided in Rural Areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
                       For HHAs that DO submit quality data                                       For HHAs that DO NOT submit quality data
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Multiply by the   CY 2016 rural                                       Multiply by the   CY 2016 rural
            CY 2016 conversion factor             3 percent rural   NRS conversion       CY 2016 conversion factor      3 percent rural   NRS conversion
                                                       add-on           factor                                               add-on           factor
--------------------------------------------------------------------------------------------------------------------------------------------------------
$52.71..........................................          x 1.03           $54.29   $51.68............................          x 1.03           $53.23
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                       Table 18--CY 2016 NRS Payment Amounts for Services Provided in Rural Areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       For HHAs that DO submit quality     For HHAs that DO NOT submit
                                                                                        data (CY 2016 NRS conversion        quality data (CY 2016 NRS
                                                                                               factor = $54.29             conversion factor = $53.23)
                 Severity level                            Points (scoring)          -------------------------------------------------------------------
                                                                                                         CY 2016 NRS                       CY 2016 NRS
                                                                                      Relative weight  payment amounts  Relative weight  payment amounts
                                                                                                       for rural areas                   for rural areas
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...............................................  0.................................          0.2698           $14.65           0.2698           $14.36
2...............................................  1 to 14...........................          0.9742            52.89           0.9742            51.86
3...............................................  15 to 27..........................          2.6712           145.02           2.6712           142.19
4...............................................  28 to 48..........................          3.9686           215.46           3.9686           211.25
5...............................................  49 to 98..........................          6.1198           332.24           6.1198           325.76
6...............................................  99+...............................         10.5254           571.42          10.5254           560.27
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The following is a summary of comments we received regarding the CY 
2016 home health rate update.
    Comment: A commenter objected to the proposed 0.6 percent 
productivity adjustment.
    Response: The productivity adjustment was mandated by Section 
3401(e) of the Affordable Care Act by adding section 1895(b)(3)(B)(vi) 
to the Act and requiring that the market basket percentage under the HH 
PPS be annually adjusted by changes in economy-wide productivity in CY 
2015 (and in subsequent calendar years). Since publication of the 
proposed rule, our forecast for the productivity adjustment has been 
revised to 0.4 percent based on an updated forecast with historical 
data through 2014.
    Comment: A commenter stated that because CAHs are located in rural 
areas, the absence of CAH wage data further compromises the accuracy of 
the hospital wage index to determine labor costs of HHAs providing 
services in rural areas. In addition, pending development of an 
industry specific wage index, CMS should add a population density 
adjustment to the labor portion of the payment to account for increased 
costs of providing services in less densely populated areas.
    Response: Although the pre-floor, pre-reclassified hospital wage 
index does not include data from CAHs, we believe it reflects the 
relative level of wages and wage-related costs applicable to providing 
home health services. As we stated in the IPPS Final Rule published on 
August 1, 2003 (68 FR 45397), ``CAHs represent a substantial number of 
hospitals with significantly different labor costs in many labor market 
areas where they exist.'' We further noted that, ``. . . in 89 percent 
of all labor market areas with hospitals that

[[Page 68653]]

converted to CAH status sometime after FY 2000, the average hourly wage 
for CAHs is lower than the average hourly wage for other short-term 
hospitals in the area. In 79 percent of the labor market areas with 
CAHs, the average hourly wage for CAHs is lower than the average hourly 
wage for other short-term hospitals by 5 percent or greater. These 
results suggest that the wage data for CAHs, in general, are 
significantly different from other short-term hospitals.
    At this time, we do not have evidence that a population density 
adjustment is appropriate. While rural HHAs cite the added cost of long 
distance travel to provide care for their patients, urban HHAs cite 
added costs associated with needed security measures and traffic 
congestion.
    Comment: A commenter urges CMS to review the wage index calculation 
for rural Massachusetts and to include Nantucket Cottage Hospital's 
data in the calculation. The commenter states that Nantucket Cottage 
Hospital had given up its critical access hospital (CAH) designation in 
2014 yet CMS has apparently not used wage data from Nantucket Cottage 
Hospital in calculating the 2016 wage index for rural Massachusetts. 
The commenter urges CMS to include wage data from CAHs in calculating 
the wage index for HHAs and other non-hospital provider types. The 
commenter believes that including wage data from CAHS would make the 
wage index more reflective of actual local wage practices.
    Response: Data from Nantucket Cottage Hospital is included in the 
calculation of the 2016 wage index for rural Massachusetts. In fact, 
data from this hospital has been included in the calculation of the HH 
wage index for rural Massachusetts since CY 2012. It has been our 
longstanding practice to not include data from CAHs in the calculation 
of the HH wage index. We only include hospital data from acute IPPS 
hospitals in the calculation of the HH wage index.
    Comment: A commenter questions the validity of the wage index 
assigned to CBSA 22520, Florence-Muscle Shoals, AL. The commenter 
requests that the underlying data to determine this index be 
investigated to determine its validity. In addition, the commenter 
states that the wage index as assigned places this urban area below the 
rural wage index for the state, which cannot be correct.
    Response: The HH wage index values in urban areas are not 
necessarily higher than the HH wage index values in rural areas. The 
wage index values are based on data submitted on the inpatient hospital 
cost reports. We utilize efficient means to ensure and review the 
accuracy of the hospital cost report data and resulting wage index. The 
home health wage index is derived from the pre-floor, pre-reclassified 
wage index which is calculated based on cost report data from hospitals 
paid under the IPPS. All IPPS hospitals must complete the wage index 
survey (Worksheet S-3, Parts II and III) as part of their Medicare cost 
reports. Cost reports will be rejected if Worksheet S-3 is not 
completed. In addition, our intermediaries perform desk reviews on all 
hospitals' Worksheet S-3 wage data, and we run edits on the wage data 
to further ensure the accuracy and validity of the wage data. We 
believe that our review processes result in an accurate reflection of 
the applicable wages for the areas given. The processes and procedures 
describing how the inpatient hospital wage index is developed are 
discussed in the Inpatient Prospective Payment System (IPPS) rule each 
year, with the most recent discussion provided in the FY 2016 IPPS 
final rule (80 FR 49488 through 49508). Any provider type may submit 
comments on the hospital wage index during the annual IPPS rulemaking 
cycle.
    Comment: Several commenters took issue with the fact that the HH 
wage index is based on pre-floor, pre-reclassified hospital wage data, 
but hospitals in the same geographic locations have the ability to 
apply for re-classification to another CBSA and may be eligible for the 
rural floor wage index. The commenters state that this inequity has 
created a competitive advantage for hospitals in recruiting and 
retaining scarce labor. Several commenters believe that the statute 
does give CMS authority to address and correct some of these 
inequities. One commenter believes that a correction to the manner in 
which the wage index is calculated is needed in order to recruit and 
retain staff necessary to provide home health care. The commenter 
continues to state that otherwise it may be difficult for HHAs to meet 
the increased demand for services, which may jeopardize the success of 
CMS' VBP initiatives. Another commenter recommends that CMS reform the 
HH wage index by instituting a proxy that allows HHAs to receive the 
same reclassification as hospitals if they provide series in the same 
service area.
    Response: We continue to believe that the regulations and statutes 
that govern the HH PPS do not provide a mechanism for allowing HHAs to 
seek geographic reclassification or to utilize the rural floor 
provisions that exist for IPPS hospitals. Section 4410(a) of the BBA 
provides that the area wage index applicable to any hospital that is 
located in an urban area of a State may not be less than the area wage 
index applicable to hospitals located in rural areas in that state. 
This is the rural floor provision and it is specific to hospitals. The 
re-classification provision found in section 1886(d)(10) of the Act. 
Section 1886(d)(10)(C)(i) of the Act states, ``The Board shall consider 
the application of any subsection (d) hospital requesting that the 
Secretary change the hospital's geographic classification . . .'' This 
provision is only applicable to hospitals as defined in section 1886(d) 
of the Act.
    In addition, we do not believe that using hospital reclassification 
data would be appropriate as these data are specific to the requesting 
hospitals and it may or may not apply to a given HHA in a given 
instance. With regard to implementing a rural floor, we do not believe 
it would be prudent at this time to adopt such a policy. MedPAC has 
recommended eliminating the rural floor policy from the calculation of 
the IPPS wage index (see Chapter 3 of MedPAC's March 2013 Report to 
Congress on Medicare Payment Policy, available at http://medpac.gov/documents/reports/mar13_entirereport.pdf, which notes on page 65 that 
in 2007, MedPAC had ``. . . recommended eliminating these special wage 
index adjustments and adopting a new wage index system to avoid 
geographic inequities that can occur due to current wage index 
policies.''
    We continue to believe that using the pre-floor, pre-reclassified 
hospital wage index as the wage adjustment to the labor portion of the 
HH PPS rates is appropriate and reasonable.
    Comment: A commenter requests that CMS explore wholesale revision 
and reform of the HH wage index. The commenter believes that existing 
law permits CMS flexibility in establishing area wage adjustment 
factors. Another commenter notes that CMS indicated that the entire 
wage index system was under review, and that a move to a Commuting-
Based Wage Index (CBWI) was being considered. The commenter urges CMS 
to expedite that review and implement a system that not only recognizes 
variations between localities, but also treats all provider types 
within a local market equitably. Until such a system is in place, the 
commenter urges CMS to adjust the 2016 HHA wage index to reflect a 
policy to limit the wage index disparity between provider types within 
a given CBSA to no more than 10 percent.
    Response: CMS' ``Report to Congress: Plan to Reform the Medicare 
Wage Index'' was submitted by the Secretary on April 11, 2012 and is 
available on

[[Page 68654]]

our Wage Index Reform Web page at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html. This report states that other steps are necessary before 
we would be able to adopt a CBWI. In the meantime, we do not believe 
that limiting wage index differences between provider types within a 
given CBSA would be feasible. Regardless of whether or not it would be 
appropriate to do so, it would not be feasible to limit the differences 
in wage index values among provider types within a given CBSA to no 
more than 10 percent, due to timing issues. Some provider types are 
reimbursed on a calendar year basis and some are reimbursed on a fiscal 
year basis.
    Comment: A commenter opposes CMS' use of the hospital wage index to 
establish the HH wage index. The commenter states that differences in 
the occupational personnel pool and costs between hospitals and HHAs 
make the use of the hospital wage index inappropriate in the HH 
setting. The commenter further states that hospitals benefit from 
institutional efficiencies that and rural hospitals have a 
reclassification mechanism to avoid exposure to the drastic rural index 
rate in most states. The commenter believes that Congress has granted 
CMS discretion in establishing the HH wage index and that CMS should 
establish a HH specific wage index. Another commenter believes that 
basing the wage index on hospital data is not reliable for home health. 
The commenter continues to state that home health workers pay is 
typically much more than that of a hospital employee due to the 
demanding nature of the job. The commenter suggests that CMS complete a 
detailed study of this issue.
    Response: Our previous attempts at either proposing or developing a 
home health specific wage index were not well received by the home 
health industry. In a Federal Register Notice (53 FR 38476) published 
on September 30, 1988, the Health Care Financing Administration (HCFA), 
as we were then known, implemented an HHA-specific wage index based on 
data received from HHAs. Subsequently, HCFA and the Congress received 
numerous complaints from providers concerning the burden that the 
reporting requirements posed and the accuracy of the data. As a result, 
the Congress retroactively repealed its mandate in the Medicare 
Catastrophic Coverage Act of 1988 for use of an HHA wage index and 
referenced use of the hospital wage index (see section 1895(b)(4)(C) of 
the Act). This caused great confusion among both providers and fiscal 
intermediaries.
    Developing a wage index that utilizes data specific to HHAs would 
require us to engage resources in an audit process. In order to 
establish a home health specific wage index, we would need to collect 
data that is specific to home health services. Because of the 
volatility of the home health wage data and the significant amount of 
resources that would be required to improve the quality of those data, 
we do not expect to propose a home health specific wage index until we 
can demonstrate that a home health specific wage index would be more 
reflective of the wages and salaries paid in a specific area, be based 
upon stable data sources, significantly improve our ability to 
determine payment for HHAs, and that we can justify the resources 
required to collect the data, as well as the increased burden on 
providers. We believe that in the absence of home health specific wage 
data, using the pre-floor, pre-reclassified hospital wage data is 
appropriate and reasonable for the HH PPS.
    Comment: A commenter states that the wage index needs to reflect 
the growing difficulties of providing care in rural areas. The 
commenter states that paying lower wages for rural health care 
professionals that put as much time, skill and intensity into their 
work as their urban counterparts, exacerbates the workforces shortages. 
The commenter continues to state that further reducing the wage index 
for rural providers will make recruiting and retaining medical 
professionals more difficult for rural America. The commenter states 
that using the wage index for the local area ignores important market 
forces and that many health professionals are recruited from a 
distance, making the local wage insufficient financial incentive for 
practicing in rural America. Another commenter states that rural HHAs 
often function as the primary caregivers for elderly homebound 
patients, who have high resource needs, which also increases the cost 
of rural home health services.
    Response: The HH wage index values in rural areas are not 
necessarily lower than the HH wage index values in urban areas. The HH 
wage index reflects the wages that inpatient hospitals pay in their 
local geographic areas. In addition, HHAs receive rural add-on payments 
for services provided to beneficiaries in rural areas. Section 421(a) 
of the MMA, as amended by section 210 of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10), provides for a 
payment increase of 3 percent for HH services provided in rural areas 
for episodes or visits ending on or after April 1, 2010, and before 
January 1, 2018.
    Final Decision: After considering the comments received in response 
to the CY 2016 HH PPS proposed rule (80 FR 39840) and for the reasons 
discussed above, we are finalizing our proposal to use the pre-floor, 
pre-reclassified hospital inpatient wage index as the wage adjustment 
to the labor portion of the HH PPS rates. For CY 2016, the updated wage 
data are for hospital cost reporting periods beginning on or after 
October 1, 2011 and before October 1, 2012 (FY 2012 cost report data).

D. Payments for High-Cost Outliers Under the HH PPS

1. Background
    In the July 10, 2015 Medicare and Medicaid Programs; CY 2016 Home 
Health Prospective Payment System Rate Update; Home Health Value-Based 
Purchasing Model; and Home Health Quality Reporting Requirements; 
Proposed Rules (80 FR 39863 through 39864), we described the background 
and current method for determining outlier payments under the HH PPS. 
In that rule, we did not propose any changes to the current home health 
outlier payment policy for CY 2016.
    For this final rule, simulating payments using CY 2014 claims data 
(as of June 30, 2015) and the CY 2016 payment rates, without the 
rebasing and nominal case-mix growth adjustments as described in 
section III.C.3 of this rule, we estimate that outlier payments in CY 
2016 would comprise 2.13 percent of total payments. Based on 
simulations using CY 2014 claims data and the CY 2016 payments rates, 
including the rebasing and nominal case-mix growth adjustments as 
described in section III.C.3 of this rule, we estimate that outlier 
payments would comprise approximately 2.30 percent of total HH PPS 
payments, a percent change of almost 8 percent. This increase is 
attributable to the increase in the national per-visit amounts through 
the rebasing adjustments and the decrease in the national, standardized 
60-day episode payment amount as a result of the rebasing and nominal 
case-mix growth adjustments. Given the same rebasing adjustments and 
case-mix growth reduction would also occur for 2017, and hence a 
similar anticipated increase in the outlier payments, we estimate that 
for CY 2017 outlier payments as a percent of total HH PPS payments 
would be approximately 2.5 percent.
    We did not propose a change to the FDL ratio or loss-sharing ratio 
for CY

[[Page 68655]]

2016 as we believe that maintaining an FDL of 0.45 and a loss-sharing 
ratio of 0.80 are appropriate given the percentage of outlier payments 
is estimated to increase as a result of the increase in the national 
per-visit amounts through the rebasing adjustments and the decrease in 
the national, standardized 60-day episode payment amount as a result of 
the rebasing adjustment and nominal case-mix growth reduction. We will 
continue to monitor the percent of total HH PPS payments paid as 
outlier payments to determine if future adjustments to either the FDL 
ratio or loss-sharing ratio are warranted.
    The following is a summary of comments we received regarding 
payments for high-cost outliers.
    Comment: One commenter expressed support of the continuation of the 
high cost outlier parameters as currently structured.
    Response: We appreciate the commenter's support of the current HH 
PPS outlier policy. We strive to maintain an approach that accounts for 
episodes that incur unusually high costs due to patient care needs.
    Comment: Several commenters recommended changes to the existing 
outlier policy, including the elimination of the outlier payment policy 
altogether as well as modifications to the FDL Ratio and/or Loss-
Sharing Ratio in order to generate outlier payment levels approximating 
2.5 percent.
    Response: We believe that section 1895(b)(5)(A) of the Act affords 
the Secretary the discretion as to whether or not to have an outlier 
policy under the HH PPS. We plan to continue investigating whether or 
not an outlier policy remains appropriate as well as ways to maintain 
an outlier policy for episodes that incur unusually high costs due to 
patient care needs without qualifying episodes of care that do not meet 
said criteria or are potentially fraudulent. We recently awarded a 
contract to Abt Associates to address any findings from the home health 
study required by section 3131(d) of the Affordable Care Act, monitor 
the potential impact of the rebasing adjustments and other recent 
payment changes, and develop payment options to ensure ongoing access 
to care for vulnerable populations. The work under this contract may 
include potential revisions to the outlier payment methodology to 
better reflect costs of treating Medicare beneficiaries with high 
levels of severity of illness.
    Comment: One commenter suggested that CMS's outlier policy and ten 
percent threshold cap are not appropriate fraud-fighting initiatives 
and suggested other mechanisms for oversight and monitoring, including 
a provider-specific floor (minimum) on the number or percent of 
episodes that result in LUPAs.
    Response: As we have noted in the past (74 FR 58085), we are 
committed to addressing potentially fraudulent activities, especially 
those in areas where we see suspicious outlier payments. As we noted 
above, we plan to examine potential revisions to the outlier payment 
methodology through ongoing studies and analysis of home health claims 
and other utilization data. Monitoring of potentially fraudulent 
activity will be captured in this analysis, and we will make policy and 
other adjustments as necessary in light of the new data and outcomes as 
appropriate.
    Final Decision: We are finalizing no change to the FDL ratio or 
loss sharing ratio for CY 2016. However, we will continue to monitor 
outlier payments and continue to explore ways to maintain an outlier 
policy for episodes that incur unusually high costs due to patient care 
needs without qualifying episodes of care that do not meet that 
criteria.

E. Report to the Congress on the Home Health Study Required by Section 
3131(d) of the Affordable Care Act and an Update on Subsequent Research 
and Analysis

    In the CY 2016 HH PPS proposed rule (80 FR 39840), we included an 
informational summary of the Report to Congress on the home health 
study required by section 3131(d) of the Affordable Care Act and we 
provided an update on subsequent research and analysis completed to 
date. We will continue to provide the home health industry with 
periodic updates on the progress of our subsequent research, aimed at 
addressing the findings from the section 3131(d) of the Affordable Care 
Act home health study, in future rulemaking and/or announcements on the 
HHA Center Web page at: https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html.

F. Technical Regulations Text Changes

    We proposed to make several technical corrections in part 484 to 
better align the payment requirements with recent statutory and 
regulatory changes for home health services. We proposed to make 
changes to Sec.  484. 205(e) to state that estimated total outlier 
payments for a given calendar year are limited to no more than 2.5 
percent of total outlays under the HHA PPS, as required by section 
1895(b)(5)(A) of the Act as amended by section 3131(b)(2)(B) of the 
Affordable Care Act, rather than 5 percent of total outlays. Similarly, 
we also proposed to specify in Sec.  484.240(e) that the fixed dollar 
loss and the loss sharing amounts are chosen so that the estimated 
total outlier payment is no more than 2.5 percent of total payments 
under the HH PPS. We also proposed to describe in Sec.  484.240(f) that 
the estimated total amount of outlier payments to an HHA in a given 
year may not exceed 10 percent of the estimated total payments to the 
specific agency under the HH PPS in a given year. This update aligns 
the regulations text at Sec.  484.240(f) with the statutory 
requirement. Finally, we proposed a minor editorial change in Sec.  
484.240(b) to specify that the outlier threshold for each case-mix 
group is the episode payment amount for that group, or the PEP 
adjustment amount for the episode, plus a fixed dollar loss amount that 
is the same for all case-mix groups.
    In addition to the proposed changes to the regulations text 
pertaining to outlier payments under the HH PPS, we also proposed to 
amend Sec.  409.43(e)(iii) and to add language to Sec.  484.205(d) to 
clarify the frequency of review of the plan of care and the provision 
of Partial Episode Payments (PEP) under the HH PPS as a result of a 
regulations text change in Sec.  424.22(b) that was finalized in the CY 
2015 HH PPS final rule (79 FR 66032). Specifically, we proposed to 
change the definition of an intervening event to include transfers and 
instances where a patient is discharged and return to home health 
during a 60-day episode, rather than a discharge and return to the same 
HHA during a 60-day episode. In Sec.  484.220, we proposed to update 
the regulations text to reflect the downward adjustments to the 60-day 
episode payment rate due to changes in the coding or classification of 
different units of service that do not reflect real changes in case-mix 
(nominal case-mix growth) applied to calendar years 2012 and 2013, 
which were finalized in the CY 2012 HH PPS final rule (76 FR 68532) as 
well as updating the CY 2011 adjustment to 3.79 percent as finalized in 
the CY 2011 HH PPS final rule (75 FR 70461). In Sec.  484.225 we 
proposed to eliminate references to outdated market basket index 
factors by removing paragraphs (b), (c), (d), (e), (f), and (g). In 
Sec.  484.230 we proposed to delete the last sentence as a result of a 
change from a separate LUPA add-on amount to a LUPA add-on factor 
finalized in the CY 2014 HH PPS final rule (78 FR 72256). Finally, we 
proposed deleting and reserving Sec.  484.245 as we believe that this 
language is no longer applicable under the HH PPS, as it was meant to

[[Page 68656]]

facilitate the transition to the original PPS established in CY 2000.
    Lastly, we proposed to make one technical correction in Sec.  
424.22 to re-designate paragraph (a)(1)(v)(B)(1) as (a)(2).
    We invited comments on these technical corrections and associated 
changes in the regulations in parts 409, 424, and 484. However, we did 
not receive any comments regarding the technical regulations text 
changes.
    Final Decision: We are finalizing the technical regulations text 
changes at Sec.  409, Sec.  424, and Sec.  484 as proposed.

IV. Provisions of the Home Health Value-Based Purchasing (HHVBP) Model 
and Response to Comments

A. Background

    In the CY 2015 Home Health Prospective Payment System (HH PPS) 
final rule titled ``Medicare and Medicaid Programs; CY 2015 Home Health 
Prospective Payment System Rate Update; Home Health Quality Reporting 
Requirements; and Survey and Enforcement Requirements for Home Health 
Agencies (79 FR 66032-66118), we indicated that we were considering the 
development of a home health value-based purchasing (HHVBP) model. We 
sought comments on a future HHVBP model, including elements of the 
model; size of the payment incentives and percentage of payments that 
would need to be placed at risk in order to spur home health agencies 
(HHAs) to make the necessary investments to improve the quality of care 
for Medicare beneficiaries; the timing of the payment adjustments; and, 
how performance payments should be distributed. We also sought comments 
on the best approach for selecting states for participation in this 
model. We noted that if the decision was made to move forward with the 
implementation of a HHVBP model in CY 2016, we would solicit additional 
comments on a more detailed model proposal to be included in future 
rulemaking.
    In the CY 2015 HH PPS final rule,\8\ we indicated that we received 
a number of comments related to the magnitude of the percentage payment 
adjustments; evaluation criteria; payment features; a beneficiary risk 
adjustment strategy; state selection methodology; and the approach to 
selecting Medicare-certified HHAs. A number of commenters supported the 
development of a value-based purchasing model in the home health 
industry in whole or in part with consideration of the design 
parameters provided. No commenters provided strong counterpoints or 
alternative design options which dissuaded CMS from moving forward with 
general design and framework of the HHVBP model as discussed in the CY 
2015 HH PPS proposed rule. All comments were considered in our decision 
to develop an HHVBP model for implementation beginning January 1, 2016. 
Therefore, in the CY 2016 HH PPS proposed rule, we proposed to 
implement a HHVBP model, which included a randomized state selection 
methodology; a reporting framework; a payment adjustment methodology; a 
payment adjustment schedule by performance year and payment adjustment 
percentage; a quality measures selection methodology, classifications 
and weighting, measures for performance year one, including the 
reporting of New Measures, and a framework for proposing to adopt 
measures for subsequent performance years; a performance scoring 
methodology, which includes performance based on achievement and 
improvement; a review and recalculation period; and an evaluation 
framework. As we discuss in more detail below, we are finalizing our 
proposal to implement the HHVBP Model beginning January 1, 2016. We 
respond to comments received on the proposed components of the model, 
and discuss our final policies with respect to each of these 
components, in the relevant sections below.
---------------------------------------------------------------------------

    \8\ Medicare and Medicaid Programs; CY 2015 Home Health 
Prospective Payment System Rate Update; Home Health Quality 
Reporting Requirements; and Survey and Enforcement Requirements for 
Home Health Agencies, 79 FR 66105-66106 (November 6, 2014).
---------------------------------------------------------------------------

    The basis for developing the proposed value-based purchasing (VBP) 
model, as described in the proposed regulations at Sec.  484.300 et 
seq., stems from several important areas of consideration. First, we 
expect that tying quality to payment through a system of value-based 
purchasing will improve the beneficiaries' experience and outcomes. In 
turn, we expect payment adjustments that both reward improved quality 
and penalize poor performance will incentivize quality improvement and 
encourage efficiency, leading to a more sustainable payment system.
    Second, section 3006(b) of the Affordable Care Act directed the 
Secretary of the Department of Health and Human Services (the 
Secretary) to develop a plan to implement a VBP program for payments 
under the Medicare Program for HHAs and the Secretary issued an 
associated Report to Congress in March of 2012 (2012 Report).\9\ The 
2012 Report included a roadmap for implementation of an HHVBP model and 
outlined the need to develop an HHVBP program that aligns with other 
Medicare programs and coordinates incentives to improve quality. The 
2012 Report also indicated that a HHVBP program should build on and 
refine existing quality measurement tools and processes. In addition, 
the 2012 Report indicated that one of the ways that such a program 
could link payment to quality would be to tie payments to overall 
quality performance.
---------------------------------------------------------------------------

    \9\ CMS, ``Report to Congress: Plan to Implement a Medicare Home 
Health Agency Value-Based Purchasing Program'' (March 15, 2012) 
available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/downloads/stage-2-NPRM.PDF.
---------------------------------------------------------------------------

    Third, section 402(a)(1)(A) of the Social Security Amendments of 
1967 (as amended) (42 U.S.C. 1395b-1(a)(1)(A)), provided authority for 
us to conduct the Home Health Pay-for-Performance (HHPFP) Demonstration 
that ran from 2008 to 2010. The results of that demonstration found 
modest quality improvement in certain measures after comparing the 
quality of care furnished by demonstration participants to the quality 
of care furnished by the control group. One important lesson learned 
from the HHPFP Demonstration was the need to link the HHA's quality 
improvement efforts and the incentives. HHAs in three of the four 
regions generated enough savings to have incentive payments in the 
first year of the demonstration, but the size of payments were unknown 
until after the conclusion of the demonstration. Also, the time lag 
between quality performance and payment incentives was too long to 
provide a sufficient motivation for HHAs to take necessary steps to 
improve quality. The results of the demonstration, published in a 
comprehensive evaluation report \10\ suggest that future models could 
benefit from ensuring that incentives are reliable enough, of 
sufficient magnitude, and paid in a timely fashion to encourage HHAs to 
be fully engaged in the quality of care initiative.
---------------------------------------------------------------------------

    \10\ ``CMS Report on Home Health Agency Value-Based Purchasing 
Program'' (February of 2012) available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Downloads/HHP4P_Demo_Eval_Final_Vol1.pdf.
---------------------------------------------------------------------------

    Furthermore, the President's FY 2015 and 2016 Budgets proposed that 
VBP should be extended to additional providers including skilled 
nursing facilities, home health agencies, ambulatory surgical centers, 
and hospital outpatient departments. The FY 2015 Budget called for at 
least 2-percent of payments to be tied to quality and efficiency of 
care on a budget neutral

[[Page 68657]]

basis. The FY 2016 Budget outlines a program which would tie at least 
2-percent of Medicare payments to the quality and efficiency of care in 
the first 2 years of implementation beginning in 2017, and at least 5-
percent beginning in 2019 without any impact to the budget. We proposed 
and are finalizing an HHVBP model that follows a graduated payment 
adjustment strategy within certain selected states beginning January 1, 
2016.
    The Secretary has also set two overall delivery system reform goals 
for CMS. First, we seek to tie 30-percent of traditional, or fee-for-
service, Medicare payments to quality or value-based payments through 
alternative payment models by the end of 2016, and to tie 50-percent of 
payments to these models by the end of 2018. Second, we seek to tie 85-
percent of all traditional Medicare payments to quality or value by 
2016 and 90-percent by 2018.\11\ To support these efforts the Health 
Care Payment Learning and Action Network was recently launched to help 
advance the work being done across sectors to increase the adoption of 
value-based payments and alternative payment models. We believe that 
testing the HHVBP Model would support these goals.
---------------------------------------------------------------------------

    \11\ Content of this announcement can be found at http://www.hhs.gov/news/press/2015pres/01/20150126a.html.
---------------------------------------------------------------------------

    Finally, we have already successfully implemented the Hospital 
Value-Based Purchasing (HVBP) program, under which value-based 
incentive payments are made in a fiscal year to hospitals that meet 
performance standards established for a performance period with respect 
to measures for that fiscal year. The percentage of a participating 
hospital's base-operating DRG payment amount for FY 2016 discharges 
that is at risk, based on the hospital's performance under the program 
for that fiscal year, is 1.75 percent. That percentage will increase to 
2.0 by FY 2017. We proposed and are finalizing in this rule an HHVBP 
Model that builds on the lessons learned and guidance from the HVBP 
program and other applicable demonstrations as discussed above, as well 
as from the evaluation report discussed earlier.
    As we stated in the CY 2016 HH PPS proposed rule, the HHVBP Model 
presents an opportunity to improve the quality of care furnished to 
Medicare beneficiaries and study what incentives are sufficiently 
significant to encourage HHAs to provide high quality care. The HHVBP 
Model will offer both a greater potential reward for high performing 
HHAs as well as a greater potential downside risk for low performing 
HHAs. We proposed, and are finalizing in this rule, that the model will 
begin on January 1, 2016, and include an array of measures that would 
capture the multiple dimensions of care that HHAs furnish.
    The HHVBP Model, as finalized, will be tested by CMS's Center for 
Medicare and Medicaid Innovation (CMMI) under section 1115A of the Act. 
Under section 1115A(d)(1) of the Act, the Secretary may waive such 
requirements of Titles XI and XVIII and of sections 1902(a)(1), 
1902(a)(13), and 1903(m)(2)(A)(iii) as may be necessary solely for 
purposes of carrying out section 1115A with respect to testing models 
described in section 1115A(b). The Secretary is not issuing any waivers 
of the fraud and abuse provisions in sections 1128A, 1128B, and 1877 of 
the SSA or any other Medicare or Medicaid fraud and abuse laws for this 
model. Thus, notwithstanding any other provisions of this rule, all 
providers participating in the HHVBP Model must comply with all 
applicable fraud and abuse laws and regulations. Therefore, to clarify 
the scope of the Secretary's authority we have finalized Sec.  484.300 
confirming authority to establish Part F under sections 1102, 1115A, 
and 1871 of the Act (42 U.S.C. 1315a), which authorizes the Secretary 
to issue regulations to operate the Medicare program and test 
innovative payment and service delivery models to improve coordination, 
quality, and efficiency of health care services furnished under Title 
XVIII.
    As we proposed, we are using section 1115A(d)(1) waiver authority 
to apply a reduction or increase of up to 8-percent to current Medicare 
payments to competing HHAs delivering care to beneficiaries in selected 
states, depending on the HHA's performance on specified quality 
measures relative to its peers. Specifically, the HHVBP Model will 
utilize the waiver authority to adjust Medicare payment rates under 
section 1895(b) of the Act.\12\ In accordance with the authority 
granted to the Secretary in section 1115A(d)(1) of the Act, we are 
waiving section 1895(b)(4) of the Act only to the extent necessary to 
adjust payment amounts to reflect the value-based payment adjustments 
under this model for Medicare-certified HHAs in specified states 
selected in accordance with CMS's selection methodology. We are not 
implementing this model under the authority granted by the Affordable 
Care Act under section 3131 (``Payment Adjustments for Home Health 
Care'').
---------------------------------------------------------------------------

    \12\ 42 U.S.C. 1395fff.
---------------------------------------------------------------------------

    We are finalizing in this rule, as we proposed, that the defined 
population includes all Medicare beneficiaries provided care by any 
Medicare-certified HHA delivering care within the selected states. 
Medicare-certified HHAs that are delivering care within selected states 
are considered `Competing Home Health Agencies' within the scope of 
this HHVBP Model. If care is delivered outside of selected states, or 
within a non-selected state that does not have a reciprocal agreement 
with a selected state, payments for those beneficiaries are not 
considered within the scope of the model because we are basing 
participation in the model on state-specific CMS Certification Numbers 
(CCNs). Payment adjustments for each year of the model will be 
calculated based on a comparison of how well each competing HHA 
performed during the performance period for that year (proposed, and 
finalized below, to be one year in length, starting in CY 2016) with 
its performance on the same measures in 2015 (proposed, and finalized 
below, to be the baseline data year).
    As we proposed, and are finalizing in this rule, the first 
performance year will be CY 2016, the second will be CY 2017, the third 
will be CY 2018, the fourth will be 2019, and the fifth will be CY 
2020. Greater details on performance periods are outlined in Section 
D--Performance Assessment and Payment Periods. This model will test 
whether being subject to significant payment adjustments to the 
Medicare payment amounts that would otherwise be made to competing 
Medicare-certified HHAs would result in statistically-significant 
improvements in the quality of care being delivered to this specific 
population of Medicare beneficiaries.
    We proposed, and are finalizing in this rule, to identify Medicare-
certified HHAs to compete in this model using state borders as 
boundaries. We do so under the authority granted in section 1115A(a)(5) 
of the Act to elect to limit testing of a model to certain geographic 
areas. This decision is influenced by the 2012 Report to Congress 
mandated under section 3006(b) of the Affordable Care Act. This Report 
stated that HHAs which participated in previous value-based purchasing 
demonstrations ``uniformly believed that all Medicare-certified HHAs 
should be required to participate in future VBP programs so all 
agencies experience the potential burdens and benefits of the program'' 
and some HHAs expressed concern that absent mandatory participation, 
``low-performing agencies in areas with

[[Page 68658]]

limited competition may not choose to pursue quality improvement.'' 
\13\
---------------------------------------------------------------------------

    \13\ See the Recommendations section of the U.S. Department of 
Health and Human Services. Report to Congress: Plan to Implement a 
Medicare Home Health Agency Value-Based Purchasing Program.'' (March 
2012) p. 28.
---------------------------------------------------------------------------

    Section 1115A(b)(2)(A) of the Act requires that the Secretary 
select models to be tested where the Secretary determines that there is 
evidence that the model addresses a defined population for which there 
are deficits in care leading to poor clinical outcomes or potentially 
avoidable expenditures. The HHVBP Model was developed to improve care 
for Medicare patients receiving care from HHAs based on evidence in the 
March 2014 MedPAC Report to Congress citing quality and cost concerns 
in the home health sector. According to MedPAC, ``about 29-percent of 
post-hospital home health stays result in readmission, and there is 
tremendous variation in performance among providers within and across 
geographic regions.'' \14\ The same report cited limited improvement in 
quality based on existing measures, and noted that the data on quality 
``are collected only for beneficiaries who do not have their home 
health care stays terminated by a hospitalization,'' skewing the 
results in favor of a healthier segment of the Medicare population.\15\ 
This model will test the use of adjustments to Medicare HH PPS rates by 
tying payment to quality performance with the goal of achieving the 
highest possible quality and efficiency.
---------------------------------------------------------------------------

    \14\ See full citation at note 11. MedPAC Report to Congress 
(March 2014) p. 215.
    \15\ MedPAC Report to Congress (March 2014) p. 226.
---------------------------------------------------------------------------

B. Overview

    We proposed to include in Sec.  484.305 definitions for 
``applicable percent'', ``applicable measure'', ``benchmark'', ``home 
health prospective payment system'', ``larger-volume cohort'', ``linear 
exchange function'', ``Medicare-certified home health agency'', ``New 
Measures'', ``payment adjustment'', ``performance period'', ``smaller-
volume cohort'', ``selected states'', ``starter set'', ``Total 
Performance Score'', and ``value-based purchasing'' as they pertain to 
this subpart. Where we received comments on the proposed definitions or 
the substantive provisions of the model connected to the proposed 
definitions, we respond to comments in the relevant sections below. We 
are finalizing all the definitions as proposed in Sec.  484.305 except 
for two: We are revising ``applicable percent'' so the final definition 
reflects the revised percentages as 3-percent for CY 2018, 5-percent 
for CY 2019, 6-percent for 2020; 7-percent for CY 2021 and 8-percent 
for CY 2022, as discussed in section G and we are revising ``Medicare-
certified home health agency'' as ``Competing home health agency'' for 
clarity, since all HHAs with CCNs are, by definition, Medicare-
certified, and only those HHAs in selected states are competing in the 
model. As we proposed and are finalizing in this rule, the HHVBP Model 
will encompass 5 performance years and be implemented beginning January 
1, 2016 and conclude on December 31, 2022.
    Payment and service delivery models are developed by CMMI in 
accordance with the requirements of section 1115A of the Act. During 
the development of new models, CMMI builds on the ideas received from 
internal and external stakeholders and consults with clinical and 
analytical experts.
    We are finalizing our proposal to implement a HHVBP Model that has 
an overall purpose of improving the quality and efficient delivery of 
home health care services to the Medicare population. The specific 
goals of the model are to:
    1. Incentivize HHAs to provide better quality care with greater 
efficiency;
    2. Study new potential quality and efficiency measures for 
appropriateness in the home health setting; and,
    3. Enhance current public reporting processes.
    We proposed that the HHVBP Model would adjust Medicare HHA payments 
over the course of the model by up to 8-percent depending on the 
applicable performance year and the degree of quality performance 
demonstrated by each competing HHA. As discussed in greater detail in 
section G, we are finalizing this proposal with modification. Under our 
final policy, the model will reduce the HH PPS final claim payment 
amount to an HHA for each episode in a calendar year by an amount up to 
the applicable percentage revised and defined in Sec.  484.305. The 
timeline of payment adjustments as they apply to each performance year 
is described in greater detail in the section D2 entitled ``Payment 
Adjustment Timeline.''
    As we proposed, and are finalizing in this rule, the model will 
apply to all Medicare-certified HHAs in each of the selected states, 
which means that all HHAs in the selected states will be required to 
compete. We codify this policy at 42 CFR 484.310. Furthermore, a 
competing HHA will only be measured on performance for care delivered 
to Medicare beneficiaries within selected states (with rare exceptions 
given for care delivered when a reciprocal agreement exists between 
states). The distribution of payment adjustments will be based on 
quality performance, as measured by both achievement and improvement, 
across a set of quality measures rigorously constructed to minimize 
burden as much as possible and improve care. Competing HHAs that 
demonstrate they can deliver higher quality of care in comparison to 
their peers (as defined by the volume of services delivered within the 
selected state), or their own past performance, could have their 
payment for each episode of care adjusted higher than the amount that 
otherwise would be paid under section 1895 of the Act. Competing HHAs 
that do not perform as well as other competing HHAs of the same size in 
the same state might have their payments reduced and those competing 
HHAs that perform similarly to others of similar size in the same state 
might have no payment adjustment made. This operational concept is 
similar in practice to what is used in the HVBP program.
    We expect that the risk of having payments adjusted in this manner 
will provide an incentive among all competing HHAs delivering care 
within the boundaries of selected states to provide significantly 
better quality through improved planning, coordination, and management 
of care. The degree of the payment adjustment will be dependent on the 
level of quality achieved or improved from the baseline year, with the 
highest upward performance adjustments going to competing HHAs with the 
highest overall level of performance based on either achievement or 
improvement in quality. The size of a competing HHA's payment 
adjustment for each year under the model will be dependent upon that 
HHA's performance with respect to that calendar year relative to other 
competing HHAs of similar size in the same state and relative to its 
own performance during the baseline year.
    We proposed that states would be selected randomly from nine 
regional groupings for model participation. As discussed further in 
section IV.C. of this rule, we are finalizing this proposal. A 
competing HHA is only measured on performance for care delivered to 
Medicare beneficiaries within boundaries of selected states and only 
payments for HHA services provided to Medicare beneficiaries within 
boundaries of selected states will be subject to adjustment under this 
model unless a reciprocal agreement is in place. Requiring all 
Medicare-certified HHAs within the boundaries of selected

[[Page 68659]]

states to compete in the model ensures that: (1) There is no self-
selection bias, (2) competing HHAs are representative of HHAs 
nationally, and (3) there is sufficient participation to generate 
meaningful results. We believe it is necessary to require all HHAs 
delivering care within boundaries of selected states to be included in 
the model because, in our experience, Medicare-providers are generally 
reluctant to participate voluntarily in models in which their Medicare 
payments could be subject to possible reduction. This reluctance to 
participate in voluntary models has been shown to cause self-selection 
bias in statistical assessments and thus, may present challenges to our 
ability to evaluate the model. In addition, state boundaries represent 
a natural demarcation in how quality is currently being assessed 
through Outcome Assessment Information Set (OASIS) measures on Home 
Health Compare (HHC). Secondly, it is our intent to generate an 
appropriate selection of competitor types in this model as a means of 
yielding the most optimal level of generalizability and 
representativeness of HHAs in the nation. Finally, having an 
appropriate number of competitors within the model should generate an 
appropriate statistical power to detect key effects we are testing in 
this model.

C. Selection Methodology

1. Identifying a Geographic Demarcation Area
    We proposed to adopt a methodology that uses state borders as 
boundaries for demarcating which Medicare-certified HHAs will be 
required to compete in the model and proposed to select nine states 
from nine geographically-defined groupings of five or six states. 
Groupings were also defined so that the successful implementation of 
the model would produce robust and generalizable results, as discussed 
later in this section. We are finalizing this approach here.
    We took into account five key factors when deciding to propose 
selection at the state-level for this model. First, if we required 
some, but not all, Medicare-certified HHAs that deliver care within the 
boundaries of a selected state to participate in the model, we believe 
the HHA market for the state could be disrupted because HHAs in the 
model would be competing against HHAs that are not included in the 
model (herein referenced `non-competing HHAs'). Second, we wanted to 
ensure that the distribution of payment adjustments based on 
performance under the model could be extrapolated to the entire 
country. Statistically, the larger the sample to which payment 
adjustments are applied, the smaller the variance of the sampling 
distribution and the greater the likelihood that the distribution 
accurately predicts what would transpire if the methodology were 
applied to the full population of HHAs. Third, we considered the need 
to align with other HHA quality program initiatives including HHC. The 
HHC Web site presently provides the public and HHAs a state- and 
national-level comparison of quality. We expect that aligning 
performance with the HHVBP benchmark and the achievement score will 
support how measures are currently being reported on HHC. Fourth, there 
is a need to align with CMS regulations which require that each HHA 
have a unique CMS Certification Number (CCN) for each state in which 
the HHA provides service. Fifth, we wanted to ensure sufficient sample 
size and the ability to meet the rigorous evaluation requirements for 
CMMI models. These five factors are important for the successful 
implementation and evaluation of this model.
    We expect that when there is a risk for a downward payment 
adjustment based on quality performance measures, the use of a self-
contained, mandatory cohort of HHA participants will create a stronger 
incentive to deliver greater quality among competing HHAs. 
Specifically, it is possible the market would become distorted if non-
model HHAs are delivering care within the same market as competing HHAs 
because competition, on the whole, becomes unfair when payment is 
predicated on quality for one group and volume for the other group. In 
addition, we expect that evaluation efforts might be negatively 
impacted because some HHAs would be competing on quality and others on 
volume, within the same market.
    We proposed the use of state boundaries after careful consideration 
of several alternative selection approaches, including randomly 
selecting HHAs from all HHAs across the country, and requiring 
participation from smaller geographic regions including the county; the 
Combined Statistical Area (CSA); the Core-Based Statistical Area 
(CBSA); Metropolitan Statistical Area (MSA) rural provider level; and 
the Hospital Referral Region (HRR) level.
    A methodology using a national sample of HHAs that are randomly 
selected from all HHAs across the country could be designed to include 
enough HHAs to ensure robust payment adjustment distribution and a 
sufficient sample size for the evaluation; however, this approach may 
present significant limitations when compared with the state boundaries 
selection methodology we proposed in this model. Of primary concern 
with randomly selecting at the provider-level across the nation is the 
issue with market distortions created by having competing HHAs 
operating in the same market as non-model HHAs.
    Using smaller geographic areas than states, such as counties, CSAs, 
CBSAs, rural, and HRRs, could also present challenges for this model. 
These smaller geographic areas were considered as alternate selection 
options; however, their use could result in too small of a sample size 
of potential competing HHAs. As a result, we expect the distribution of 
payment adjustments could become highly divergent among fewer HHA 
competitors. In addition, the ability to evaluate the model could 
become more complex and may be less generalizable to the full 
population of Medicare-certified HHAs and the beneficiaries they serve 
across the nation. Further, the use of smaller geographic areas than 
states could increase the proportion of Medicare-certified HHAs that 
could fall into groupings with too few agencies to generate a stable 
distribution of payment adjustments. Thus, if we were to define 
geographic areas based on CSAs, CBSAs, counties, or HRRs, we would need 
to develop an approach for consolidating smaller regions into larger 
regions.
    Home health care is a unique type of health care service when 
compared to other Medicare provider types. In general, the HHA's care 
delivery setting is in the beneficiaries' homes as opposed to other 
provider types that traditionally deliver care at a brick and mortar 
institution within beneficiaries' respective communities. As a result, 
the HHVBP Model needs to be designed to account for the unique way that 
HHA care is provided in order for results to be generalizable to the 
population. HHAs are limited to providing care to beneficiaries in the 
state that they have a CCN however; HHAs are not restricted from 
providing service in a county, CSA, CBSA or HRR that they are not 
located in (as long as the other county/CBSA/HRR is in the same state 
in which the HHA is certified). As a result, using smaller geographic 
areas (than state boundaries) could result in similar market distortion 
and evaluation confounders as selecting providers from a randomized 
national sampling. The reason is that HHAs in adjacent counties/CSAs/
CBSAs/HRRs may not be in the model but, would be directly competing for 
services in the same markets or geographic regions. Competing HHAs 
delivering care in the

[[Page 68660]]

same market area as non-competing HHAs could generate a spillover 
effect where non-model HHAs would be vying for the same beneficiaries 
as competing HHAs. This spillover effect presents several issues for 
evaluation as the dependent variable (quality) becomes confounded by 
external influences created by these non-competing HHAs. These 
unintentional external influences on competing HHAs may be made 
apparent if non-competing HHAs become incentivized to generate greater 
volume at the expense of quality delivered to the beneficiaries they 
serve and at the expense of competing HHAs that are paid on quality 
instead of volume. Further, the ability to extrapolate these results to 
the full population of HHAs and the beneficiaries they serve becomes 
confounded by an artifact of the model and inferences would be limited 
from an inability to duplicate these results. While these concerns 
would decrease in some order of magnitude as larger regions are 
considered, the only way to eliminate these concerns entirely is to 
define inclusion among Medicare-certified HHAs at the state level.
    In addition, home health quality data currently displayed on HHC 
allows users to compare HHA services furnished within a single state. 
Selecting HHAs using other geographic regions that are smaller and/or 
cross state lines could require the model to deviate from the 
established process for reporting quality. For these reasons, we stated 
in the proposed rule that we believe a selection methodology based on 
the use of Medicare-certified HHAs delivering care within state 
boundaries is the most appropriate for the successful implementation 
and evaluation of this model. In the proposed rule, we requested 
comments on this proposed state selection methodology as well as 
potential alternatives. We summarize and respond to comments received 
at the end of this section (section IV.C.). As we discuss below, we are 
finalizing the state selection model as proposed.
2. Overview of the Randomized Selection Methodology for States
    We proposed the state selections listed in proposed Sec.  484.310 
based on the described proposed randomized selection methodology. We 
proposed to group states by each state's geographic proximity to one 
another accounting for key evaluation characteristics (that is, 
proportionality of service utilization, proportionality of 
organizations with similar tax-exempt status and HHA size, and 
proportionality of beneficiaries that are dually-eligible for Medicare 
and Medicaid).
    Based on an analysis of OASIS quality data and Medicare claims 
data, we stated in the proposed rule that we believe the use of nine 
geographic groupings would account for the diversity of beneficiary 
demographics, rural and urban status, cost and quality variations, 
among other criteria. To provide for comparable and equitable selection 
probabilities, these separate geographic groupings each include a 
comparable number of states. Under our proposed methodology, groupings 
were based on states' geographic proximity to one another, having a 
comparable number of states if randomized for an equal opportunity of 
selection, and similarities in key characteristics that will be 
considered in the evaluation study because the attributes represent 
different types of HHAs, regulatory oversight, and types of 
beneficiaries served. This is necessary for the evaluation study to 
remain objective and unbiased and so that the results of this study 
best represent the entire population of Medicare-certified HHAs across 
the nation.
    Several of the key characteristics we used for grouping state 
boundaries into clusters for selection into the model are also used in 
the impact analysis of our annual HHA payment updates, a fact that 
reinforces their relevance for evaluation. The additional proposed 
standards for grouping (level of utilization and socioeconomic status 
of patients) are also important to consider when evaluating the 
program, because of their current policy relevance. Large variations in 
the level of utilization of the home health benefit has received 
attention from policymakers concerned with achieving high-value health 
care and curbing fraud and abuse.\16\ Policymakers' concerns about the 
role of beneficiary-level characteristics as determinants of resource 
use and health care quality were highlighted in the Affordable Care 
Act, which mandated a study \17\ of access to home health care for 
vulnerable populations \18\ and, more recently, the Improving Medicare 
Post-acute Care Transformation (IMPACT) Act of 2014 required the 
Secretary to study the relationship between individuals' socioeconomic 
status and resource use or quality.\19\ The parameters used to define 
each geographic grouping are further described in the next three 
sections.
---------------------------------------------------------------------------

    \16\ See MedPAC Report to Congress: Medicare Payment Policy 
(March 2014, Chapter 9) available at http://medpac.gov/documents/reports/mar14_entirereport.pdf. See also the Institute of Medicine 
Interim Report of the Committee on Geographic Variation in Health 
Care Spending and Promotion of High-Value Health Care: Preliminary 
Committee Observations (March 2013) available at http://iom.edu/Reports/2013/Geographic-Variation-in-Health-Care-Spending-and-Promotion-of-High-Care-Value-Interim-Report.aspx.
    \17\ This study can be accessed at http://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html.
    \18\ Section 3131(d) of the Affordable Care Act.
    \19\ Improving Medicare Post-acute Care Transformation (IMPACT) 
Act of 2014 (Public Law 113-185).
---------------------------------------------------------------------------

a. Geographic Proximity
    We explained in the proposed rule that under this methodology, in 
order to ensure that the Medicare-certified HHAs that would be required 
to participate in the model are not all in one region of the country, 
the states in each grouping are adjacent to each other whenever 
possible while creating logical groupings of states based on common 
characteristics as described above. Specifically, analysis based on 
quality data and claims data found that HHAs in these neighboring 
states tend to hold certain characteristics in common. These include 
having similar patterns of utilization, proportionality of non-profit 
agencies, and types of beneficiaries served (for example, severity and 
number, type of co-morbidities, and socio-economic status). Therefore, 
the proposed groupings of states were delineated according to states' 
geographic proximity to one another and common characteristics as a 
means of permitting greater comparability. In addition, each of the 
groupings retains similar types of characteristics when compared to any 
other type of grouping of states.
b. Comparable Number of States in Each Grouping
    Under the proposed randomized selection methodology, each 
geographic region, or grouping, has a similar number of states. As a 
result, all states had a 16.7-percent to 20-percent chance of being 
selected under our proposed methodology, and Medicare-certified HHAs 
had a similar likelihood of being required to compete in the model by 
using this sampling design. We asserted in the proposed rule that this 
sampling design would ensure that no single entity is singled out for 
selection, since all states and Medicare-certified HHAs would have 
approximately the same chance of being selected. In addition, this 
sampling approach would mitigate the opportunity for HHAs to self-
select into the model and thereby bias any results of the test.

[[Page 68661]]

c. Characteristics of State Groupings
    Without sacrificing an equal opportunity for selection, we 
explained in the proposed rule that the proposed state groupings are 
intended to ensure that important characteristics of Medicare-certified 
HHAs that deliver care within state boundaries can be used to evaluate 
the primary intervention with greater generalizability and 
representativeness of the entire population of Medicare-certified HHAs 
in the nation. Data analysis of these characteristics employed the full 
data set of Medicare claims and OASIS quality data. Although some 
characteristics, such as beneficiary age and case-mix, yielded some 
variations from one state to another, other important characteristics 
do vary substantially and could influence how HHAs respond to the 
incentives of the model. Specifically, home health services utilization 
rates, tax-exemption status of the provider, the socioeconomic status 
of beneficiaries (as measured by the proportion of dually-eligible 
beneficiaries), and agency size (as measured by average number of 
episodes of care per HHA), are important characteristics that could 
influence outcomes of the model. Subsequently, we intend to study the 
impacts of these characteristics for purposes of designing future 
value-based purchasing models and programs. These characteristics and 
expected variations must be considered in the evaluation study to 
enable us to avoid erroneous inferences about how different types of 
HHAs will respond to HHVBP incentives.
    Under our proposed state selection methodology, state groupings 
reflect regional variations that enhance the generalizability of the 
model. In line with this methodology, each grouping includes states 
that are similar in at least one important aforementioned 
characteristic while being geographically located in close proximity to 
one another. Using the criteria described above, the following 
geographic groupings were identified using Medicare claims-based data 
from calendar years 2013-2014. Each of the 50 states was assigned to 
one of the following geographic groups:
     Group #1: (VT, MA, ME, CT, RI, NH)
    States in this group tend to have larger HHAs and have average 
utilization relative to other states.
     Group #2: (DE, NJ, MD, PA, NY)
    States in this group tend to have larger HHAs, have lower 
utilization, and provide care to an average number of dually-eligible 
beneficiaries relative to other states.
     Group #3: (AL, GA, SC, NC, VA)
    States in this group tend to have larger HHAs, have average 
utilization rates, and provide care to a high proportion of minorities 
relative to other states.
     Group #4: (TX, FL, OK, LA, MS)
    States in this group have HHAs that tend to be for-profit, have 
very high utilization rates, and have a higher proportion of dually-
eligible beneficiaries relative to other states.
     Group #5: (WA, OR, AK, HI, WY, ID)
    States in this group tend to have smaller HHAs, have average 
utilization rates, and are more rural relative to other states.
     Group #6: (NM, CA, NV, UT, CO, AZ)
    States in this group tend to have smaller HHAs, have average 
utilization rates, and provide care to a high proportion of minorities 
relative to other states.
     Group #7: (ND, SD, MT, WI, MN, IA)
    States in this group tend to have smaller HHAs, have very low 
utilization rates, and are more rural relative to other states.
     Group #8: (OH, WV, IN, MO, NE., KS)
    States in this group tend to have HHAs that are of average size, 
have average utilization rates, and provide care to a higher proportion 
of dually-eligible beneficiaries relative to other states.
     Group #9: (IL, KY, AR, MI, TN)
    States in this group tend to have HHAs with higher utilization 
rates relative to other states.
d. Randomized Selection of States
    We stated in the proposed rule that upon the careful consideration 
of the alternative selection methodologies discussed in that rule, 
including selecting states on a non-random basis, we proposed to use a 
selection methodology based on a randomized sampling of states within 
each of the nine regional groupings described above. We examined data 
on the evaluation elements listed in this section of the proposed rule 
and this final rule to determine if specific states could be identified 
in order to fulfill the needs of the evaluation. After careful review, 
we determined that each evaluation element could be measured by more 
than one state. As a result, we determined that it was necessary to 
apply a fair method of selection where each state would have a 
comparable opportunity of being selected and which would fulfill the 
need for a robust evaluation. The proposed nine groupings of states, as 
described in this section of the proposed rule and this final rule, 
permit the model to capture the essential elements of the evaluation 
including demographic, geographic, and market factors.
    We explained in the proposed rule that the randomized sampling of 
states is without bias to any characteristics of any single state 
within any specific regional grouping, where no states are excluded, 
and no state appears more than once across any of the groupings. The 
randomized selection of states was completed using a scientifically-
accepted computer algorithm designed for randomized sampling. The 
randomized selection of states was run on each of the previously 
described regional groupings using exactly the same process and, 
therefore, reflects a commonly accepted method of randomized sampling. 
This computer algorithm employs the aforementioned sampling parameters 
necessary to define randomized sampling and omits any human interaction 
once it runs.
    Based on this sampling methodology, SAS Enterprise Guide (SAS EG) 
5.1 software was used to run a computer algorithm designed to randomly 
select states from each grouping. SAS EG 5.1 and the computer algorithm 
were employed to conduct the randomized selection of states. SAS EG 5.1 
represents an industry-standard for generating advanced analytics and 
provided a rigorous, standardized tool by which to satisfy the 
requirements of randomized selection. The key SAS commands employed 
include a ``PROC SURVEYSELECT'' statement coupled with the 
``METHOD=SRS'' option used to specify simple random sampling as the 
sample selection method. A random number seed was generated by using 
the time of day from the computer's clock. The random number seed was 
used to produce random number generation. Note that no stratification 
was used within any of the nine geographically-diverse groupings to 
ensure there is an equal probability of selection within each grouping. 
For more information on this procedure and the underlying statistical 
methodology, please reference SAS support documentation at: http://support.sas.com/documentation/cdl/en/statug/63033/HTML/default/viewer.htm#statug_surveyselect_sect003.htm/.
    Based on consideration of the comments received and for the reasons 
discussed, we believe this state selection methodology provides the 
strongest evidence of producing meaningful results representative of 
the

[[Page 68662]]

national population of competing Medicare-certified HHAs and, in turn, 
meets the evaluation requirements of section 1115A(b)(4) of the Act.
    In Sec.  484.310, we proposed to codify the names of the states 
selected utilizing this proposed methodology, where one state from each 
of the nine groupings was selected. For each of these groupings, we 
proposed to use state borders to demarcate which Medicare-certified 
HHAs would be required to compete in this model: Massachusetts was 
randomly selected from Group 1, Maryland was randomly selected from 
Group 2, North Carolina was randomly selected from Group 3, Florida was 
randomly selected from Group 4, Washington was randomly selected from 
Group 5, Arizona was randomly selected from Group 6, Iowa was randomly 
selected from Group 7, Nebraska was randomly selected from Group 8, and 
Tennessee was randomly selected from Group 9. Thus, we explained in the 
proposed rule that if our methodology is finalized as proposed, all 
Medicare-certified HHAs that provide services in Massachusetts, 
Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, 
and Tennessee will be required to compete in this model. We invited 
comments on this proposed randomized selection methodology.
    We summarize and respond to these comments at the end of this 
section. As discussed we are finalizing the state selection methodology 
as proposed without modification, as well as finalizing the states that 
were selected utilizing this methodology as codified in Sec.  484.310.
e. Use of CMS Certification Numbers (CCNs)
    We proposed that Total Performance Scores (TPS) and payment 
adjustments would be calculated based on an HHA's CCN \20\ and, 
therefore, based only on services provided in the selected states. The 
exception to this methodology is where an HHA provides service in a 
state that also has a reciprocal agreement with another state. Services 
being provided by the HHA to beneficiaries who reside in another state 
would be included in the TPS and subject to payment adjustments.\21\ 
The reciprocal agreement between states allows for an HHA to provide 
services to a beneficiary across state lines using its original CCN 
number. Reciprocal agreements are rare and, as identified using the 
most recent Medicare claims data from 2014, there was found to be less 
than 0.1 percent of beneficiaries that provided services that were 
being served by CCNs with reciprocal agreements across state lines. Due 
to the very low number of beneficiaries served across state borders as 
a result of these agreements, we stated in the proposed rule that we 
expect there to be an inconsequential impact by including these 
beneficiaries in the model.
---------------------------------------------------------------------------

    \20\ HHAs are required to report OASIS data and any other 
quality measures by its own unique CMS Certification Number (CCN) as 
defined under title 42, chapter IV, subchapter G, part 484, Sec.  
484.20 Available at URL http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title42/42cfr484_main_02.tpl.
    \21\ See Chapter 2 of the State Operations Manual (SOM), Section 
2184--Operation of HHAs Cross State Lines, stating ``When an HHA 
provides services across State lines, it must be certified by the 
State in which its CCN is based, and its personnel must be qualified 
in all States in which they provide services. The appropriate SA 
completes the certification activities. The involved States must 
have a written reciprocal agreement permitting the HHA to provide 
services in this manner.''
---------------------------------------------------------------------------

    We received the following comments on the proposed selection 
methodology. As discussed, we are finalizing the selection methodology 
as proposed.
    Comment: A few commenters expressed concern that participating HHAs 
will receive payment adjustment incentives based on quality of care, 
while non-participating HHAs in the same geographic area might be 
incentivized to generate greater volume at the expense of quality. Some 
commenters recommended expanding the model to allow more states to 
participate in each succeeding year of the model to prevent non-
participating states from falling behind, and some commenters also 
recommended CMS shorten the duration of the model to three (3) years to 
expedite the implementation of VBP nationally.
    Response: Competing HHAs within the selected states will not be 
compared with non-competing HHAs within the same geographic area. HHAs 
will not compete across state borders, other than those HHAs that may 
provide services in a state that has a reciprocal agreement with 
another state. Specifically, the model is designed to have HHAs compete 
only within their state and within their size cohort, as discussed 
further in section F. Competing HHAs will not compete for payment 
adjustment incentives outside of their state or size cohort. The 
decision to utilize states to select HHAs for inclusion in the model 
was based on a range of factors related to implementation and 
evaluation and weighed against other selection alternatives. 
Specifically, we considered how the competing HHA's CCN is 
operationalized at the state-level and how evaluation will determine 
whether the payment adjustment incentive has an effect on quality 
within each competing HHA's state and size-cohort. In response to 
comments suggesting that non-competing HHAs in non-selected states 
might `fall behind,' we again reference the design of the payment 
methodology which precludes non-competitors from competing outside of 
selected states and size-cohorts. The purpose of this model is to test 
the effect of high incentives on quality. Performance measurement is 
based on a linear exchange function which only includes competing-HHAs. 
If the model yields early positive results within these states and 
competing cohorts, expansion may be considered if the requirements of 
the statute are met. Section 1115A(c) of the Act authorizes the 
Secretary to expand the scope and duration of a model being tested 
through rulemaking, including implementation on a nationwide basis. In 
addition, we do not expect that HHAs in non-selected states would fall 
significantly behind in improving quality because of their interest in 
attracting beneficiaries, and improving performance on quality metrics 
in other programs, such as the HHQRP. Further, we believe testing the 
model over 5 years will provide more data with which to evaluate the 
effects of high incentives with greater certainty.
    Comment: Several commenters expressed concern regarding how HHAs 
are selected to participate in the HHVBP Model. Commenters expressed 
concerns centered on leaving behind innovative HHAs in non-
participating states. Many commenters recommended including voluntary 
participation by interested innovative HHAs in non-participating states 
and carefully documenting characteristics of selected agencies. 
Commenters also stated that mandatory participation may potentially put 
agencies with fewer resources in selected states at risk for closure.
    Response: We appreciate the comments and input on the state 
selection methodology. The selection methodology was based on lessons 
learned, industry stakeholder perspectives, and an analysis of Medicare 
data. For the reasons discussed above, we believe that application of 
this methodology will result in participation by HHAs that represent an 
accurate reflection of the entire population of Medicare-certified 
HHAs, both in terms of size and in terms of quality. In general, 
providers do not voluntarily participate in alternate payment models 
when payments are at risk of being lowered. This reluctance to 
participate in voluntary models has been shown to cause self-selection 
bias in statistical assessments and thus, we believe that

[[Page 68663]]

allowing voluntary participation by interested HHAs in non-
participating states could present challenges to our ability to 
evaluate the model. In reference to concerns that some HHAs with fewer 
resources may be at greater risk for closure, CMS will continue to 
monitor for direct associations between HHAs that exhibit poor 
performance and the effect of the payment adjustment incentive.
    Comment: Commenters questioned the fairness of being required to 
participate in both the proposed HHVBP Model and the proposed 
Comprehensive Care Joint Replacement Model (CJR).
    Response: HHAs located in the MSAs included in the proposed CJR 
Model will not be excluded from the HHVBP Model. HHAs are not 
participants in the proposed CJR Model. As proposed, Hospitals are the 
participants. Home health payments for beneficiaries participating in 
the proposed CJR are not subject to alteration under that model. As 
proposed, only the hospital payments are at risk. HHAs will continue to 
be paid for the services they provide to and bill for Medicare 
beneficiaries that are participating in the proposed CJR.
    Comment: Some commenters expressed concern that state selection 
will not sufficiently represent the Medicare population at large and 
impacts a disproportionate portion of the Medicare population. Another 
commenter recommended CMS consider a hardship exemption for HHAs with a 
high percentage of Medicaid services or that serve a high percentage of 
dual-eligible patients. Commenters also expressed concern on various 
topics around state selection, including lack of complex urban areas 
and corresponding utilization patterns; peer cohorts based simply on 
size and state; consideration of profit or non-profit status, hospital-
based or free-standing HHAs, and rural and urban status, all related to 
either under-representation or potential bias in the selected competing 
HHAs, or over-representation of certain sub-populations of Medicare 
beneficiaries included in the model One commenter also recommended 
excluding states with populations under a certain threshold, such as 
2.5 million, to ensure a large population and making the model more 
robust.
    Response: We have taken into consideration the level of utilization 
and socioeconomic status of patients in grouping states for random 
selection, and will evaluate the model sensitive to these differences. 
The alternative methodologies proposed by stakeholders did not fulfill 
the requirements to be generalizable and representative of the entire 
population of Medicare-certified HHAs in the nation. Our mechanisms, 
including tracking quality improvement through performance measures and 
conducting comparative analysis based on variations on HHA size, 
geographic location, organizational structure, and other HHA 
demographic information will be utilized for evaluating the model. We 
have conducted extensive analysis on the population of HHAs included in 
the model and are confident we will be able to effectively extrapolate 
model results to the general population. In part, this analysis is 
referenced in Table 24 and finds an association between the higher 
proportion of dually-eligible beneficiaries serviced and better 
performance. The performance and subsequent payment distributions are 
consistent with respect to the four described categories (that is 
dually-eligible, level of acuity, percent rural, and organization 
type). In addition, CMS conducted a statistical analysis of the sample 
size of HHAs provided by the nine selected states and determined it was 
sufficient to effectively detect the model's impact.
    Comment: One commenter stated that Maryland should not be included 
in the selected states for HHVBP because Maryland is already 
participating in the Maryland All Payer Model. Another commenter 
suggested that Florida not be included in both HHVBP and ACO bundling 
models because it is difficult for HHAs to track compliance with all 
relevant policy and regulatory requirements.
    Response: We understand the variances in state demographics, state 
regulatory structures, and the interplay with other federal 
initiatives, and intend to evaluate how the HHVBP Model performs in the 
selected states, including interactions with existing policies, models 
and programs operating in the specific states selected. For example, 
the Maryland All-Payer Model does not directly intersect with HHVBP 
because it is a hospital-based model, so we do not believe this is a 
compelling reason to exclude this state. In addition, concerns that 
Florida Medicare-certified HHAs would also be included in ACO models is 
not a compelling reason to exclude this state because other states have 
HHAs participating within ACO models. We do, however, recognize the 
need to evaluate the impact of the model in the context of the various 
policies and programs operating in those states where participating 
HHAs serve patients. As discussed, after consideration of the public 
comments received, we are finalizing our proposal to include the nine 
selected states as stated in Section 2. In comparison to other 
alternatives for selection, we believe the proposed randomized state-
selection method provides an equitable process of selection and a 
comparable number of HHAs to account for the power to detect 
statistical variations between the payment adjustment incentive as well 
as non-financial incentives and their effect on quality. The nine 
selected states finalized here will participate for the full duration 
of the model.
    Comment: One commenter suggested that selected states be more 
homogenous in having no prior experience in VBP and to exclude any 
states that participated in 2008-2010 HH Pay for Performance 
demonstration.
    Response: We understand concerns about previous program and model 
participation in that some competitors may be more prepared for VBP in 
comparison to others. While we are not convinced that we can attribute 
the level of preparedness for VBP to the HHA's experience with the 
HHP4P Demonstration or any other VBP initiative, we intentionally 
developed a methodology for randomized selection of states to prevent 
bias to any characteristics of any single state within any specific 
grouping. As a result of this randomness of selection, the design 
permits an equitable opportunity for selection and provides a greater 
capacity to generalize results to the entire population of Medicare-
certified HHAs in the U.S.
    Final Decision: For the reasons stated and in consideration of the 
comments received, we are finalizing the state selection methodology as 
proposed, including the nine states selected under this methodology as 
codified at Sec.  484.310. All Medicare-certified HHAs that provide 
services in Massachusetts, Maryland, North Carolina, Florida, 
Washington, Arizona, Iowa, Nebraska, and Tennessee will be required to 
compete in the HHVBP Model.

D. Performance Assessment and Payment Periods

1. Performance Reports

    We proposed to use quarterly performance reports, annual payment 
adjustment reports, and annual publicly-available performance reports 
as a means of developing greater transparency of Medicare data on 
quality and aligning the competitive forces within the market to 
deliver care based on value over volume, and are finalizing this 
reporting structure here. The publicly-reported reports will inform 
home health industry

[[Page 68664]]

stakeholders (consumers, physicians, hospitals) as well as all 
competing HHAs delivering care to Medicare beneficiaries within 
selected state boundaries on their level of quality relative to both 
their peers and their own past performance.
    We proposed that competing HHAs would be scored for the quality of 
care delivered under the model based on their performance on measures 
compared to both the performance of their peers, defined by the same 
size cohort (either smaller- or larger-volume cohorts as defined in 
Sec.  484.305), and their own past performance on the measures. We also 
proposed in Sec.  484.305 to define larger-volume cohort to mean the 
group of competing HHAs within the boundaries of a selected state that 
are participating in Home Health Care Consumer Assessment of Healthcare 
Providers and Systems (HHCAHPS) in accordance with Sec.  484.250 and to 
define smaller-volume cohort to mean the group of HHAs within the 
boundaries of a selected state that are exempt from participation in 
HHCAHPS in accordance with Sec.  484.250. We also proposed where there 
are too few HHAs in the smaller-volume cohort in each state to compete 
in a fair manner (that is, when there is only one or two HHAs competing 
within a small cohort in a given state), these HHAs would be included 
in the larger-volume cohort for purposes of calculating the total 
performance score and payment adjustment without being measured on 
HHCAHPS. We requested comments on this proposed methodology.
    Comment: A few commenters mentioned the cohort methodology in their 
submissions. One commenter offered support to CMS's decision to measure 
each HHA against a comparable cohort by size of agency and agreed that 
large HHAs with multiple locations have a scale that smaller agencies 
do not, rendering outcomes difficult to measure by comparison. 
Conversely, other commenters did not support CMS's proposal to base 
performance payments on relative performance within HHA peer cohorts, 
with one commenter recommending payments should be based solely on 
comparisons to prior year performance and another suggesting using 
national data for all HHAs, taking into account socio-demographic 
factors.
    Response: Analysis of existing HHA data (see 80 FR 39910, Table 
26--HHA Cohort Payment Adjustment Distributions by State) indicates 
dividing HHAs into large and small cohorts results in a higher 
likelihood of fair and accurate performance comparisons and the 
subsequent payment adjustments. We intend to closely evaluate model 
outcomes across a range of demographic factors within the small and 
large cohorts, and may modify the model if warranted in subsequent 
years.
    Final Decision: After considering the comments received, we are 
finalizing the large and small cohort structure as proposed.
    We proposed that quality performance scores and relative peer 
rankings would be determined through the use of a baseline year 
(calendar year 2015) and subsequent performance periods for each 
competing HHA. Further, these reports will provide competing HHAs with 
an opportunity to track their quality performance relative to their 
peers and their own past performance. Using these reports provides a 
convenient and timely means for competing HHAs to assess and track 
their own respective performance as capacity is developed to improve or 
sustain quality over time.
    Beginning with the data collected during the first quarter of CY 
2016 (that is, data for the period January 1, 2016 to March 31, 2016), 
and for every quarter of the model thereafter, we proposed to provide 
each Medicare-certified HHA with a quarterly report that contains 
information on their performance during the quarter. We stated that we 
expect to make the first quarterly report available in July 2016, and 
make performance reports for subsequent quarters available in October, 
January and April. The final quarterly report would be made available 
in April 2021. We proposed that the quarterly reports would include a 
competing HHA's model-specific performance results with a comparison to 
other competing HHAs within its cohort (larger- or smaller-volume) 
within the state boundary. These model-specific performance results 
will complement all quality data sources already being provided through 
the QIES system and any other quality tracking system possibly being 
employed by HHAs. We note that all performance measures that competing 
HHAs will report through the QIES system are also already made 
available in the CASPER Reporting application. The primary difference 
between the two reports (CASPER reports and the model-specific 
performance report) is that the model-specific performance report we 
proposed consolidates the applicable performance measures used in the 
HHVBP Model and provides a peer-ranking to other competing HHAs within 
the same state and size-cohort. In addition, CASPER reports will 
provide quality data earlier than model-specific performance reports 
because CASPER reports are not limited by a quarterly run-out of data 
and a calculation of competing peer-rankings. For more information on 
the accessibility and functionality of the CASPER system, please 
reference the CASPER Provider Reporting Guide.\22\
---------------------------------------------------------------------------

    \22\ The Casper Reporting Guide is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/downloads/HHQICASPER.pdf).
---------------------------------------------------------------------------

    We proposed that the model-specific quarterly performance report 
will be made available to each HHA through a dedicated CMMI model-
specific platform for data dissemination and include each HHA's 
relative ranking amongst its peers along with measurement scores and 
overall performance rankings.
    We also proposed that a separate payment adjustment report would be 
provided once a year to each of the competing HHAs. This annual report 
will focus primarily on the payment adjustment percentage and include 
an explanation of when the adjustment will be applied and how this 
adjustment was determined relative to performance scores. Each 
competing HHA will receive its own annual payment adjustment report 
viewable only to that HHA.
    We also proposed a separate, annual, publicly available quality 
report that would provide home health industry stakeholders, including 
providers and suppliers that refer their patients to HHAs, with an 
opportunity to confirm that the beneficiaries they are referring for 
home health services are being provided the best possible quality of 
care available.
    We invited comments on the proposed reporting framework.
    Comment: Some commenters expressed support for the proposed HHVBP 
reporting framework of quarterly/annual reports and public reporting. 
Specifically, one commenter supported CMS in its efforts to provide 
agencies with performance reports and notices of payment change prior 
to the imposition of any payment penalty. One commenter suggested that 
CMS employ a continuous improvement cycle with industry stakeholders to 
maximize the value of the annual publicly available quality reports so 
that information does not mislead beneficiaries. Another commenter 
supported the proposed timeliness with which quarterly reports would be 
made available to HHAs after agency data submission, but expressed 
doubts about CMS's ability to comply with its own proposed timeline for

[[Page 68665]]

releasing quarterly reports. Conversely, a few commenters suggested 
that challenges related to providing updated quarterly reports on 
performance should be considered more fully before implementation. Some 
commenters also suggested that CMS should include in future rulemaking 
how quarterly reconciliation will be implemented. Another commenter 
posited that current reporting timeframes, even if complied with, do 
not give small and rural HHAs enough lead time to improve quality.
    Response: We thank the commenters for their overall support for the 
inclusion of performance reports for all competing HHAs and industry 
stakeholders. In reference to concerns with the timelines for delivery 
of reports, we intend to meet all performance report timeline 
expectations. However, in this final rule, we are revising the 
timelines for notification and preview of the annual payment adjustment 
to remove the references to specific days of the month set forth in the 
proposed rule. This will allow for greater flexibility for the industry 
and CMS to meet these expectations and to account for the possibility 
of a specific day falling on a weekend or holiday. Through technical 
assistance efforts, we will continuously work with all competing-HHAs 
and stakeholders in how these reports are interpreted and reconciled 
and how they may be used to support transformational efforts to deliver 
care within the HHVBP system of incentives.
    Comment: Some comments offered their general support of the HHVBP 
public reporting of performance data because it will inform industry 
stakeholders of quality improvements, and noted several areas of value 
in performance data. Specifically, commenters suggested public reports 
would permit providers to steer patients to high-performing HHAs based 
on quality reports. Commenters offered that to the extent possible, 
accurate comparable data will provide HHAs the ability to improve care 
delivery and patient outcomes, while better predicting and managing 
quality performance and payment updates. These same commenters urged 
CMS to consider the HHA information technology infrastructure needed to 
support complex performance tracking connected with a VBP program. 
Overall, commenters generally encouraged the transparency of data 
pertaining to the HHVBP Model.
    Response: As part of the HHVBP Model, we will provide technical 
assistance and other tools for HHAs in selected states to encourage 
best practices when making changes to improve quality. We anticipate 
that the HHVBP learning network will be an integral part of data 
monitoring and performance related discussion and feedback. As 
indicated in the proposed rule (see 80 FR 39873) we also intend to make 
public competing HHAs' Total Performance Scores with the intention of 
encouraging providers and other stakeholders to utilize quality ranking 
when selecting an HHA.
    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing the reporting framework for 
the HHVBP Model as proposed without modification.

2. Payment Adjustment Timeline

    We proposed to codify in Sec.  484.325 that competing HHAs will be 
subject to upward or downward payment adjustments based on the agency's 
Total Performance Score. We proposed that the model would consist of 5 
performance years, where each performance year would link performance 
to the opportunity and risk for payment adjustment up to an applicable 
percent as defined in proposed Sec.  484.305. The 1st performance year 
would transpire from January 1, 2016 through December 31, 2016, and 
subsequently, all other performance years would be assessed on an 
annual basis through 2020 unless modified through rulemaking. We 
proposed that the first payment adjustment would begin January 1, 2018 
applied to that calendar year based on 2016 performance data. 
Subsequently, all other payment adjustments would be made on an annual 
basis through the conclusion of the model. We proposed that payment 
adjustments would be increased incrementally over the course of the 
model with a maximum payment adjustment of 5-percent (upward or 
downward) in 2018 and 2019, a maximum payment adjustment of 6-percent 
(upward or downward) in 2020, and a maximum payment adjustment of 8-
percent (upward or downward) in 2021 and 2022. We proposed to implement 
this model over a total of seven (7) years beginning on January 1, 
2016, and ending on December 31, 2022.
    After consideration of comments received, we are modifying the 
final payment adjustment percentages as discussed in Section G and 
finalized in Sec.  484.305.
    We proposed that the baseline year would run from January 1, 2015 
through December 31, 2015 and provide a basis from which each 
respective HHA's performance will be measured in each of the 
performance years. Data related to performance on quality measures will 
continue to be provided from the baseline year through the model's 
tenure using a dedicated HHVBP web-based platform specifically designed 
to disseminate data in this model (this ``portal'' will present and 
archive the previously described quarterly and annual quality reports). 
Further, HHAs will provide performance data on the three new quality 
measures discussed in section E5 through this platform as well. Any 
additional measures added through the model's tenure and proposed 
through future rulemaking, will use data from the previous calendar 
year as the baseline.
    We proposed that new market entries (specifically, new competing 
HHAs delivering care in the boundaries of selected states) would also 
be measured from their first full calendar year of services in the 
state, which would be treated as baseline data for subsequent 
performance years under this model. The delivery of services would be 
measured by the number of episodes of care for Medicare beneficiaries 
and used to determine whether an HHA falls into the smaller- or larger-
volume cohort. Furthermore, these new market entries would be competing 
under the HHVBP Model in the first full calendar year following the 
full calendar year baseline period.
    We proposed that HHAs would be notified in advance of their first 
performance level and payment adjustment being finalized, based on the 
2016 performance period (January 1, 2016 to December 31, 2016), with 
their first payment adjustment to be applied January 1, 2018 through 
December 31, 2018. We proposed that each competing HHA would be 
notified of this first pending payment adjustment on August 1, 2017 and 
a preview period would run for 10 days through August 11, 2017. This 
preview period would provide each competing HHA an opportunity to 
reconcile any performance assessment issues relating to the calculation 
of scores prior to the payment adjustment taking effect, in accordance 
with the process in Section H--Preview and Period to Request 
Recalculation. Once the preview period ends, any changes would be 
reconciled and a report finalized no later than November 1, 2017 (or 60 
days prior to the payment adjustment taking affect). As discussed 
further in section H, we are finalizing this proposal with 
modification, to allow for a longer preview period of quarterly 
performance reports and annual payment adjustment reports for all 
competing HHAs. Specifically, we are extending the preview period such 
that each HHA will be notified of the first pending payment adjustment 
in

[[Page 68666]]

August 2017 and followed by a 30-day preview period.
    We proposed that subsequent payment adjustments would be calculated 
based on the applicable full calendar year of performance data from the 
quarterly reports, with competing HHAs notified and payments adjusted, 
respectively, every year thereafter. As a sequential example, the 
second payment adjustment will occur January 1, 2019 based on a full 12 
months of the CY 2017 performance period. Notification of the second 
adjustment will occur in August of 2018, followed by a 30-day preview 
period (under our modifications to the proposed notification and 
preview timeline, as discussed previously) and followed by 
reconciliation prior to November 1, 2018. Subsequent payment 
adjustments will continue to follow a similar timeline and process.
    Beginning in CY 2019, we may consider revising this payment 
adjustment schedule and updating the payment adjustment more frequently 
than once each year if it is determined that a more timely application 
of the adjustment as it relates to performance improvement efforts that 
have transpired over the course of a calendar year would generate 
increased improvement in quality measures. Specifically, we would 
expect that having payment adjustments transpire closer together 
through more frequent performance periods would accelerate improvement 
in quality measures because HHAs would be able to justify earlier 
investments in quality efforts and be incentivized for improvements. In 
effect, this concept may be operationalized to create a smoothing 
effect where payment adjustments are based on overlapping 12-month 
performance periods that occur every 6 months rather than annually. As 
an example, the normal 12-month performance period occurring from 
January 1, 2020 to December 31, 2020 might have an overlapping 12-month 
performance period occurring from July 1, 2020 to June 30, 2021. 
Following the regularly scheduled January 1, 2022 payment adjustments, 
the next adjustments could be applied to payments beginning on July 1, 
2022 through December 31, 2022. Depending on if and when more frequent 
payment adjustments would be applied, performance would be calculated 
based on the applicable 12-months of performance data, HHAs notified, 
and payments adjusted, respectively, every six months thereafter, until 
the conclusion of the model. As a result, separate performance periods 
would have a 6-month overlap through the conclusion of the model. HHAs 
would be notified through rulemaking and be given the opportunity to 
comment on any proposed changes to the frequency of payment 
adjustments.
    We received the following comments on this proposed payment 
adjustment schedule.
    Comment: Many commenters recommended a delay in the payment 
adjustment schedule. One commenter recommended that CMS collect and 
report quality data for 2016 as an educational exercise only, and use 
2017 data as the basis to adjust payment rates beginning in October 
2018. This same commenter also recommended CMS delay the first year of 
rate adjustments by nine months to October 1, 2018. Another commenter 
supported the importance of HHAs in the VBP program not experiencing 
payment adjustments until two years after the performance year in an 
effort to minimize the programmatic impact and allow agencies the 
ability to plan ahead. Several commenters suggested a one year delay in 
implementing the model, citing the timeline as too aggressive. A few 
commenters posited that it is difficult for HHAs in the HHVBP Model to 
begin preparing for the model now without a final rule to guide them, 
and noted concern that the final rule will publish so close to the 
beginning of the model. Some commenters specifically supported payment 
adjustment on an annual basis, positing adjustments made more 
frequently than once each year may jeopardize the financial viability 
of smaller volume providers, causing further disruption, as multiple 
adjustments throughout a fiscal year would be difficult to manage. 
Further, due to the delay in data collection and reporting used in 
these programs, significant change in performance in shorter increments 
would be unlikely, as quality improvement initiatives take time to 
fully implement and for results to be realized. Another commenter 
offered that any move to increase the payment adjustment to every 6 
months would not offer HHAs sufficient time to improve clinician 
practice patterns and evaluate the effectiveness of the changes made.
    Response: We are finalizing the proposed payment adjustment 
timeline for model implementation on an annual basis. Any changes to 
the frequency of payment adjustments under the model would be 
implemented through future rulemaking. In response to concerns with 
having the first performance year tied to an annual payment adjustment 
in 2018, we expect that competing HHAs will begin transforming delivery 
patterns as soon as this model is implemented. Delaying the payment 
adjustment, which is the primary intervention in this model, limits the 
ability to understand the intervention's associated effect on quality. 
We expect that model-specific technical assistance which will be made 
available to all competing-HHAs will provide the appropriate 
information and tools needed to transform how care is delivered within 
the HHVBP Model.
    Comment: Several commenters expressed concern about the time lag 
between the performance year and the year in which payment adjustments 
would be applied and strongly recommended less time lapse between 
performance measurement and payment adjustment. One commenter 
recommended CMS revise the HHVBP Model so that rewards and penalties 
are imposed within 6 months of the end of the measurement period, 
rather than a full year later, and consider imposing the rewards and 
penalties for 6 months at a time, allowing the rates to return to 
normal for the first 6 months of the subsequent year. Another commenter 
offered that this expedited timeframe would allow agencies working 
towards improvement to have the resources available to do so more 
immediately.
    Response: We agree that there may be merit in closing the gap 
between performance measurement and payment adjustments in order to 
more effectively connect improvements in quality care with financial 
incentives. We will closely evaluate the efficacy of the model, and may 
consider whether shorter performance assessment cycles (and by 
extension, shorter payment adjustment cycles) are warranted. Any such 
changes will be implemented through future rulemaking.
    Final Decision: For the reasons discussed, we are finalizing the 
payment adjustment timeline as proposed with modification. 
Specifically, we are finalizing that payment adjustments will be 
increased incrementally over the course of the model with a maximum 
payment adjustment of 3-percent (upward or downward) in 2018, a maximum 
payment adjustment of 5-percent (upward or downward) in 2019, a maximum 
payment adjustment of 6-percent (upward or downward) in 2020, a maximum 
payment adjustment of 7-percent (upward or downward) in 2021, and a 
maximum payment adjustment of 8-percent (upward or downward) in 2022. 
We are also modifying the timeline for notification and preview of the 
pending payment adjustment to allow for greater flexibility and to 
account for the possibility of a specific day falling on a weekend or 
holiday,

[[Page 68667]]

and also to provide a longer preview period for HHAs. Specifically, we 
are extending the preview period such that each HHA will be notified of 
each pending payment adjustment in August of the year prior to the 
payment adjustment being applied and the preview period will run for 30 
days of that year. We also removed specific days of the month 
previously referenced in the proposed rule to allow for greater 
flexibility.

E. Quality Measures

1. Objectives
    We proposed that initially, the measures for the HHVBP Model would 
be predominantly drawn from the current OASIS,\23\ which is familiar to 
the home health industry and readily available for utilization by the 
model. In addition, the HHVBP Model provides us with an opportunity to 
examine a broad array of quality measures that address critical gaps in 
care. A recent comprehensive review of the VBP experience over the past 
decade, sponsored by the Office of the Assistant Secretary for Planning 
and Evaluation (ASPE), identified several near- and long-term 
objectives for HHVBP measures.\24\ The recommended objectives emphasize 
measuring patient outcomes and functional status; appropriateness of 
care; and incentives for providers to build infrastructure to 
facilitate measurement within the quality framework.\25\ The following 
seven objectives derived from this study served as guiding principles 
for the selection of the proposed measures for the HHVBP Model:
---------------------------------------------------------------------------

    \23\ For detailed information on OASIS see the official CMS 
OASIS Web resource available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/OASIS/index.html?redirect=/oasis. See also industry resource available at 
http://www.oasisanswers.com/index.htm, specifically updated OASIS 
component information available at www.oasisanswers.com/LiteratureRetrieve.aspx?ID=215074).
    \24\ U.S. Department of Health and Human Services. Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) (2014) 
Measuring Success in Health Care Value-Based Purchasing Programs. 
Cheryl L. Damberg et al. on behalf of RAND Health.
    \25\ Id.
---------------------------------------------------------------------------

    1. Use a broad measure set that captures the complexity of the HHA 
service provided;
    2. Incorporate the flexibility to include Improving Medicare Post-
Acute Care Transformation (IMPACT) Act of 2014 measures that are cross-
cutting amongst post-acute care settings;
    3. Develop second-generation measures of patient outcomes, health 
and functional status, shared decision making, and patient activation;
    4. Include a balance of process, outcome, and patient experience 
measures;
    5. Advance the ability to measure cost and value;
    6. Add measures for appropriateness or overuse; and,
    7. Promote infrastructure investments.
2. Methodology for Selection of Quality Measures
a. Direct Alignment With National Quality Strategy Priorities
    A central driver of the proposed measure selection process was 
incorporating innovative thinking from the field while simultaneously 
drawing on the most current evidence-based literature and documented 
best practices. Broadly, we proposed measures that have a high impact 
on care delivery and support the combined priorities of HHS and CMS to 
improve health outcomes, quality, safety, efficiency, and experience of 
care for patients. To frame the selection process, we utilized the 
domains described in the CMS Quality Strategy that maps to the six 
National Quality Strategy (NQS) priority areas (see Figure 3 for CMS 
domains).\26\
---------------------------------------------------------------------------

    \26\ The CMS Quality Strategy is discussed in broad terms at URL 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html. CMS 
Domains appear presentations by CMS and ONC (available at http://www.cms.gov/eHealth/downloads/Webinar_eHealth_March25_eCQM101.pdf) 
and a CMS discussion of the NQS Domains can be found at URL http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/2014_ClinicalQualityMeasures.html.

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[[Page 68668]]

[GRAPHIC] [TIFF OMITTED] TR05NO15.004

b. Referenced Quality Measure Authorities
    We proposed at Sec.  484.315 that Medicare-certified HHAs will be 
evaluated using a starter set of quality measures (``starter set'' 
refers to the quality measures for the first year of this model) 
designed to encompass multiple NQS domains, and provide future 
flexibility to incorporate and study newly developed measures over 
time. New and evolving measures will be considered for inclusion in 
subsequent years of this model and proposed through future rulemaking.
    To create the proposed starter set we began researching the current 
set of OASIS measures that are being used within the health home 
environment.\27\ Following that, we searched for endorsed quality 
measures using the National Quality Forum (NQF) Quality Positioning 
System (QPS),\28\ selecting measures that address all possible NQS 
domains. We further examined measures on the CMS-generated Measures 
Under Consideration (MUC) list,\29\ and reviewed other relevant 
measures used within the health care industry, but not currently used 
in the home health setting, as well as measures required by the IMPACT 
Act of 2014. Finally, we searched the National Quality Measures 
Clearinghouse (NQMS) to identify evidence-based measures and measure 
sets.
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    \27\ All data for the starter set measures, not including New 
Measures, is currently collected from HHAs under Sec. Sec.  484.20 
and 484.210.
    \28\ The NQF Quality Positioning System is available at http://www.qualityforum.org/QPS.
    \29\ To review the MUC List see https://www.qualityforum.org/Setting_Priorities/Partnership/Measures_Under_Consideration_List_2014.aspx.
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c. Key Policy Considerations and Data Sources
    So that measures for the HHVBP Model take a more holistic view of 
the patient beyond a particular disease state or care setting, we 
proposed, and are finalizing in this rule, measures, which include 
outcome measures as well as process measures, that have the potential 
to follow patients across multiple settings, reflect a multi-faceted 
approach, and foster the intersection of health care delivery and 
population health. A key consideration behind this approach is to use 
in performance year one (PY1) of the model proven measures that are 
readily available and meet a high impact need, and in subsequent model 
years augment this starter set with innovative measures that have the 
potential to be impactful and fill critical measure gap areas. All 
substantive changes or additions to the starter set or new measures 
would be proposed in future rulemaking. This approach to quality 
measure selection aims to balance the burden of collecting data with 
the inclusion of new and important measures. We carefully considered 
the potential burden on HHAs to report the measure data when developing 
the starter set, and prioritized measures that will draw both from 
claims data and data already collected in OASIS.
    The majority of the measures proposed, as well as the majority of 
measures being finalized, in this model will use OASIS data currently 
being reported to CMS and linked to state-specific CCNs for selected 
states in order to promote consistency and to reduce the data 
collection burden for providers. Utilizing primarily OASIS data will 
allow the model to leverage reporting structures already in place to 
evaluate performance and identify weaknesses in care delivery. This 
model will also afford the opportunity to study measures developed in 
other care settings and new to the home health industry (hereinafter 
referred to as ``New Measures''). Many of the New Measures have been 
used in other health care settings and are readily applicable to the 
home health environment (for example, influenza vaccination coverage 
for health care personnel). The final New Measures for PY1 are 
described in detail below. We proposed, and are finalizing with 
modification, in PY1 to collect data on these New Measures which have 
already been tested for validity, reliability, usability/feasibility, 
and sensitivity in

[[Page 68669]]

other health care settings but have not yet been validated within the 
home health setting. As discussed in further detail under ``E5.New 
Measures,'' we are finalizing three of the four proposed New Measures 
for reporting under this model. HHVBP will study if their use in the 
home health setting meets validity, reliability, usability/feasibility, 
and sensitivity to statistical variations criteria. For PY1, we 
proposed that HHAs could earn points to be included in the Total 
Performance Score (TPS) simply for reporting data on New Measures (see 
Section--Performance Scoring Methodology). To the extent we determine 
that one or more of the New Measures is valid and reliable for the home 
health setting, we will consider in future rulemaking to score 
Medicare-certified HHAs on their actual performance on the measure.
3. Selected Measures
    The initial set of measures proposed for PY1 of the model utilizes 
data collected via OASIS, Medicare claims, HHCAHPS survey data, and 
data reported directly from the HHAs to CMS. We proposed, in total, 10 
process measures and 15 outcome measures (see Figure 4a of the proposed 
rule) plus four New Measures (see Figure 4b of the proposed rule). As 
discussed below, we are finalizing the proposed starter set of measures 
with modification; specifically, under our final policy, there are in 
total six process measures and 15 outcome measures (see Figure 4a of 
this final rule) and three New Measures (see Figure 4b of this final 
rule). Process measures evaluate the rate of HHA use of specific 
evidence-based processes of care based on the evidence available. 
Outcomes measures illustrate the end result of care delivered to HHA 
patients. When available, NQF endorsed measures will be used. This set 
of measures will be subject to change or retirement during subsequent 
model years and revised through the rulemaking process. For example, we 
may propose in future rulemaking to remove one or more of these 
measures if, based on the evidence; we conclude that it is no longer 
appropriate for the model due to its performance being topped-out. We 
will also consider proposing to update the measure set if new measures 
that address gaps within the NQS domains became available. We will also 
consider proposing adjustments to the measure set based on lessons 
learned during the course of the model. For instance, in light of the 
passage of the IMPACT Act of 2014, which mandates the collection and 
use of standardized post-acute care assessment data, we will consider 
proposing in future rulemaking to adopt measures that meet the 
requirements of the IMPACT Act as soon as they became available. 
Provisions of the IMPACT ACT applicable to HHAs will take effect 
beginning CY 2017. Currently, IMPACT measures for home health are in 
the development stage and not available for inclusion in the starter 
set of measures. We requested public comment on the methodology for 
constructing the proposed starter set of quality measures and on the 
proposed selected measures.
    Comment: Many commenters expressed concern at the number of 
measures proposed for use in the model, with the primary concern 
related to the burden placed on HHAs to focus on so many different 
areas at once, as well as the effort required to track and report New 
Measures at the same time. Many commenters suggested decreasing the 
number of measures, particularly process measures, in the starter set 
and expressed the opinion less measures would allow for greater 
targeting of quality improvement.
    Response: We have considered the commenters' suggestions and agree 
that more narrowly focusing the starter set of measures being tested in 
the HHVBP Model may increase the likelihood of HHA success in their 
quality improvement and transformation efforts. In addition, we were 
encouraged by commenters to re-evaluate the proposed starter set of 
measures and specifically include fewer process measures in the final 
starter set. After consideration of these comments we are reducing the 
number of measures in the final starter set. We proposed that the 
starter set would include 25 measures that are currently reported 
through existing systems (in addition to the proposed New Measures). 
Twenty of these proposed measures were process/outcomes measures 
collected on the OASIS or through claims data and five are HHCAHPs. We 
agree with commenters that placing an emphasis on outcome measures over 
process measures determines performance in a way most meaningful to 
patients. For each process measure in the proposed starter set we 
analyzed what specific metrics were being assessed in relation to the 
entire starter set and how close the measure was to being `topped-out' 
based on the most recent available data. Based on these comments and 
for the reasons stated we are reducing the number of process measures 
by four resulting in a final starter set with six process measures, 10 
outcome measures and five HHCAHPS. In addition, we have decreased the 
New Measures from four to three (as discussed later in this section). 
We are not including the following proposed measures in the final 
starter set: Timely Initiation of Care (NQF0526), Pressure Ulcer 
Prevention and Care (NQF0538), Multifactor Fall Risk Assessment 
Conducted for All Patients who can Ambulate (NQF0537), Depression 
assessment conducted (NQF0518), and Adverse Event for Improper 
Medication Administration and/or Side Effects (New Measures).
    Comment: We received some public comments expressing concern that 
all measures in the starter set are not endorsed by NQF.
    Response: We agree that wherever possible NQF-endorsed measures 
should be utilized. When creating the proposed starter set it was our 
policy to utilize an NQF-endorsed measure whenever one was available to 
address a known quality improvement issue in home health. For other 
measures included in the finalized starter set, we are utilizing long-
standing OASIS data components to track quality. As an innovation 
model, it is our intention to closely monitor the quality measures and 
to address any needed adjustments through future rulemaking. In 
addition, the information we learn during this model may, where 
appropriate, be utilized to assist in effective measures gaining 
endorsement within the HH service line.
    Comment: We received a number of public comments citing the 
settlement agreement in Jimmo v. Sebelius and expressing concern with 
the inclusion of five measures related to improvement and articulating 
the importance of including measures related to patient stabilization 
and maintenance.
    Response: We appreciate the feedback on the measures methodology 
and acknowledge that skilled care may be necessary to improve a 
patient's current condition, to maintain the patient's current 
condition, or to prevent or slow further deterioration of the patient's 
condition, as was clarified through the Jimmo settlement. The Jimmo 
settlement agreement, however, pertains only to the clarification of 
CMS's manual guidance on coverage standards, not payment measures, and 
expressly does not pertain to or prevent the implementation of new 
regulations, including new regulations pertaining to the HHVBP Model. 
While we considered using some of the stabilization measures for this 
model, we found that in contrast to the average HHA improvement measure 
scores which ranged from 56- to 65-percent, the average HHA 
stabilization measure scores ranged from 94- to 96-percent. Using 
measures where the average rates are nearly 100-percent would not allow

[[Page 68670]]

for meaningful comparisons between competing-HHAs on the quality of 
care delivered. In addition, we performed analyses on whether the 
proportion of an individual HHA's episodes of care relating to ``low 
therapy'' episodes (episodes with 0-5 therapy visits) and the 
proportion of an individual HHA's total therapy visits relating to 
maintenance therapy would have an impact on the measures related to 
improvement used in the model. HHAs that have a higher proportion of 
patients that require maintenance therapy or patients that receive 
little to no therapy at all would not be expected to perform well on 
the measures related to improvement. Although the functional measures 
related to improvement are expected to be sensitive to the provision of 
therapy, our analysis did not determine that HHAs' performance on the 
measures related to improvement were negatively impacted by whether 
they had a higher proportion of maintenance therapy patients or a 
higher proportion of patients that had little to no therapy.
    Based on these two analyses, CMS expects that, at this time, HHAs 
that provide care to more beneficiaries that are maintenance-oriented 
will not be at a disadvantage in the model. We also do not expect any 
access issues for beneficiaries that have more maintenance needs 
because HHAs would not know whether the beneficiary has restorative or 
maintenance needs until the HHA initiates the episode of care and 
conducts the necessary assessments. Once the initial OASIS assessment 
is complete, the beneficiary will be included in measure calculation.
    We are finalizing the measures related to improvement as proposed 
in the proposed rule, however, we are sensitive to this issue and will 
closely monitor whether HHVBP Model-specific measures have the 
potential to impact beneficiaries that require skilled care to maintain 
the patient's current condition, or to prevent or slow further 
deterioration of the patient's condition. If necessary, we will use 
future rulemaking if we determine that this issue has a meaningful 
detrimental effect on payments of those HHAs that provide more 
maintenance care. In addition, we are currently working on the 
development of valid and reliable stabilization measures that may be 
incorporated into the HHVBP Model in the future. One stabilization 
measure is referenced in Table 20 `Future Setting-specific Measure 
Constructs under Consideration'. The HHVBP Model is designed such that 
any measures determined to be good indicators of quality will be 
considered for use in the HHVBP Model in future years and may be added 
through the rulemaking process.
    Comment: Although CMS received general support for the use of OASIS 
data, some commenters expressed concern with OASIS issues related to 
data validation or with the use of certain OASIS data elements as the 
basis for measuring quality.
    Response: We appreciate the comments on this issue and are 
committed to balancing concerns related to provider burden with 
concerns related to data validation and accurate reporting of 
information to CMS via OASIS. In designing the HHVBP Model, we 
intentionally crafted a starter set of measures to minimize burden. 
Specifically, the majority of measures rely on OASIS data already 
reported by HHAs. In response to a 2012 report issued by the Office of 
the Inspector General,\30\ CMS affirmed a series of monitoring 
activities related to OASIS education, training and also updated the 
HHA surveyor worksheet related to HHA OASIS compliance. As part of the 
monitoring and evaluation of this model CMMI will utilize CMS best 
practices for determining the validity of OASIS data and detecting 
fraud related to data submission. Should validation concerns arise, 
CMMI may consider implementing data validation processes. The model 
will closely monitor reported measures for indications of fraud and CMS 
will propose any changes to the model as needed in future rulemaking.
---------------------------------------------------------------------------

    \30\ Cite for OIG report here.
---------------------------------------------------------------------------

    Comment: A few commenters expressed specific concern that measures 
in the starter set will be duplicative of, or will not take into 
account the future measures implemented under the IMPACT Act, and 
suggested consciously aligning the HHVBP starter set with the IMPACT 
Act as it is implemented.
    Response: We agree the HHVBP measure set should be in alignment 
with the IMPACT Act. As stated in the HHVBP proposed rule and finalized 
here, as soon as new IMPACT measures are finalized and approved, we 
will consider how best to incorporate and align IMPACT Act measures 
with the HHVBP measure in future rulemaking. As an example, once 
baseline data is available for NQF #0678 `pressure ulcers' which will 
be implemented in CY 2016, we will consider using this measure in 
future years through rulemaking.
    Comment: One commenter recommended eliminating all vaccine-related 
measures, as vaccines are not the primary focus of home health care. 
The commenter stated that the use of vaccine-related measures creates 
misalignment between patient centered principles and HHA financial 
incentives.
    Response: We have included two immunization measures in the starter 
set that are NQF-endorsed as preventive services measures and already 
collected by home health agencies. These measures are the pneumococcal 
vaccine and the influenza vaccines for HHA beneficiaries. The 
immunization measures that are New Measures, the shingles vaccine and 
influenza vaccines for HHA staff, under the final HHVBP Model serve 
important public health functions. The New Measure for influenza 
vaccination for HHA staff is a well-established scientific principle as 
being a sound mechanism for protecting vulnerable patient populations 
from avoidable disease transmission. In addition, this New Measure is 
utilized in every care setting except home health, and is intended to 
close the gap in protection. The Shingles vaccination is the other New 
Measure utilizing immunizations, and its efficacy in either preventing 
shingles entirely or reducing the pain symptoms associated with 
shingles is directly related to improvement of patient quality of life. 
The measurements related to vaccination are not connected to whether a 
patient does or does not receive the vaccinations. Patients are free to 
decline vaccinations and competing HHAs are not financially penalized 
for the patient's choice.
    Final Decision: For the reasons discussed and in consideration of 
the comments received we are not finalizing the following proposed 
measures:
     Timely Initiation of Care (NQF0526)
     Pressure Ulcer Prevention and Care (NQF0538)
     Multifactor Fall Risk Assessment Conducted for All 
Patients Who Can Ambulate (NQF0537)
     Depression assessment conducted (NQF0518)
     Adverse Event for Improper Medication Administration and/
or Side Effects (New Measure)
    We are finalizing the remaining quality measures as proposed. The 
final starter set includes 6 process measures, 10 outcome measures and 
5 HHCAHPS, and three New Measures.
    The final PY1 measures are presented in the following figures.

[[Page 68671]]



                                                           Figure 4a: Final PY1 Measures \31\
--------------------------------------------------------------------------------------------------------------------------------------------------------
           NQS Domains               Measure title       Measure type         Identifier          Data source          Numerator          Denominator
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clinical Quality of Care........  Improvement in      Outcome...........  NQF0167...........  OASIS (M1860).....  Number of home      Number of home
                                   Ambulation-                                                                     health episodes     health episodes
                                   Locomotion.                                                                     of care where the   of care ending
                                                                                                                   value recorded on   with a discharge
                                                                                                                   the discharge       during the
                                                                                                                   assessment          reporting period,
                                                                                                                   indicates less      other than those
                                                                                                                   impairment in       covered by
                                                                                                                   ambulation/         generic or
                                                                                                                   locomotion at       measure-specific
                                                                                                                   discharge than at   exclusions.
                                                                                                                   the start (or
                                                                                                                   resumption) of
                                                                                                                   care.
Clinical Quality of Care........  Improvement in Bed  Outcome...........  NQF0175...........  OASIS (M1850).....  Number of home      Number of home
                                   Transferring.                                                                   health episodes     health episodes
                                                                                                                   of care where the   of care ending
                                                                                                                   value recorded on   with a discharge
                                                                                                                   the discharge       during the
                                                                                                                   assessment          reporting period,
                                                                                                                   indicates less      other than those
                                                                                                                   impairment in bed   covered by
                                                                                                                   transferring at     generic or
                                                                                                                   discharge than at   measure-specific
                                                                                                                   the start (or       exclusions.
                                                                                                                   resumption) of
                                                                                                                   care.
Clinical Quality of Care........  Improvement in      Outcome...........  NQF0174...........  OASIS (M1830).....  Number of home      Number of home
                                   Bathing.                                                                        health episodes     health episodes
                                                                                                                   of care where the   of care ending
                                                                                                                   value recorded on   with a discharge
                                                                                                                   the discharge       during the
                                                                                                                   assessment          reporting period,
                                                                                                                   indicates less      other than those
                                                                                                                   impairment in       covered by
                                                                                                                   bathing at          generic or
                                                                                                                   discharge than at   measure-specific
                                                                                                                   the start (or       exclusions.
                                                                                                                   resumption) of
                                                                                                                   care.
Clinical Quality of Care........  Improvement in      Outcome...........  NA................  OASIS (M1400).....  Number of home      Number of home
                                   Dyspnea.                                                                        health episodes     health episodes
                                                                                                                   of care where the   of care ending
                                                                                                                   discharge           with a discharge
                                                                                                                   assessment          during the
                                                                                                                   indicates less      reporting period,
                                                                                                                   dyspnea at          other than those
                                                                                                                   discharge than at   covered by
                                                                                                                   start (or           generic or
                                                                                                                   resumption) of      measure-specific
                                                                                                                   care.               exclusions.
Communication & Care              Discharged to       Outcome...........  NA................  OASIS (M2420).....  Number of home      Number of home
 Coordination.                     Community.                                                                      health episodes     health episodes
                                                                                                                   where the           of care ending
                                                                                                                   assessment          with discharge or
                                                                                                                   completed at the    transfer to
                                                                                                                   discharge           inpatient
                                                                                                                   indicates the       facility during
                                                                                                                   patient remained    the reporting
                                                                                                                   in the community    period, other
                                                                                                                   after discharge.    than those
                                                                                                                                       covered by
                                                                                                                                       generic or
                                                                                                                                       measure-specific
                                                                                                                                       exclusions.
Communication & Care              Care Management:    Process...........  NA................  OASIS (M2102).....  Multiple data       Multiple data
 Coordination.                     Types and Sources                                                               elements.           elements.
                                   of Assistance.
Efficiency & Cost Reduction.....  Acute Care          Outcome...........  NQF0171...........  CCW (Claims)......  Number of home      Number of home
                                   Hospitalization:                                                                health stays for    health stays that
                                   Unplanned                                                                       patients who have   begin during the
                                   Hospitalization                                                                 a Medicare claim    12-month
                                   during first 60                                                                 for an admission    observation
                                   days of Home                                                                    to an acute care    period. A home
                                   Health.                                                                         hospital in the     health stay is a
                                                                                                                   60 days following   sequence of home
                                                                                                                   the start of the    health payment
                                                                                                                   home health stay.   episodes
                                                                                                                                       separated from
                                                                                                                                       other home health
                                                                                                                                       payment episodes
                                                                                                                                       by at least 60
                                                                                                                                       days.
Efficiency & Cost Reduction.....  Emergency           Outcome...........  NQF0173...........  CCW (Claims)......  Number of home      Number of home
                                   Department Use                                                                  health stays for    health stays that
                                   without                                                                         patients who have   begin during the
                                   Hospitalization.                                                                a Medicare claim    12-month
                                                                                                                   for outpatient      observation
                                                                                                                   emergency           period. A home
                                                                                                                   department use      health stay is a
                                                                                                                   and no claims for   sequence of home
                                                                                                                   acute care          health payment
                                                                                                                   hospitalization     episodes
                                                                                                                   in the 60 days      separated from
                                                                                                                   following the       other home health
                                                                                                                   start of the home   payment episodes
                                                                                                                   health stay.        by at least 60
                                                                                                                                       days.
Patient Safety..................  Improvement in      Outcome...........  NQF0177...........  OASIS (M1242).....  Number of home      Number of home
                                   Pain Interfering                                                                health episodes     health episodes
                                   with Activity.                                                                  of care where the   of care ending
                                                                                                                   value recorded on   with a discharge
                                                                                                                   the discharge       during the
                                                                                                                   assessment          reporting period,
                                                                                                                   indicates less      other than those
                                                                                                                   frequent pain at    covered by
                                                                                                                   discharge than at   generic or
                                                                                                                   the start (or       measure-specific
                                                                                                                   resumption) of      exclusions.
                                                                                                                   care.
Patient Safety..................  Improvement in      Outcome...........  NQF0176...........  OASIS (M2020).....  Number of home      Number of home
                                   Management of                                                                   health episodes     health episodes
                                   Oral Medications.                                                               of care where the   of care ending
                                                                                                                   value recorded on   with a discharge
                                                                                                                   the discharge       during the
                                                                                                                   assessment          reporting period,
                                                                                                                   indicates less      other than those
                                                                                                                   impairment in       covered by
                                                                                                                   taking oral         generic or
                                                                                                                   medications         measure-specific
                                                                                                                   correctly at        exclusions.
                                                                                                                   discharge than at
                                                                                                                   start (or
                                                                                                                   resumption) of
                                                                                                                   care.

[[Page 68672]]

 
Patient Safety..................  Prior Functioning   Outcome...........  NQF0430...........  OASIS (M1900).....  The number (or      All patients in a
                                   ADL/IADL.                                                                       proportion) of a    risk adjusted
                                                                                                                   clinician's         diagnostic
                                                                                                                   patients in a       category with a
                                                                                                                   particular risk     Daily Activity
                                                                                                                   adjusted            goal for an
                                                                                                                   diagnostic          episode of care.
                                                                                                                   category who meet   Cases to be
                                                                                                                   a target            included in the
                                                                                                                   threshold of        denominator could
                                                                                                                   improvement in      be identified
                                                                                                                   Daily Activity      based on ICD-9
                                                                                                                   (that is, ADL and   codes or
                                                                                                                   IADL) functioning.  alternatively,
                                                                                                                                       based on CPT
                                                                                                                                       codes relevant to
                                                                                                                                       treatment goals
                                                                                                                                       focused on Daily
                                                                                                                                       Activity
                                                                                                                                       function.
Population/Community Health.....  Influenza Vaccine   Process...........  NA................  OASIS (M1041).....  NA................  NA.
                                   Data Collection
                                   Period: Does this
                                   episode of care
                                   include any dates
                                   on or between
                                   October 1 and
                                   March 31?
Population/Community Health.....  Influenza           Process...........  NQF0522...........  OASIS (M1046).....  Number of home      Number of home
                                   Immunization                                                                    health episodes     health episodes
                                   Received for                                                                    during which        of care ending
                                   Current Flu                                                                     patients (a)        with discharge,
                                   Season.                                                                         Received            or transfer to
                                                                                                                   vaccination from    inpatient
                                                                                                                   the HHA or (b)      facility during
                                                                                                                   had received        the reporting
                                                                                                                   vaccination from    period, other
                                                                                                                   HHA during          than those
                                                                                                                   earlier episode     covered by
                                                                                                                   of care, or (c)     generic or
                                                                                                                   was determined to   measure-specific
                                                                                                                   have received       exclusions.
                                                                                                                   vaccination from
                                                                                                                   another provider.
Population/Community Health.....  Pneumococcal        Process...........  NQF0525...........  OASIS (M1051).....  Number of home      Number of home
                                   Polysaccharide                                                                  health episodes     health episodes
                                   Vaccine Ever                                                                    during which        of care ending
                                   Received.                                                                       patients were       with discharge or
                                                                                                                   determined to       transfer to
                                                                                                                   have ever           inpatient
                                                                                                                   received            facility during
                                                                                                                   Pneumococcal        the reporting
                                                                                                                   Polysaccharide      period, other
                                                                                                                   Vaccine (PPV).      than those
                                                                                                                                       covered by
                                                                                                                                       generic or
                                                                                                                                       measure-specific
                                                                                                                                       exclusions.
Population/Community Health.....  Reason              Process...........  NA................  OASIS (M1056).....  NA................  NA.
                                   Pneumococcal
                                   vaccine not
                                   received.
Clinical Quality of Care........  Drug Education on   Process...........  NA................  OASIS (M2015).....  Number of home      Number of home
                                   All Medications                                                                 health episodes     health episodes
                                   Provided to                                                                     of care during      of care ending
                                   Patient/Caregiver                                                               which patient/      with a discharge
                                   during all                                                                      caregiver was       or transfer to
                                   Episodes of Care.                                                               instructed on how   inpatient
                                                                                                                   to monitor the      facility during
                                                                                                                   effectiveness of    the reporting
                                                                                                                   drug therapy, how   period, other
                                                                                                                   to recognize        than those
                                                                                                                   potential adverse   covered by
                                                                                                                   effects, and how    generic or
                                                                                                                   and when to         measure-specific
                                                                                                                   report problems     exclusions.
                                                                                                                   (since the
                                                                                                                   previous OASIS
                                                                                                                   assessment).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Home Health CAHPS: Satisfaction Survey Measures
--------------------------------------------------------------------------------------------------------------------------------------------------------
Patient & Caregiver-Centered      Care of Patients..  Outcome...........  ..................  CAHPS.............  NA................  NA.
 Experience.
Patient & Caregiver-Centered      Communications      Outcome...........  ..................  CAHPS.............  NA................  NA.
 Experience.                       between Providers
                                   and Patients.
Patient & Caregiver-Centered      Specific Care       Outcome...........  ..................  CAHPS.............  NA................  NA.
 Experience.                       Issues.
Patient & Caregiver-Centered      Overall rating of   Outcome...........  ..................  CAHPS.............  NA................  NA.
 Experience.                       home health care
                                   and.
Patient & Caregiver-Centered      Willingness to      Outcome...........  ..................  CAHPS.............  NA................  NA.
 Experience.                       recommend the
                                   agency.
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

    \31\ For more detailed information on the proposed measures 
utilizing OASIS refer to the OASIS-C1/ICD-9, Changed Items & Data 
Collection Resources dated September 3, 2014 available at 
www.oasisanswers.com/LiteratureRetrieve.aspx?ID=215074. For NQF 
endorsed measures see The NQF Quality Positioning System available 
at http://www.qualityforum.org/QPS. For non-NQF measures using OASIS 
see links for data tables related to OASIS measures at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html. For 
information on HHCAHPS measures see https://homehealthcahps.org/SurveyandProtocols/SurveyMaterials.aspx.

[[Page 68673]]



                                                            Figure 4b--Final PY1 New Measures
--------------------------------------------------------------------------------------------------------------------------------------------------------
           NQS domains               Measure title       Measure type         Identifier          Data source          Numerator          Denominator
--------------------------------------------------------------------------------------------------------------------------------------------------------
Population/Community Health.....  Influenza           Process...........  NQF0431 (Used in    Reported by HHAs    Healthcare          Number of
                                   Vaccination                             other care          through Web         personnel in the    healthcare
                                   Coverage for Home                       settings, not       Portal.             denominator         personnel who are
                                   Health Care                             Home Health).                           population who      working in the
                                   Personnel.                                                                      during the time     healthcare
                                                                                                                   from October 1      facility for at
                                                                                                                   (or when the        least 1 working
                                                                                                                   vaccine became      day between
                                                                                                                   available)          October 1 and
                                                                                                                   through March 31    March 31. of the
                                                                                                                   of the following    following year,
                                                                                                                   year: (a)           regardless of
                                                                                                                   received an         clinical
                                                                                                                   influenza           responsibility or
                                                                                                                   vaccination         patient contact.
                                                                                                                   administered at
                                                                                                                   the healthcare
                                                                                                                   facility, or
                                                                                                                   reported in
                                                                                                                   writing or
                                                                                                                   provided
                                                                                                                   documentation
                                                                                                                   that influenza
                                                                                                                   vaccination was
                                                                                                                   received
                                                                                                                   elsewhere: or (b)
                                                                                                                   were determined
                                                                                                                   to have a medical
                                                                                                                   contraindication/
                                                                                                                   condition of
                                                                                                                   severe allergic
                                                                                                                   reaction to eggs
                                                                                                                   or to other
                                                                                                                   components of the
                                                                                                                   vaccine or
                                                                                                                   history of
                                                                                                                   Guillain-Barre
                                                                                                                   Syndrome within 6
                                                                                                                   weeks after a
                                                                                                                   previous
                                                                                                                   influenza
                                                                                                                   vaccination; or
                                                                                                                   (c) declined
                                                                                                                   influenza
                                                                                                                   vaccination; or
                                                                                                                   (d) persons with
                                                                                                                   unknown
                                                                                                                   vaccination
                                                                                                                   status or who do
                                                                                                                   not otherwise
                                                                                                                   meet any of the
                                                                                                                   definitions of
                                                                                                                   the above-
                                                                                                                   mentioned
                                                                                                                   numerator
                                                                                                                   categories.
Population/Community Health.....  Herpes zoster       Process...........  NA................  Reported by HHAs    Total number of     Total number of
                                   (Shingles)                                                  through Web         Medicare            Medicare
                                   vaccination: Has                                            Portal.             beneficiaries       beneficiaries
                                   the patient ever                                                                aged 60 years and   aged 60 years and
                                   received the                                                                    over who report     over receiving
                                   shingles                                                                        having ever         services from the
                                   vaccination?                                                                    received zoster     HHA.
                                                                                                                   vaccine (shingles
                                                                                                                   vaccine).
Communication & Care              Advance Care Plan.  Process...........  NQF0326...........  Reported by HHAs    Patients who have   All patients aged
 Coordination.                                                                                 through Web         an advance care     65 years and
                                                                                               Portal.             plan or surrogate   older.
                                                                                                                   decision maker
                                                                                                                   documented in the
                                                                                                                   medical record or
                                                                                                                   documentation in
                                                                                                                   the medical
                                                                                                                   record that an
                                                                                                                   advanced care
                                                                                                                   plan was
                                                                                                                   discussed but the
                                                                                                                   patient did not
                                                                                                                   wish or was not
                                                                                                                   able to name a
                                                                                                                   surrogate
                                                                                                                   decision maker or
                                                                                                                   provide an
                                                                                                                   advance care plan.
--------------------------------------------------------------------------------------------------------------------------------------------------------

4. Additional Information on HHCAHPS
    Figure 5 provides details on the elements of the Home Health Care 
Consumer Assessment of Healthcare Providers and Systems Survey 
(HHCAHPS) we proposed, and are finalizing, to include in the PY1 
starter set. The HHVBP Model will not alter the HHCAHPS current scoring 
methodology or the participation requirements in any way. Details on 
participation requirements for HHCAHPS can be found at 42 CFR 484.250 
\32\ and details on HHCAHPS scoring methodology are available at; 
https://homehealthcahps.org/SurveyandProtocols/SurveyMaterials.aspx.\33\
---------------------------------------------------------------------------

    \32\ 76 FR 68606, Nov. 4, 2011, as amended at 77 FR 67164, Nov. 
8, 2012; 79 FR 66118, Nov. 6, 2014.
    \33\ Detailed scoring information is contained in the Protocols 
and Guidelines manual posted on the HHCAHPS Web site and available 
at https://homehealthcahps.org/Portals/0/PandGManual_NOAPPS.pdf.

 Figure 5--Home Health Care Consumer Assessment of Healthcare Providers
                 and Systems Survey (HHCAHPS) Composites
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                   Care of Patients                         Response
                                                           Categories
------------------------------------------------------------------------
Q9. In the last 2 months of care, how often did home   Never, Sometimes,
 health providers from this agency seem informed and    Usually, Always.
 up-to-date about all the care or treatment you got
 at home?
Q16. In the last 2 months of care, how often did home  Never, Sometimes,
 health providers from this agency treat you as         Usually, Always.
 gently as possible?
Q19. In the last 2 months of care, how often did home  Never, Sometimes,
 health providers from this agency treat you with       Usually, Always.
 courtesy and respect?
Q24. In the last 2 months of care, did you have any    Yes, No.
 problems with the care you got through this agency?
------------------------------------------------------------------------

[[Page 68674]]

 
     Communications Between Providers & Patients            Response
                                                           Categories
------------------------------------------------------------------------
Q2. When you first started getting home health care    Yes, No.
 from this agency, did someone from the agency tell
 you what care and services you would get?
Q15. In the past 2 months of care, how often did home  Never, Sometimes,
 health providers from this agency keep you informed    Usually, Always.
 about when they would arrive at your home?
Q17. In the past 2 months of care, how often did home  Never, Sometimes,
 health providers from this agency explain things in    Usually, Always.
 a way that was easy to understand?
Q18. In the past 2 months of care, how often did home  Never, Sometimes,
 health providers from this agency listen carefully     Usually, Always.
 to you?
Q22. In the past 2 months of care, when you contacted  Yes, No.
 this agency's office did you get the help or advice
 you needed?
Q23. When you contacted this agency's office, how      Same day; 1 to 5
 long did it take for you to get the help or advice     days; 6 to 14
 you needed?                                            days; More than
                                                        14 days.
------------------------------------------------------------------------
                 Specific Care Issues                       Response
                                                           Categories
------------------------------------------------------------------------
Q3. When you first started getting home health care    Yes, No.
 from this agency, did someone from the agency talk
 with you about how to set up your home so you can
 move around safely?
Q4. When you started getting home health care from     Yes, No.
 this agency, did someone from the agency talk with
 you about all the prescription medicines you are
 taking?
Q5. When you started getting home health care from     Yes, No.
 this agency, did someone from the agency ask to see
 all the prescription medicines you were taking?
Q10. In the past 2 months of care, did you and a home  Yes, No.
 health provider from this agency talk about pain?
Q12. In the past 2 months of care, did home health     Yes, No.
 providers from this agency talk with you about the
 purpose for taking your new or changed prescription
 medicines?
Q13. In the last 2 months of care, did home health     Yes, No.
 providers from this agency talk with you about when
 to take these medicines?
Q14. In the last 2 months of care, did home health     Yes, No.
 providers from this agency talk with you about the
 important side effects of these medicines?
------------------------------------------------------------------------
                 Global type Measures                       Response
                                                           Categories
------------------------------------------------------------------------
Q20. What number would you use to rate your care from  Use a rating
 this agency's home health providers?                   scale (0-10) (0
                                                        is worst, 10 is
                                                        best).
Q25. Would you recommend this agency to your family    Definitely no;
 or friends if they needed home health care?            Probably no;
                                                        Probably yes;
                                                        Definitely yes.
------------------------------------------------------------------------

5. New Measures
    As discussed in the proposed rule and the previous section of this 
final rule, the New Measures we proposed are not currently reported by 
Medicare-certified HHAs to CMS, but we believe fill gaps in the NQS 
Domains not completely covered by existing measures in the home health 
setting. We proposed that all competing HHAs in selected states, 
regardless of cohort size or number of episodes, will be required to 
submit data on the New Measures for all Medicare beneficiaries to whom 
they provide home health services within the state (unless an exception 
applies). We proposed at Sec.  484.315(b) that competing HHAs would be 
required to report data on these New Measures. Competing HHAs will 
submit New Measure data through a dedicated HHVBP web-based platform. 
This web-based platform will function as a means to collect and 
distribute information from and to competing HHAs. Also, for those HHAs 
with a sufficient number of episodes of care to be subject to a payment 
adjustment, New Measures scores included in the final TPS for PY1 are 
only based on whether the HHA has submitted data to the HHVBP web-based 
platform or not. We proposed the following New Measures for competing 
HHAs:
     Advance Care Planning;
     Adverse Event for Improper Medication Administration and/
or Side Effects;
     Influenza Vaccination Coverage for Home Health Care 
Personnel; and,
     Herpes Zoster (Shingles) Vaccination received by HHA 
patients.
    For the reasons explained below and in consideration of the 
comments received, we are not including the proposed ``Adverse Event 
for Improper Medication Administration and/or Side Effects'' as one of 
the final New Measures. We are finalizing the other three proposed New 
Measures without modification.
a. Advance Care Planning
    Advance Care Planning is an NQF-endorsed process measure in the NQS 
domain of Person- and Caregiver-centered experience and outcomes (see 
Figure 3). This measure is currently endorsed at the group practice/
individual clinician level of analysis. We believe its adoption under 
the HHVBP Model represents an opportunity to study this measure in the 
home health setting. This is an especially pertinent measure for home 
health care to confirm that the wishes of the patient regarding their 
medical, emotional, or social needs are met across care settings. The 
Advance Care Planning measure will focus on Medicare beneficiaries, 
including dually-eligible beneficiaries.
    We proposed that the measure would be numerically expressed by a 
ratio whose numerator and denominator are as follows:
    Numerator: The measure would calculate the percentage of patients 
age 65 years and older served by the HHA that have an advance care plan 
or

[[Page 68675]]

surrogate decision maker \34\ documented in the clinical record or 
documentation in the clinical record that an advance care plan was 
discussed, but the patient did not wish or was not able to name a 
surrogate decision maker or provide an advance care plan.
---------------------------------------------------------------------------

    \34\ A surrogate decision maker, also known as a health care 
proxy or agent, advocates for patients who are unable to make 
decisions or speak for themselves about personal health care such 
that someone else must provide direction in decision-making, as the 
surrogate decision-maker.
---------------------------------------------------------------------------

    Denominator: All patients aged 65 years and older admitted to the 
HHA.
    Advance care planning provides that the health care plan is 
consistent with the patient's wishes and preferences. Therefore, 
studying this measure within the HHA environment allows for further 
analysis of planning for the ``what ifs'' that may occur during the 
patient's lifetime. In addition, the use of this measure is expected to 
result in an increase in the number of patients with advance care 
plans. Increased advance care planning among the elderly is expected to 
result in enhanced patient autonomy and reduced hospitalizations and 
in-hospital deaths.\35\
---------------------------------------------------------------------------

    \35\ Lauren Hersch Nicholas, Ph.D., MPP et al. Regional 
Variation in the Association Between Advance Directives and End-of-
Life Medicare Expenditures. JAMA. 2011;306(13):1447-1453. 
doi:10.1001/jama.2011.1410.
---------------------------------------------------------------------------

    We invited comments on this proposed measure.
    Comment: Some commenters expressed support for the inclusion of the 
advance care directive quality measure in the HHVBP Model as an 
important step towards advancing the needs and wishes of Medicare 
beneficiaries and improving care near the end of life. One commenter 
suggested CMS should collect data separately for advance care plans and 
for surrogate decision makers, since they should not be considered to 
be alternatives to each other and suggested breaking this one measure 
into two new separate measures. Another commenter recommended that 
information collected for Advanced Care Planning be compliant with the 
standard at Sec.  484.10(c)(ii), in which the HHA must inform and 
distribute written information to the patient, in advance, concerning 
its policies on advance directives, including a description of 
applicable state law.
    Response: HHAs are already required to comply with Conditions of 
Participation as codified in Sec.  484.10(c)(1)(ii) regarding patient 
rights and participation in this model in no way alters those 
regulatory obligations for participating HHAs. We will analyze the data 
collected for this New Measure and based on this analysis determine if 
we need to modify the measure in future rulemaking. We also note that 
standard practices for developing advance care plans integrate 
selection of surrogate decision making into the plan, so if and when a 
surrogate is needed they are readily made aware of the patient's wishes 
as articulated in the care plan.
    Comment: One commenter did not support adoption of an Advance Care 
Planning measure and stated that an HHA should not be given an 
incentive to make the patient acquire an advanced directive. The 
commenter also asserted that Advance Care Planning is better suited for 
long-term care relationships and that advance directive compliance is 
already assessed at the HHA level. The commenter expressed concern that 
the Advance Care Planning measure shows a preference for living wills 
instead of working through a process to create an advance care plan.
    Response: Advance Care Plans are fundamentally different than 
advanced directives (also referred to as living wills.) The basis for 
an Advance Care Plan is ongoing communication with health providers, 
family members, and potential surrogate decision makers; they are not 
focused exclusively on end of life or life threatening conditions. 
Advance Care Plans ensure patient centered care by providing an 
opportunity for health care providers and patients to identify how a 
patient would like to be cared for when a medical crisis makes it 
difficult or impossible to make their own healthcare decisions.
    Comment: Commenters suggested that this metric, and the reporting 
on all New Measures be delayed until CY2017 and that it be included 
within OASIS for data collection due to the complexity of the question 
and its multiple parts.
    Response: Based on the comments we received from HHAs to delay the 
reporting requirement for New Measures, including Advance Care 
Planning, we are modifying our proposal to require HHAs to submit the 
first round of data on this and the other New Measures no later than 
October 7, 2016 for the period July 2016 through September 2016. In 
response to the recommendation that we incorporate this measure into 
OASIS before including it in the Model, part of the purpose of testing 
this measure in the HH setting is to make informed decisions based on 
newly available data analysis prior to recommending that this measure 
be incorporated into measures that all HHAs are required to report.
    Comment: Some commenters expressed concern that the Advance Care 
Planning Measure does not clearly state that the patient does not have 
to complete the advance care plan. In addition, some commenters wrote 
that the measure creates an incentive to pressure patients to do so. A 
few commenters requested CMS make regulations and policy guidance on 
the Advance Care Planning measure to more strongly clarify that the 
well-being and autonomy of the individual patient is the primary 
concern, not cost savings for the government.
    Response: Beneficiaries are free to make their own decisions 
related to their participation in their care, and this measure 
ascertains that providers provide information and opportunity to the 
patient so they can engage in planning their own care. The intent of 
the measure is to provide education and guidance to the beneficiaries, 
not to pressure them regarding this measure. We will provide robust 
technical assistance for HHAs related to this new measure, including 
necessary tools and information for ensuring autonomous decision making 
on the part of the patient.
    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing this New Measure as proposed, 
with the modification that HHAs will be required to begin reporting 
data no later than October 7, 2016 for the period July 2016 through 
September 2016 and quarterly thereafter. As a result, the first 
quarterly performance report in July 2016 will not account for any of 
the New Measures.
b. Adverse Event for Improper Medication Administration and/or Side 
Effects
    We proposed an Adverse Event for Improper Medication Administration 
and/or Side Effects measure that aligns with the NQS domain of Safety 
(specifically ``medication safety''--see Figure 3) with the goal of 
making care safer by reducing harm caused in the delivery of care. The 
National Quality Forum included ADEs as a Serious Reportable Event 
(SRE) in the category of Care Management, defining said event as a 
``patient death or serious injury associated with a medication error 
(for example, errors involving the wrong drug, wrong dose, wrong 
patient, wrong time, wrong rate, wrong preparation, or wrong route of 
administration),'' noting that ``. . . the high rate of medication 
errors resulting in injury and death makes this event important to 
endorse again.'' \36\ We refer

[[Page 68676]]

readers to the CY 2016 HH PPS proposed rule for more detail on this 
proposed measure (80 FR 39883 through 39884).
---------------------------------------------------------------------------

    \36\ National Quality Forum, Serious Reportable Events in 
Healthcare-2011, at 9. (2011), available at: http://www.qualityforum.org/Publications/2011/12/Serious_Reportable_Events_in_Healthcare_2011.aspx.
---------------------------------------------------------------------------

    We invited comments on the Adverse Drug Events measure.
    Comment: Many commenters noted the duplication between this 
proposed New Measure and an existing OASIS adverse event outcome 
measure, ``Emergent Care for Improper Medication Administration, 
Medication Side Effects''. A commenter recommended substituting the 
proposed New Measure titled Adverse Event for Improper Medication 
Administration and/or Side Effects with the current measure called 
``Potentially Avoidable Event Outcome titled Emergent Care for Improper 
Medication Administration, Medication Side Effects'' generated using 
OASIS data. In addition, commenters generally did not support inclusion 
of the ADE metric as part of HHVBP because: HHA staff are not typically 
trained to positively identify ADEs, which are often complex; ADEs 
often only become apparent after further care; the complexity of ADEs 
means they are often not identified on discharge paperwork, meaning 
that more effort would be required to identify ADEs and less vigilant 
HHAs would be rewarded for not inputting information; and drug 
education metrics are already part of home health compare and in OASIS 
data. One commenter expressed concern that ADE measure could create a 
disincentive for HHAs to accept patients with complex medication 
regimes.
    Response: We agree with the comments suggesting Adverse Drug Event 
data would be duplicative and are not finalizing this measure for PY1 
of the model. We will evaluate if there is a more narrowly tailored 
approach for measuring quality performance related to medication 
management. We will continue to analyze ways to address the issue of 
adverse drug events in the home health setting and seek input from 
stakeholders on including an alternative measure in future model years.
    Final Decision: In consideration of comments received we are not 
finalizing this measure.
c. Influenza Vaccination Coverage for Home Health Care Personnel
    Staff Immunizations (Influenza Vaccination Coverage among Health 
Care Personnel) (NQF #0431) is an NQF-endorsed measure that addresses 
the NQS domain of Population Health (see Figure 3). The measure is 
currently endorsed in Ambulatory Care; Ambulatory Surgery Center (ASC), 
Ambulatory Care; Clinician Office/Clinic, Dialysis Facility, Hospital/
Acute Care Facility, Post-Acute/Long Term Care Facility; Inpatient 
Rehabilitation Facility, Post-Acute/Long Term Care Facility; Long Term 
Acute Care Hospital, and Post-Acute/Long Term Care Facility: Nursing 
Home/Skilled Nursing Facility. Home health care is among the only 
remaining settings for which the measure has not been endorsed. We 
stated in the proposed rule that we believe the HHVBP Model presents an 
opportunity to study this measure in the home health setting. This 
measure is currently reported in multiple CMS quality reporting 
programs, including Ambulatory Surgical Center Quality Reporting, 
Hospital Inpatient Quality Reporting, and Long-Term Care Hospital 
Quality Reporting; we believe its adoption under the HHVBP Model 
presents an opportunity for alignment in our quality reporting 
programs. The documentation of staff immunizations is also a standard 
required by many HHA accrediting organizations. We believe that this 
measure would be appropriate for HHVBP because it addresses total 
population health across settings of care by reducing the exposure of 
individuals to a potentially avoidable virus.
    We proposed that the measure would be numerically expressed by a 
ratio whose numerator and denominator are as follows:
    Numerator: The measure would calculate the percentage of home 
health care personnel who receive the influenza vaccine, and document 
those who do not receive the vaccine in the articulated categories 
below:
    (1) Received an influenza vaccination administered at the health 
care agency, or reported in writing (paper or electronic) or provided 
documentation that influenza vaccination was received elsewhere; or
    (2) Were determined to have a medical contraindication/condition of 
severe allergic reaction to eggs or to other component(s) of the 
vaccine, or history of Guillain[hyphen]Barr[eacute] Syndrome within 6 
weeks after a previous influenza vaccination; or
    (3) Declined influenza vaccination; or
    (4) Persons with unknown vaccination status or who do not otherwise 
meet any of the definitions of the above[hyphen]mentioned numerator 
categories.
    We proposed that each of the above groups would be divided by the 
number of health care personnel who are working in the HHA for at least 
one working day between October 1 and March 31 of the following year, 
regardless of clinical responsibility or patient contact.
    Denominator: This measure collects the number of home health care 
personnel who work in the HHA during the flu season: \37\ Denominators 
are to be calculated separately for the following three (3) groups:
---------------------------------------------------------------------------

    \37\ Flu season is generally October 1 (or when the vaccine 
became available) through March 31 of the following year. See URL 
http://www.cdc.gov/flu/about/season/flu-season.htm for detailed 
information.
---------------------------------------------------------------------------

    1. Employees: all persons who receive a direct paycheck from the 
reporting HHA (that is, on the agency's payroll);
    2. Licensed independent practitioners: include physicians (MD, DO), 
advanced practice nurses, and physician assistants only who are 
affiliated with the reporting agency who do not receive a direct 
paycheck from the reporting HHA; and
    3. Adult students/trainees and volunteers: include all adult 
students/trainees and volunteers who do not receive a direct paycheck 
from the reporting HHA.
    We stated in the proposed rule that this measure for the HHVBP 
Model is expected to result in increased influenza vaccination among 
home health professionals. Reporting health care personnel influenza 
vaccination status would allow HHAs to better identify and target 
unvaccinated personnel. Increased influenza vaccination coverage among 
HHA personnel would be expected to result in reduced morbidity and 
mortality related to influenza virus infection among patients, 
especially elderly and vulnerable populations.\38\
---------------------------------------------------------------------------

    \38\ Carman WF, Elder AG, Wallace LA, et al. Effects of 
influenza vaccination of health[hyphen]care workers on mortality of 
elderly people in long[hyphen]term care: a randomized controlled 
trial. Lancet 2000; 355:93-97.
---------------------------------------------------------------------------

    We proposed, and are finalizing in this rule, that information on 
the above numerator and denominator will be reported by HHAs through 
the HHVBP Web-based platform, in addition to other information related 
to this measure as the Secretary deems appropriate.
    We invited comments on the proposed Staff Influenza Vaccination 
measure.
    Comment: A few commenters asserted that HHVBP is not the correct 
avenue for improving population health and that extending the measure 
to all allied staff is too broad of a reach for the program, especially 
considering that the HHA has no mandate that allows it to force allied 
staff to comply. Commenters recommended modifying proposed influenza 
measures to include in the numerator HHA staff who decline the 
vaccination yet wear protective masks

[[Page 68677]]

or be limited to HHA staff who have contact with the patient. 
Commenters also noted that staff data is already collected through 
licensure and certification requirements, and recommended that CMS 
promote staff influenza immunization through the upcoming Conditions of 
Participation in Medicare and Medicaid for Home Health Agencies rule.
    Response: Home health care is among the only remaining settings for 
which the measure has not been endorsed. Mandatory health worker 
vaccinations are widely endorsed by national professional associations 
\39\ because public health data has conclusively demonstrated that 
immunizing health staff to prevent influenza improves population 
health.\40\ We also note that state certification and documentation 
requirements for licensure are not consistent from state to state and 
the requirement for staff vaccination is not part of the CoPs.
---------------------------------------------------------------------------

    \39\ For a complete list of professional organizations that 
endorse mandatory flu vaccinations for health workers see URL http://www.immunize.org/honor-roll/influenza-mandates.
    \40\ Carman WF, Elder AG, Wallace LA, et al. Effects of 
influenza vaccination of health[hyphen]care workers on mortality of 
elderly people in long[hyphen]term care: a randomized controlled 
trial. Lancet 2000; 355:93-97.
---------------------------------------------------------------------------

    Comment: Some commenters suggested CMS develop state-specific or 
regional time frames for when this measure applies, noting the proposed 
October-March timeframe may not be sufficiently protective for states 
in the Northeast.
    Response: We are following flu season guidelines from the Centers 
for Disease Control (CDC), which indicates peak flu season is from 
October through March. We defer to CDC expertise and will not be 
amending the flu time frame for the purposes of the HHVBP model at this 
time.
    Comment: One commenter did not support the inclusion of the metric 
for Influenza Vaccination Coverage for Home Health Care Personnel 
because, as proposed, the metric does not include consideration of the 
overall availability of the flu vaccine at the local/state level. The 
commenter asserted that regardless of known national declared 
shortages, regional availability limits should be reflected within the 
measure so as not to unduly penalize home health agencies.
    Response: In PY1, HHAs will not be scored on immunization rates for 
health personnel and will receive credit for reporting data related to 
immunizing healthcare staff.
    Comment: Some commenters expressed concern that the resources and 
time commitment required to be able to reliably report on this metric 
would create undue hardship for January 1, 2016 implementation and 
suggested delayed implementation.
    Response: We acknowledge the concerns expressed related to the 
timeline for reporting data on New Measures and agree with commenters 
that additional time for HHAs to prepare for data reporting is merited. 
We are finalizing that competing HHAs will be required to report data 
on this measure, as well as the other New Measures, no later than 
October 7, 2016.
    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing this New Measure as proposed, 
with the modification that HHAs will be required to begin reporting 
data no later than October 7, 2016 for the period July 2016 through 
September 2016 and quarterly thereafter. As a result, the first 
quarterly performance report in July 2016 will not account for any of 
the New Measures.
c. Herpes Zoster Vaccine (Shingles Vaccine) for Patients
    We proposed to adopt this measure for the HHVBP Model because it 
aligns with the NQS Quality Strategy Goal to Promote Effective 
Prevention & Treatment of Chronic Disease. Currently this measure is 
not endorsed by NQF or collected in OASIS. However, due to the severe 
physical consequences of symptoms associated with shingles,\41\ we view 
its adoption under the HHVBP Model as an opportunity to perform further 
study on this measure. The results of this analysis could provide the 
necessary data to meet NQF endorsement criteria. We proposed that the 
measure would calculate the percentage of home health patients who 
receive the Shingles vaccine, and collect the number of patients who 
did not receive the vaccine.
---------------------------------------------------------------------------

    \41\ For detailed information on Shingles incidences and known 
complications associated with this condition see CDC information 
available at http://www.cdc.gov/shingles/about/overview.html.
---------------------------------------------------------------------------

    Numerator: Equals the total number of Medicare beneficiaries aged 
60 years and over who report having ever received herpes zoster vaccine 
(shingles vaccine) during the home health episode of care.
    Denominator: Equals the total number of Medicare beneficiaries aged 
60 years and over receiving services from the HHA.
    The Food and Drug Administration (FDA) has approved the use of 
herpes zoster vaccine in adults age 50 and older. In addition, the 
Advisory Committee on Immunization Practices (ACIP) currently 
recommends that herpes zoster vaccine be routinely administered to 
adults, age 60 years and older.\42\ In 2013, 24.2 percent of adults 60 
years and older reported receiving herpes zoster vaccine to prevent 
shingles, an increase from the 20.1 percent in 2012,\43\ yet below the 
targets recommended in the HHS Healthy People 2020 initiative.\44\
---------------------------------------------------------------------------

    \42\ CDC. Morbidity and Mortality Weekly Report 2011; 
60(44):1528.
    \43\ CDC. Morbidity and Mortality Weekly Report 2015; 64(04):95-
102.
    \44\ Healthy People 2020: Objectives and targets for 
immunization and infectious diseases. Available at https://www.healthypeople.gov/2020/topics-objectives/topic/immunization-and-infectious-diseases/objectives.
---------------------------------------------------------------------------

    The incidence of herpes zoster outbreak increases as people age, 
with a significant increase after age 50. Older people are more likely 
to experience the severe nerve pain known as post-herpetic neuralgia 
(PHN),\45\ the primary acute symptom of shingles infection, as well as 
non-pain complications, hospitalizations,\46\ and interference with 
activities of daily living.\47\ Studies have shown for adults aged 60 
years or older the vaccine's efficacy rate for the prevention of herpes 
zoster is 51.3 percent and 66.5 percent for the prevention of PHN for 
up to 4.9 years after vaccination.\48\ The Short-Term Persistence Sub 
study (STPS) followed patients 4 to 7 years after vaccination and found 
a vaccine efficacy of 39.6 percent for the prevention of herpes zoster 
and 60.1 percent for the prevention of PHN.\49\ The majority of 
patients reporting PHN are over age 70; vaccination of this older 
population would prevent most cases, followed by vaccination at age 60 
and then age 50.
---------------------------------------------------------------------------

    \45\ Yawn BP, Saddier P, Wollen PC, St Sauvier JL, Kurland MJ, 
Sy LS. A population-based study of the incidence and complication 
rate of herpes zoster before zoster vaccine introduction. Mayo 
Clinic Proc 2007; 82:1341-9.
    \46\ Lin F, Hadler JL. Epidemiology of primary varicella and 
herpes zoster hospitalizations: the pre-varicella vaccine era. J 
Infect Dis 2000; 181:1897-905.
    \47\ Schmader KE, Johnson GR, Saddier P, et al. Effect of a 
zoster vaccine on herpes zoster-related interference with functional 
status and health-related quality-of-life measures in older adults. 
J Am Geriatr Soc 2010; 58:1634-41.
    \48\ Schmader KE, Johnson GR, Saddier P, et al. Effect of a 
zoster vaccine on herpes zoster0-related interference with 
functional status and health-related quality-of-life measures in 
older adults. J Am Geriatr Soc 2010; 58:1634-41.
    \49\ Schmader, KE, Oxman, MN, Levin, MJ, Johnson,G, Zhang, JH, 
Betts, R, Morrison, VA, Gelb, L, Guatelli, JC, Harbecke, R, 
Pachucki, C, Keay, S, Menzies, B, Griffin, MR, Kauffman, C, Marques, 
A, Toney, J, Keller, PM, LI, X, Chan, LSF, Annumziato, P. 
Persistence of the Efficacy of Zoster Vaccine in the Shingles 
Prevention Study and the Short Term Persistence Substudy. Clinical 
Infectious Disease 2012; 55:1320-8
---------------------------------------------------------------------------

    We stated in the proposed rule that studying this measure in the 
home

[[Page 68678]]

health setting presents an ideal opportunity to address a population at 
risk which will benefit greatly from this vaccination strategy. For 
example, receiving the vaccine will often reduce the course and 
severity of the disease and reduce the risk of post herpetic neuralgia.
    We proposed, and are finalizing in this rule, that information on 
the above numerator and denominator will be reported by HHAs through 
the HHVBP web-based platform, in addition to other information related 
to this measure as the Secretary deems appropriate.
    We invited public comment on the proposed Herpes Zosters Vaccine 
measure.
    Comment: A number of commenters expressed concern that patients 
refuse Shingles vaccination since the vaccine is costly and is paid for 
only through Medicare Part D. A few commenters also expressed concerns 
that patients in home health may not have ready knowledge of their 
vaccination status, and tracking this information down could be 
burdensome for HHAs. Some commenters also raised the concern that a 
desire to comply with the measure presents the potential for 
unnecessary repeat vaccinations.
    Response: We appreciate public comment on this issue. CMS 
recognizes there are payment and access issues related to the Shingles 
vaccination. As a New Measure, competing HHAs will have the opportunity 
to report on implementation challenges related to patients accessing 
the Shingles vaccination and we will be evaluating feedback from HHAs 
provided through data reporting on the measure. However, we believe 
inclusion of this New Measure is connected to quality care for patients 
because the Shingles vaccination has been demonstrated to either reduce 
the incidence of Shingles or significantly mitigate the pain and 
discomfort associated with Shingles. Including the measure in intended 
to increase patient awareness and access to the vaccine if they so 
choose.
    Comment: One commenter recommended development of additional 
vaccine measures to align with ACIP policies.
    Response: We thank the commenter and note that we intend to 
evaluate the measures in the HHVBP Model on an annual basis and 
implement any changes to the measure set in future rulemaking. In PY1 
we have included the ACIP recommendation to utilize the Shingles 
vaccination, and we will refer to ACIP recommendations when analyzing 
additional measures in subsequent years of the model.
    Comment: Commenters expressed concern about collecting Herpes 
Zoster vaccination data because they asserted that modifications to EMR 
will have to occur. Commenters also asserted that the resources and 
time commitment required to be able to reliably report on this metric 
would create undue hardship for January 1, 2016 implementation. 
Commenters recommended moving the timeline out 6-12 months for 
collecting this data.
    Response: We appreciate commenters' concerns regarding the timeline 
for data collection and agree that in some instances additional 
preparation time may be needed by competing HHAs including allowing for 
those HHAs who may have to modify their clinical record system. We are 
finalizing that competing HHAs will be required to report data on this 
measure, as well as the other New Measures, no later than October 7, 
2016 for the period July 2016 through September 2016.
    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing this New Measure as proposed, 
with the modification that HHAs will be required to begin reporting 
data no later than October 7, 2016 for the period July 2016 through 
September 2016 and quarterly thereafter. As a result, the first 
quarterly performance report in July 2016 will not account for any of 
the New Measures.
6. HHVBP Model's Four Classifications
    As previously stated, the quality measures that we proposed to use 
in the performance years, as well as the quality measures that we are 
finalizing in this final rule, are aligned with the six NQS domains: 
Patient and Caregiver-Centered Experience and Outcomes; Clinical 
Quality of Care; Care Coordination; Population Health; Efficiency and 
Cost Reduction; and, Safety (see Figure 6).
    We proposed to filter these NQS domains and the HHVBP quality 
measures into four classifications to align directly with the measure 
weighting utilized in calculating payment adjustments. The four HHVBP 
classifications we proposed are: Clinical Quality of Care, Outcome and 
Efficiency, Person- and Caregiver-Centered Experience, and New Measures 
reported by the HHAs.
    We did not receive any public comments on our proposed measure 
classifications for the HHVBP Model and are finalizing these 
classifications with one modification. Specifically, we are revising 
Classification II from ``Outcome and Efficiency'' to ``Care 
Coordination and Efficiency.'' The definition of this classification is 
unchanged from the proposed rule. We are making this change to be more 
inclusive about this classification designation, which includes 
measures/NQS domains relating to care coordination.
    These final four classifications capture the multi-dimensional 
nature of health care provided by the HHA. These classifications are 
further defined as:
     Classification I--Clinical Quality of Care: Measures the 
quality of health care services provided by eligible professionals and 
paraprofessionals within the home health environment.
     Classification II--Care Coordination and Efficiency: 
Outcomes measure the end result of care including coordination of care 
provided to the beneficiary. Efficiencies measure maximizing quality 
and minimizing use of resources.
     Classification III--Person- and Caregiver-Centered 
Experience: Measures the beneficiary and their caregivers' experience 
of care.
     Classification IV--New Measures: Measures not currently 
reported by Medicare-certified HHAs to CMS, but that may fill gaps in 
the NQS Domains not completely covered by existing measures in the home 
health setting.

[[Page 68679]]

[GRAPHIC] [TIFF OMITTED] TR05NO15.005

7. Weighting
    We proposed that measures within each classification would be 
weighted the same for the purposes of payment adjustment. We are 
weighting at the individual measure level and not the classification 
level. Classifications are for organizational purposes only. We 
proposed this approach because we did not want any one measure within a 
classification to be more important than another measure. Under this 
approach, a measure's weight will remain the same even if some of the 
measures within a classification group have no available data. We 
stated in the proposed rule that weighting will be re-examined in 
subsequent years of the model and be subject to the rulemaking process. 
We invited comments on the proposed weighting methodology for the HHVBP 
Model.
    Comment: We received a few comments on the weighting of measures in 
the starter set. Some commenters recommended that certain measures 
should be weighted more than others; with one comment specifying the 
re-hospitalization measure should have greater weight, and some other 
commenters suggesting that measures not based on self-reported data 
should have greater weight. One commenter expressed concern that by 
weighting measures equally, HHAs will have little opportunity to make 
significant improvements because each measure will only represent a 
small fraction of the agency's score; therefore, agencies would need to 
make large improvements in many measures to see a meaningful difference 
in their overall score. All comments related to weighting indicated a 
preference for moving away from each measure receiving equal weight.
    Response: The quality measures that were selected for the HHVBP 
Model capture the multiple dimensions of care that HHA provide to their 
beneficiaries. We are finalizing this proposed policy because equally 
weighted measures will encourage HHAs to approach quality improvement 
initiatives more broadly in an effort to capture the multidimensional 
aspects of care that HHAs provide. In addition, weighting the measures 
equally addresses concerns where HHAs may be providing services to 
beneficiaries with different needs. If particular measures are weighted 
more than others, HHAs may only make the investment to improve their 
quality in those areas where measures have a higher weight, potentially 
allowing other aspects of care to be subject to potential neglect. We 
will monitor the impact of the equally weighting the individual 
measures and may consider changes to the weighting methodology after 
analysis and through rulemaking.
    Final Decision: For the reasons discussed, we are finalizing the 
weighting methodology as proposed without modification.

F. Performance Scoring Methodology

1. Performance Calculation Parameters
    The methodology we proposed, and are finalizing in this final rule 
for the reasons discussed herein, for assessing each HHA's total annual 
performance is based on a score calculated using the starter set of 
quality measures that apply to the HHA (based on a minimum number of 
cases, as discussed herein). The methodology will provide an assessment 
on a quarterly basis for each HHA and will result in an annual 
distribution of value-based payment adjustments among HHAs so that HHAs 
achieving the highest performance scores will receive the largest 
upward payment adjustment. The methodology includes three primary 
features:
     The HHA's Total Performance Score (TPS) will be determined 
using the higher of an HHA's achievement or improvement score for each 
measure;
     All measures within the Clinical Quality of Care, Care 
Coordination and Efficiency, and Person and Caregiver-Centered 
Experience classifications will have equal weight and will account for 
90-percent of the TPS (see Section 2 below) regardless of the number of 
measures in the three classifications.

[[Page 68680]]

Points for New Measures are awarded for submission of data on the New 
Measures via the HHVBP web-based platform, and withheld if data is not 
submitted. Data reporting for each New Measure will have equal weight 
and will account for 10-percent of the TPS for the first performance 
year; and,
     The HHA performance score would reflect all of the 
measures that apply to the HHA based on a minimum number of cases 
defined below.
    For the reasons discussed in more detail later in this section, we 
are finalizing our proposed performance scoring methodology with one 
modification related to the rounding up or down of achievement and 
improvement scoring used in the calculation of the Total Performance 
Score.
2. Considerations for Calculating the Total Performance Score
    We proposed, and are finalizing in this final rule, in Sec.  
484.320 to calculate the TPS by adding together points awarded to 
Medicare-certified HHAs on the starter set of measures, including the 
New Measures. As explained in the proposed rule, we considered several 
factors when developing the performance scoring methodology for the 
HHVBP Model. First, it is important that the performance scoring 
methodology be straightforward and transparent to HHAs, patients, and 
other stakeholders. HHAs must be able to clearly understand performance 
scoring methods and performance expectations to maximize quality 
improvement efforts. The public must understand performance score 
methods to utilize publicly-reported information when choosing HHAs.
    Second, we believe the performance scoring methodology for the 
HHVBP Model should be aligned appropriately with the quality 
measurements adopted for other Medicare value-based purchasing programs 
including those introduced in the hospital and skilled nursing home 
settings. This alignment will facilitate the public's understanding of 
quality measurement information disseminated in these programs and 
foster more informed consumer decision-making about their health care 
choices.
    Third, we believe that differences in performance scores must 
reflect true differences in quality performance. To make sure that this 
point is addressed in the performance scoring methodology for the HHVBP 
Model, we assessed quantitative characteristics of the measures, 
including the current state of measure development, number of measures, 
and the number and grouping of measure classifications.
    Fourth, we believe that both quality achievement and improvement 
must be measured appropriately in the performance scoring methodology 
for the HHVBP Model. The methodology specifies that performance scores 
under the HHVBP Model are calculated utilizing the higher of 
achievement or improvement scores for each measure. The impact of 
performance scores utilizing achievement and improvement on HHAs' 
behavior and the resulting payment implications was also considered. 
Using the higher of achievement or improvement scores allows the model 
to recognize HHAs that have made great improvements, though their 
measured performance score may still be relatively lower in comparison 
to other HHAs.
    Fifth, through careful measure selection we intend to eliminate, or 
at least control for, unintended consequences such as undermining 
better outcomes to patients or rewarding inappropriate care. As 
discussed above, when available, NQF endorsed measures will be used. In 
addition we are adopting measures that we believe are closely 
associated with better outcomes in the HHA setting in order to 
incentivize genuine improvements and sustain positive achievement while 
retaining the integrity of the model.
    Sixth, we intend that the model will utilize the most currently 
available data to assess HHA performance. We recognize that these data 
would not be available instantaneously due to the time required to 
process quality measurement information accurately; however, we intend 
to make every effort to process data in the timeliest fashion. Using 
more current data will result in a more accurate performance score 
while recognizing that HHAs need time to report measure data.
3. Additional Considerations for the HHVBP Total Performance Scores
    Many of the key elements of the HHVBP Model performance scoring 
methodology that we proposed, and are finalizing in this final rule for 
the reasons described herein, are aligned with the scoring methodology 
of the Hospital Value-Based Purchasing Program (HVBP) in order to 
leverage the rigorous analysis and review underpinning that Program's 
approach to value-based purchasing in the hospital sector. The HVBP 
Program includes as one of its core elements the scoring methodology 
included in the 2007 Report to Congress ``Plan to Implement a Medicare 
Hospital Value-Based Purchasing Program'' (hereinafter referred to as 
``The 2007 HVBP Report'').\50\ The 2007 HVBP Report describes a 
Performance Assessment Model with core elements that can easily be 
replicated for other value-based purchasing programs or models, 
including the HHVBP Model.
---------------------------------------------------------------------------

    \50\ The 2007 HVBP Report is available at the CMS Web site at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUBMITTED2007.pdf.
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    In the HVBP Program, the Performance Assessment Model aggregates 
points on the individual quality measures across different quality 
measurement domains to calculate a hospital's TPS. Similarly, the 
proposed HHVBP Model would aggregate points on individual measures 
across four measure classifications derived from the 6 CMS/NQS domains 
as described above (see Figure 3) to calculate the HHA's TPS. In 
addition, the proposed HHVBP payment methodology is also aligned with 
the HVBP Program with respect to evaluating an HHA's performance on 
each quality measure based on the higher of an achievement or 
improvement score in the performance period. The model is not only 
designed to provide incentives for HHAs to provide the highest level of 
quality, but also to provide incentives for HHAs to improve the care 
they provide to Medicare beneficiaries. By rewarding HHAs that provide 
high quality and/or high improvement, we believe the HHVBP Model will 
ensure that all HHAs will be incentivized to commit the resources 
necessary to make the organizational changes that will result in better 
quality.
    We proposed, and are finalizing for the reasons described herein, 
that under the model, an HHA will be awarded points only for 
``applicable measures.'' An ``applicable measure'' is one for which the 
HHA has provided 20 home health episodes of care per year. Points 
awarded for each applicable measure will be aggregated to generate a 
TPS. As described in the benchmark section below, HHAs will have the 
opportunity to receive 0 to 10 points for each measure in the Clinical 
Quality of Care, Care Coordination and Efficiency, and Person and 
Caregiver-Centered Experience classifications. Each measure will have 
equal weight regardless of the total number of measures in each of the 
first three classifications. In contrast, we proposed, and are 
finalizing in this rule, to score the New Measures in a different way. 
For each New Measure, HHAs will receive 10 points if they report the 
New Measure or 0 points if they do not report the measure during the 
performance

[[Page 68681]]

year. In total, the New Measures will account for 10-percent of the TPS 
regardless of the number of measures applied to an HHA in the other 
three classifications.
    We proposed, and are finalizing in this rule, to calculate the TPS 
for the HHVBP methodology similarly to the TPS calculation that has 
been finalized under the HVBP program. The performance scoring 
methodology for the HHVBP Model will include determining performance 
standards (benchmarks and thresholds) using the 2015 baseline period 
performance year's quality measure data, scoring HHAs based on their 
achievement and/or improvement with respect to those performance 
standards, and weighting each of the classifications by the number of 
measures employed, as presented in further detail in Section G below.
4. Setting Performance Benchmarks and Thresholds
    For scoring HHAs' performance on measures in the Clinical Quality 
of Care, Care Coordination and Efficiency, and Person and Caregiver-
Centered Experience classifications, we proposed, and are finalizing in 
this rule, to adopt an approach using several key elements from the 
scoring methodology set forth in the 2007 HVBP Report and the 
successfully implemented HVBP Program \51\ including allocating points 
based on achievement or improvement, and calculating those points based 
on industry benchmarks and thresholds.
---------------------------------------------------------------------------

    \51\ For detailed information on HVBP scoring see http://www.medicare.gov/hospitalcompare/data/hospital-vbp.html.
---------------------------------------------------------------------------

    In determining the achievement points for each measure, HHAs will 
receive points along an achievement range, which is a scale between the 
achievement threshold and a benchmark. We proposed, and are finalizing 
in this rule, that the achievement threshold will be calculated as the 
median of all HHAs' performance on the specified quality measure during 
the baseline period and to calculate the benchmark as the mean of the 
top decile of all HHAs' performance on the specified quality measure 
during the baseline period. Unlike the HVBP Program that uses a 
national sample, this model will calculate both the achievement 
threshold and the benchmark separately for each selected state and for 
HHA cohort size. Under this methodology, we will have benchmarks and 
achievement thresholds for both the larger-volume cohort and for the 
smaller-volume cohort of HHAs (defined in each state based on a 
baseline period that runs from January 1, 2015 through December 31, 
2015). Another way HHVBP differs from the Hospital VBP is this model 
only uses 2015 as the baseline year for the measures included in the 
starter set. For the starter set used in the model, 2015 will 
consistently be used as the baseline period in order to evaluate the 
degree of change that may occur over the multiple years of the model. 
In determining improvement points for each measure, we proposed, and 
are finalizing in this rule, that HHAs will receive points along an 
improvement range, which is a scale indicating change between an HHA's 
performance during the performance period and the baseline period. In 
addition, as in the achievement calculation, the benchmark and 
threshold will be calculated separately for each state and for HHA 
cohort size so that HHAs will only be competing with those HHAs in 
their state and their size cohort.
5. Calculating Achievement and Improvement Points
a. Achievement Scoring
    We proposed the achievement scoring under the HHVBP Model be based 
on the Performance Assessment Model set forth in the 2007 HVBP Report 
and as implemented under the HVBP Program. An HHA could earn 0-10 
points for achievement for each measure in the Clinical Quality of 
Care, Care Coordination and Efficiency, and Person and Caregiver-
Centered Experience classifications based on where its performance 
during the performance period falls relative to the achievement 
threshold and the benchmark, according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR05NO15.006

    We proposed that all achievement points would be rounded up or down 
to the nearest point (for example, an achievement score of 4.55 would 
be rounded to 5). After considering the potential skewing of HHA 
ranking that would occur with rounding up to the nearest point, we are 
finalizing that all achievement points will be rounded up or down to 
the third decimal point (for example, an achievement score of 4.5555 
would be rounded to 4.556). The will ensure greater precision in 
scoring and ranking HHAs within their cohorts.
    HHAs could receive an achievement score as follows:
     An HHA with performance equal to or higher than the 
benchmark could receive the maximum of 10 points for achievement.
     An HHA with performance equal to or greater than the 
achievement threshold (but below the benchmark) could receive 1-9 
points for achievement, by applying the formula above.
     An HHA with performance less than the achievement 
threshold could receive 0 points for achievement.
    We invited comments on the proposed methodology for scoring HHAs on 
achievement.
    Comment: Some commenters expressed concern that HHAs will not know 
what benchmark is needed to avoid penalty until the end of the 2015 
performance year, and several commenters recommended that CMS establish 
benchmarks based on historical performance so it is clear to HHAs the 
level of achievement necessary to avoid penalties. Commenters voiced 
concern that agencies may not invest in quality improvement activities 
if the potential financial return is difficult to determine. Commenters 
also recommended that CMS set benchmarks at a level such that most 
providers have a reasonable expectation of achieving them. A few 
commenters suggested keeping 2015 as the base year, and suggested 
providing HHAs with mid-course snapshots of their performance against 
the benchmarks.
    Response: The HHVBP Model is using the 2015 quality data as the 
baseline for the model because it is the most recent data available. As 
indicated in the payment methodology, the achievement threshold for 
each measure used in the

[[Page 68682]]

model will be based on the median of Medicare-certified HHA performance 
on the specified quality measure during the baseline period (2015). The 
benchmark refers to the mean of the top decile of Medicare-certified 
HHA performance on the specified quality measure during the baseline 
period (2015). Benchmarks and achievement thresholds are calculated 
separately for the larger-volume and smaller-volume cohorts within each 
state. HHAs will receive points if they achieve performance equal to or 
above the achievement threshold (the median of 2015). We believe that 
awarding points to HHAs that provide better quality than the median is 
an achievable level and will incentivize HHAs to make the investments 
necessary to improve their quality. Benchmarks and achievement 
thresholds for each measure will be available on each respective HHA's 
quarterly report. The 2015 base year achievement threshold and the 
benchmarks for each cohort will be provided to the HHAs in April 2016. 
We believe that this will provide sufficient notice to HHAs of the 
level of performance necessary to receive points for each given 
measure. In addition, baseline values will be included in all quarterly 
reports for all measures.
    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing the proposed methodology for 
scoring HHAs on achievement under the HHVBP Model, with one 
modification. Specifically, as noted above, under our final policy all 
achievement points will be rounded up or down to the third decimal 
point (for example, an achievement score of 4.5555 would be rounded to 
4.556).
b. Improvement Scoring
    In keeping with the approach used by the HVBP Program, we proposed 
that an HHA could earn 0-10 points based on how much its performance 
during the performance period improved from its performance on each 
measure in the Clinical Quality of Care, Care Coordination and 
Efficiency, and Person and Caregiver-Centered Experience 
classifications during the baseline period. A unique improvement range 
for each measure will be established for each HHA that defines the 
difference between the HHA's baseline period score and the same state 
and size level benchmark for the measure used in the achievement 
scoring calculation described previously, according to the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR05NO15.007

    We proposed that all improvement points will be rounded to the 
nearest point and are now finalizing that improvement points will be 
rounded up or down to the third decimal point (see example above). If 
an HHA's performance on the measure during the performance period was:
     Equal to or higher than the benchmark score, the HHA could 
receive an improvement score of 10 points;
     Greater than its baseline period score but below the 
benchmark (within the improvement range), the HHA could receive an 
improvement score of 0-10, based on the formula above; or
     Equal to or lower than its baseline period score on the 
measure, the HHA could receive 0 points for improvement.
    We invited comments on the proposed methodology for scoring HHAs on 
improvement.
    Comment: There were many comments directed at the proposed 
methodology for improvement scoring under the HHVBP Model. Some 
commenters opposed awarding credit for improvement, and noted their 
concern that by using the greater of either an HHA's achievement or 
improvement score, the methodology could reward a HHA with a low 
performance but high improvement score because that HHA could receive 
higher payments than a high performing agency. These commenters 
encouraged CMS to focus on rewarding the achievement of specified 
quality scores, and reduce its emphasis on improvement scores after the 
initial three years of the HHVBP Model, given that what matters most to 
beneficiaries is an agency's actual performance. Additionally, 
commenters recommended that HHA achievement scores be weighted more 
heavily than improvement scores, noting that some HHAs may have little 
or no room for improvement in their current quality performance scores. 
Some commenters suggested measuring performance primarily on the basis 
of achievement of specified quality scores, with a declining emphasis 
over time on improvement versus achievement.
    Response: We appreciate the commenters raising these concerns. The 
model is designed to improve and to ensure the highest quality of care 
for all Medicare beneficiaries. If the model only focused on rewarding 
those HHAs that already provide the highest quality of care, only the 
beneficiaries that receive care from those HHAs would benefit from the 
model. Therefore, we believe that providing the opportunity to earn 
points for both achievement and improvement provides the greatest 
opportunity for the quality of care to rise for all beneficiaries who 
receive services from competing HHAs. We will, however, monitor and 
evaluate the impact of awarding an equal amount of points for both 
achievement and improvement and may consider changes to the weight of 
the improvement score relative to the achievement score in future years 
through rulemaking.
    Final Decision: For the reasons discussed, we are finalizing the 
improvement scoring methodology as proposed.
    Comment: Several commenters expressed concern that the proposed 
HHVBP structure requires that HHAs be penalized each year, regardless 
of their performance or improvement, noting that each year, some HHAs 
will end up in the bottom decile, even if the difference between the 
highest and lowest scoring is only a few points. These commenters were 
concerned that if the lowest scoring HHAs do not have the resources to 
rise from the bottom they are at risk for going out of business by the 
end of the model. If low scoring HHAs leave the market, then higher 
scoring HHAs will move into the bottom decile the next year of the 
model. These HHAs could experience a downward payment adjustment even 
though their performance, in actuality, is not significantly different 
than HHAs ranked higher. These commenters are concerned this limits 
value based performance improvement.
    Response: We understand commenters concerns but the purpose of the 
model is to improve quality across the HH sector. As is the case 
currently, the market will not remain static, and HHAs of all calibers 
will leave and enter the market. In many instances, if a small number 
of low performing HHAs do drop out of the market, the next group

[[Page 68683]]

of low scoring HHAs will include HHAs whose performance equals or 
exceeds the average baseline performance, and will likely have received 
bonus payments in previous years. We have done financial modeling based 
on recent HHA performance (see chart I2 for further explanation) and 
results support our understanding of how scoring will work. In 
addition, we have analyzed available data and lessons learned from the 
Hospital VBP program and the previous home health demonstration to 
support our findings. As indicated in the proposed rule,\52\ HHAs may 
end up in the bottom decile in relationship to other HHAs in their 
cohort in later years of the model even after they improve their 
quality if all the HHAs in the model improve at the same rate. However, 
in the HHVBP model their downward payment adjustment, if any, could be 
substantially reduced because all performance scoring is anchored to 
the 2015 benchmark.
---------------------------------------------------------------------------

    \52\ 80 FR 39910 (July 10, 2015). See Table 25.
---------------------------------------------------------------------------

    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing the proposed methodology for 
scoring HHAs under the HHVBP Model, with one modification to decimal 
scoring, where we are finalizing that all achievement and improvement 
points will be rounded up or down to the third decimal point (for 
example, an achievement score of 4.5555 would be rounded to 4.556).
c. Examples of Calculating Achievement and Improvement Scores
    For illustrative purposes we present the following examples of how 
the performance scoring methodology will be applied in the context of 
the measures in the Clinical Quality of Care, Care Coordination and 
Efficiency, and Person and Caregiver-Centered Experience 
classifications. These HHA examples were selected from an empirical 
database created from 2013/2014 data from the Home Health Compare 
archived data, claims data and enrollment data to support the 
development of the HHVBP permutation of the Performance Assessment 
Model, and all performance scores are calculated for the pneumonia 
measure, with respect to the number of individuals assessed and 
administered the pneumococcal vaccine. We note that the figures and 
examples below are the same figures and examples set forth in the 
proposed rule, updated to reflect our final policy on rounding of these 
scores, as discussed previously.
    Figure 7 shows the scoring for HHA `A', as an example. The 
benchmark calculated for the pneumonia measure in this case was 0.875 
(the mean value of the top decile in 2013), and the achievement 
threshold was 0.474 (the performance of the median or the 50th 
percentile among HHAs in 2013). HHA A's 2014 performance rate of 0.910 
during the performance period for this measure exceeds the benchmark, 
so HHA A would earn 10 (the maximum) points for its achievement score. 
The HHA's performance rate on a measure is expressed as a decimal. In 
the illustration, HHA A's performance rate of 0.910 means that 91-
percent of the applicable patients that were assessed were given the 
pneumococcal vaccine. In this case, HHA A has earned the maximum number 
of 10 possible achievement points for this measure and thus, its 
improvement score is irrelevant in the calculation.
    Figure 7 also shows the scoring for HHA `B'. As referenced below, 
HHA B's performance on this measure went from 0.212 (which was below 
the achievement threshold) in the baseline period to 0.703 (which is 
above the achievement threshold) in the performance period. Applying 
the achievement scale, HHA B would earn 5.640 points for achievement, 
calculated as follows: [9 * ((0.703 - 0.474)/(0.875 - 0.474))] + 0.5 = 
5.640.
    Checking HHA B's improvement score yields the following result: 
Based on HHA B's period-to-period improvement, from 0.212 in the 
baseline year to 0.703 in the performance year, HHA B would earn 6.906 
points, calculated as follows: [10 * ((0.703 - 0.212)/(0.875 - 0.212))] 
- 0.5 = 6.906. Because the higher of the achievement and improvement 
scores is used, HHA B would receive 6.906 points for this measure.

[[Page 68684]]

[GRAPHIC] [TIFF OMITTED] TR05NO15.008

    In Figure 8, HHA `C' yielded a decline in performance on the 
pneumonia measure, falling from 0.571 to 0.462 (a decline of 0.11 
points). HHA C's performance during the performance period is lower 
than the achievement threshold of 0.472 and, as a result, receives 0 
points based on achievement. It also receives 0 points for improvement, 
because its performance during the performance period is lower than its 
performance during the baseline period.

[[Page 68685]]

[GRAPHIC] [TIFF OMITTED] TR05NO15.009

6. Scoring Methodology for New Measures
    The HHVBP Model provides us with the opportunity to study new 
quality measures. We proposed that the New Measures for PY1 would be 
reported directly by the HHA and would account for 10-percent of the 
TPS regardless of the number of measures in the other three 
classifications (we refer the reader to 80 FR 39890 for further 
discussion of our proposed scoring methodology for New Measures). For 
the reasons set forth in the proposed rule and in response to comments 
below, we are finalizing our proposed scoring methodology for New 
Measures, revised only to reflect that the final starter set will 
include three, rather than four, New Measures, as discussed in section 
E5. Under our final methodology, the final three New Measures that we 
are adopting for PY1 will be reported directly by the HHA and will 
account for 10-percent of the TPS regardless of the number of measures 
in the other three classifications. HHAs that report on these measures 
will receive 10 points out of a maximum of 10 points for each of the 3 
measures in the New Measure classification. Hence, a HHA that reports 
on all 3 measures will receive 30 points out of a maximum of 30. An HHA 
will receive 0 points for each measure that it fails to report on. If 
an HHA reports on all 3 measures, it will receive 30 points for the 
classification and 10 points (30/30 * 10 points) will be added to its 
TPS because the New Measure classification has a maximum weight of 10 
percent. If an HHA reports on 2 of 3 measures, it will receive 20 
points of 30 points available for the classification and 6.667 points 
(20/30 * 10 points) added to its TPS. If an HHA reports on 1 of 3 
measures, they will receive 10 points of 30 points available for the 
classification and 3.333 points (10/30 * 10 points) added to their TPS. 
If an HHA reports on 0 of 3 measures, they will receive 0 points and 
have no points added to their TPS. We intend to update these measures 
through future rulemaking to allow us to study newer, leading-edge 
measures as well as retire measures that no longer require such 
analysis.
    We invited comments on the proposed scoring methodology for New 
Measures.
    Comment: Several commenters expressed support for CMS limiting the 
burden on HHAs by allowing them to gain full credit toward their TPS on 
the New Measures just for reporting data to CMS.
    Response: We appreciate the commenters' support for our proposal. 
In order to reduce the burden of introducing innovative measures not 
previously endorsed for home health, and to allow HHAs to acclimate to 
reporting the New Measures, we are finalizing our proposed scoring 
methodology that awards HHAs full credit for data reporting on New 
Measures.
    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing our proposed scoring 
methodology for New Measures, modified to reflect the removal of one 
New Measure resulting in a total of three New Measures for PY1.
7. Minimum Number of Cases for Outcome and Clinical Quality Measures
    We proposed that while no HHA in a selected state would be exempt 
from the HHVBP Model, there may be periods when an HHA does not receive 
a payment adjustment because there are not an adequate number of 
episodes of care to generate sufficient quality measure data. We 
proposed, and are finalizing in this rule, that the minimum threshold 
for an HHA to receive a score on a given measure will be 20 home health 
episodes of care per year for HHAs that have been certified for at 
least 6-months. If a competing HHA does not meet this threshold to 
generate scores on five or more of the Clinical Quality of Care, Care 
Coordination and Efficiency, and Person and Caregiver-Centered 
Experience measures, no payment adjustment will be made, and

[[Page 68686]]

the HHA will be paid for HHA services in an amount equivalent to the 
amount it would have been paid under section 1895 of the Act.\53\
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    \53\ HHVBP would follow the Home Health Compare Web site policy 
not to report measures on HHAs that have less than 20 observations 
for statistical reasons concerning the power to detect reliable 
differences in the quality of care.
---------------------------------------------------------------------------

    We explained in the proposed rule that HHAs with very low case 
volumes will either increase their volume in later performance years, 
and be subject to future payment adjustment, or the HHAs' volume will 
remain very low and the HHAs would continue to not have their payment 
adjusted in future years. Based on the most recent data available at 
this time, a very small number of HHAs are reporting on less than five 
of the total number of measures included in the Clinical Quality of 
Care, Care Coordination and Efficiency, and Person and Caregiver-
Centered Experience classifications and account for less than 0.5 
percent of the claims made over 1,900 HHAs delivering care within the 
nine selected states. We stated that we expect very little impact of 
very low service volume HHAs on the model due to the low number of low-
volume HHAs and because it is unlikely that a HHA will reduce the 
amount of service to such a low level to avoid a payment adjustment. 
Although these HHAs will not be subject to payment adjustments, they 
will remain in the model and have access to the same technical 
assistance as all other HHAs in the model, and will receive quality 
reports on any measures for which they do have 20 episodes of care, and 
a future opportunity to compete for payment adjustments.
    We invited comments on the proposed minimum number of cases to 
receive a score on outcome and clinical quality measures.
    Comment: One commenter expressed concern that some HHAs would 
artificially suppress the number of cases open in OASIS to below 20 in 
order to be excluded from a particular measure, or be excluded from a 
sufficient number of measures to be excluded from payment adjustments 
entirely.
    Response: All Medicare-certified HHAs in selected states are 
included in the HHVBP Model, even when a particular HHA does not meet 
the minimum number of cases to generate scores on a sufficient number 
of quality measures. During a period when an HHA does not receive a 
payment adjustment the HHA remains in the model, performance is still 
monitored, and the agency is eligible for technical assistance. HHAs 
with small patient loads are expected to access technical assistance 
and engage in quality improvement activities in anticipation of earning 
scores on all quality measures in the future. HHAs with small patient 
populations are also expected to enter data on the New Measures via the 
CMS portal. In addition, HHAs must submit OASIS data in order to 
receive payment for their services. We do not anticipate HHAs 
suppressing the number of patients they serve in order to avoid payment 
adjustments because there are very few HHAs that provide care to such a 
small number of beneficiaries and the financial losses associated with 
restricting the volume of care provided would far outweigh the losses 
associated with the downward payment adjustment.
    Final Decision: For these reasons and in consideration of the 
comments received, we are finalizing our proposal on the minimum number 
of cases for outcome and clinical quality measures without 
modification.
    We provide below an example of the payment methodology. We note 
that this is the same example provided in the proposed rule (see 80 FR 
39891), modified only to reflect our final policy to include 21 (rather 
than 25) measures in the Clinical Quality of Care, Care Coordination 
and Efficiency, and Person and Caregiver-Centered Experience 
classifications and three (rather than four) New Measures in the final 
starter set for PY1.
    HHA ``A'' has at least 20 episodes of care in a 12-month period for 
only nine (9) quality measures out of a possible 21 measures from three 
of the four classifications (except the New Measures). Under the final 
scoring methodology outlined above, HHA A would be awarded 0, 0, 3, 4, 
5, 7, 7, 9, and 10 points, respectively, for these measures. HHA A's 
total earned points for the three classifications would be calculated 
by adding together all the points awarded to HHA A, resulting in a 
total of 45 points. HHA A's total possible points would be calculated 
by multiplying the total number of measures for which the HHA reported 
on least 20 episodes (nine) by the maximum number of points for those 
measures (10), yielding a total of 90 possible points. HHA A's score 
for the three classifications would be the total earned points (45) 
divided by the total possible points (90) multiplied by 90 because as 
mentioned in section E7, the Clinical Quality of Care, Care 
Coordination and Efficiency, and Person and Caregiver-Centered 
Experience classifications account for 90-percent of the TPS and the 
New Measures classification accounts for 10-percent of the TPS, which 
yields a result of 45. In this example, HHAs also reported all 3 
measures and would receive the full 10 points for the New Measures. As 
a result, the TPS for HHA A would be 55 (45 plus 10). In addition, as 
specified in Section E:7--Weighting, all measures have equal weights 
regardless of their classification (except for New Measures) and the 
total earned points for the three classifications can be calculated by 
adding the points awarded for each such measure together.

G. The Payment Adjustment Methodology

    We proposed to codify at 42 CFR 484.330 a methodology for applying 
value-based payment adjustments to home health services under the HHVBP 
Model. We proposed that payment adjustments would be made to the HH PPS 
final claim payment amount as calculated in accordance with Sec.  
484.205 using a linear exchange function (LEF) similar to the 
methodology utilized by the HVBP Program. The LEF is used to translate 
an HHA's TPS into a percentage of the value-based payment adjustment 
earned by each HHA under the HHVBP Model. The LEF was identified by the 
HVBP Program as the simplest and most straightforward option to provide 
the same marginal incentives to all hospitals, and we believe the same 
to be true for HHAs. We proposed the function's intercept at zero 
percent, meaning those HHAs that have a TPS that is average in 
relationship to other HHAs in their cohort (a zero percent), would not 
receive any payment adjustment. Payment adjustments for each HHA with a 
score above zero percent would be determined by the slope of the LEF. 
In addition we proposed to set the slope of the LEF for the first 
performance year, CY 2016, so that the estimated aggregate value-based 
payment adjustments for CY 2016 are equal to 5-percent of the estimated 
aggregate base operating episode payment amount for CY 2018. The 
estimated aggregate base operating episode payment amount is the total 
amount of episode payments made to all the HHAs by Medicare in each 
individual state in the larger- and smaller-volume cohorts 
respectively.
    We provided in Figure 9 of the proposed rule an example of how the 
LEF is calculated and how it would be applied to calculate the 
percentage payment adjustment to a HHA's TPS (we refer the reader to 80 
FR 39891 through 39892 for further discussion of our proposal). For 
this example, we applied the 8-percent payment adjustment level that 
was proposed to be used in the final 2 years of the HHVBP Model, and 
noted that the rate

[[Page 68687]]

for the payment adjustments for other years would be proportionally 
less.
    We invited comments on this proposed payment adjustment 
methodology.
    Comment: While offering support for the concept of value-based 
purchasing, the majority of commenters expressed concern with the 
magnitude of an 8-percent maximum payment risk such that it might 
reduce access to care for vulnerable patients. Commenters offered that 
payment adjustments could be made in later years of the model to 
provide HHAs with adequate time to ensure readiness to comply with 
model requirements and to allow CMS more time to study the initial 
model results. Many commenters also remarked on the differences between 
the Hospital Value- Based Purchasing (HVBP) Program and HHVBP Model 
maximum risk corridors and suggested lowering the HHVBP payment 
adjustments to align with the 2-percent maximum established in the HVBP 
Program.
    Response: We thank commenters for their input. As discussed in the 
proposed rule, based on lessons learned from Hospital VBP, the 2008 
Home Health pay for performance demonstration, and the MedPAC report, 
we believe that testing high financial incentives is necessary to 
motivate improvements in quality and patient satisfaction. However, we 
agree with commenters that providing some additional leeway for HHAs to 
ensure compliance with the model is important, and would also address 
concerns associated with moving competing HHAs from FFS incentives to 
VBP financial incentives tied to quality measures. Accordingly, under 
our final policy, we are reducing the payment adjustment percentage in 
CY 2018 from 5-percent to 3-percent. Further, by responding to these 
practical concerns, the conceptual model remains intact with the 
capacity to test the effect of higher incentives on quality.
    We believe this will provide HHAs more time to become familiar with 
the operation of the model before applying the higher percentage 
payment adjustments in later years. Additionally, under our final 
policy, we are reducing the payment adjustment for CY 2021 from 8-
percent to 7-percent to establish a more gradual payment adjustment 
incentive schedule of 3-percent (in 2018), 5-percent (in 2019), 6-
percent (in 2020), 7-percent (in 2021) and, 8-percent (in 2022).
    Comment: Several commenters raised concerns with the magnitude of 
an 8-percent maximum payment risk such that it might reduce access to 
care for vulnerable patients and threaten the financial viability of 
HHAs, including their ability to reinvest in infrastructure, care 
coordination, and financial preparations to participate in the HHVBP 
Model.
    Response: We have conducted financial modeling based on the 
proposed model and posit the finalized maximum upward and downward 
payment adjustments (ranging from 3- to 8-percent) are sufficiently 
significant to improve quality of care and will not have a negative 
impact on beneficiary access. The model does not reduce the overall 
payments to HHAs and, as a result, the aggregate average margins of all 
competing HHAs will be unaffected by the model. Competing HHAs that 
provide the highest quality of care and that receive the maximum upward 
adjustment will improve their financial viability that could ensure 
that the vulnerable population that they serve has access to high 
quality care. Only HHAs that provide very poor quality of care, 
relative to the cohort they compete within, would be subject to the 
highest downward payment adjustments.
    Final Decision: For the reasons discussed and in consideration of 
the comments received, we are finalizing the proposed payment 
adjustment methodology with modification. As noted, we are finalizing 
the following maximum payment adjustment percentage for each payment 
year: in CY 2018, 3-percent; in CY 2019, 5-percent; in CY 2020, 6-
percent; in CY 2021, 7-percent; and in CY 2022, 8-percent. Consistent 
with this final policy, under our final payment adjustment methodology, 
we set the slope of the LEF for the first performance year, CY 2016, so 
that the estimated aggregate value-based payment adjustments for CY 
2016 are equal to 3-percent of the estimated aggregate base operating 
episode payment amount for CY 2018, rather than 5-percent as proposed.
    Figure 9 provides an example of how the LEF is calculated and how 
it is applied to calculate the percentage payment adjustment to a HHA's 
TPS under our final policy. For this example, we applied the 8-percent 
payment adjustment level that will be used in the final year of the 
HHVBP Model (CY 2022) under our final policy. The rate for the payment 
adjustments for other years would be proportionally less.
    Step #1 involves the calculation of the `Prior Year Aggregate HHA 
Payment Amount' (See C2 in Figure 9) that each HHA was paid in the 
prior year. From claims data, all payments are summed together for each 
HHA for CY 2015, the year prior to the HHVBP Model.
    Step #2 involves the calculation of the `8-percent Payment 
Reduction Amount' (C3 of Figure 9) for each HHA. The `Prior Year 
Aggregate HHA Payment Amount' is multiplied by the `8-percent Payment 
Reduction Rate'. The aggregate of the `8-percent Payment Reduction 
Amount' is the numerator of the LEF.
    Step #3 involves the calculation of the `Final TPS Adjusted 
Reduction Amount' (C4 of Figure 9) by multiplying the `8-percent 
Payment Reduction Amount' from Step #2 by the TPS (C1) divided by 100. 
The aggregate of the `TPS Adjusted Reduction Amount' is the denominator 
of the LEF.
    Step #4 involves calculating the LEF (C5 of Figure 9) by dividing 
the aggregate `8-percent Payment Reduction Amount' by the aggregate 
`TPS Adjusted Reduction Amount'.
    Step #5 involves the calculation of the `Final TPS Adjusted Payment 
Amount' (C6 of Figure 9) by multiplying the `TPS Adjusted Reduction 
Amount' (C4) by the LEF (C5). This is an intermediary value used to 
calculate `Quality Adjusted Payment Rate'.
    Step #6 involves the calculation of the `Quality Adjusted Payment 
Rate' (C7 of Figure 9) that the HHA will receive instead of the 8-
percent reduction in payment. This is an intermediary step to 
determining the payment adjustment rate. For CY 2022, the payment 
adjustment in this column will range from 0-percent to 16-percent 
depending on the quality of care provided.
    Step #7 involves the calculation of the `Final Percent Payment 
Adjustment' (C8 of Figure 9) that will be applied to the HHA payments 
after the performance period. It simply involves the CY payment 
adjustment percent (as finalized, in 2018, 3-percent; in 2019, 5-
percent; in 2020, 6-percent; in 2021, 7-percent; and in 2022, 8-
percent). In this example, we use the maximum eight-percent (8-percent) 
subtraction to the `Quality Adjusted Payment Rate'. Note that the 
payment adjustment percentage is capped at no more than plus or minus 
8-percent for each respective performance period and the payment 
adjustment will occur on the final claim payment amount.

[[Page 68688]]



                                                          Figure 9--8-Percent Reduction Sample
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Step 1        Step 2        Step 3        Step 4        Step 5        Step 6        Step 7
                                                       -------------------------------------------------------------------------------------------------
                                                                                                     Linear
                                                         Prior year     8-Percent   TPS adjusted    exchange      Final TPS      Quality        Final
                    HHA                         TPS       aggregate      payment      reduction     function      adjusted      adjusted       percent
                                                         HHA payment    reduction    amount (C1/   (LEF) (Sum      payment    payment rate     payment
                                                              *          amount        100)*C3     of C3/ Sum      amount     (C6/C2) *100  adjustment +/
                                                                         (C2*8%)                     of C4)        (C4*C5)                    - (C7-8%)
                                                  (C1)          (C2)          (C3)          (C4)          (C5)          (C6)          (C7)          (C8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
HHA1.......................................         38      $100,000        $8,000        $3,040          1.93        $5,867         5.9 %         -2.1%
HHA2.......................................         55       145,000        11,600         6,380          1.93        12,313           8.5           0.5
HHA3.......................................         22       800,000        64,000        14,080          1.93        27,174           3.4          -4.6
HHA4.......................................         85       653,222        52,258        44,419          1.93        85,729          13.1          5.1%
HHA5.......................................         50       190,000        15,200         7,600          1.93        14,668           7.7         -0.3%
HHA6.......................................         63       340,000        27,200        17,136          1.93        33,072           9.7           1.7
HHA7.......................................         74       660,000        52,800        39,072          1.93        75,409          11.4           3.4
HHA8.......................................         25       564,000        45,120        11,280          1.93        21,770           3.9          -4.1
                                            ------------------------------------------------------------------------------------------------------------
    Sum....................................  .........  ............       276,178       143,007  ............       276,002  ............  ............
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Example cases.

H. Preview and Period to Request Recalculation

    We proposed that Medicare-certified HHAs be provided two separate 
opportunities to review scoring information under the HHVBP Model. 
First, HHAs will have the opportunity to review their quarterly quality 
reports following each quarterly posting; second, competing HHAs will 
have the opportunity to review their TPS and payment adjustment 
calculations, and request a recalculation if a discrepancy is 
identified due to a CMS error as described in this section. These 
processes would help educate and inform each competing Medicare-
certified HHA on the direct relation between the payment adjustment and 
performance measure scores.
    We proposed to inform HHAs quarterly of their performance on each 
of the individual quality measures used to calculate the TPS. We 
proposed that an HHA would have ten days after the quarterly reports 
are provided to request a recalculation of measure scores if it 
believes there is evidence of a discrepancy. We stated that we will 
adjust the score if it is determined that the discrepancy in the 
calculated measure scores was the result of our failure to follow 
measurement calculation protocols.
    In addition, we proposed to inform each competing HHA of the TPS 
and payment adjustment amount in an annual report. We proposed that 
these annual reports would be provided to competing HHAs each August 
1st prior to the calendar year for which the payment adjustment would 
be applied. Similar to quarterly reports, we proposed that HHAs will 
have ten days to request a recalculation of their TPS and payment 
adjustment amount from the date information is made available. For both 
the quarterly reports and the annual report containing the TPS and 
payment adjustments, competing HHAs will only be permitted to request 
scoring recalculations, and must include a specific basis for the 
requested recalculation. We will not be responsible for providing HHAs 
with the underlying source data utilized to generate performance 
measure scores. Each HHA has access to this data via the QIES system. 
The final TPS and payment adjustment will then be provided to competing 
Medicare-certified HHAs in a final report no later than 60 days in 
advance of the payment adjustment taking effect.
    The TPS from the annual performance report will be calculated based 
on the calculation of performance measures contained in the quarterly 
reports that have already been provided and reviewed by the HHAs. As a 
result, we stated in the proposed rule that we believe that quarterly 
reviews will provide substantial opportunity to identify and correct 
errors and resolve discrepancies, thereby minimizing the challenges to 
the annual performance scores linked to payment adjustment.
    As described above, a quarterly performance report will be provided 
to all competing HHAs within the selected states beginning with the 
first quarter of CY 2016 being reported in July 2016. We proposed that 
HHAs would submit recalculation requests for both quarterly quality 
performance measure reports and for the TPS and payment adjustment 
reports via an email link provided on the model-specific Web page. We 
proposed that the request form would be entered by a person who has 
authority to sign on behalf of the HHA and be submitted within 10 days 
of receiving the quarterly data report or the annual TPS and payment 
adjustment report.
    We proposed that requests for both quarterly report measure score 
recalculations or TPS and payment adjustment recalculations would 
contain the following information:
     The provider's name, address associated with the services 
delivered, and CMS Certification Number (CCN);
     The basis for requesting recalculation to include the 
specific quality measure data that the HHA believes is inaccurate or 
the calculation the HHA believes is incorrect;
     Contact information for a person at the HHA with whom CMS 
or its agent can communicate about this request, including name, email 
address, telephone number, and mailing address (must include physical 
address, not just a post office box); and,
     A copy of any supporting documentation the HHA wishes to 
submit in electronic form via the model-specific Web page.
    Following receipt of a request for quarterly report measure score 
recalculations or a request for TPS and payment adjustment 
recalculation, we proposed that CMS or its agent would:
     Provide an email acknowledgement, using the contact 
information provided in the recalculation request, to the HHA contact 
notifying the HHA that the request has been received;
     Review the request to determine validity, and determine 
whether the requested recalculation results in a score change altering 
performance measure scores or the HHA's TPS;
     If recalculation results in a performance measure score or 
TPS

[[Page 68689]]

change, conduct a review of quality data and if an error is found, 
recalculate the TPS using the corrected performance data; and,
     Provide a formal response to the HHA contact, using the 
contact information provided in the recalculation request, notifying 
the HHA of the outcome of the review and recalculation process.
    We proposed that recalculation and subsequent communication of the 
results of these determinations would occur as soon as administratively 
feasible following the submission of requests. Additionally, we stated 
that we will develop and adopt an appeals mechanism under the model 
through future rulemaking in advance of the application of any payment 
adjustments.
    The following is a summary of comments we received on the proposed 
quarterly quality measure reports and annual TPS preview periods.
    Comment: Several commenters suggested that the HHVBP Model provide 
30 days, instead of 10 days, after quarterly and annual reports are 
provided to request a recalculation of the measure scores if the HHA 
believes there is evidence of discrepancy. In addition to allowing more 
time to challenge report contents, one commenter recommended another 
level of appeal be added with an independent entity to perform the 
calculation to determine if the discrepancy is valid.
    Response: We agree the review period for performance scores should 
be greater than 10 days to allow a more complete opportunity for HHAs 
to review, and are extending the time period for HHAs to preview their 
quarterly performance reports and annual payment adjustment reports 
(with requests for recalculations) from 10 days to 30 days. As noted in 
the proposed rule, CMS intends to propose an appeals mechanism in 
future rulemaking prior to the application of the first payment 
adjustments scheduled for 2018.
    Final Decision: For the reasons stated and in consideration of the 
comments received, we are finalizing the processes described above with 
modification. Specifically, under our final policy, the recalculation 
request form must be submitted within 30 days, rather than 10 days, of 
posting the quarterly data report or the annual TPS and payment 
adjustment reports on the model-specific Web site. We are not making 
any other changes to the proposed policies as described in this 
section.

I. Evaluation

    We proposed, and are finalizing in this rule, to codify at Sec.  
484.315(c) that competing HHAs in selected states will be required to 
collect and report information to CMS necessary for the purposes of 
monitoring and evaluating this model as required by statute.\54\ An 
evaluation of the HHVBP Model will be conducted in accordance with 
section 1115A(b)(4) of the Act, which requires the Secretary to 
evaluate each model tested by CMMI. We consider an independent 
evaluation of the model to be necessary to understand its impacts on 
care quality in the home health setting. The evaluation will be focused 
primarily on understanding how successful the model is in achieving 
quality improvement as evidenced by HHAs' performance on clinical care 
process measures, clinical outcome measures (for example, functional 
status), utilization/outcome measures (for example, hospital 
readmission rates, emergency room visits), access to care, and 
patient's experience of care, and Medicare costs. We also intend to 
examine the likelihood of unintended consequences. We intend to select 
an independent evaluation contractor to perform this evaluation. The 
procurement for the selection of the evaluation contractor is in 
progress, thus we cannot provide a detailed description of the 
evaluation methodology here.
---------------------------------------------------------------------------

    \54\ See section 1115A(b)(4) of the Act (42 U.S.C. 1315a).
---------------------------------------------------------------------------

    We intend to use a multilevel approach to evaluation. Here, we 
intend to conduct analyses at the state, HHA, and patient levels. Based 
on the state groupings discussed in the section on selection of 
competing HHAs, we believe there are several ways in which we can draw 
comparison groups and remain open to scientifically-sound, rigorous 
methods for evaluating the effect of the model intervention.
    The evaluation effort may require of HHAs participating in the 
model additional data specifically for evaluation purposes. Such 
requirements for additional data to carry out model evaluation will be 
in compliance with 42 CFR 403.1105 which, as of January 1, 2015, 
requires entities participating in the testing of a model under section 
1115A to collect and report such information, including protected 
health information (as defined at 45 CFR 160.103), as the Secretary 
determines is necessary to monitor and evaluate the model. We will 
consider all Medicare-certified HHAs providing services within a state 
selected for the model to be participating in the testing of this model 
because the competing HHAs will be receiving payment from CMS under the 
model.\55\
---------------------------------------------------------------------------

    \55\ 79 FR 67751 through 67755.
---------------------------------------------------------------------------

    We invited comments on the proposed evaluation plan.
    Comment: Several commenters highlighted the importance of closely 
monitoring and evaluating Medicare beneficiary access to home 
healthcare to ensure the model does not inadvertently negatively impact 
beneficiary access to necessary and appropriate care. In addition, some 
commenters suggested the model may cause some HHAs in selected states 
to leave the market, thereby creating insufficient HHA supply. Other 
commenters specifically raised the concern that some HHAs may attempt 
to avoid treating beneficiaries they fear will have a negative impact 
on performance scores. These commenters suggest that CMS monitor 
whether Medicare beneficiaries experience problems with access to care, 
and if they do, immediately address issues to ensure beneficiaries 
receive needed services. One commenter specifically suggests surveying 
Medicare beneficiaries to help measure access and ensure proactive 
monitoring.
    Response: Beneficiary access to care is of paramount concern to us, 
and as indicated in the proposed rule, we will observe the progress of 
the model to guard against unintended consequences. Our monitoring and 
evaluation designs will be able to detect the types of concerns 
mentioned above. Adjustments to the monitoring and evaluation plans 
will be made as needed. As part of the development of this model, we 
have identified counties with low HHA market penetration, high dually-
eligible populations, proportions of beneficiaries with high levels of 
acuity (as measured by hierarchical condition categories or HCCs), and 
organizational types. Future monitoring activities will include a 
continuous review of beneficiary-level claims data, Medicare cost 
reports, and beneficiary enrollment data to understand whether any 
unintended consequences arise across all competing HHAs in the Model.
    Comment: Several commenters suggested that CMS employ a process to 
continuously monitor quality improvement and evaluate other aspects of 
the model in conjunction with all stakeholders, including home health 
agencies. Commenters also recommended sharing lessons learned from the 
model to inform, educate and engage beneficiaries and the general 
public of lessons learned. Several commenters specifically recommended 
that CMS establish a HHVBP learning

[[Page 68690]]

network to foster smoother post-pilot implementation of VBP in home 
health.
    Response: We agree that wherever possible, competing HHAs should 
have every opportunity to share lessons learned from the model. We 
appreciate all suggestions related to learning from the HHVBP Model, 
both for competing HHAs and the public. The model contains multiple 
mechanisms for sharing information, including the use of a model-
specific Web site, a collaboration Web site, and model-specific 
technical assistance efforts.
    Comment: Several commenters specifically requested subsequent 
revisions to the HHVBP Model following initial evaluation in order to 
ensure that payment reflects a broad range of patients and does not 
incentivize under or over provision of services. These commenters 
recommended independent evaluation that includes state specific data on 
changes in home health quality outcomes, changes in home health 
utilization and access to home health for patients with specific 
diagnosis and functional status, with breakdowns by geographic location 
of patients (for example, rural, urban).
    Response: We appreciate the recommendations provided. An 
independent evaluation is planned. As discussed in the proposed rule, 
we intend to use a multilevel approach to evaluation. We intend to 
conduct analyses at the state, HHA, and patient levels. The evaluation 
will be conducted in accordance with section 1115A(b)(4) of the Act and 
will include analysis of quality improvement as evidenced by HHAs' 
performance on clinical care process measures, clinical outcome 
measures (for example, functional status), utilization/outcome measures 
(for example, hospital readmission rates, emergency room visits), 
access to care, and patient's experience of care, and changes in 
Medicare costs. We also intend to examine the likelihood of unintended 
consequences. The evaluation will use a scientifically rigorous 
approach for evaluating the model intervention and making necessary 
alterations to the model as needed.
    Final Decision: For these reasons and in consideration of the 
comments received, we are finalizing the evaluation plan as proposed.

V. Provisions of the Home Health Care Quality Reporting Program (HHQRP) 
and Response to Comments

A. Background and Statutory Authority

    Section 1895(b)(3)(B)(v)(II) of the Act requires that for 2007 and 
subsequent years, each HHA submit to the Secretary in a form and 
manner, and at a time, specified by the Secretary, such data that the 
Secretary determines are appropriate for the measurement of health care 
quality. To the extent that an HHA does not submit data in accordance 
with this clause, the Secretary is directed to reduce the home health 
market basket percentage increase applicable to the HHA for such year 
by 2 percentage points. As provided at section 1895(b)(3)(B)(vi) of the 
Act, depending on the market basket percentage for a particular year, 
the 2 percentage point reduction under section 1895(b)(3)(B)(v)(I) of 
the Act may result in this percentage increase, after application of 
the productivity adjustment under section 1895(b)(3)(B)(vi)(I) of the 
Act, being less than 0.0 percent for a year, and may result in payment 
rates under the Home Health PPS for a year being less than payment 
rates for the preceding year.
    Section 2(a) of the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (the IMPACT Act) (Pub. L. 113-185, enacted 
on Oct. 6, 2014) amended Title XVIII of the Act, in part, by adding a 
new section 1899B, which imposes new data reporting requirements for 
certain post-acute care (PAC) providers, including HHAs. New section 
1899B of the Act is titled, ``Standardized Post-Acute Care (PAC) 
Assessment Data for Quality, Payment, and Discharge Planning''. Under 
section 1899B(a)(1) of the Act, certain post-acute care (PAC) providers 
(defined in section 1899B(a)(2)(A) of the Act to include HHAs, SNFs, 
IRFs, and LTCHs) must submit standardized patient assessment data in 
accordance with section 1899B(b) of the Act, data on quality measures 
required under section 1899B(c)(1) of the Act, and data on resource 
use, and other measures required under section 1899B(d)(1) of the Act. 
The Act also sets out specified application dates for each of the 
measures. The Secretary must specify the quality, resource use, and 
other measures no later than the applicable specified application date 
defined in section 1899B(a)(2)(E) of the Act.
    Section 1899B(b) of the Act describes the standardized patient 
assessment data that PAC providers are required to submit in accordance 
with section 1899B(b)(1) of the Act; requires the Secretary, to the 
extent practicable, to match claims data with standardized patient 
assessment data in accordance with section 1899B(b)(2) of the Act; and 
requires the Secretary, as soon as practicable, to revise or replace 
existing patient assessment data to the extent that such data duplicate 
or overlap with standardized patient assessment data, in accordance 
with section 1899B(b)(3) of the Act.
    Sections 1899B(c)(1) and (d)(1) of the Act direct the Secretary to 
specify measures that relate to at least five stated quality domains 
and three stated resource use and other measure domains. Section 
1899B(c)(1) of the Act provides that the quality measures on which PAC 
providers, including HHAs, are required to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
must be in accordance with, at least, the following domains:
     Functional status, cognitive function, and changes in 
function and cognitive function;
     Skin integrity and changes in skin integrity;
     Medication reconciliation;
     Incidence of major falls; and
     Accurately communicating the existence of and providing 
for the transfer of health information and care preferences of an 
individual to the individual, family caregiver of the individual, and 
providers of services furnishing items and services to the individual 
when the individual transitions (1) from a hospital or Critical Access 
Hospital (CAH) to another applicable setting, including a PAC provider 
or the home of the individual, or (2) from a PAC provider to another 
applicable setting, including a different PAC provider, hospital, CAH, 
or the home of the individual.
    Section 1899B(c)(2)(A) provides that, to the extent possible, the 
Secretary must require such reporting through the use of a PAC 
assessment instrument and modify the instrument as necessary to enable 
such use.
    Section 1899B(d)(1) of the Act provides that the resource use and 
other measures on which PAC providers, including HHAs, are required to 
submit any necessary data specified by the Secretary, which may include 
standardized assessment data in addition to claims data, must be in 
accordance with, at least, the following domains:
     Resource use measures, including total estimated Medicare 
spending per beneficiary;
     Discharge to community; and
     Measures to reflect all-condition risk-adjusted 
potentially preventable hospital readmission rates.
    Sections 1899B(c) and (d) of the Act indicate that data satisfying 
the eight measure domains in the IMPACT Act is the minimum data 
reporting requirement. The Secretary may specify additional measures 
and additional domains.

[[Page 68691]]

    Section 1899B(e)(1) of the Act requires that the Secretary 
implement the quality, resource use, and other measures required under 
sections 1899B(c)(1) and (d)(1) of the Act in phases consisting of 
measure specification, data collection, and data analysis; the 
provision of feedback reports to PAC providers in accordance with 
section 1899B(f) of the Act; and public reporting of PAC providers' 
performance on such measures in accordance with section 1899B(g) of the 
Act. Section 1899B(e)(2) of the Act generally requires that each 
measure specified by the Secretary under section 1899B of the Act be 
National Quality Forum (NQF)-endorsed, but authorizes an exception 
under which the Secretary may select non-NQF-endorsed quality measures 
in the case of specified areas or medical topics determined appropriate 
by the Secretary for which a feasible or practical measure has not been 
endorsed by the NQF, as long as due consideration is given to measures 
that have been endorsed or adopted by a consensus organization 
identified by the Secretary. Section 1899B(e)(3) of the Act provides 
that the pre-rulemaking process required by section 1890A of the Act 
applies to quality, resource use, and other measures specified under 
sections 1899B(c)(1) and (d)(1) of the Act, but authorizes exceptions 
under which the Secretary may (1) use expedited procedures, such as ad 
hoc reviews, as necessary in the case of a measure required for data 
submissions during the 1-year period before the applicable specified 
application date, or (2) alternatively, waive section 1890A of the Act 
in the case of such a measure if applying section 1890A of the Act 
(including through the use of expedited procedures) would result in the 
inability of the Secretary to satisfy any deadline specified under 
section 1899B of the Act for the measure.
    Section 1899B(f)(1) of the Act requires the Secretary to provide 
confidential feedback reports to PAC providers on the performance of 
such PAC providers for quality, resource use, and other measures 
required under sections 1899B(c)(1) and (d)(1) of the Act beginning 1 
year after the applicable specified application date.
    Section 1899B(g) of the Act requires the Secretary to establish 
procedures for making available to the public information regarding the 
performance of individual PAC providers for quality, resource use, and 
other measures required under sections 1899B(c)(1) and (d)(1) beginning 
not later than 2 years after the applicable specified application date. 
The procedures must ensure, including through a process consistent with 
the process applied under section 1886(b)(3)(B)(viii)(VII) for similar 
purposes, that each PAC provider has the opportunity to review and 
submit corrections to the data and information that are to be made 
public for the PAC provider prior to such data being made public.
    Section 1899B(h) of the Act sets out requirements for removing, 
suspending, or adding quality, resource use, and other measures 
required under sections 1899B(c)(1) and (d)(1) of the Act. In addition, 
section 1899B(j) of the Act requires the Secretary to allow for 
stakeholder input, such as through town halls, open door forums, and 
mailbox submissions, before the initial rulemaking process to implement 
section 1899B of the Act.
    Section 2(c)(1) of the IMPACT Act amended section 1895 of the Act 
to address the payment consequences for HHAs for the additional data 
which HHAs are required to submit under section 1899B of the Act. These 
changes include the addition of a new section 1895(b)(3)(B)(v)(IV), 
which requires HHAs to submit the following additional data: (1) For 
the year beginning on the specified application date and each 
subsequent year, data on the quality, resource use, and other measures 
required under sections 1899B(c)(1) and (d)(1) of the Act; and (2) for 
2019 and subsequent years, the standardized patient assessment data 
required under section 1899B(b)(1) of the Act. Such data must be 
submitted in the form and manner, and at the time, specified by the 
Secretary.
    As noted, the IMPACT Act adds a new section 1899B of the Act that 
imposes new data reporting requirements for certain post-acute care 
(PAC) providers, including HHAs. Sections 1899B(c)(1) and 1899B(d)(1) 
of the Act collectively require that the Secretary specify quality 
measures and resource use and other measures with respect to certain 
domains not later than the specified application date that applies to 
each measure domain and PAC provider setting. Section 1899B(a)(2)(E) of 
the Act delineates the specified application dates for each measure 
domain and PAC provider. The IMPACT Act also amends other sections of 
the Act, including section 1895(b)(3)(B)(v), to require the Secretary 
to reduce the otherwise applicable PPS payment to a PAC provider that 
does not report the new data in a form and manner, and at a time, 
specified by the Secretary. For HHAs, amended section 1895(b)(3)(B)(v) 
of the Act will require the Secretary to reduce the payment update for 
any HHA that does not satisfactorily submit the newly required data.
    Under the current HH QRP, the general timeline and sequencing of 
measure implementation occurs as follows: Specification of measures; 
proposal and finalization of measures through notice-and-comment 
rulemaking; HHA submission of data on the adopted measures; analysis 
and processing of the submitted data; notification to HHAs regarding 
their quality reporting compliance for a particular year; consideration 
of any reconsideration requests; and imposition of a payment reduction 
in a particular year for failure to satisfactorily submit data for that 
year. Any payment reductions that are taken for a year begin 
approximately 1 year after the end of the data submission period for 
that year and approximately 2 years after we first adopt the measure.
    To the extent that the IMPACT Act could be interpreted to shorten 
this timeline, so as to require us to reduce HH PPS payment for failure 
to satisfactorily submit data on a measure specified under section 
1899B(c)(1) or (d)(1) of the IMPACT Act beginning with the same year as 
the specified application date for that measure, such a timeline would 
not be feasible. The current timeline discussed above reflects 
operational and other practical constraints, including the time needed 
to specify and adopt valid and reliable measures, collect the data, and 
determine whether a HHA has complied with our quality reporting 
requirements. It also takes into consideration our desire to give HHAs 
enough notice of new data reporting obligations so that they are 
prepared to timely start reporting data. Therefore, we intend to follow 
the same timing and sequence of events for measures specified under 
sections 1899B(c)(1) and (d)(1) of the Act that we currently follow for 
other measures specified under the HH QRP. We intend to specify each of 
these measures no later than the specified application dates set forth 
in section 1899B(a)(2)(E) of the Act and will adopt them consistent 
with the requirements in the Act and Administrative Procedure Act. To 
the extent that we finalize a proposal to adopt a measure for the HH 
QRP that satisfies an IMPACT Act measure domain, we intend to require 
HHAs to report data on the measure for the year that begins 2 years 
after the specified application date for that measure. Likewise, we 
intend to require HHAs to begin reporting any other data specifically 
required under the IMPACT Act for the year that begins 2 years after we 
adopt requirements that

[[Page 68692]]

would govern the submission of that data.
    Lastly, on April 1, 2014, the Congress passed the Protecting Access 
to Medicare Act of 2014 (PAMA) (Pub. L. 113-93), which stated the 
Secretary may not adopt ICD-10 prior to October 1, 2015. On August 4, 
2014, HHS published a final rule titled ``Administrative 
Simplification: Change to the Compliance Date for the International 
Classification of Diseases, 10th Revision (ICD-10-CM and ICD-10-PCS 
Medical Data Code Sets'' (79 FR 45128), which announced October 1, 2015 
as the new compliance date. The OASIS-C1 data item set had been 
previously approved by the Office of Management and Budget (OMB) on 
February 6, 2014 and scheduled for implementation on October 1, 2014. 
We intended to use the OASIS-C1 to coincide with the original 
implementation date of the ICD-10. The approved OASIS-C1 included 
changes to accommodate coding of diagnoses using the ICD-10-CM coding 
set and other important stakeholder concerns such as updating clinical 
concepts, and revised item wording and response categories to improve 
item clarity. This version included five (5) data items that required 
the use of ICD-10 codes.
    Since OASIS-C1 was revised to incorporate ICD-10 coding, it was not 
feasible to implement the OASIS-C1/ICD-10 version prior to October 1, 
2015, when ICD-10 was scheduled to be implemented. Due to this delay, 
we had to ensure the collection and submission of OASIS data continued, 
until ICD-10 was implemented. Therefore, we made interim changes to the 
OASIS-C1 data item set to allow use with ICD-9 until ICD-10 was 
adopted. The OASIS-C1/ICD-9 version was submitted to OMB for approval 
until the OASIS-C1/ICD-10 version could be implemented. A 6-month 
emergency approval was granted on October 7, 2014 and CMS subsequently 
applied for an extension. The extension of the OASIS-C1/ICD-9 version 
was reapproved under OMB control number 0938-0760 with a current 
expiration date of March 31, 2018. It is important to note, that this 
version of the OASIS will be discontinued once the OASIS-C1/ICD-10 
version is approved and implemented. In addition, to facilitate the 
reporting of OASIS data as it relates to the implementation of ICD-10 
on October 1, 2015, we submitted a new request for approval to OMB for 
the OASIS-C1/ICD-10 version under the Paperwork Reduction Act (PRA) 
process. We requested a new OMB control number for the proposed revised 
OASIS item as announced in the 30-day Federal Register notice (80 FR 
15796). The new information collection request for OASIS-C1/ICD-10 
version was approved under OMB control number 0938-1279 with a current 
expiration date of May 31, 2018. Information regarding the OASIS-C1 can 
be located on the OASIS C-1 Data Sets Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/OASIS-C1.html. Additional information regarding 
the adoption of ICD-10 can be located on the ICD-10 Web page at: http://www.cms.gov/Medicare/Coding/ICD10/index.html?redirect=/icd10.
    We received multiple public comments pertaining to the general 
timeline and plan for implementation of the IMPACT Act, sequencing of 
measure implementation, and standardization of PAC assessment tools. 
The following is a summary of the comments we received on this topic 
and our responses.
    Comment: We received several comments requesting the development of 
a comprehensive implementation plan for all settings covered by the 
IMPACT Act. Commenters stated that a comprehensive implementation plan 
would give home health providers an opportunity to plan for the 
potential impact on their operations, and enable all stakeholders to 
understand CMS's approach to implementing the IMPACT Act across care 
settings. Some commenters requested that CMS plans be communicated as 
soon as possible and that CMS develop setting-specific communications 
to facilitate understanding of the IMPACT Act requirements. Another 
commenter urged CMS to provide clear and transparent explanations of 
each measure's specifications, providing as much information as 
possible to the public about the measures proposed. This commenter 
added that the detailed information submitted for NQF consensus 
development process would be helpful to stakeholders, and offered to 
work with CMS on measure development and specifications. One commenter 
specifically expressed the importance of a transparent process in 
relation to measure development, noting that the Act calls for 
informing the public of the measure's numerator, denominator, 
exclusions, and any other aspects the Secretary determines necessary. 
Another commenter requested that CMS abide by certain principles such 
as: Provide implementation timelines for data collection and reporting 
requirements in a timely manner; implement measures that are reliable, 
feasible and setting appropriate that are endorsed as well as included 
in the pre-rulemaking Measure Applications Partnership (MAP) process; 
minimize unnecessary provider burden; and finally that CMS ensure the 
standardization of measures and data collection across post-acute care 
settings as feasible.
    Response: We appreciate and agree with the commenters' requests for 
a comprehensive and transparent plan for implementation of the IMPACT 
Act, as well as the need for timely stakeholder input, the development 
of reliable, accurate measures that are endorsed and have undergone the 
pre-rulemaking MAP process, clarity on the level of standardization of 
items and measures, the importance of feasibility and standardization, 
and the avoidance of unnecessary burden on PAC providers. Our intent 
has been to comply with these principles in the implementation and 
rollout of QRPs in the various care settings, and we will continue to 
adhere to these principles as the agency moves forward with 
implementing IMPACT Act requirements.
    In addition to implementing the IMPACT Act requirements, we will 
follow the strategy for identifying cross-cutting measures, timelines 
for data collection, and timelines for reporting as outlined in the 
IMPACT Act. As described more fully above, the IMPACT Act requires CMS 
to specify measures that relate to at least five stated quality domains 
and three stated resource use and other measure domains. The IMPACT Act 
also outlines timelines for data collection and timelines for 
reporting. We intend to adopt measures that comply with the IMPACT Act 
in a manner that is consistent with the sequence we follow in other 
quality reporting programs. We intend to follow all processes in place 
for adoption of measures including the MAP review and the notice and 
comment rulemaking process. In the selection and specification of 
measures, we employ a transparent process in which we seek input from 
stakeholders and national experts and engage in a process that allows 
for pre-rulemaking input on each measure, as required by section 1890A 
of the Act. This process is based on a private-public partnership, and 
it occurs via the MAP. The MAP is composed of multi-stakeholder groups 
convened by the NQF, our current contractor under section 1890 of the 
Act, to provide input on the selection of quality and efficiency 
measures described in section 1890(b)(7)(B). The NQF must convene these 
stakeholders and provide us with the stakeholders' input on the 
selection of such measures. We, in turn, must take this input into 
consideration in selecting such

[[Page 68693]]

measures. In addition, the Secretary must make available to the public 
by December 1 of each year a list of such measures that the Secretary 
is considering under Title XVIII of the Act. Additionally, proposed 
measures and specifications are to be announced through the Notice of 
Proposed Rulemaking (NPRM) process in which proposed rules are 
published in the Federal Register and are available for public view and 
comment.
    We further note that we are committed to the principles surrounding 
public input as part of its measure development that occurs prior to 
rule making. As part of this measure development process, we seek input 
from the public on the measure specifications under development by CMS 
and our measure contractors. We have a designated Web page where we 
solicit public comment on measure constructs during measure 
development. This is a key component to how we develop and maintain 
quality measures, as outlined in the CMS Blueprint for Measures 
Management System. You can find more information about the CMS 
Blueprint for Measures Management System on the CMS Measure Management 
System Web page at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/index.html. The CMS Quality Measures 
Public Comment page is located at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html.
    Comment: Several commenters requested that CMS continue in its 
public engagement with stakeholders. They stated their appreciation for 
the opportunity to work with CMS during the implementation phases of 
the IMPACT Act. These commenters noted a need for more opportunities 
for stakeholder input into various aspects of the measure and 
assessment instrument development process. Commenters requested 
opportunities to provide ongoing input into measure and assessment 
instrument development and modifications.
    Response: We appreciate the commenters' feedback and the continued 
involvement of stakeholders in all phases of measure development and 
implementation, as we see the value in strong public-private 
partnerships. We also believe that ongoing stakeholder input is 
important to the success of the IMPACT Act and look forward to 
continued and regular input from the provider communities as we 
continue to implement the IMPACT Act. It is our intent to move forward 
with IMPACT Act implementation in a manner in which the measure and 
assessment instrument development process continues to be transparent, 
and includes input and collaboration from experts, the PAC provider 
community, and the public. It is of the utmost importance to CMS to 
continue to engage stakeholders, including patients and their families, 
throughout the measure and assessment instrument development lifecycle 
through our measure development public comment periods, the pre-
rulemaking activities, participation in the Technical Expert Panels 
(TEPs) convened by our measure development contractors, as well as open 
door forums, and other opportunities. We have already provided multiple 
opportunities for stakeholder input, including the following 
activities: Our measure development contractor(s) convened TEPs for 
many of the measures in development under the IMPACT Act such as the 
functional assessment TEP, Discharge to Community TEP, Potentially 
Preventable Readmissions TEP, and the Drug Regimen Review TEP. We 
intend to continue this form of stakeholder engagement with future TEPs 
that will assess data standardization and Medicare Spending per 
Beneficiary measure concepts, among other topics. We also convened two 
separate listening sessions on February 10, 2015 and March 24, 2015 in 
order to receive stakeholder input on IMPACT Act implementation. In 
addition, we heard stakeholder input during the February 9, 2015 ad hoc 
MAP meeting provided for the sole purpose of reviewing the measures 
proposed in response to the IMPACT Act. We also implemented a public 
mail box for the submission of comments in January 2015, 
[email protected], which is listed on our IMPACT Act of 
2014 & Cross-Setting Measures Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, 
and we held a Special Open Door Forum to seek input on the measures on 
February 25, 2015. The slides from the Special Open Door Forum are 
available http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    Comment: We received several comments requesting that CMS ensure 
that the data used to satisfy the IMPACT Act measure domains be aligned 
across PAC settings to maximize the reliability and validity of such 
data and to enable data comparability. Commenters noted the importance 
of standardized patient assessment data for cross-setting comparisons 
of patient outcomes. Another commenter expressed concern about the 
level of standardization of data collection instruments across PAC 
settings, specifically the importance of assessment item alignment for 
items selected for use in the various PAC settings, and urged CMS to 
consider such data alignment issues. One commenter recommended CMS move 
as quickly as possible to collect interoperable and standardized data, 
and one commenter recommended that CMS conduct testing to evaluate 
comparability across settings. One commenter expressed concern related 
to the inconsistencies in the measures proposed, suggesting that there 
was significant variance in relation to their numerator, denominator 
and exclusions.
    We received a few comments requesting details pertaining to the 
timing of the development and implementation of the standardized 
patient assessment data, measures, data collection, and reporting. 
Commenters requested a detailed timeline and schedule that specifies 
planned changes to standardize assessment data, including dates and 
sequencing of changes. Specifically, one commenter stated that although 
the sequencing for the quality measures and specified application dates 
were provided in the proposed rule, the detail related to the timing of 
the standardized data appeared to have been left out. The commenter 
requested that this final rule provide such timeline and sequencing.
    Response: We agree that standardization is important for data 
comparability and outcome analysis. We will work to ensure that items 
pertaining to measures required under the IMPACT Act that are included 
in assessment instruments are standardized and aligned across the 
assessment instruments. In addition, we will ensure that the data used 
to satisfy the IMPACT Act measure domains will be aligned across PAC 
settings to maximize the reliability and validity of such data and to 
enable data comparability. We recognize the need for transparency as we 
move forward to implement the IMPACT Act and we intend to continue to 
engage stakeholders and ensure that our approach to implementation and 
timing is communicated in an open and informative manner. We will 
continue this communication through various means, such as open door 
forums, national provider calls, email blasts, and announcements. We 
intend to provide

[[Page 68694]]

ongoing information pertaining to the implementation and development of 
standardized patient assessment data, measures, data collection, and 
reporting to the public. We will also continue to provide information 
about development and implementation of the IMPACT Act on the IMPACT 
Act of 2014 & Cross-Setting Measures Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html. In addition to the Web site updates and provider calls, 
we intend to provide information about development and implementation 
through pre-rulemaking activities surrounding the development of 
quality measures, which includes public input as part of our process. 
We intend to engage stakeholders and experts in developing the 
assessment instrument modifications necessary to meet data 
standardization requirements of the IMPACT Act. We also will use the 
rulemaking process to communicate timelines for implementation, 
including timelines for the replacement of items in PAC assessment 
tools, timelines for implementation of new or revised quality measures, 
and timelines for public reporting.
    Regarding the timeline and sequencing surrounding the standardized 
patient assessment data, we interpret the commenters' concern to refer 
to the standardized data assessment domains listed within the Act under 
section 2(b) ``Standardized patient assessment data''. As stated in the 
preamble to the CY 2016 HH PPS proposed rule, we intend to require HHAs 
to begin reporting data on the quality measures required under the 
IMPACT Act for the year that begins 2 years after we adopt requirements 
that govern the submission of that data.
    Comment: We received a few comments supporting and encouraging the 
use of NQF-endorsed measures and recommending that measures be NQF-
endorsed prior to implementation. Specifically, commenters urged CMS to 
seek and receive NQF endorsement for measures in each PAC setting, 
noting that quality measure endorsement in one setting, such as a 
skilled nursing facility, may not mean a measure is appropriate, 
reliable, or valid for use in the home health setting.
    Response: We will propose appropriate measures that meet the 
requirements of the IMPACT Act measure domains and that have been 
endorsed or adopted by a consensus organization whenever possible. 
However, when this is not feasible because there is no NQF-endorsed 
measure that meets all the requirements for a specified IMPACT Act 
measure domain, we intend to rely on the exception authority given to 
the Secretary in section 1899B(e)(2)(B) of the Act. This statutory 
exception allows the Secretary to specify a measure for the HH QRP 
setting that is not NQF-endorsed where, as here, we have not been able 
to identify other measures on the topic that are endorsed or adopted by 
a consensus organization. For all quality measures for the HH QRP, we 
seek MAP review, as well as expert opinion on the validity and 
reliability of those measures in the HH setting. For the proposed 
quality measure, the Percent of Residents/Patients/Persons with 
Pressure Ulcers That Are New or Worsened, the MAP PAC LTC Off-Cycle 
Workgroup conditionally supported the quality measure for HH QRP. We 
wish to note that we intend to seek consensus endorsement for the 
IMPACT Act measures in each PAC setting.
    Comment: We received several comments about the burden on PAC 
providers of meeting new requirements imposed as a result of the 
implementation of the IMPACT Act. Specifically, commenters requested 
that CMS consider minimizing the burden for PAC providers when possible 
and avoiding duplication in data collection.
    Response: We appreciate the importance of avoiding undue burden and 
will continue to evaluate and consider any burden the IMPACT Act and 
the HH QRP places on home health providers. In implementing the IMPACT 
Act thus far, we have taken into consideration any new burden that our 
requirements might place on PAC providers. In this respect, we note 
that many assessment items used to calculate the measure proposed for 
use in the HH QRP, the Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened are currently being collected in the 
OASIS instrument.
    Comment: We received one comment requesting that, in the future, 
cross-setting measures and assessment data changes related to the 
IMPACT Act be addressed in one stand-alone notice and rule that applies 
to all four post-acute care settings.
    Response: We will take this request under consideration.
    Comment: We received one comment expressing interest in learning 
about any proposed changes to the OASIS assessment instrument in the 
next version of the item set and when these changes might occur.
    Response: We are committed to transparent communication about 
updates to the PAC assessment instruments required to support the 
IMPACT Act measures, as well as any new measures for the HH QRP. We 
wish to clarify that the draft revisions to the integumentary portion 
of the OASIS were posted along with the proposed rule on the Home 
Health Quality Measures Web page at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html. We intend to make 
publically available the final item set with its revisions as well as 
the submission specifications in a manner consistent with our previous 
postings of such information in the coming months.
    Comment: We received one comment expressing concern that data used 
in reformulating the payment model and assessing quality in PAC 
settings be gathered by qualified clinicians. Specifically, the 
commenter emphasized the unique contributions of occupational 
therapists to support the intent of the IMPACT Act.
    Response: We appreciate the feedback and concur on the important 
role played by qualified clinicians in collecting the data needed to 
support the requirements of the IMPACT Act.
    Comment: One commenter recommended that CMS invest in training 
clinicians for any new data collection requirements that address the 
quality measures, the assessment items, and how the measures and the 
items are developed to meet the mandate of the IMPACT Act objectives. 
This commenter additionally noted that the training should address 
different settings of care and how patient populations differ across 
PAC settings, to support consistency in data collection.
    Response: We agree that training is critical to assure both 
provider accuracy and understanding of the assessment and data 
collection requirements. We intend to provide training on updates to 
the OASIS assessment instrument as suggested, and intend to ensure that 
such training includes the information necessary to ensure consistent 
data collection.
    Comment: One commenter underscored cognitive function as an 
important aspect of the IMPACT Act, because of its significant 
relationship to Medicare resource use, length of stay, and patients' 
long term outcomes. The commenter recommended that assessment of 
functional cognition be incorporated as part of CMS's efforts to meet 
the requirements of the IMPACT Act and added that providers need more 
training around appropriate functional activities for patients with 
cognitive impairments. This commenter also

[[Page 68695]]

offered to provide research studies and related materials to support 
CMS in this area.
    Response: We concur on the importance of cognitive function and its 
relationship to quality outcomes for PAC patients. We are working 
toward developing quality measures that assess areas of cognition, 
recognizing that this quality topic is intrinsically linked to the 
function domain. We appreciate the commenter's offer of assistance and 
encourage the submission of comments and measure specification details 
to our comment email [email protected].
    Comment: One commenter supported the inclusion of new standardized 
self-care and mobility functional items in PAC assessment tools that 
utilize the data source of the CARE Tool. The commenter anticipated 
that functional measures based on CARE items that are being implemented 
in other PAC settings will be eventually added to the HH QRP. This 
commenter noted that use of these new items would facilitate accurate 
representation of patient function across the spectrum of PAC settings.
    Response: We appreciate the commenter's feedback and support of the 
self-care and functional items that utilize data elements derived from 
the CARE Tool item set source. We believe that standardization of 
assessment items and measures, such as measures of functional status, 
across post-acute care settings is an important goal.
    Comment: One commenter expressed concern regarding harmonization of 
measures across settings and outcomes measurement when multiple 
populations are included. This commenter urged that proposed IMPACT Act 
measures be limited to Medicare FFS beneficiaries, noting that to 
include other populations (Medicaid, Medicare Advantage, and MCO 
Medicaid) will complicate the interpretation of outcome results. The 
commenter expressed support of the construct of the Total Cost per 
Beneficiary. The commenter also suggested that a measure such as the 
Percent of Patients Discharged to a Higher Level of Care versus 
Community, which the commenter suggested could be used across all 
patients receiving home care, be included in future measure 
development. In addition, the commenter expressed support for measures 
related to falls and nutritional assessment, and hospitalizations, but 
requested clarification about the population that would be measured and 
recommended that all of these measures be limited to Medicare FFS 
patients only. The commenter additionally recommended that the 
uniqueness of home health care be considered when developing a 
standardized falls measure, noting that home health staff are not 
present 24 hours a day, seven days a week and are reliant on patients 
and caregivers in reporting and preventing falls.
    Response: We appreciate the commenter's feedback about comparison 
of outcomes across different payer populations and appreciate the 
commenter's support for quality measure standardization as mandated by 
the IMPACT Act. The cross-setting measures: (1) Payment Standardized 
Medicare Spending Per Beneficiary (MSPB), (2) Percentage residents/
patients at discharge assessment, who discharged to a higher level of 
care versus to the community, (Application of NQF #2510), (3) Skilled 
Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM), and (4) 
Application of the LTCH/IRF All-Cause Unplanned Readmission Measure for 
30 Days Post Discharge from LTCHs/IRFs are currently under development 
for all four PAC settings. These quality measures are being developed 
using Medicare claims data, thus the denominators for these measure 
constructs are limited to the Medicare FFS population. We intend to 
standardize denominator and numerator definitions across PAC settings 
in order to standardize quality measures as required by the IMPACT Act.
    We acknowledge the unique constraints home health agencies face in 
monitoring patient falls. We are in the process of standardizing a 
quality measure that assesses one or more falls with a major injury, 
rather than just a measure assessing if a fall occurred. In the FY 2016 
IPPS/LTCH PPS final rule, FY 2016 IRF PPS final rule and FY 2016 SNF 
PPS final rule, we finalized an application of the quality measure, the 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long Stay) measure (NQF #0674). This application of the quality 
measure assesses falls resulting in major injuries only, satisfying the 
domain in the IMPACT Act, the Incidence of Major Falls. A TEP convened 
by our measure development contractor provided input on the technical 
specifications of the application of the quality measure, the Percent 
of Residents Experiencing One or More Falls with Major Injury (Long 
Stay) (NQF #0674), including the feasibility of implementing the 
measure across PAC settings, including home health care. The TEP was 
supportive of the implementation of this measure across PAC settings 
and was also supportive of our efforts to standardize this measure for 
cross-setting development. We have taken steps to standardize the 
numerator, denominator, and other facets of the quality measure across 
all PAC settings. As part of best clinical practice, the HHA should 
take steps to mitigate falls with major injury, especially since such 
falls are considered to be ``never events'' as they relate to 
healthcare acquired conditions.
    Finally, we appreciate the commenter's concern that home health 
staff are not present 24 hours, 7 days a week and may not be able to 
track falls as they occur.

B. General Considerations Used for the Selection of Quality Measures 
for the HH QRP

    We strive to promote high quality and efficiency in the delivery of 
health care to the beneficiaries we serve. Performance improvement 
leading to the highest quality health care requires continuous 
evaluation to identify and address performance gaps and reduce the 
unintended consequences that may arise in treating a large, vulnerable, 
and aging population. Quality reporting programs, coupled with public 
reporting of quality information, are critical to the advancement of 
health care quality improvement efforts.
    We seek to adopt measures for the HH QRP that promote better, 
safer, and more efficient care. Valid, reliable, relevant quality 
measures are fundamental to the effectiveness of our quality reporting 
programs. Therefore, selection of quality measures is a priority for 
CMS in all of its quality reporting programs.
    The measures selected will address the measure domains as specified 
in the IMPACT Act and align with the CMS Quality Strategy, which is 
framed using the three broad aims of the National Quality Strategy:
     Better Care: Improve the overall quality of care by making 
healthcare more patient-centered, reliable, accessible, and safe.
     Healthy People, Healthy Communities: Improve the health of 
the U.S. population by supporting proven interventions to address 
behavioral, social, and environmental determinants of health in 
addition to delivering higher-quality care.
     Affordable Care: Reduce the cost of quality healthcare for 
individuals, families, employers, and government.
    In addition, our measure selection activities for the HH QRP take 
into consideration input we receive from the MAP. Input from the MAP is 
located on the MAP PAC LTC Programmatic Deliverable--Final Report Web 
page at:

[[Page 68696]]

http://www.qualityforum.org/Publications/2015/02/MAP_PAC-LTC_Programmatic_Deliverable_-_Final_Report.aspx. We also take into 
account national priorities, such as those established by the National 
Priorities Partnership at http://www.qualityforum.org/npp/, and the HHS 
Strategic Plan at: http://www.hhs.gov/secretary/about/priorities/priorities.html.
    We initiated an Ad Hoc MAP process for the review of the measures 
under consideration for implementation in preparation of the measures 
for adoption into the HH QRP that we proposed through this fiscal 
year's rule, in order to begin implementing such measures by 2017. We 
included under the List of Measures under Consideration (MUC List) 
measures that the Secretary must make available to the public, as part 
of the pre-rulemaking process, as described in section 1890A(a)(2) of 
the Act. The MAP Off-Cycle Measures under Consideration for PAC-LTC 
Settings can be accessed on the National Quality Forum Web site at: 
http://www.qualityforum.org/Publications/2015/03/MAP_Off-Cycle_Deliberations_2015_-_Final_Report.aspx. The NQF MAP met in 
February 2015 and provided input to us as required under section 
1890A(a)(3) of the Act. The MAP issued a pre-rulemaking report on March 
6, 2015 entitled MAP Off-Cycle Deliberations 2015: Measures under 
Consideration to Implement Provisions of the IMPACT Act--Final Report, 
which is available for download at: http://www.qualityforum.org/Publications/2015/03/MAP_Off-Cycle_Deliberations_2015_-_Final_Report.aspx. The MAP's input for the proposed measure is 
discussed in this section.
    To meet the first specified application date applicable to HHAs 
under section 1899B(a)(2)(E) of the Act, which is January 1, 2017, we 
focused on measures that:
     Correspond to a measure domain in sections 1899B(c)(1) or 
(d)(1) of the Act and are setting-agnostic: For example falls with 
major injury and the incidence of pressure ulcers;
     Are currently adopted for 1 or more of our PAC quality 
reporting programs, are already either NQF-endorsed and in use or 
finalized for use, or already previewed by the Measure Applications 
Partnership (MAP) with support;
     Minimize added burden on HHAs;
     Minimize or avoid, to the extent feasible, revisions to 
the existing items in assessment tools currently in use (for example, 
the OASIS); and
     Where possible, avoid duplication of existing assessment 
items.
    As discussed in section V.A. of this final rule, section 1899B(j) 
of the Act requires that we allow for stakeholder input, such as 
through town halls, open door forums, and mailbox submissions, before 
the initial rulemaking process to implement section 1899B. To meet this 
requirement, we provided the following opportunities for stakeholder 
input: (1) We convened a Technical Expert Panel (TEP) that included 
stakeholder experts and patient representatives on February 3, 2015; 
(2) we provided two separate listening sessions on February 10 and 
March 24, 2015; (3) we sought public input during the February 2015 ad 
hoc MAP process regarding the measures under consideration for IMPACT 
Act domains; (4) we sought public comment as part of our measure 
maintenance work; and (5) we implemented a public mail box for the 
submission of comments in January 2015 located at 
[email protected]. The CMS public mailbox can be 
accessed on our IMPACT Act of 2014 & Cross-Setting Measures Web page 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html. Lastly, we held a National Stakeholder 
Special Open Door Forum to seek input on the measures on February 25, 
2015.
    In the absence of NQF endorsement on measures for the home health 
(HH) setting, or measures that are not fully supported by the MAP for 
the HH QRP, we intend to propose for adoption measures that most 
closely align with the national priorities discussed above and for 
which the MAP supports the measure concept. Further discussion as to 
the importance and high-priority status of these measures in the HH 
setting is included under each quality measure in this final rule. In 
addition, for measures not endorsed by the NQF, we have sought, to the 
extent practicable, to adopt measures that have been endorsed or 
adopted by a national consensus organization, recommended by multi-
stakeholder organizations, and/or developed with the input of 
providers, purchasers/payers, and other stakeholders.

C. HH QRP Quality Measures and Measures Under Consideration for Future 
Years

    In the CY 2014 HH PPS final rule, (78 FR 72256-72320), we finalized 
a proposal to add two claims-based measures to the HH QRP, and stated 
that we would begin reporting the data from these measures to HHAs 
beginning in CY 2014. These claims based measures are: (1) 
Rehospitalization during the first 30 days of HH; and (2) Emergency 
Department Use without Hospital Readmission during the first 30 days of 
HH. In an effort to align with other updates to Home Health Compare, 
including the transition to quarterly provider preview reports, we made 
the decision to delay the reporting of data from these measures until 
July 2015 (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQISpotlight.html). Also 
in that rule, we finalized our proposal to reduce the number of process 
measures reported on the Certification and Survey Provider Enhanced 
Reporting (CASPER) reports by eliminating the stratification by episode 
length for nine (9) process measures. The removal of these measures 
from the CASPER folders occurred in October 2014. The CMS Home Health 
Quality Initiative Web site identifies the current HH QRP measures 
located on the Quality Measures Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html. In addition, as stated 
in the CY 2012 and CY 2013 HH PPS final rules (76 FR 68575 and 77 FR 
67093, respectively), we finalized that we will also use measures 
derived from Medicare claims data to measure home health quality. This 
effort ensures that providers do 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 are avoided.
    (a) We proposed one standardized cross-setting new measure for CY 
2016 to meet the requirements of the IMPACT Act. The proposed quality 
measure addressing the domain of skin integrity and changes in skin 
integrity is the National Quality Forum (NQF)-endorsed measure: Percent 
of Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678) (http://www.qualityforum.org/QPS/0678).
    The IMPACT Act requires the specification of a quality measure to 
address skin integrity and changes in skin integrity in the home health 
setting by January 1, 2017. We proposed the implementation of quality 
measure NQF #0678, Percent of Residents or Patients with Pressure 
Ulcers that are New or Worsened (Short Stay) in the HH QRP as a cross-
setting quality measure to meet the requirements of the IMPACT Act for 
the CY 2018 payment determination and subsequent years. This measure 
reports the percent of patients with Stage 2 through 4 pressure

[[Page 68697]]

ulcers that are new or worsened since the beginning of the episode of 
care.
    Pressure ulcers are high-volume in post-acute care settings and 
high-cost adverse events. According to the 2014 Prevention and 
Treatment Guidelines published by the National Pressure Ulcer Advisory 
Panel, European Pressure Ulcer Advisory Panel, and Pan Pacific Pressure 
Injury Alliance, pressure ulcer care is estimated to cost approximately 
$11 billion annually, and between $500 and $70,000 per individual 
pressure ulcer.\56\ Pressure ulcers are a serious medical condition 
that result in pain, decreased quality of life, and increased mortality 
in aging populations.57 58 59 60 Pressure ulcers typically 
are the result of prolonged periods of uninterrupted pressure on the 
skin, soft tissue, muscle, and bone.61 62 63 Elderly 
individuals are prone to a wide range of medical conditions that 
increase their risk of developing pressure ulcers. These include 
impaired mobility or sensation, malnutrition or undernutrition, 
obesity, stroke, diabetes, dementia, cognitive impairments, circulatory 
diseases, dehydration, bowel or bladder incontinence, the use of 
wheelchairs, the use of medical devices, polypharmacy, and a history of 
pressure ulcers or a pressure ulcer at 
admission.64 65 66 67 68 69 70 71 72 73 74
---------------------------------------------------------------------------

    \56\ National Pressure Ulcer Advisory Panel, European Pressure 
Ulcer Advisory Panel and Pan Pacific Pressure Injury Alliance. 
Prevention and Treatment of Pressure Ulcers: Clinical Practice 
Guideline. Emily Haesler (Ed.) Cambridge Media; Osborne Park, 
Western Australia; 2014.
    \57\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10): 20-24.
    \58\ Gorzoni, M. L., and S. L. Pires (2011). ``Deaths in nursing 
homes.'' Rev Assoc Med Bras 57(3): 327-331.
    \59\ Thomas, J. M., et al. (2013). ``Systematic review: health-
related characteristics of elderly hospitalized adults and nursing 
home residents associated with short-term mortality.'' J Am Geriatr 
Soc 61(6): 902-911.
    \60\ White-Chu, E. F., et al. (2011). ``Pressure ulcers in long-
term care.'' Clin Geriatr Med 27(2): 241-258.
    \61\ Bates-Jensen BM. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \62\ Institute for Healthcare Improvement (IHI). Relieve the 
pressure and reduce harm. May 21, 2007. Available from http://www.ihi.org/IHI/Topics/PatientSafety/SafetyGeneral/ImprovementStories/FSRelievethePressureandReduceHarm.htm.
    \63\ Russo CA, Steiner C, Spector W. Hospitalizations related to 
pressure ulcers among adults 18 years and older, 2006 (Healthcare 
Cost and Utilization Project Statistical Brief No. 64). December 
2008. Available from http://www.hcupus.ahrq.gov/reports/statbriefs/sb64.pdf.
    \64\ Agency for Healthcare Research and Quality (AHRQ). Agency 
news and notes: pressure ulcers are increasing among hospital 
patients. January 2009. Available from http://www.ahrq.gov/research/jan09/0109RA22.htm.=
    \65\ Bates-Jensen BM. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \66\ Cai, S., et al. (2013). ``Obesity and pressure ulcers among 
nursing home residents.'' Med Care 51(6): 478-486.
    \67\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10): 20-24.
    \68\ Hurd D, Moore T, Radley D, Williams C. Pressure ulcer 
prevalence and incidence across post-acute care settings. Home 
Health Quality Measures & Data Analysis Project, Report of Findings, 
prepared for CMS/OCSQ, Baltimore, MD, under Contract No. 500-2005-
000181 TO 0002. 2010.
    \69\ MacLean DS. Preventing & managing pressure sores. Caring 
for the Ages. March 2003;4(3):34-7. Available from http://www.amda.com/publications/caring/march2003/policies.cfm.
    \70\ Michel, J. M., et al. (2012). ``As of 2012, what are the 
key predictive risk factors for pressure ulcers? Developing French 
guidelines for clinical practice.'' Ann Phys Rehabil Med 55(7): 454-
465
    \71\ National Pressure Ulcer Advisory Panel (NPUAP) Board of 
Directors; Cuddigan J, Berlowitz DR, Ayello EA (Eds). Pressure 
ulcers in America: prevalence, incidence, and implications for the 
future. An executive summary of the National Pressure Ulcer Advisory 
Panel Monograph. Adv Skin Wound Care. 2001;14(4):208-15
    \72\ Park-Lee E, Caffrey C. Pressure ulcers among nursing home 
residents: United States, 2004 (NCHS Data Brief No. 14). 
Hyattsville, MD: National Center for Health Statistics, 2009. 
Available from http://www.cdc.gov/nchs/data/databriefs/db14.htm.
    \73\ Reddy, M. (2011). ``Pressure ulcers.'' Clin Evid (Online) 
2011.
    \74\ Teno, J. M., et al. (2012). ``Feeding tubes and the 
prevention or healing of pressure ulcers.'' Arch Intern Med 172(9): 
697-701.
---------------------------------------------------------------------------

    The IMPACT Act requires the specification of quality measures that 
are harmonized across PAC settings. This requirement is consistent with 
the NQF Steering Committee report, which stated that to understand the 
impact of pressure ulcers across settings, quality measures addressing 
prevention, incidence, and prevalence of pressure ulcers must be 
harmonized and aligned.\75\ NQF #0678, Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) is NQF-
endorsed and has been successfully implemented using a harmonized set 
of data elements in IRF, LTCH, and SNF settings. A new item, M1309 was 
previously added to the OASIS-C1/ICD-9 version to collect data on new 
and worsened pressure ulcers in home health patients to support 
harmonization with NQF #0678 and data collection for this item began 
January 1, 2015. A new measure, based on this item, was included in the 
2014 MUC list and received conditional endorsement from the National 
Quality Forum. That measure was harmonized with NQF #0678, but differed 
in the consideration of unstageable pressure ulcers. In this rule, we 
proposed a HH measure that is fully-standardized with NQF #0678.
---------------------------------------------------------------------------

    \75\ National Quality Forum. National voluntary consensus 
standards for developing a framework for measuring quality for 
prevention and management of pressure ulcers. April 2008. Available 
from http://www.qualityforum.org/Projects/Pressure_Ulcers.aspx.
---------------------------------------------------------------------------

    A TEP convened by our measure development contractor provided input 
on the technical specifications of this quality measure, including the 
feasibility of implementing the measure across PAC settings. The TEP 
was supportive of the implementation of this measure across PAC 
settings and supported CMS's efforts to standardize this measure for 
cross-setting development. Additionally, the NQF MAP met on February 9, 
2015 and February 27, 2015 and provided input to CMS. The MAP supported 
the use of NQF #0678, Percent of Residents or Patients with Pressure 
Ulcers that are New or Worsened (Short Stay) in the HH QRP as a cross-
setting quality measure implemented under the IMPACT Act. More 
information about the MAPs recommendations for this measure on the 
National Quality Forum Web site at: http://www.qualityforum.org/Publications/2015/02/MAP_PAC-LTC_Programmatic_Deliverable_-_Final_Report.aspx.
    We proposed that data for the standardized quality measure would be 
collected using the OASIS-C1 with submission through the Quality 
Improvement and Evaluation System (QIES) Assessment Submission and 
Processing (ASAP) system. HHAs began submitting data for the OASIS 
items used to calculate NQF #0678, the Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay), as part of 
the Home Health Quality Initiative to assess the number of new or 
worsened pressure ulcers in January 2015. By building on the existing 
reporting and submission infrastructure for HHAs, we intend to minimize 
the administrative burden related to data collection and submission for 
this measure under the HH QRP. For more information on HH reporting 
using the QIES ASAP system, refer to OASIS User Manual Web page at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIOASISUserManual.html and http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/OASIS/index.html?redirect=/oasis/.
    Data collected through the OASIS-C1 would be used to calculate this 
quality measure. Data items in the OASIS-C1 include M1308 (Current 
Number of Unhealed Pressure Ulcers at Each Stage or Unstageable) and 
M1309 (Worsening in Pressure Ulcer Status Since SOC/ROC). Data 
collected through the OASIS-C1 would be used for risk adjustment of 
this measure. We

[[Page 68698]]

anticipate risk adjustment items will include, but not be limited to 
M1850 (Activities of Daily Living Assistance, Transferring), and M1620 
(Bowel Incontinence Frequency). OASIS C1 items M1016 (Diagnoses 
Requiring Medical or Treatment Change Within past 14 Days), M1020 
(Primary Diagnoses) and M1022 (Other Diagnoses) would be used to 
identify patients with a diagnosis of peripheral vascular disease, 
diabetes, or malnutrition. More information about the OASIS items is 
available in the downloads section of the Home Health Quality Measures 
Web page at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html.
    The specifications and data items for NQF #0678, the Percent of 
Residents or Patients with Pressure Ulcers that are New or Worsened 
(Short Stay), are available in the downloads section of the Home Health 
Quality Measures Web page at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html.
    As part of our ongoing measure development efforts, we considered a 
future update to the numerator of the quality measure NQF #0678, 
Percent of Residents or Patients with Pressure Ulcers that are New or 
Worsened (Short Stay). This update would hold providers accountable for 
the development of unstageable pressure ulcers and suspected deep 
tissue injuries (sDTIs). Under this proposed change the numerator of 
the quality measure would be updated to include unstageable pressure 
ulcers, including sDTIs that are new/developed while the patient is 
receiving home health care, as well as Stage 1 or 2 pressure ulcers 
that become unstageable due to slough or eschar (indicating progression 
to a full thickness [that is, stage 3 or 4] pressure ulcer) after 
admission. This would be consistent with the specifications of the 
``New and Worsened Pressure Ulcer'' measure for HH patients presented 
to the MAP on the 2014 MUC list. We did not propose the implementation 
of this change (that is, including sDTIs and unstageable pressure 
ulcers in the numerator) in the HH QRP, but solicited public feedback 
on this potential area of measure development.
    Our measure development contractor convened a cross-setting 
pressure ulcer TEP that strongly recommended that CMS hold providers 
accountable for the development of new unstageable pressure ulcers and 
sDTIs by including these pressure ulcers in the numerator of the 
quality measure. Although the TEP acknowledged that unstageable 
pressure ulcers and sDTIs cannot and should not be assigned a numeric 
stage, panel members recommended that these be included in the 
numerator of NQF #0678, the Percent of Residents, or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay), as a new 
pressure ulcer if developed during a home health episode. The TEP also 
recommended that a Stage 1 or 2 pressure ulcer that becomes unstageable 
due to slough or eschar should be considered worsened because the 
presence of slough or eschar indicates a full thickness (equivalent to 
Stage 3 or 4) wound.76 77 These recommendations were 
supported by technical and clinical advisors and the National Pressure 
Ulcer Advisory Panel.\78\ Additionally, exploratory data analysis 
conducted by our measure development contractor suggested that the 
addition of unstageable pressure ulcers, including sDTIs, would 
increase the observed incidence of new or worsened pressure ulcers at 
the agency level and may improve the ability of the quality measure to 
discriminate between poor- and high-performing facilities.
---------------------------------------------------------------------------

    \76\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
    \77\ Schwartz, M., Ignaczak, M.K., Swinson Evans, T.M., Thaker, 
S., and Smith, L.: The Development of a Cross-Setting Pressure Ulcer 
Quality Measure: Summary Report on November 15, 2013, Technical 
Expert Panel Follow-Up Webinar. Centers for Medicare & Medicaid 
Services, January 2014. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Pressure-Ulcer-Quality-Measure-Summary-Report-on-November-15-2013-Technical-Expert-Pa.pdf.
    \78\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
---------------------------------------------------------------------------

    In addition, we also considered whether body mass index (BMI) 
should be used as a covariate for risk-adjusting NQF #0678 in the home 
health setting, as is done in other post-acute care settings. We 
invited public feedback to inform our direction to include unstageable 
pressure ulcers and sDTIs in the numerator of the quality measure NQF 
#0678 Percent of Residents or Patients with Pressure Ulcers that are 
New or Worsened (Short Stay), as well as on the possible collection of 
height and weight data for risk-adjustment, as part of our future 
measure development efforts.
    We invited public comment on our proposal to adopt NQF #0678 
Percent of Residents or Patients with Pressure Ulcers that are New or 
Worsened (Short Stay) for the HH QRP to fulfill the requirements of the 
IMPACT Act for CY 2018 HH payment determination and subsequent years. 
The following is a summary of the comments received and our responses.
    Comment: The majority of commenters supported the addition of the 
proposed quality measure, the Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (NQF #0678) to the Home Health 
Quality Reporting Program. Commenters appreciated that CMS chose a 
measure that uses data home health agencies already collect.
    Response: We appreciate the commenters' support for implementing 
the proposed quality measure, the Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (NQF #0678).
    Comment: A few commenters raised concerns about the fairness of 
using NQF #0678 to compare performance within home health and across 
PAC providers. One commenter noted that pressure ulcer improvement is 
challenging to measure in limited timeframes and disadvantages 
providers serving frailer populations and requested CMS consider risk 
adjustment based on sociodemographic, diagnostic, and care coordination 
factors. Commenters also recommended that CMS take into account the 
discrepancy in the control providers have over patient care in home 
health, relative to institutional settings. Another commenter 
additionally raised concerns about the reliability of the 
implementation of the Wound, Ostomy, and Continence Nurses (WOCN) 
Society guidelines used in staging pressure ulcers, and the lack of 
information about the status of the wound beyond staging while the 
patient is in the care of the provider. In addition, one commenter 
recommended that CMS conduct ongoing evaluation of the risk adjustment 
methodology for this proposed quality measure.
    Response: We appreciate the commenters' concerns about ensuring 
fair comparisons within and across PAC settings. We also appreciate 
that such comparisons take into account the discrepancy in the control 
providers have over patient care in home health,

[[Page 68699]]

relative to institutional settings. We are committed to developing risk 
models that take into account differences in patient characteristics, 
including chronic conditions and frailty. We believe that as with 
provider services within institutional settings, home health agencies 
aim to provide high quality care and therefore assess for and put into 
place care planning and services that mitigate poor quality outcomes. 
However, we will also take into account potential variation that may 
exist in relation to home based services as opposed to institutional 
services. Therefore, as part of measure maintenance, we intend to 
continue to evaluate for risk factors associated with pressure ulcers 
including those unique to the individuals receiving home health 
services. We intend to provide specific guidance through the OASIS 
manual and provider trainings to support clinicians in appropriately 
coding the stages of the pressure ulcers. In addition, we plan to 
conduct field testing on all the new and revised OASIS items that 
support the IMPACT Act measures, to assess inter-rater reliability and 
to further refine guidance and training.
    This proposed quality measure underwent recent review as part of 
its measure maintenance by CMS's measure development contractor. Under 
Technical Expert Panel review, which included national experts and 
members of a various professional wound organizations such as the 
National Pressure Ulcer Advisory Panel (NPUAP), the current staging was 
not adjusted. We confirm our commitment to ongoing monitoring and re-
evaluation of the risk models for all applicable outcome measures.
    While we appreciate these comments and the importance of the role 
that sociodemographic status plays in the care of patients, we continue 
to have concerns about holding providers to different standards for the 
outcomes of their patients of low sociodemographic status because we do 
not want to mask potential disparities or minimize incentives to 
improve the outcomes of disadvantaged populations. We routinely monitor 
the impact of sociodemographic status on facilities' results on our 
measures.
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of these reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    Comment: A commenter expressed concern that the proposed 
implementation of NQF #0678 did not include risk adjustment, just 
exclusion of patients who die.
    Response: The Percent of Residents or Patients with Pressure Ulcers 
That Are New or Worsened (NQF #0678) is risk-adjusted based on an 
evaluation of covariates that predict the outcome, including low body 
mass, diabetes, arterial and peripheral vascular disease, med mobility 
and bowel incompetence. As stated in the CY 2016 HH PPS proposed rule, 
a discussion pertaining to risk adjustment for this measure can be 
found in the downloads section on the Home Health Quality Measures Web 
page at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIQualityMeasures.html.
    Comment: One commenter appreciated the revision in the organization 
of the pressure ulcer items in section M1308 that makes the section 
easier to understand and suggested similar revisions to other items. 
The commenter also questioned why data on the number and stage of 
pressure ulcers was collected on both M1309 and M1308, noting that this 
might confuse clinicians. This commenter suggested deleting M1309 and 
making additional revisions to M1308 to capture the number of new or 
worsened pressure ulcers since the most recent SOC/ROC, and further 
suggested adding M1308 at recertification. Another commenter noted that 
OASIS Item M1309 is complex and recommended CMS develop an algorithm to 
assist HHAs with completing this item, adding that this complexity may 
lead to a wide variation of responses from HHAs and affect data 
reliability. This commenter further noted that home health agencies 
might be reliant on caregivers and patients to follow instructions 
related to pressure ulcer prevention in order to achieve quality 
outcomes for pressure ulcers.
    Response: We appreciate the commenters' positive feedback on items 
M1308, and suggestions related to M1309 in the current OASIS C1 item 
set, which we will take into consideration. We wish to clarify that 
M1308 would be collected at recertification. We also wish to clarify 
that the revised version of M1309 builds upon the current version of 
this item in the OASIS instrument and has been adjusted to be 
standardized to ensure comparable data capture of these items across 
the PAC settings. We appreciate the potential for confusion between the 
item sections M1308 and M1309. The items used in the skin assessment 
that inform this measure were tested during the development of the 
Minimum Data Set version 3.0. The inter-rater reliability and validity 
of these items was very strong suggesting that there was little 
confusion in the coding of these items by clinicians. We believe that 
training is important in assuring accurate assessments and OASIS 
coding. Therefore, we plan to issue new guidance on these items, as 
part of the update to the OASIS manual, well in advance of their 
implementation, and to provide further support through training and 
other education materials. We appreciate the unique role of patients 
and caregivers in achieving quality health outcomes in the home 
setting, where skilled care is intermittent in nature. We believe that 
as part of home health services, the provider ensures that adequate 
person and family centered education is provided to help in the 
avoidance and mitigation of pressure ulcers, or other events. Thus, CMS 
currently has implemented several process measures in the HH QRP, which 
assess whether care plans and other best practices have been 
implemented to help patients achieve the best possible outcomes.
    Comment: A commenter noted strong support for assessing and 
considering other wounds in addition to pressure ulcers when 
determining the clinical and functional status of the patient. This 
commenter additionally recommended that CMS expand the list of active 
diagnoses that are typically barriers to good outcomes and clarify 
whether these are diagnoses or symptomology.
    Response: We appreciate the comment supporting assessment and 
monitoring all wounds, as well as the recommendation to expand the list 
of active diagnoses. We believe that as part of providing quality care, 
home health

[[Page 68700]]

agencies assess, care for, document, and ensure surveillance of all 
wound types. We will consider this feedback in future refinements of 
this proposed quality measure. In addition, we will consider expanding 
the items referencing active diagnoses and better clarifying whether 
items are referencing new diagnoses or symptomology of a disease.
    Comment: Several commenters commented on the collection of a 
patient's height and weight in the OASIS, in order to calculate body 
mass index (BMI) as a risk adjustor for this proposed quality measure. 
CMS received several comments in support of the proposal of this 
quality measure. One commenter supported the efforts to standardize 
data to improve data accuracy and to help facilitate best practices for 
the prevention of pressure ulcers, while assuring appropriate care for 
pressure ulcers is given in all settings. The commenter expressed that 
there is relevance of low BMI and the incidence of pressure ulcers and 
recommended that CMS consider evaluating high BMI as a risk factor for 
developing new or worsened pressure ulcers. One commenter believed that 
CMS should not use BMI obtained in the home health setting, suggesting 
that physician offices and care centers obtain such information. One 
commenter did not support the use of BMI as a covariate for the New or 
Worsened Pressure Ulcer proposed quality measure without additional 
evidence of its relevance in the home care setting.
    Several commenters expressed concerns about the situations in which 
providers are unable to collect accurate height and weight data in the 
home care setting safely, including situations such as, but not limited 
to, bedbound patients who are unable to stand on scales or whose self-
reported height may be invalid due to memory deficits. Commenters 
additionally cited the lack of appropriate equipment to obtain this 
information in the home, including scales and Hoyer lifts for patients 
who cannot transfer. An additional commenter recommended that CMS add 
an option box to the new OASIS items to allow coding for those patients 
who cannot be weighed. Finally, one commenter requested clarification 
of ``base weight'' and the expectation for recording a weight that is 
measured during the visit versus a weight which could be reported by 
the patient when they are weighed in their home or based a recent 
healthcare provider appointment or hospitalization.
    Response: We appreciate the comments received pertaining to the 
relevance of low BMI as a risk factor for developing pressure ulcers, 
the inclusion of low BMI in the measure and the suggestion that we 
evaluate the inclusion of high BMI as a risk factor for pressure 
ulcers. We further appreciate the comments regarding the challenge of 
obtaining height and weight data in the home for home health patients. 
This information is collected in order to standardize risk adjustment 
for measuring the incidence of new and worsened pressure ulcers to 
facilitate the comparison of quality data within and across post-acute 
care settings for this outcome measure.
    Low body mass index, which is derived from a patient's height and 
weight, is a known correlate of developing pressure ulcers. We 
recognize that there will be instances in which obtaining height and 
weight cannot occur, and coding response options will be available in 
order to indicate when such data cannot be obtained. We intend to issue 
specific guidance through the OASIS manual on obtaining these data, 
including a definition of ``base weight''. We will also offer support 
through training, Open Door Forums, and other communication mechanisms.
    In response to the commenter who suggested that physician offices 
and wound care centers obtain information related to height and weight, 
we will take this feedback into consideration in our ongoing 
maintenance of this proposed quality measure. In the cross-setting 
Technical Expert Panel held by our measure contractor, it was advised 
that we continue to use BMI, as collected, to indicate low body mass. 
We appreciate those comments that suggest enhancements to the measure's 
risk adjustment and we will take into consideration revisions to the 
measure and risk adjustment model in our ongoing maintenance of the 
measure.
    Comment: One commenter expressed support for the integration of 
unstageable pressure ulcers and sDTIs into the measure, and stressed 
the importance of education on the additional options prior to 
implementing this change, citing the challenges to correct staging and 
the importance of inter-rater reliability across PAC settings.
    Response: We appreciate the feedback on future integration of 
unstageable pressure ulcers and sDTIs into this measure, and will 
consider it when undertaking any revisions. We also appreciate the 
commenter's emphasis on the important of education and training as the 
OASIS is revised and the quality measures are developed. We 
historically have and will continue to provide comprehensive training 
each time the assessment items change. In addition to the manual and 
training sessions, we will provide training materials through the CMS 
webinars, open door forums, and help desk support. As provided 
previously, item testing revealed very strong inter-rater reliability. 
Additionally, with the measure development and maintenance process, we 
will continue to test this proposed measure's reliability and validity 
across settings.
    Final Action: After consideration of the comments received, we are 
finalizing as proposed the adoption of NQF #0678 Percent of Residents 
or Patients with Pressure Ulcers that are New or Worsened (Short Stay) 
for use in the HH QRP for CY 2018 HH payment determination and 
subsequent years.

[[Page 68701]]



Table 19--Future Cross-Setting Measure Constructs Under Consideration To
                      Meet IMPACT Act Requirements
       [Home Health Timeline for Implementation--January 1, 2017]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
IMPACT Act Domain.................  Measures to reflect all-condition
                                     risk-adjusted potentially
                                     preventable hospital readmission
                                     rates.
Measures..........................  Application of (NQF #2510): Skilled
                                     Nursing Facility 30-Day All-Cause
                                     Readmission Measure (SNFRM). CMS is
                                     the steward.
                                    Application of the LTCH/IRF All-
                                     Cause Unplanned Readmission Measure
                                     for 30 Days Post Discharge from
                                     LTCHs/IRFs.
IMPACT Act Domain:................  Resource Use, including total
                                     estimated Medicare spending per
                                     beneficiary.
Measure...........................  Payment Standardized Medicare
                                     Spending Per Beneficiary (MSPB).
IMPACT Act Domain.................  Discharge to community.
Measure...........................  Percentage residents/patients at
                                     discharge assessment, who
                                     discharged to a higher level of
                                     care versus to the community.
IMPACT Act Domain.................  Medication Reconciliation.
Measure...........................  Percent of patients for whom any
                                     needed medication review actions
                                     were completed.
------------------------------------------------------------------------

    We also identified four future, cross-setting measure constructs to 
potentially meet requirements of the IMPACT Act domains of: (1) All-
condition risk-adjusted potentially preventable hospital readmission 
rates; (2) resource use, including total estimated Medicare spending 
per beneficiary; (3) discharge to community; and (4) medication 
reconciliation. These are shown in Table 19; we solicited public 
feedback to inform future measure development of these constructs as it 
relates to meeting the IMPACT Act requirements in these areas. These 
measures will be proposed in future rulemaking. The comments we 
received on this topic, with our responses, are summarized below.
    Comment: One commenter encouraged CMS to include clinical experts 
in the development of measures for cognition, expressive and receptive 
language, and swallowing stressing that without clinical expertise, 
substandard data, barriers to data collection, and risks in improving 
patient outcomes could occur. The commenter asked that these suggested 
measures be considered as items of function and not exclusively as risk 
adjustors. This commenter supported the risk adjustment of all outcome 
measures based on key case-mix variables due to the variability of 
patients treated in PAC settings.
    Response: We intend to incorporate clinical expertise in our 
ongoing measure refinement activities to better inform the development 
of these quality measures. One way we incorporate this form of clinical 
input is through the inclusion of Technical Expert Panels supported by 
the quality measurement development contractor. We also encourage 
public input on our measure development, and comments may be submitted 
to our quality reporting program email 
[email protected]
    We are working toward developing quality measures that assess areas 
of cognition and expression, recognizing that these quality topic 
domains are intrinsically linked or associated to the domain of 
function and cognitive function. In this measure development, we will 
take into consideration the variability of the PAC population and the 
appropriate risk-adjustment based on case-mix. In addition, we will 
take into consideration the suggestion that these measures operate as 
items of function and not exclusively as risk adjustors.
    Comment: One commenter requested that CMS consider the CARE-C and 
CARE-F items based on the National Outcomes Measurement System (NOMS) 
to capture communication, cognition, and swallowing as additional 
measures to be adopted in post-acute care settings for future measures.
    Response: We appreciate the suggestion that we consider refinements 
to functional items such as communication, cognition, and swallowing, 
which may provide a more meaningful picture of patients with 
impairments in these areas. We will consider these recommendations in 
our item, measure, and testing efforts for both measure development as 
well as standardized assessment domain development.
    Comment: One commenter expressed concern regarding the cross-
setting all-cause potentially preventable hospital readmissions 
measure. The commenter suggested that additional research on the 
effectiveness of this measure be pursued. The commenter proposed that 
the measure include rewards for sustained achievement as well as for 
improvement; and that actions outside of the agency's control (for 
example, timely physician signatures on orders) be taken into 
consideration in the application of the all-cause readmission measure. 
In addition, the commenter recommends that CMS consider risk adjustment 
to address family-requested hospitalizations and increased risk of 
hospitalization due to select diagnoses and comorbidities.
    One commenter noted difficulty in providing meaningful comment on 
specific measures and measure constructs without further information. 
Regarding the measure ``Percent of patients for whom any needed 
medication review actions were completed'', the commenter stated it is 
unclear from the table how one would determine whether a medication 
review action is needed for purposes of the measure. One commenter 
stated they need additional time to review more thoroughly, and plans 
to provide further feedback in the future.
    Finally, one commenter recommended the inclusion of nurse 
practitioners in both the development and implementation of care plans 
based on quality indicators.
    Response: We appreciate the commenters' feedback and suggestions 
regarding the cross-setting all-cause potentially preventable hospital 
readmissions measure, and will consider them in future revisions. We 
intend to risk adjust this outcome measure, based on evaluation of 
statistically significant covariates, including diagnoses and co-
morbidities.
    We appreciate the comments pertaining to the quality measure, the 
percent of patients for whom any needed medication review actions were 
completed. As we continue to develop and test this measure construct, 
we will make information about the measurement specifications available 
through posting specifications on our Web site and public comment 
periods. We recognize the need for transparency as we move forward to 
implement the IMPACT Act and will continue to engage stakeholders to 
ensure that our approach to measure development and implementation is 
communicated in an open and informative manner. We

[[Page 68702]]

would like to note that anyone can submit feedback on the measures by 
means of our mailbox [email protected].
    Finally, we appreciate the important role played by nurse 
practitioners in patient health and home care outcomes, and encourage 
their participation through the variety of modes of stakeholder 
engagement noted above.
    We will take all comments into consideration when developing and 
modifying assessment items and quality measures.

Table 20--Future Setting-Specific Measure Constructs Under Consideration
------------------------------------------------------------------------
 National Quality Strategy Domain             Measure Construct
------------------------------------------------------------------------
Safety............................  Falls risk composite process
                                     measure: Percentage of home health
                                     patients who were assessed for
                                     falls risk and whose care plan
                                     reflects the assessment, and which
                                     was implemented appropriately.
                                    Nutrition assessment composite
                                     measure: Percentage of home health
                                     patients who were assessed for
                                     nutrition risk with a validated
                                     tool and whose care plan reflects
                                     the assessment, and which was
                                     implemented appropriately.
Effective Prevention and Treatment  Improvement in Dyspnea in Patients
                                     with a Primary Diagnosis of
                                     Congestive Heart Failure (CHF),
                                     Chronic Obstructive Pulmonary
                                     Disease (COPD), and/or Asthma:
                                     Percentage of home health episodes
                                     of care during which a patient with
                                     a primary diagnosis of CHF, asthma
                                     and/or COPD became less short of
                                     breath or dyspneic.
                                    Improvement in Patient-Reported
                                     Interference due to Pain: Percent
                                     of home health patients whose self-
                                     reported level of pain interference
                                     on the Patient-Reported Objective
                                     Measurement Information System
                                     (PROMIS) tool improved.
                                    Improvement in Patient-Reported Pain
                                     Intensity: Percent of home health
                                     patients whose self-reported level
                                     of pain severity on the PROMIS tool
                                     improved.
                                    Improvement in Patient-Reported
                                     Fatigue: Percent of home health
                                     patients whose self-reported level
                                     of fatigue on the PROMIS tool
                                     improved.
                                    Stabilization in 3 or more
                                     Activities of Daily Living (ADLs):
                                     Percent of home health patients
                                     whose functional scores remain the
                                     same between admission and
                                     discharge for at least 3 ADLs.
------------------------------------------------------------------------

    (b) We worked with our measure development and maintenance 
contractor to identify setting-specific measure concepts for future 
implementation in the HH QRP that align with or complement current 
measures and new measures to meet domains specified in the IMPACT Act. 
In identifying priority areas for future measure enhancement and 
development, we took into consideration results of environmental scans 
and resulting gap analysis for relevant home health quality measure 
constructs, along with input from numerous stakeholders, including the 
Measures Application Partnership (MAP), the Medicare Payment Advisory 
Commission (MedPAC), Technical Expert Panels, and national priorities, 
such as those established by the National Priorities Partnership, the 
HHS Strategic Plan, the National Strategy for Quality Improvement in 
Healthcare, and the CMS Quality Strategy. Based on input from 
stakeholders, CMS identified several high priority concept areas for 
future measure development in Table 20.
    These measure concepts are under development, and details regarding 
measure definitions, data sources, data collection approaches, and 
timeline for implementation will be communicated in future rulemaking. 
We invited feedback about these seven high priority concept areas for 
future measure development. Public comments and our responses to 
comments are summarized below.
    Comment: Multiple commenters expressed support for the potential 
constructs for future development, and especially cited stabilization 
in function. One commenter expressed appreciation that the basic 
timeline for implementation of future measures is consistent with the 
IMPACT Act's requirements.
    One commenter recommended four new quality measure constructs 
related to family caregivers. These included: Home health agency 
documentation of whether the beneficiary has a family caregiver; 
whether the care or discharge plan relies on the family caregiver to 
provide assistance; whether the family caregiver was provided supports 
they need as part of the plan after determining the need for such 
supports; and family caregiver experience of care. A few commenters 
recommended that CMS ensure new measures provide meaningful information 
and minimize burden.
    One commenter urged CMS to provide clear and transparent 
explanations of measure specifications, and to provide as much 
information as possible about the measures proposed. One commenter 
recommended CMS only use measures after they have been tested in the 
home health setting and proved to have meaningful risk adjustment, as 
well as to be person-centered and realistic for patients' disease 
state. Two commenters recommended that CMS consider consolidating or 
removing measures prior to expanding the current set of measures to 
minimize administrative burden. One additionally noted that some 
existing measures could prove to be redundant or unnecessary when the 
IMPACT Act measures are implemented. A few commenters encouraged CMS to 
employ a transparent process for measure development that allows for 
multiple avenues for stakeholder input. One commenter welcomed the 
opportunity to work with CMS in the development of these measures and 
their specifications.
    In response to the specific constructs listed in the Notice for 
Proposed Rule Making, one commenter said that a nutrition assessment 
conducted in the home setting, to support a nutritional assessment 
process measure, must comprise data elements that would not be included 
in a facility assessment, such as access to, and resources for food 
shopping. This commenter additionally recommended that new measures 
take into account patient-centered decisions and goals, including 
refusal of care, and balance these against provider accountability.
    MedPAC expressed concern about the number of quality measures in 
the Medicare Program, specifically the number currently used in the HH 
QRP. MedPAC suggested that prior to expanding the current set of 
measures in the HH QRP, CMS should consider

[[Page 68703]]

whether any of the current measures can be consolidated or removed, 
recognizing that some measures are proposed in response to legislation. 
MedPAC further suggested that CMS consider whether any of its measures 
are unnecessary or redundant for the HH QRP, once the IMPACT Act 
measures are implemented.
    Response: We appreciate the feedback on potential constructs for 
future measure development and concur with the importance of valid and 
reliable stabilization measures for home health patients. Additionally, 
we agree that caregiver constructs are high priority areas to consider 
for future measure development.
    With all new measure development, we are committed to assessing the 
burden and utility of proposed measures, through Technical Expert 
Panels, public comment periods and other opportunities for stakeholder 
input. In addition, we are planning to conduct field testing of new and 
existing OASIS items to assess their reliability, validity and 
relevance in the home health setting. This field testing will inform 
new measure development.
    We agree with MedPAC, as well as other commenters, regarding the 
importance of a modest set of measures for the HH QRP and are re-
evaluating the entire set to determine which measures are candidates 
for revision or retirement. CMS's measure contractor has convened a 
Technical Expert Panel of providers, caregiver representatives, and 
other clinical experts to aid in the re-evaluation process. This 
process has included: (1) Analysis of historical measure trends, as 
well as reliability, validity and variability; (2) a review of the 
scientific basis for the measure construct in the literature and 
guidelines; and (3) feedback on the value of the measures to providers 
and patients for assessing and improving quality. Ongoing evaluation of 
measures used in HH QRP will continue as measures intended to satisfy 
the IMPACT Act's specified domains are made operational.
    In the current HH QRP outcome measures are risk-adjusted for a wide 
array of covariates and these risk models undergo periodic review and 
updating. We would extend this practice to new outcome measures as 
appropriate.
    We recognize the unique circumstances of home health patients, who 
have greater control and potentially greater barriers for maintaining 
good nutritional status. Additionally, we recognize that home health 
patients may make decisions that align with their personal choice but 
may be at odds with high quality outcomes.
    Comment: One commenter recommended that the OASIS capture 
information on cerebral palsy, traumatic brain injury, and cognitive 
impairment for long-term home health patients.
    Response: We appreciate the commenter's recommendation to capture 
information on the OASIS for all individuals with cerebral palsy, 
traumatic brain injury, and cognitive impairment and will take these 
comments into consideration when developing and modifying assessment 
items and quality measures.

D. Form, Manner, and Timing of OASIS Data Submission and OASIS Data for 
Annual Payment Update

1. Regulatory Authority
    The HH conditions of participation (CoPs) at Sec.  484.55(d) 
require that the comprehensive assessment must be updated and revised 
(including the administration of the OASIS) no less frequently than: 
(1) The last 5 days of every 60 days beginning with the start of care 
date, unless there is a beneficiary-elected transfer, significant 
change in condition, or discharge and return to the same HHA during the 
60-day episode; (2) within 48 hours of the patient's return to the home 
from a hospital admission of 24-hours or more for any reason other than 
diagnostic tests; and (3) at discharge.
    It is important to note that to calculate quality measures from 
OASIS data, there must be a complete quality episode, which requires 
both a Start of Care (initial assessment) or Resumption of Care OASIS 
assessment and a Transfer or Discharge OASIS assessment. Failure to 
submit sufficient OASIS assessments to allow calculation of quality 
measures, including transfer and discharge assessments, is a failure to 
comply with the CoPs.
    HHAs do not need to submit OASIS data for those patients who are 
excluded from the OASIS submission requirements. As described in the 
December 23, 2005 Medicare and Medicaid Programs: Reporting Outcome and 
Assessment Information Set Data as Part of the Conditions of 
Participation for Home Health Agencies final rule (70 FR 76202), we 
defined the exclusion as those patients:
     Receiving only non-skilled services;
     For whom neither Medicare nor Medicaid is paying for HH 
care (patient receiving care under a Medicare or Medicaid Managed Care 
Plan are not excluded from the OASIS reporting requirement);
     Receiving pre- or post-partum services; or
     Under the age of 18 years.
    As set forth in the CY 2008 HH PPS final rule (72 FR 49863), HHAs 
that become Medicare certified on or after May 31 of the preceding year 
are not subject to the OASIS quality reporting requirement nor any 
payment penalty for quality reporting purposes for the following year. 
For example, HHAs certified on or after May 31, 2014 are not subject to 
the 2 percentage point reduction to their market basket update for CY 
2015. These exclusions only affect quality reporting requirements and 
do not affect the HHA's reporting responsibilities as announced in the 
December 23, 2005 final rule.
2. Home Health Quality Reporting Program Requirements for CY 2016 
Payment and Subsequent Years
    In the CY 2014 HH PPS Final rule (78 FR 72297), we finalized a 
proposal to consider OASIS assessments submitted by HHAs to CMS in 
compliance with HH CoPs and Conditions for Payment for episodes 
beginning on or after July 1, 2012, and before July 1, 2013 as 
fulfilling one portion of the quality reporting requirement for CY 
2014.
    In addition, we finalized a proposal to continue this pattern for 
each subsequent year beyond CY 2014. OASIS assessments submitted for 
episodes beginning on July 1 of the calendar year 2 years prior to the 
calendar year of the Annual Payment Update (APU) effective date and 
ending June 30 of the calendar year one year prior to the calendar year 
of the APU effective date, fulfill the OASIS portion of the HH QRP 
requirement.
3. Previously Established Pay-for-Reporting Performance Requirement for 
Submission of OASIS Quality Data
    Section 1895(b)(3)(B)(v)(I) of the Act states that for 2007 and 
each subsequent year, the home health market basket percentage increase 
applicable under such clause for such year shall be reduced by 2 
percentage points if a home health agency does not submit data to the 
Secretary in accordance with subclause (II) for such a year. This pay-
for-reporting requirement was implemented on January 1, 2007. In the CY 
2015 HH PPS Final rule (79 FR 38387), we finalized a proposal to define 
the quantity of OASIS assessments each HHA must submit to meet the pay-
for-reporting requirement.
    We believe that defining a more explicit performance requirement 
for the submission of OASIS data by HHAs would better meet the intent 
of the statutory requirement.
    In the CY 2015 HH PPS Final rule (79 FR 38387), we reported 
information on a study performed by the Department of

[[Page 68704]]

Health & Human Services, Office of the Inspector General (OIG) in 
February 2012 to: (1) Determine the extent to which HHAs met federal 
reporting requirements for the OASIS data; (2) to determine the extent 
to which states met federal reporting requirements for OASIS data; and 
(3) to determine the extent to which CMS was overseeing the accuracy 
and completeness of OASIS data submitted by HHAs. Based on the OIG 
report we proposed a performance requirement for submission of OASIS 
quality data, which would be responsive to the recommendations of the 
OIG.
    In response to these requirements and the OIG report, we designed a 
pay-for-reporting performance system model that could accurately 
measure the level of an HHA's submission of OASIS data. The performance 
system is based on the principle that each HHA is expected to submit a 
minimum set of two matching assessments for each patient admitted to 
their agency. These matching assessments together create what is 
considered a quality episode of care, consisting ideally of a Start of 
Care (SOC) or Resumption of Care (ROC) assessment and a matching End of 
Care (EOC) assessment. However, it was determined that there are 
several scenarios that could meet this matching assessment requirement 
of the new pay-for-reporting performance requirement. These scenarios 
or quality assessments are defined as assessments that create a quality 
episode of care during the reporting period or could create a quality 
episode if the reporting period were expanded to an earlier reporting 
period or into the next reporting period.
    Seven types of assessments submitted by an HHA fit this definition 
of a quality assessment. These are:
    1. A Start of Care (SOC; M0100 = `01') or Resumption of Care (ROC; 
M0100 = `03') assessment that can be matched to an End of Care (EOC; 
M0100 = `06', `07', `08', or `09') assessment. These SOC/ROC 
assessments are the first assessment in the pair of assessments that 
create a standard quality of care episode describe in the previous 
paragraph.
    2. An End of Care (EOC) assessment that can be matched to a Start 
of Care (SOC) or Resumption of Care (ROC) assessment. These EOC 
assessments are the second assessment in the pair of assessments that 
create a standard quality of care episode describe in the previous 
paragraph.
    3. A SOC/ROC assessment that could begin an episode of care, but 
the assessment occurs in the last 60 days of the performance period. 
This is labeled as a Late SOC/ROC quality assessment. The assumption is 
that the EOC assessment will occur in the next reporting period.
    4. An EOC assessment that could end an episode of care that began 
in the previous reporting period, (that is, an EOC that occurs in the 
first 60 days of the performance period). This is labeled as an Early 
EOC quality assessment. The assumption is that the matching SOC/ROC 
assessment occurred in the previous reporting period.
    5. A SOC/ROC assessment that is followed by one or more follow-up 
assessments, the last of which occurs in the last 60 days of the 
performance period. This is labeled as an SOC/ROC Pseudo Episode 
quality assessment.
    6. An EOC assessment is preceded by one or more follow-up 
assessments, the first of which occurs in the first 60 days of the 
performance period. This is labeled an EOC Pseudo Episode quality 
assessment.
    7. A SOC/ROC assessment that is part of a known one-visit episode. 
This is labeled as a One-Visit episode quality assessment. This 
determination is made by consulting HH claims data.
    SOC, ROC, and EOC assessments that do not meet any of these 
definitions are labeled as Non-Quality assessments. Follow-up 
assessments (that is, where the M0100 Reason for Assessment = `04' or 
`05') are considered Neutral assessments and do not count toward or 
against the pay-for-reporting performance requirement.
    Compliance with this performance requirement can be measured 
through the use of an uncomplicated mathematical formula. This pay-for-
reporting performance requirement metric has been titled as the 
``Quality Assessments Only'' (QAO) formula because only those OASIS 
assessments that contribute, or could contribute, to creating a quality 
episode of care are included in the computation.
    The formula based on this definition is as follows:
    [GRAPHIC] [TIFF OMITTED] TR05NO15.010
    
    Our ultimate goal is to require all HHAs to achieve a pay-for-
reporting performance requirement compliance rate of 90 percent or 
more, as calculated using the QAO metric illustrated above. In the CY 
2015 HH PPS final rule (79 FR 66074), we proposed implementing a pay-
for-reporting performance requirement over a 3-year period. After 
consideration of the public comments received, we adopted as final our 
proposal to establish a pay-for-reporting performance requirement for 
assessments submitted on or after July 1, 2015 and before June 30, 2016 
with appropriate start of care dates, HHAs must score at least 70 
percent on the QAO metric of pay-for-reporting performance requirement 
or be subject to a 2 percentage point reduction to their market basket 
update for CY 2017.
    HHAs have been statutorily required to report OASIS for a number of 
years and therefore should have many years of experience with the 
collection of OASIS data and transmission of this data to CMS. Given 
the length of time that HHAs have been mandated to report OASIS data 
and based on preliminary analyses that indicate that the majority of 
HHAs are already achieving the target goal of 90 percent on the QAO 
metric, we believe that HHAs would adapt quickly to the implementation 
of the pay-for-reporting performance requirement, if phased in over a 
3-year period.
    In the CY 2015 rule, we did not finalize a proposal to increase the 
reporting requirement in 10 percent increments over a 2-year period 
beginning July 1, 2016 until the maximum rate of 90 percent is reached. 
Instead, we proposed to analyze historical data to set the reporting 
requirements. To set the threshold for the 2nd year, we analyzed the 
most recently available data, from 2013 and 2014, to make a 
determination about what the pay-for-reporting performance requirement 
should be. Specifically, we reviewed OASIS data from this time period 
simulating the pay-for-reporting performance 70 percent submission 
requirement to determine the hypothetical performance of each HHA as if 
the pay-for-reporting performance requirement were in effect during the 
reporting period preceding its implementation. This analysis indicated 
a nominal increase of 10 percent each year would provide the greatest 
opportunity for successful implementation versus an increase of 20 
percent from year 1 to year 2.

[[Page 68705]]

    Based on this analysis, we proposed to set the performance 
threshold at 80 percent for the reporting period from July 1, 2016 
through June 30, 2017. For the reporting period from July 1, 2017 
through June 30, 2018 and thereafter, we proposed the performance 
threshold would be 90 percent.
    We provided a report to each HHA of their hypothetical performance 
under the pay-for-reporting performance requirement during the 2014-
2015 pre-implementation reporting period in June 2015. On January 1, 
2015, the data submission process for OASIS converted from the current 
state-based OASIS submission system to a new national OASIS submission 
system known as the Assessment Submission and Processing (ASAP) System. 
On July 1, 2015, when the pay-for-reporting performance requirement of 
70 percent went into effect, providers were required to submit their 
OASIS assessment data into the ASAP system. Successful submission of an 
OASIS assessment consist of the submission of the data into the ASAP 
system with a receipt of no ``fatal error'' messages. Error messages 
received during submission can be an indication of a problem that 
occurred during the submission process and could also be an indication 
that the OASIS assessment was rejected. Successful submission can be 
verified by ascertaining that the submitted assessment data resides in 
the national database after the assessment has met all of the quality 
standards for completeness and accuracy during the submission process. 
Should one or more OASIS assessments submitted by a HHA be rejected due 
to an IT/server issue caused by CMS, we may at our discretion, excuse 
the non-submission of OASIS data. We anticipate that such a scenario 
would rarely, if ever, occur. In the event that a HHA believes that 
they were unable to submit OASIS assessments due to an IT/server issue 
on the part of CMS, the HHA should be prepared to provide any 
documentation or proof available, which could demonstrate that no fault 
on their part contributed to the failure of the OASIS records to 
transmit to CMS.
    The initial performance period for the pay-for-reporting 
performance requirement is July 1, 2015 through June 30, 2016. Prior to 
and during this performance period, we have scheduled Open Door Forums 
and webinars to educate HHA personnel as needed about the pay-for-
reporting performance requirement program and the pay-for- reporting 
performance QAO metric, and distributed individual provider preview 
reports. Additionally, OASIS Education Coordinators (OECs) have been 
trained to provide state-level instruction on this program and metric. 
We have posted a report, which provides a detailed explanation of the 
methodology for this pay-for-reporting QAO methodology. To view this 
report, go to the downloads section at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/Home-Health-Quality-Reporting-Requirements.html. 
Training announcements and additional educational information related 
to the pay-for-reporting performance requirement have been provided on 
the HH Quality Initiatives Web page.
    We invited public comment on our proposal to implement an 80 
percent Pay-for-Reporting Performance Requirement for Submission of 
OASIS Quality Data for Year 2 reporting period July 1, 2016 to June 30, 
2017 as described previously, for the HH QRP. Public comments and our 
responses to comments are summarized below.
    Comment: Several commenters supported CMS' proposed phased-in 
approach for the ``Quality Assessments Only'' (QAO) reporting 
requirements and the submission of OASIS data; one additionally noted 
appreciation for the added clarity about the QAO benchmarks for the 
next two assessment periods. A few commenters noted that the proposed 
increase to 80 percent for the 2016-2017 was acceptable, but encouraged 
CMS to defer subsequent increases, pending evaluation. One of these 
commenters additionally requested that CMS provide continuing status 
updates on the progress toward these goals so that HHAs could make 
changes to their processes in order to be compliant.
    Response: We appreciate the feedback and support for the QAO 
reporting thresholds and intend to conduct ongoing monitoring of the 
effect of increasing the QAO threshold on the percent of agencies that 
are compliant with this pay-for-reporting requirement. We do not intend 
to defer the increase to 90 percent beyond the schedule included in the 
rule; this threshold was chosen based on analysis indicating compliance 
was already at this level for the vast majority of agencies. We 
designed the pay-for-reporting performance system model in response to 
federal reporting requirements for the OASIS data and the 
recommendation in the OIG report entitled, ``Limited Oversight of Home 
Health Agency OASIS Data,'' that we ``identify all HHAs that failed to 
submit OASIS data and apply the 2 percent payment reduction to them''. 
As the OASIS reporting requirements have been in existence for 16 
years, HHAs should already possess knowledge of these requirements and 
know what they need to do to bring their agency into compliance. We 
provided a report to each HHA of their hypothetical performance under 
the pay-for-reporting performance requirement during the 2014-2015 pre-
implementation reporting period in June 2015; additionally we are 
considering options for ongoing communication with agencies about their 
compliance levels.
    Comment: One commenter requested CMS provide additional 
clarification about the definition of ``OASIS submission'' and whether 
it required acceptance of the submission by the state agency, as well 
as whether the QAO calculation included Medicare Advantage and Medicaid 
patients, in addition to traditional Medicare. This commenter 
recommended the standard be applied only to assessments completed for 
traditional Medicare patients and requested CMS provide comprehensive 
education on the new standard at least six months before it is 
effective.
    Response: On January 1, 2015, the data submission process for OASIS 
converted from the former state-based OASIS submission system to a new 
national OASIS submission system known as the Assessment Submission and 
Processing (ASAP) System. Therefore, the commenter's question about 
whether successful submission requires both submission and acceptance 
of OASIS data by the state agency is not applicable because the state-
based OASIS submission system is no longer in existence.
    Providers are required to submit their OASIS assessment data into 
the ASAP system. Successful submission of an OASIS assessment consists 
of the submission of the data into the ASAP system with a receipt of no 
fatal error messages. Error messages received during submission can be 
an indication of a problem that occurred during the submission process 
and could also be an indication that the OASIS assessment was rejected. 
Successful submission can be verified by ascertaining that the 
submitted assessment data resides in the national database after the 
assessment has met all of the quality standards for completeness and 
accuracy during the submission process.
    As noted previously, should one or more OASIS assessments submitted 
by a HHA be rejected due to an IT/server issue caused by CMS, we may at 
our discretion, excuse the non-submission of OASIS data. We anticipate 
that such a scenario would rarely, if ever, occur. In the event that a 
HHA believes they were unable to submit OASIS

[[Page 68706]]

assessments due to an IT/server issue on the part of CMS, the HHA 
should be prepared to provide any documentation or proof available 
which demonstrates no fault on their part contributed to the failure of 
the OASIS transmission to CMS.
    Patients receiving care under a Medicare or Medicaid managed care 
plan are not excluded from the OASIS reporting requirements, and HHAs 
are required to submit OASIS assessments for these patients. OASIS 
reporting is mandated for all Medicare beneficiaries (under 42 CFR 
484.250(a), 484.225(i), and 484.55). The HH CoPs require that the HH 
Registered Nurse (RN) or qualified therapist perform an initial 
assessment within 48 hours of referral, within 48 hours of the 
patient's return home, or on the physician-ordered start of care date. 
The HH RN or qualified therapist must also complete a comprehensive 
assessment within 5 days from the start of care. During these 
assessments, the HH RN or qualified therapist must determine the 
patient's eligibility for the Medicare HH benefit, including homebound 
status (42 CFR 484.55(a)(1) and (b)). In addition, the requirement for 
OASIS reporting on Medicare and Medicaid Managed Care patients was 
established in a final rule titled ``Medicare and Medicaid Programs: 
Reporting Outcome and Assessment Information Set Data as Part of the 
Conditions of Participation for Home Health Agencies Final Rule'' dated 
December 23, 2005 (70 FR 76200), which stated the following:
    ``In the January 25, 1999, interim final rule with comment period 
(64 FR 3749), we generally mandated that all HHAs participating in 
Medicare and Medicaid (including managed care organizations providing 
home health services to Medicare and Medicaid beneficiaries) report 
their OASIS data to the database we established within each State via 
electronic transmission.''
    We do not believe that there is more burden associated with the 
collection of OASIS assessment data for a Medicare Managed Care patient 
than there is for a HH patient that receives traditional Medicare fee-
for-service (FFS) benefits. The requirements for the HH RN or qualified 
therapist to perform an initial and comprehensive assessment and 
complete all required OASIS assessments is the same for all Medicare 
patients regardless of the type of Medicare or Medicaid benefits they 
receive. The completion of these activities is a condition of payment 
of both Medicare FFS and managed care claims.
    We are committed to stakeholder education and as such conducted a 
Special Open Door forum on the QAO methodology and compliance rates on 
June 2, 2015; materials from this Special Open Door Forum, along with 
additional educational information, are available in the downloads 
section at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/Home-Health-Quality-Reporting-Requirements.html. CMS anticipates communicating ongoing 
educational opportunities through the regular HH QRP communication 
channels, including Open Door Forums, webinars, listening sessions, 
memos, email notification, and web postings.
    Final Action: After consideration of the comments received, we are 
adopting as final our proposal to implement an 80 percent Pay-for-
Reporting Performance Requirement for Submission of OASIS Quality Data 
for Year 2 reporting period July 1, 2016 to June 30, 2017, and a 90 
percent Pay-for-Reporting Performance Requirement for Submission of 
OASIS Quality Data for the reporting period July 1, 2017 to June 30, 
2018 and thereafter.
e. Home Health Care CAHPS[supreg] Survey (HHCAHPS)
    In the CY 2015 HH PPS final rule (79 FR 66031), we stated that the 
home health quality measures reporting requirements for Medicare-
certified agencies includes the Home Health Care CAHPS[supreg] 
(HHCAHPS) Survey for the CY 2015 Annual Payment Update (APU). We are 
continuing to maintain the stated HHCAHPS data requirements for CY 2016 
that were stated in CY 2015 and in previous rules, for the continuous 
monthly data collection and quarterly data submission of HHCAHPS data.
1. Background and Description of HHCAHPS
    As part of the HHS Transparency Initiative, we 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) Consumer Assessment of Healthcare 
Providers and Systems (CAHPS[supreg]) program and endorsed by the NQF 
in March 2009 (NQF Number 0517) and recently NQF re-endorsed in 2015. 
The HHCAHPS Survey is approved under OMB Control Number 0938-1066 
through May 31, 2017. 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[supreg] 
(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 enabled valid comparisons 
across all HHAs. The history and development process for HHCAHPS has 
been described in previous rules and is also available on the official 
HHCAHPS Web site at: https://homehealthcahps.org and in the annually-
updated HHCAHPS Protocols and Guidelines Manual, which is downloadable 
from https://homehealthcahps.org.
    Since April 2012, for public reporting purposes, we report five 
measures from the HHCAHPS Survey--three composite measures and two 
global ratings of care that are derived from the questions on the 
HHCAHPS survey. The publicly reported data are adjusted for differences 
in patient mix across HHAs. We update the HHCAHPS data on Home Health 
Compare on www.medicare.gov quarterly. Each HHCAHPS composite measure 
consists of four or more individual survey items 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); and
     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 (Q20), and the patient's willingness to recommend 
the HHA to family and friends (Q25).
    The HHCAHPS survey is currently available in English, Spanish, 
Chinese, Russian, and Vietnamese. The OMB number on these surveys is 
the same (0938-1066). All of these surveys are on the Home Health Care 
CAHPS[supreg] Web site, https://homehealthcahps.org. We continue to 
consider additional language translations of the HHCAHPS in response to 
the needs of the home health patient population.
    All of the requirements about home health patient eligibility for 
the HHCAHPS survey and conversely, which home health patients are 
ineligible for the HHCAHPS survey are delineated and detailed in the 
HHCAHPS Protocols and Guidelines Manual, which is downloadable at 
https://homehealthcahps.org. Home health patients are eligible for 
HHCAHPS if they received at least two skilled home health visits in the 
past 2 months, which are paid for by Medicare or Medicaid.

[[Page 68707]]

    Home health patients are ineligible for inclusion in HHCAHPS 
surveys if one of these conditions pertains to them:
     Are under the age of 18;
     Are deceased prior to the date the sample is pulled;
     Receive hospice care;
     Receive routine maternity care only;
    Are not considered survey eligible because the state in 
which the patient lives restricts release of patient information for a 
specific condition or illness that the patient has; or
     No Publicity patients, defined as patients who on their 
own initiative at their first encounter with the HHAs make it very 
clear that no one outside of the agencies can be advised of their 
patient status, and no one outside of the HHAs can contact them for any 
reason.
    We stated in previous rules that Medicare-certified HHAs are 
required to contract with an approved HHCAHPS survey vendor. This 
requirement continues, and Medicare-certified agencies also must 
provide on a monthly basis a list of their patients served to their 
respective HHCAHPS survey vendors. Agencies are not allowed to 
influence at all how their patients respond to the HHCAHPS survey.
    As previously required, 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 have approximately 30 approved HHCAHPS survey 
vendors. The list of approved HHCAHPS survey vendors is available at: 
https://homehealthcahps.org.
2. HHCAHPS Oversight Activities
    We stated in prior final rules that all approved HHCAHPS survey 
vendors 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 
approved HHCAHPS survey vendors follow the HHCAHPS Protocols and 
Guidelines Manual. As stated in previous HH PPS final rules, all 
HHCAHPS approved survey vendors must develop a Quality Assurance Plan 
(QAP) for survey administration in accordance with the HHCAHPS 
Protocols and Guidelines Manual. An HHCAHPS survey vendor's first QAP 
must be submitted within 6 weeks of the data submission deadline date 
after the vendor's first quarterly data submission. The QAP must be 
updated and submitted annually thereafter and at any time that changes 
occur in staff or vendor capabilities or systems. A model QAP is 
included in the HHCAHPS Protocols and Guidelines Manual. The QAP must 
include the following:
     Organizational Background and Staff Experience;
     Work Plan;
     Sampling Plan;
     Survey Implementation Plan;
     Data Security, Confidentiality and Privacy Plan; and
     Questionnaire Attachments
    As part of the oversight activities, the HHCAHPS Survey 
Coordination Team conducts on-site visits to all approved HHCAHPS 
survey vendors. The purpose of the site visits is to allow the HHCAHPS 
Survey Coordination Team to observe the entire HHCAHPS Survey 
implementation process, from the sampling stage through file 
preparation and submission, as well as to assess data security and 
storage. The HHCAHPS Survey Coordination Team reviews the HHCAHPS 
survey vendor's survey systems, and assesses administration protocols 
based on the HHCAHPS Protocols and Guidelines Manual posted at: https://homehealthcahps.org. The systems and program site visit review 
includes, but is not limited to the following:
     Survey management and data systems;
     Printing and mailing materials and facilities;
     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. HHCAHPS survey 
vendors are subject to follow-up site visits on an as-needed basis.
    In the CY 2013 HH PPS final rule (77 FR 67094, 67164), we codified 
the current guideline that all approved HHCAHPS survey vendors fully 
comply with all HHCAHPS oversight activities. We included this survey 
requirement at Sec.  484.250(c)(3).
3. HHCAHPS Requirements for the CY 2016 APU
    In the CY 2015 HH PPS final rule (79 FR 66031), we stated that for 
the CY 2016 APU, we would require continued monthly HHCAHPS data 
collection and reporting for four quarters. The data collection period 
for the CY 2016 APU includes the second quarter 2014 through the first 
quarter 2015 (the months of April 2014 through March 2015). Although 
these dates are past, we wished to state them in this rule so that HHAs 
are again reminded of what months constituted the requirements for the 
CY 2016 APU.
    For the 2016 APU, we required that all HHAs that had fewer than 60 
HHCAHPS-eligible unduplicated or unique patients in the period of April 
1, 2013 through March 31, 2014 are exempted from the HHCAHPS data 
collection and submission requirements for the CY 2016 APU, upon 
completion of the CY 2016 HHCAHPS Participation Exemption Request form, 
and upon CMS verification of the HHA patient counts. Agencies with 
fewer than 60 HHCAHPS-eligible, unduplicated or unique patients in the 
period of April 1, 2013, through March 31, 2014, were required to 
submit their patient counts on the HHCAHPS Participation Exemption 
Request form for the CY 2016 APU posted on https://homehealthcahps.org 
from April 1, 2014, to 11:59 p.m., EST on March 31, 2015. This deadline 
for the exemption form is firm, as are all of the quarterly data 
submission deadlines for the HHAs that participate in HHCAHPS.
    We automatically exempt HHAs receiving Medicare certification after 
the period in which HHAs do their patient counts. HHAs receiving 
Medicare certification on or after April 1, 2014 were exempt from the 
HHCAHPS reporting requirement for the CY 2016 APU. These newly-
certified HHAs did not need to complete the HHCAHPS Participation 
Exemption Form for the CY 2016 APU.
4. HHCAHPS Requirements for the CY 2017 APU
    For the CY 2017 APU, we require continued monthly HHCAHPS data 
collection and reporting for four quarters. The data collection period 
for the CY 2017 APU includes the second quarter 2015 through the first 
quarter 2016 (the months of April 2015 through March 2016). HHAs are 
required to submit their HHCAHPS data files to the HHCAHPS Data Center 
for the second quarter 2015 by 11:59 p.m., EST on October 15, 2015; for 
the third quarter 2015 by 11:59 p.m., EST on January 21, 2016; for the 
fourth quarter 2015 by 11:59 p.m., EST on April 21, 2016; and for the 
first quarter 2016 by 11:59 p.m., EST on July 21, 2016. These deadlines 
are firm; no exceptions are permitted.
    For the CY 2017 APU, we require that all HHAs with fewer than 60 
HHCAHPS-eligible unduplicated or unique patients in the period of April 
1, 2014, through March 31, 2015 are exempt from the HHCAHPS data 
collection and submission requirements for the CY 2017 APU, upon 
completion of the CY 2017 HHCAHPS Participation Exemption Request form, 
and upon

[[Page 68708]]

CMS verification of the HHA patient counts. Agencies with fewer than 60 
HHCAHPS-eligible, unduplicated or unique patients in the period of 
April 1, 2014, through March 31, 2015, are required to submit their 
patient counts on the CY 2017 HHCAHPS Participation Exemption Request 
form posted on https://homehealthcahps.org from April 1, 2015, to 11:59 
p.m., EST to March 31, 2016. This deadline is firm, as are all of the 
quarterly data submission deadlines for the HHAs that participate in 
HHCAHPS.
    We automatically exempt HHAs receiving Medicare certification after 
the period in which HHAs do their patient count. HHAs receiving 
Medicare-certification on or after April 1, 2015 are exempt from the 
HHCAHPS reporting requirement for the CY 2017 APU. These newly-
certified HHAs do not need to complete the HHCAHPS Participation 
Exemption Request Form for the CY 2017 APU.
5. HHCAHPS Requirements for the CY 2018 APU
    For the CY 2018 APU, we require continued monthly HHCAHPS data 
collection and reporting for four quarters. The data collection period 
for the CY 2018 APU includes the second quarter 2016 through the first 
quarter 2017 (the months of April 2016 through March 2017). HHAs will 
be required to submit their HHCAHPS data files to the HHCAHPS Data 
Center for the second quarter 2016 by 11:59 p.m., EST on October 20, 
2016; for the third quarter 2016 by 11:59 p.m., EST on January 19, 
2017; for the fourth quarter 2016 by 11:59 p.m., EST on April 20, 2017; 
and for the first quarter 2017 by 11:59 p.m., EST on July 20, 2017. 
These deadlines are firm; no exceptions will be permitted.
    For the CY 2018 APU, we require that all HHAs with fewer than 60 
HHCAHPS-eligible unduplicated or unique patients in the period of April 
1, 2015 through March 31, 2016 are exempt from the HHCAHPS data 
collection and submission requirements for the CY 2018 APU, upon 
completion of the CY 2018 HHCAHPS Participation Exemption Request form, 
and upon CMS verification of the HHA patient counts. Agencies with 
fewer than 60 HHCAHPS-eligible, unduplicated or unique patients in the 
period of April 1, 2015 through March 31, 2016 are required to submit 
their patient counts on the CY 2018 HHCAHPS Participation Exemption 
Request form posted on https://homehealthcahps.org from April 1, 2016 
to 11:59 p.m., EST to March 31, 2017. This deadline is firm, as are all 
of the quarterly data submission deadlines for the HHAs that 
participate in HHCAHPS.
    We automatically exempt HHAs receiving Medicare certification after 
the period in which HHAs do their patient count. HHAs receiving 
Medicare-certification on or after April 1, 2016 are exempt from the 
HHCAHPS reporting requirement for the CY 2018 APU. These newly-
certified HHAs do not need to complete the HHCAHPS Participation 
Exemption Request Form for the CY 2018 APU.
6. HHCAHPS Reconsiderations and Appeals Process
    HHAs should monitor their respective HHCAHPS survey vendors to 
ensure that vendors submit their HHCAHPS data on time, by accessing 
their HHCAHPS Data Submission Reports on https://homehealthcahps.org. 
This helps HHAs ensure that their data are submitted in the proper 
format for data processing to the HHCAHPS Data Center.
    We continue HHCAHPS oversight activities as finalized in the 
previous rules. In the CY 2013 HH PPS final rule (77 FR 6704, 67164), 
we codified the current guideline that all approved HHCAHPS survey 
vendors must fully comply with all HHCAHPS oversight activities. We 
included this survey requirement at Sec.  484.250(c)(3).
    We continue the OASIS and HHCAHPS reconsiderations and appeals 
process that we have finalized and that we have used for prior all 
periods cited in the previous rules, and utilized in the CY 2012 to CY 
2016 APU determinations. We have described the HHCAHPS reconsiderations 
and appeals process requirements in the APU Notification Letter that we 
send to the affected HHAs annually in September. HHAs have 30 days from 
their receipt of the letter informing them that they did not meet the 
HHCAHPS requirements to reply to CMS with documentation that supports 
their requests for reconsideration of the annual payment update to CMS. 
It is important that the affected HHAs send in comprehensive 
information in their reconsideration letter/package because CMS will 
not contact the affected HHAs to request additional information or to 
clarify incomplete or inconclusive information. If clear evidence to 
support a finding of compliance is not present, then the 2 percent 
reduction in the annual payment update will be upheld. If clear 
evidence of compliance is present, then the 2 percent reduction for the 
APU will be reversed. CMS notifies affected HHAs by December 31 of the 
decisions that affects payments in the annual year beginning on January 
1. If CMS determines to uphold the 2 percent reduction for the annual 
payment update, the affected HHA may further appeal the 2 percent 
reduction via the Provider Reimbursement Review Board (PRRB) appeals 
process, which is described in the December letter.
    The following is a summary of the comments that we received 
regarding HHCAHPS:
    Comment: We received one comment that HHCAHPS is an unfunded 
administrative mandate that entails financial and resource burdens to 
HHAs.
    Response: The collection of the patient's perspectives of care data 
for similar CAHPS surveys, such as Hospital CAHPS (HCAHPS), follow the 
same model where providers pay the approved survey vendors for the data 
collection and implementation of the survey, and CMS pays for the 
HHCAHPS survey administration and technical assistance processes, the 
vendor approval, the vendor training, and vendor oversight activities, 
technical support to the home health agencies and for the vendors, and 
the data compilation, data analysis, and public reporting of the data's 
findings on www.Medicare.gov. HHAs are strongly encouraged to report 
their HHCAHPS costs on their respective annual cost reports, but HHAs 
should note that HHCAHPS costs are not reimbursable under the HH PPS. 
We post the list of the approved HHCAHPS vendors on https://homehealthcahps.org, and we encourage HHAs to contact the vendors for 
cost and service information pertaining to HHCAHPS since the HHAs may 
find differences among the vendors and will very likely find a vendor 
that is very suitable to their particular cost and administrative needs 
for HHCAHPS.
    Comment: We received a comment of concern regarding the fact that 
in the CY 2013 HH PPS final rule we codified the current guideline that 
all approved HHCAHPS survey vendors must fully comply with all HHCAHPS 
oversight activities. We included this survey requirement at Sec.  
484.250(c)(3).
    Response: We appreciate this commenter's continuing concern about 
the policy set forth in the regulation several years ago. The 
implementation of the policy in the past 3 years has worked out very 
well and it is working as intended.
    Comment: We received a comment that the HHCAHPS Star Rating 
methodology does not include Q25, ``Would you recommend this agency to 
your family or friends if they needed home health care?'' with the 
answer

[[Page 68709]]

choices of ``Definitely no, Probably no, Probably yes, and Definitely 
yes''. The commenter recommends that we include a Star Rating that is 
the average of two questions on the HHCAHPS survey, Q25 (the question 
above, ``Would you recommend this agency to your family or friends'') 
and Q20 (``Using a number from 0 to 10, where 0 is the worst home 
health care possible and 10 is the best home health care possible, what 
number would you use to rate your care from this agency's home health 
providers?'') or remove Q25 from the composite measure.
    Response: We thank the commenter for the comments, but will 
continue to retain Q20 and Q25 because they are standalone questions 
and they are not part of an HHCAHPS composite (which is a measure 
combining several survey questions).
    Comment: We received one comment that CMS should establish a 
minimum number of completed HHCAHPS surveys (at 50 surveys) per agency 
if the data are going to be used in HHVBP or any other quality 
assessment program.
    Response: We are going to start publicly reporting Star Ratings in 
January 2016. We introduced the methodology in several CMS Open Door 
Forums in spring 2015 and announcements on our Web sites. After 
extensive data testing, our statisticians established that at least 40 
surveys are needed in order to report Star Ratings for a home health 
agency. The commenter was correct; a minimum number of surveys are 
needed to have Star Ratings. In testing, it was found that there is no 
statistically significant difference between 40 surveys and 50 surveys 
as a minimum number for the HHCAHPS data.
    Comment: We received one comment in support of the continuation of 
the Home Health CAHPS[supreg] requirements that are in line with 
previous years' requirements.
    Response: We thank this commenter for their support.
    Final Decision: We are not recommending any changes to the HHCAHPS 
requirements as a result of comments received.
7. Summary
    We did not propose any changes to the participation requirements, 
or to the requirements pertaining to the implementation of the Home 
Health CAHPS[supreg] Survey (HHCAHPS). We only updated the information 
to reflect the dates in the future APU years. We again strongly 
encourage HHAs to keep up-to-date about the HHCAHPS by regularly 
viewing the official Web site for the HHCAHPS at https://homehealthcahps.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.

F. Public Display of Home Health Quality Data for the HH QRP

    Section 1895(b)(3)(B)(v)(III) of the Act and section 1899B(f) of 
the IMPACT Act states the Secretary shall establish procedures for 
making data submitted under subclause (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 for the agency 
prior to such data being made public. We recognize that public 
reporting of quality data is a vital component of a robust quality 
reporting program and are fully committed to ensuring that the data 
made available to the public be meaningful and that comparing 
performance across home health agencies requires that measures be 
constructed from data collected in a standardized and uniform manner. 
We also recognize the need to ensure that each home health agency has 
the opportunity to review the data before publication. Medicare home 
health regulations, as codified at Sec.  484.250(a), requires HHAs to 
submit OASIS assessments and Home Health Care Consumer Assessment of 
Healthcare Providers and Systems Survey[supreg] (HHCAHPS) data to meet 
the quality reporting requirements of section 1895(b)(3)(B)(v) of the 
Act.
    In addition, beginning April 1, 2015 HHAs began to receive Provider 
Preview Reports (for all Process Measures and Outcome Measures) on a 
quarterly, rather than annual, basis. The opportunity for providers to 
review their data and to submit corrections prior to public reporting 
aligns with the other quality reporting programs and the requirement 
for provider review under the IMPACT Act. We provide quality measure 
data to HHAs via the Certification and Survey Provider Enhanced Reports 
(CASPER reports), which are available through the CMS Health Care 
Quality Improvement and Evaluation System (QIES).
    As part of our ongoing efforts to make healthcare more transparent, 
affordable, and accountable, the HH QRP has developed a CMS Compare Web 
site for home health agencies, which identifies home health providers 
based on the areas they serve. Consumers can search for all Medicare-
certified home health providers that serve their city or ZIP code and 
then find the agencies offering the types of services they need. A 
subset of the HH quality measures has been publicly reported on the 
Home Health Compare (HH Compare) Web site since 2003. The selected 
measures that are made available to the public can be viewed on the HH 
Compare Web site located at http://www.medicare.gov/HHCompare/Home.asp
    The Affordable Care Act calls for transparent, easily understood 
information on provider quality to be publicly reported and made widely 
available. To provide home health care consumers with a summary of 
existing quality measures in an accessible format, we published a star 
rating based on the quality of care measures for home health agencies 
on Home Health Compare starting in July 2015. This is part of our plan 
to adopt star ratings across all Medicare.gov Compare Web sites. Star 
ratings are currently publicly displayed on Nursing Home Compare, 
Physician Compare, Hospital Compare, Dialysis Facility Compare, and the 
Medicare Advantage Plan Finder.
    The Quality of Patient Care star rating methodology assigns each 
home health agency a rating between one (1) and five (5) stars, using 
half stars for adjustment and reporting. All Medicare-certified home 
health agencies are eligible to receive a Quality of Patient Care star 
rating providing that they have quality data reported on at least 5 out 
of the 9 quality measures that are included in the calculation.
    Home health agencies will continue to have prepublication access to 
their agency's quality data, which enables each agency to know how it 
is performing before public posting of the data on the Compare Web 
site. Starting in April 2015, HHAs are receiving quarterly preview 
reports showing their Quality of Patient Care star rating and how it 
was derived well before public posting. HHAs have several weeks to 
review and provide feedback.
    The Quality of Patient Care star ratings methodology was developed 
through a transparent process the included multiple opportunities for 
stakeholder input, which was subsequently the basis for refinements to 
the methodology. An initial proposed methodology for calculating the 
Quality of Patient Care star ratings was posted on the CMS.gov Web site 
in December 2014. CMS then held two Special Open Door Forums (SODFs) on 
December 17, 2014 and February 5, 2015 to present the proposed 
methodology and solicit input. At each SODF, stakeholders provided 
immediate input, and were invited to submit additional comments via the 
Quality of Patient Care star ratings Help Desk mailbox 
[email protected]. CMS

[[Page 68710]]

refined the methodology, based on comments received and additional 
analysis. The final methodology report is posted on the new star 
ratings Web page http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIHomeHealthStarRatings.html. A Frequently-Asked-Questions (FAQ) 
document is also posted on the same Web page, addressing the issues 
raised in the comments that were received. We tested the Web site 
language used to present the Quality of Patient Care star ratings with 
Medicare beneficiaries to assure that it allowed them to accurately 
understand the significance of the various star ratings.
    Additional information regarding the Quality of Patient Care star 
rating is posted on the star ratings Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HomeHealthQualityInits/HHQIHomeHealthStarRatings.html. Additional 
communications regarding the Quality of Patient Care star ratings will 
be announced via regular HH QRP communication channels.
    Summaries of public comments and our responses to comments 
regarding the Public Display of Home Health Quality Data for the HH QRP 
are provided below:
    Comment: A commenter recommended that CMS include stabilization 
measures in the Quality of Patient Care star ratings algorithm.
    Response: We appreciate the feedback on the Quality of Patient Care 
star ratings methodology, and agree that stabilization is an important 
goal for some home health patients. CMS is committed to ongoing 
evaluation and improvement of the algorithm to calculate the star 
rating, including potential inclusion of new measures that meet the 
inclusion criteria for variability, reportability, and clinical 
relevance.

VI. Collection of Information Requirements

    While this rule contains information collection requirements, this 
rule does not add new, nor revise any of the existing information 
collection requirements, or burden estimate. The information collection 
requirements discussed in this rule for the OASIS-C1 data item set had 
been previously approved by the Office of Management and Budget (OMB) 
on February 6, 2014 and scheduled for implementation on October 1, 
2014. The extension of OASIS-C1/ICD-9 version was reapproved under OMB 
control number 0938-0760 with a current expiration date of March 31, 
2018. This version of the OASIS will be discontinued once the OASIS-C1/
ICD-10 version is approved and implemented. In addition, to facilitate 
the reporting of OASIS data as it relates to the implementation of ICD-
10 on October 1, 2015, CMS submitted a new request for approval to OMB 
for the OASIS-C1/ICD-10 version under the Paperwork Reduction Act (PRA) 
process. The proposed revised OASIS item was announced in the 30-day 
Federal Register notice (80 FR 15797) and received OMB approval and 
assigned OMB control number 0938-1279.

VII. Regulatory Impact Analysis

A. Statement of Need

    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 cost report data 
available to the Secretary, and (2) the standardized prospective 
payment amount be adjusted to account for the effects of case-mix and 
wage 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 furnished in a geographic area compared to the applicable 
national average level.
    Section 1895(b)(3)(B)(iv) of the Act provides the Secretary with 
the authority to implement adjustments to the standard prospective 
payment amount (or amounts) for subsequent years to eliminate the 
effect of changes in aggregate payments during a previous year or years 
that was the result of changes in the coding or classification of 
different units of services that do not reflect real changes in case-
mix. Section 1895(b)(5) of the Act provides the Secretary with 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.
    Section 421(a) of the MMA requires that HH services furnished in a 
rural area, for episodes and visits ending on or after April 1, 2010, 
and before January 1, 2016, receive an increase of 3 percent of the 
payment amount otherwise made under section 1895 of the Act. Section 
210 of the MACRA amended section 421(a) of the MMA to extend the 3 
percent increase to the payment amounts for serviced furnished in rural 
areas for episodes and visits ending before January 1, 2018.
    Section 3131(a) of the Affordable Care Act mandates that starting 
in CY 2014, the Secretary must apply an adjustment to the national, 
standardized 60-day episode payment rate and other amounts applicable 
under section 1895(b)(3)(A)(i)(III) of the Act to reflect factors such 
as changes in the number of visits in an episode, the mix of services 
in an episode, the level of intensity of services in an episode, the 
average cost of providing care per episode, and other relevant factors. 
In addition, section 3131(a) of the Affordable Care Act mandates that 
rebasing must be phased-in over a 4-year period in equal increments, 
not to exceed 3.5 percent of the amount (or amounts) as of the date of 
enactment (2010) under section 1895(b)(3)(A)(i)(III) of the Act, and be 
fully implemented in CY 2017.
    The HHVBP Model will apply a payment adjustment based on an HHA's 
performance on quality measures to test the effects on quality and 
costs of care. This HHVBP Model was developed based on the experiences 
we gained from the implementation of the Home Health Pay-for-
Performance (HHPP) demonstration as well as the successful 
implementation of the HVBP program. The model design was also developed 
from the public comments received on the discussion of a HHVBP model 
being considered in the CY 2015 HH PPS proposed and final rules. Value-
based purchasing programs have also been included in the President's 
budget for most provider types, including Home Health.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order

[[Page 68711]]

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 (UMRA, March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. The net transfer impacts related to the changes in 
payments under the HH PPS for CY 2016 are estimated to be -$260 
million. The savings impacts related to the HHVBP model are estimated 
at a total projected 5-year gross savings of $380 million assuming a 
very conservative savings estimate of a 6 percent annual reduction in 
hospitalizations and a 1.0 percent annual reduction in SNF admissions. 
In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
1. HH PPS
    The update set forth in this rule applies to Medicare payments 
under HH PPS in CY 2016. Accordingly, the following analysis describes 
the impact in CY 2016 only. We estimate that the net impact of the 
policies in this rule is approximately $260 million in decreased 
payments to HHAs in CY 2016. We applied a wage index budget neutrality 
factor and a case-mix weights budget neutrality factor to the rates as 
discussed in section III.C.3 of this final rule. Therefore, the 
estimated impact of the 2016 wage index and the recalibration of the 
case-mix weights for 2016 is zero. The -$260 million impact reflects 
the distributional effects of the 1.9 percent HH payment update 
percentage ($345 million increase), the effects of the third year of 
the four-year phase-in of the rebasing adjustments to the national, 
standardized 60-day episode payment amount, the national per-visit 
payment rates, and the NRS conversion factor for an impact of -2.4 
percent ($440 million decrease), and the effects of the -0.97 percent 
adjustment to the national, standardized 60-day episode payment rate to 
account for nominal case-mix growth ($165 million decrease). The $260 
million in decreased payments is reflected in the last column of the 
first row in Table 21 as a 1.4 percent decrease in expenditures when 
comparing CY 2015 payments to estimated CY 2016 payments.
    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 $7.5 million to $38.5 million in any one year. 
For the purposes of the RFA, we estimate that almost all HHAs are small 
entities as that term is used in the RFA. Individuals and states are 
not included in the definition of a small entity. The economic impact 
assessment is based on estimated Medicare payments (revenues) and HHS's 
practice in interpreting the RFA is to consider effects economically 
``significant'' only if greater than 5 percent of providers reach a 
threshold of 3 to 5 percent or more of total revenue or total costs. 
The majority of HHAs' visits are Medicare-paid visits and therefore the 
majority of HHAs' revenue consists of Medicare payments. Based on our 
analysis, we conclude that the policies finalized in this rule will 
result in an estimated total impact of 3 to 5 percent or more on 
Medicare revenue for greater than 5 percent of HHAs. Therefore, the 
Secretary has determined that this HH PPS final rule will have a 
significant economic impact on a substantial number of small entities. 
Further detail is presented in Table 24, by HHA type and location.
    With regards to options for regulatory relief, we note that in the 
CY 2014 HH PPS final rule we finalized rebasing adjustments to the 
national, standardized 60-day episode rate, non-routine supplies (NRS) 
conversion factor, and the national per-visit payment rates for each 
year, 2014 through 2017 as described in section II.C and III.C.3 of 
this final rule. Since the rebasing adjustments are mandated by section 
3131(a) of the Affordable Care Act, we cannot offer HHAs relief from 
the rebasing adjustments for CY 2016. For the 1.4 percent reduction to 
the national, standardized 60-day episode payment amount for CY 2016 
described in section III.B.2 of this final rule, we believe it is 
appropriate to reduce the national, standardized 60-day episode payment 
amount to account for the estimated increase in nominal case-mix in 
order to move towards more accurate payment for the delivery of home 
health services where payments better align with the costs of providing 
such services. In the alternatives considered section for the CY 2016 
HH PPS proposed rule (80 FR 39839), we note that we considered reducing 
the 60-day episode rate in CY 2016 only to account for nominal case-mix 
growth between CY 2012 and CY 2014. However, we instead proposed to 
reduce the 60-day episode rate over a two-year period (CY 2016 and CY 
2017) to account for estimated nominal case-mix growth between CY 2012 
and CY 2014 in order to lessen the impact on HHAs in a given year. As 
discussed in III.B.2 of this final rule, we are implementing a 
reduction of 0.97 percent to the 60-day episode rate in each of the 
next three calendar years (CY 2016 through CY 2018.
    Executive Order 13563 specifies, to the extent practicable, 
agencies should assess the costs of cumulative regulations. However, 
given potential utilization pattern changes, wage index changes, 
changes to the market basket forecasts, and unknowns regarding future 
policy changes, we believe it is neither practicable nor appropriate to 
forecast the cumulative impact of the rebasing adjustments on Medicare 
payments to HHAs for future years at this time. 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 will make it difficult to predict accurately the full scope of 
the impact upon HHAs for future years beyond CY 2016. We note that the 
rebasing adjustments to the national, standardized 60-day episode 
payment rate and the national per-visit rates are capped at the 
statutory limit of 3.5 percent of the CY 2010 amounts (as described in 
the preamble in section II.C. of this final rule) for each year, 2014 
through 2017. The NRS rebasing adjustment will be -2.82 percent in each 
year, 2014 through 2017.
    In addition, section 1102(b) of the Act requires us to prepare a 
RIA 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)

[[Page 68712]]

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 is applicable exclusively to HHAs. Therefore, 
the Secretary has determined this rule will not have a significant 
economic impact on the operations of small rural hospitals.
2. HHVBP Model
    To test the impact of upside and downside value-based payment 
adjustments, beginning in calendar year 2018 and in each succeeding 
calendar year through calendar year 2022, the HHVBP Model will adjust 
the final claim payment amount for a home health agency for each 
episode in a calendar year by an amount equal to the applicable 
percent. For purposes of this final rule, we have limited our analysis 
of the economic impacts to the value-based incentive payment 
adjustments. Under the model design, the incentive payment adjustments 
will be limited to the total payment reductions to home health agencies 
included in the model and would be no less than the total amount 
available for value-based incentive payment adjustment. Overall, the 
distributive impact of this rule is estimated at $380 million for CY 
2018-2022. Therefore, this rule is economically significant and thus a 
major rule under the Congressional Review Act. The model will test the 
effect on quality and costs of care by applying payment adjustments 
based on HHAs' performance on quality measures. This rule was developed 
based on extensive research and experience with value-based purchasing 
models.
    Guidance issued by the Department of Health and Human Services 
interpreting the Regulatory Flexibility Act considers the effects 
economically `significant' only if greater than 5-percent of providers 
reach a threshold of 3- to 5-percent or more of total revenue or total 
costs. Among the over 1900 HHAs in the selected states that would be 
expected to be included in the HHVBP Model, we estimate that the 
maximum percent payment adjustment resulting from this rule will only 
be greater than minus 3 percent for 10 percent of the HHAs included in 
the model (using the 8 percent maximum payment adjustment threshold to 
be applied in CY2022). As a result, only 2-percent of all HHA providers 
nationally would be significantly impacted, falling well below the RFA 
threshold. In addition, only HHAs that are impacted with lower payments 
are those providers that provide the poorest quality which is the main 
tenet of the model. This falls well below the threshold for economic 
significance established by HHS for requiring a more detailed impact 
assessment under the RFA. Thus, we are not preparing an analysis under 
the RFA because the Secretary has determined that this final rule would 
not have a significant economic impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural HHAs. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we have identified less than 5 
percent of HHAs included in the selected states that primarily serve 
beneficiaries that reside in rural areas (greater than 50 percent of 
beneficiaries served). We are not preparing an analysis under section 
1102(b) of the Act because the Secretary has determined that the HHVBP 
Model would not have a significant impact on the operations of a 
substantial number of small rural HHAs.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2015, that 
threshold is approximately $144 million. This rule will have no 
consequential effect on state, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts state law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

C. Detailed Economic Analysis

1. HH PPS
    This final rule sets forth updates for CY 2016 to the HH PPS rates 
contained in the CY 2015 HH PPS final rule (79 FR 66032 through 66118). 
The impact analysis of this final rule presents the estimated 
expenditure effects of policy changes finalized 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 HH benefit, based primarily 
on Medicare claims data from 2014. We note that certain events may 
combine to limit the scope or accuracy of our impact analysis, because 
such an analysis is future-oriented and, thus, susceptible to errors 
resulting from other changes in the impact time period assessed. Some 
examples of such possible events are newly-legislated general Medicare 
program funding changes made by the Congress, or changes specifically 
related to HHAs. In addition, changes to the Medicare program may 
continue to be made as a result of the 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.
    Table 24 represents how HHA revenues are likely to be affected by 
the policy changes finalized in this rule. For this analysis, we used 
an analytic file with linked CY 2014 OASIS assessments and HH claims 
data for dates of service that ended on or before December 31, 2014 (as 
of June 30, 2015). The first column of Table 24 classifies HHAs 
according to a number of characteristics including provider type, 
geographic region, and urban and rural locations. The second column 
shows the number of facilities in the impact analysis. The third column 
shows the payment effects of the CY 2016 wage index. The fourth column 
shows the payment effects of the CY 2016 case-mix weights. The fifth 
column shows the effects the 0.97 percent reduction to the national, 
standardized 60-day episode payment amount to account for nominal case-
mix growth. The sixth column shows the effects of the rebasing 
adjustments to the national, standardized 60-day episode payment rate, 
the national per-visit payment rates, and NRS conversion factor. For CY 
2016, the average impact for all HHAs due to the effects of rebasing is 
an estimated 2.4 percent decrease in payments. The seventh column shows 
the effects of the CY 2016 home health payment update percentage (i.e., 
the home health market basket update adjusted for multifactor 
productivity as discussed in section III.C.1. of this final rule).

[[Page 68713]]

    The last column shows the combined effects of all the policies 
finalized in this rule. Overall, it is projected that aggregate 
payments in CY 2016 will decrease by 1.4 percent. As illustrated in 
Table 24, the combined effects of all of the changes vary by specific 
types of providers and by location. We note that some individual HHAs 
within the same group may experience different impacts on payments than 
others due to the distributional impact of the CY 2016 wage index, the 
extent to which HHAs had episodes in case-mix groups where the case-mix 
weight decreased for CY 2016 relative to CY 2015, the percentage of 
total HH PPS payments that were subject to the low-utilization payment 
adjustment (LUPA) or paid as outlier payments, and the degree of 
Medicare utilization.

                            Table 21--Estimated Home Health Agency Impacts by Facility Type and Area of the Country, CY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     60-day episode                HH payment
                                                            Number of     CY 2016     CY 2016 case-   rate nominal     Rebasing      update
                                                             agencies    wage index    mix weights      case-mix         \4\       percentage    Total
                                                                            \1\            \2\        reduction \3\                   \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Agencies.............................................       11,609         0.0%            0.0%           -0.9%        -2.4%         1.9%      -1.4%
Facility Type and Control:
Free-Standing/Other Vol/NP...............................        1,094         0.0%            0.0%           -0.9%        -2.3%         1.9%      -1.3%
Free-Standing/Other Proprietary..........................        9,076         0.0%           -0.1%           -0.9%        -2.4%         1.9%      -1.5%
Free-Standing/Other Government...........................          382        -0.1%            0.2%           -0.9%        -2.3%         1.9%      -1.2%
Facility-Based Vol/NP....................................          718         0.1%            0.2%           -0.9%        -2.3%         1.9%      -1.0%
Facility-Based Proprietary...............................          117        -0.3%            0.1%           -0.9%        -2.3%         1.9%      -1.5%
Facility-Based Government................................          222        -0.3%            0.3%           -0.9%        -2.3%         1.9%      -1.3%
    Subtotal: Freestanding...............................       10,552         0.0%            0.0%           -0.9%        -2.4%         1.9%      -1.4%
    Subtotal: Facility-based.............................        1,057         0.0%            0.2%           -0.9%        -2.3%         1.9%      -1.1%
    Subtotal: Vol/NP.....................................        1,812         0.1%            0.1%           -0.9%        -2.3%         1.9%      -1.1%
    Subtotal: Proprietary................................        9,193         0.0%           -0.1%           -0.9%        -2.4%         1.9%      -1.5%
    Subtotal: Government.................................          604        -0.2%            0.3%           -0.9%        -2.3%         1.9%      -1.2%
Facility Type and Control: Rural:
Free-Standing/Other Vol/NP...............................          191        -0.9%            0.3%           -0.9%        -2.3%         1.9%      -1.9%
Free-Standing/Other Proprietary..........................          149        -0.4%            0.1%           -0.9%        -2.3%         1.9%      -1.6%
Free-Standing/Other Government...........................          448        -0.6%            0.0%           -0.9%        -2.3%         1.9%      -1.9%
Facility-Based Vol/NP....................................          218        -0.7%            0.3%           -0.9%        -2.4%         1.9%      -1.8%
Facility-Based Proprietary...............................           27        -0.1%            0.1%           -0.9%        -2.3%         1.9%      -1.3%
Facility-Based Government................................          131        -0.5%            0.5%           -0.9%        -2.3%         1.9%      -1.3%
Facility Type and Control: Urban:
Free-Standing/Other Vol/NP...............................          942         0.1%            0.0%           -0.9%        -2.3%         1.9%      -1.2%
Free-Standing/Other Proprietary..........................        8,760         0.0%           -0.1%           -0.9%        -2.4%         1.9%      -1.5%
Free-Standing/Other Government...........................          154        -0.3%            0.1%           -0.9%        -2.4%         1.9%      -1.6%
Facility-Based Vol/NP....................................          500         0.2%            0.2%           -0.9%        -2.3%         1.9%      -0.9%
Facility-Based Proprietary...............................           90        -0.4%            0.1%           -0.9%        -2.2%         1.9%      -1.5%
Facility-Based Government................................           91        -0.2%            0.2%           -0.9%        -2.4%         1.9%      -1.4%
Facility Location: Urban or Rural:
Rural....................................................        1,072        -0.6%            0.1%           -0.9%        -2.3%         1.9%      -1.8%
Urban....................................................       10,537         0.0%            0.0%           -0.9%        -2.4%         1.9%      -1.4%
Facility Location: Region of the Country:
Northeast................................................          837         0.0%            0.0%           -0.9%        -2.2%         1.9%      -1.2%
Midwest..................................................        3,078         0.0%            0.1%           -0.9%        -2.4%         1.9%      -1.3%
South....................................................        5,713        -0.2%           -0.1%           -0.9%        -2.4%         1.9%      -1.7%
West.....................................................         1885         0.5%            0.0%           -0.9%        -2.3%         1.9%      -0.8%
Other....................................................           96        -0.2%            0.0%           -0.9%        -2.4%         1.9%      -1.6%
Facility Location: Region of the Country (Census Region):
New England..............................................          294        -0.2%            0.0%           -0.9%        -2.1%         1.9%      -1.3%
Mid Atlantic.............................................          543         0.1%            0.0%           -0.9%        -2.3%         1.9%      -1.2%
East North Central.......................................        2,447         0.0%            0.0%           -0.9%        -2.4%         1.9%      -1.4%
West North Central.......................................          631        -0.2%            0.2%           -0.9%        -2.4%         1.9%      -1.4%
South Atlantic...........................................        1,883         0.0%            0.0%           -0.9%        -2.4%         1.9%      -1.4%
East South Central.......................................          432        -0.3%           -0.1%           -0.9%        -2.5%         1.9%      -1.9%
West South Central.......................................        3,398        -0.3%           -0.2%           -0.9%        -2.4%         1.9%      -1.9%
Mountain.................................................          621         0.0%            0.1%           -0.9%        -2.3%         1.9%      -1.2%
Pacific..................................................        1,264         0.7%            0.0%           -0.9%        -2.4%         1.9%      -0.7%
Facility Size (Number of 1st Episodes):
<100 episodes............................................        2,911         0.1%            0.1%           -0.9%        -2.4%         1.9%      -1.2%
100 to 249...............................................        2,726         0.1%            0.1%           -0.9%        -2.4%         1.9%      -1.2%
250 to 499...............................................        2,522         0.1%            0.0%           -0.9%        -2.4%         1.9%      -1.3%
500 to 999...............................................        1,857         0.1%            0.0%           -0.9%        -2.4%         1.9%      -1.3%
1,000 or More............................................        1,593        -0.1%           -0.1%           -0.9%        -2.4%         1.9%      -1.6%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CY 2014 Medicare claims data for episodes ending on or before December 31, 2014 (as of June 30, 2015) for which we had a linked OASIS
  assessment.
\1\ The impact of the CY 2016 home health wage index is offset by the wage index budget neutrality factor described in section III.C.3 of this final
  rule.
\2\ The impact of the CY 2016 home health case-mix weights reflects the recalibration of the case-mix weights as outlined in section III.B.1 of this
  final rule offset by the case-mix weights budget neutrality factor described in section III.C.3 of this final rule.

[[Page 68714]]

 
\3\ The 0.97 percent reduction to the national, standardized 60-day episode payment amount in CY 2016 is estimated to have a 0.9 percent impact on
  overall HH PPS expenditures.
\4\ The impact of rebasing includes the rebasing adjustments to the national, standardized 60-day episode payment rate (-2.74 percent after the CY 2016
  payment rate was adjusted for the wage index and case-mix weight budget neutrality factors and the nominal case-mix reduction), the national per-visit
  rates (+2.9 percent), and the NRS conversion factor (-2.82 percent). The estimated impact of the NRS conversion factor rebasing adjustment is an
  overall -0.01 percent decrease in estimated payments to HHAs.
\5\ The CY 2016 home health payment update percentage reflects the home health market basket update of 2.3 percent, reduced by a 0.4 percentage point
  multifactor productivity (MFP) adjustment as required under section 1895(b)(3)(B)(vi)(I) of the Act, as described in section III.C.1 of this final
  rule.
REGION KEY: New England=Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic=Pennsylvania, New Jersey, New York;
  South Atlantic=Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia; East North
  Central=Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central=Alabama, Kentucky, Mississippi, Tennessee; West North Central=Iowa, Kansas,
  Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central=Arkansas, Louisiana, Oklahoma, Texas; Mountain=Arizona, Colorado, Idaho,
  Montana, Nevada, New Mexico, Utah, Wyoming; Pacific=Alaska, California, Hawaii, Oregon, Washington; Other=Guam, Puerto Rico, Virgin Islands.

2. HHVBP Model
    Table 22 displays our analysis of the distribution of possible 
payment adjustments at the 3-percent, 5-percent, 6-percent, 7-percent, 
and 8-percent rates that are being used in the model based on 2013-2014 
data, providing information on the estimated impact of this rule. We 
note that this impact analysis is based on the aggregate value of all 9 
states identified in section IV.C.2. of this final rule by applying the 
state selection methodology.
    Table 23 displays our analysis of the distribution of possible 
payment adjustments based on 2013-2014 data, providing information on 
the estimated impact of this final rule. We note that this impact 
analysis is based on the aggregate value of all nine (9) states 
(identified in section IV.C.2. of this rule) by applying the state 
selection methodology.
    All Medicare-certified HHAs that provide services in Massachusetts, 
Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska, 
and Tennessee will be required to compete in this model.
    Value-based incentive payment adjustments for the estimated 1,900 
plus HHAs in the selected states that will compete in the HHVBP Model 
are stratified by the size as defined in section F. For example, 
Arizona has 31 HHAs that do not provide services to enough 
beneficiaries to be required to complete HHCAHPS surveys and therefore 
are considered to be in the state's smaller-volume cohort under the 
model. Using 2013-2014 data and the highest payment adjustment of 5-
percent (as applied in CY 2019), based on ten (10) process and outcome 
measures currently available on Home Health Compare, the smaller-volume 
HHAs in Arizona would have a mean payment adjustment of positive 0.64 
percent. Only 10-percent of home health agencies would be subject to 
downward payment adjustments of more than minus 3.3 percent (-3.3 
percent).
    The next columns provide the distribution of scores by percentile; 
we see that the value-based incentive percentage payments for home 
health agencies in Arizona range from -3.3 percent at the 10th 
percentile to +5.0 percent at the 90th percentile, while the value-
based incentive payment at the 50th percentile is 0.56 percent.
    The smaller-volume HHA cohorts table identifies that some 
consideration will have to be made for MD, WA, and TN where there are 
too few HHAs in the smaller-volume cohort and will be included in the 
larger-volume cohort without being measured on HHCAHPS.
    Table 24 provides the payment adjustment distribution based on 
proportion of dual-eligible beneficiaries, average case mix (using HCC 
scores), proportion that reside in rural areas, as well as HHA 
organizational status. Besides the observation that higher proportion 
of dually-eligible beneficiaries serviced is related to better 
performance, the payment adjustment distribution is consistent with 
respect to these four categories.
    The TPS score and the payment methodology at the state and size 
level were calculated so that each home health agency's payment 
adjustment was calculated as it will be in the model. Hence, the values 
of each separate analysis in the tables are representative of what they 
would be if the baseline year was 2013 and the performance year was 
2014.
    There were 1,931 HHAs in the nine selected states out of 1,991 HHAs 
that were found in the HHA data sources that yielded a sufficient 
number of measures to receive a payment adjustment in the model. It is 
expected that a certain number of HHAs will not be subject to the 
payment adjustment because they may be servicing too small of a 
population to report on an adequate number of measures to calculate a 
TPS.

[[Page 68715]]

[GRAPHIC] [TIFF OMITTED] TR05NO15.011


                                             Table 23--HHA Cohort Payment Adjustment Distributions by State
                                                        [Based on a 5 percent payment adjustment]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Average
                                                      # of     payment
                       State                          HHAs   adjustment    10%      20%      30%      40%      50%      60%      70%      80%      90%
                                                                  %
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Smaller-volume HHA Cohort by State
--------------------------------------------------------------------------------------------------------------------------------------------------------
AZ................................................       31        0.64    -3.33    -2.72    -2.17    -0.82     0.56     1.31     3.36     4.75     5.00
FL................................................      353        0.44    -3.01    -1.76    -1.00    -0.39     0.21     0.94     1.84     3.04     4.38
IA................................................       23        0.17    -3.14    -2.53    -2.01    -1.41    -0.97     0.31     2.74     3.25     5.00
MA................................................       29        0.39    -3.68    -1.75    -0.70    -0.10     0.39     0.79     1.33     2.46     4.68
MD................................................        2       -0.47    -2.71    -2.71    -2.71    -2.71    -0.47     1.78     1.78     1.78     1.78
NC................................................        9        0.72    -2.38    -1.84    -1.41    -1.23    -0.68     0.34     3.67     5.00     5.00
NE................................................       16       -0.51    -2.26    -1.80    -1.64    -1.43    -1.13    -0.44     0.40     0.42     1.46
TN................................................        2        2.48    -0.05    -0.05    -0.05    -0.05     2.48     5.00     5.00     5.00     5.00
WA................................................        1        0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00     0.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Larger-volume HHA Cohort by State
--------------------------------------------------------------------------------------------------------------------------------------------------------
AZ................................................       82        0.39    -3.31    -2.75    -2.19    -0.81     0.56     1.31     3.38     4.75     5.00
FL................................................      672        0.41    -3.00    -1.75    -1.60    -0.38     0.19     0.94     1.81     3.06     4.38
IA................................................      129       -0.31    -3.13    -2.31    -2.70    -1.13    -0.56     0.13     0.56     1.19     3.50
MA................................................      101        0.64    -2.88    -2.19    -1.50    -0.38     0.63     1.25     2.06     3.81     4.88
MD................................................       50        0.41    -2.75    -2.06    -2.30    -0.88     0.00     0.81     2.38     2.94     4.13
NC................................................      163        0.65    -2.75    -1.56    -1.30    -0.06     0.38     0.94     1.88     3.06     4.88
NE................................................       48        0.37    -2.63    -2.19    -1.40    -0.56    -0.19     0.50     1.31     2.31     5.00
TN................................................      134        0.39    -2.56    -1.81    -2.00    -0.63    -0.06     0.81     1.44     2.50     4.69
WA................................................       55        0.39    -2.75    -1.63    -2.00    -0.94    -0.19     0.69     1.94     3.31     4.06
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                              Table 24--Payment Adjustment Distributions by Characteristics
                                                        [Based on a 5 percent payment adjustment]
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Percentage dually-eligible          # of HHAs     10%        20%        30%        40%        50%        60%        70%        80%        90%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low % Dually-eligible.....................        498      -3.21      -2.57      -1.86      -1.29      -0.60       0.12       0.78       2.13       3.97
Medium % Dually-eligible..................        995      -2.91      -2.10      -1.33      -0.63       0.01       0.67       1.39       2.47       4.12
High % Dually-eligible....................        498      -2.46      -1.04      -0.24       0.59       1.29       2.34       3.38       4.53       5.00
Acuity (HCC):
Low Acuity................................        499      -2.83      -1.76      -0.94      -0.23       0.46       1.16       2.03       3.40       5.00
Middle acuity.............................        993      -3.05      -2.08      -1.24      -0.50       0.19       0.90       1.71       2.81       4.51
High Acuity...............................        499      -3.04      -2.04      -1.29      -0.51       0.26       1.06       2.00       3.16       4.91
% Rural Beneficiaries:
All non-rural.............................        800      -2.81      -1.51      -0.66       0.08       0.78       1.54       2.64       3.94       5.00

[[Page 68716]]

 
Up to 35% rural...........................        925      -3.12      -2.37      -1.71      -1.01      -0.42       0.32       1.18       2.24       3.97
over 35% rural............................        250      -2.91      -2.01      -1.17      -0.62      -0.11       0.56       1.32       2.86       4.58
Organizational Type:
Church....................................         62      -2.92      -2.04      -1.33      -0.46       0.12       0.64       1.30       2.58       4.22
Private Not-For-Profit....................        194      -2.78      -1.74      -0.97      -0.42       0.27       0.85       1.77       2.89       4.55
Other.....................................         93      -2.62      -1.68      -0.95      -0.38       0.36       1.08       1.86       3.09       4.63
Private For-Profit........................       1538      -3.09      -2.08      -1.27      -0.53       0.24       1.02       1.88       3.02       4.83
Federal...................................         83      -2.44      -1.61      -0.67       0.01       0.53       1.13       1.80       3.09       4.58
State.....................................          5      -3.03      -1.11      -0.37      -0.01       0.24       0.42       1.66       2.96       3.24
Local.....................................         61      -2.30      -1.28      -0.48       0.16       0.98       1.91       2.88       4.11       5.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 25, we have 
prepared an accounting statement showing the classification of the 
transfers and costs associated with the HH PPS provisions of this final 
rule. Table 25 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 for the HH PPS provisions.

   Table 25--Accounting Statement: HH PPS Classification of Estimated
            Transfers and Costs, From the CYs 2015 to 2016 *
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  -$260 million.
From Whom to Whom?                          Federal Government to HHAs.
------------------------------------------------------------------------
* The estimates reflect 2016 dollars.

    Table 26 provides our best estimate of the decrease in Medicare 
payments under the proposed HHVBP Model.

 Table 26--Accounting Statement: HHVBP Model Classification of Estimated
                  Transfers and Costs for CY 2018-2022
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
5-Year Gross Transfers....................  -$380 million.
From Whom to Whom?                          Federal Government to
                                             Hospitals and SNFs.
------------------------------------------------------------------------

E. Conclusion

1. HH PPS
    In conclusion, we estimate that the net impact of the HH PPS 
policies in this rule is a decrease of 1.4 percent, or $260 million, in 
Medicare payments to HHAs for CY 2016. The $260 million decrease in 
estimated payments to HHAs for CY 2016 reflects the effects of the 1.9 
percent CY 2016 HH payment update percentage ($345 million increase), a 
0.9 percent decrease in payments due to the 0.97 percent reduction to 
the national, standardized 60-day episode payment rate in CY 2016 to 
account for nominal case-mix growth from 2012 through 2014 ($165 
million decrease), and a 2.4 percent decrease in payments due to the 
third year of the 4-year phase-in of the rebasing adjustments required 
by section 3131(a) of the Affordable Care Act ($440 million decrease). 
This analysis, together with the remainder of this preamble, provides 
the final Regulatory Flexibility Analysis.
2. HHVBP Model
    In conclusion, we estimate there will be no net impact (to include 
either a net increase or reduction in payments) in this final rule in 
Medicare payments to HHAs competing in the HHVBP Model for CY 2016. 
However, the overall economic impact of the HHVBP Model provision is an 
estimated $380 million in total savings from a reduction in unnecessary 
hospitalizations and SNF usage as a result of greater quality 
improvements in the home health industry over the life of the HHVBP 
Model. The financial estimates were based on the analysis of hospital, 
home health and skilled nursing facility claims data from nine states 
using the most recent 2014 Medicare claims data. A study published in 
2002 by the Journal of the American Geriatric Society (JAGS), 
``Improving patient outcomes of home health care: Findings from two 
demonstration trials of outcome-based quality improvement,'' formed the 
basis for CMMI's projections.\79\ That study observed a hospitalization 
relative rate of decline of 22-percent to 26-percent over the 3-year 
and 4-year demonstration periods (the 1st year of each being the base 
year) for the national and New York trials. CMMI assumed a conservative 
savings estimate of up to a 6-percent ultimate annual reduction in 
hospitalizations and up to a 1.0-percent ultimate annual reduction in 
SNF admissions and took into account costs incurred from the 
beneficiary remaining in the HHA if the hospitalization did not occur; 
resulting in total projected five performance year gross savings of 
$380 million. Based on the JAGS study, which observed hospitalization 
reductions of over 20-percent, the 6-percent ultimate annual 
hospitalization reduction assumptions are considered reasonable.
---------------------------------------------------------------------------

    \79\ Shaughnessy, et al. ``Improving patient outcomes of home 
health care: Findings from two demonstration trials of outcome-based 
quality improvement,'' available at http://www.ncbi.nlm.nih.gov/pubmed/12164991.
---------------------------------------------------------------------------

VIII. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) establishes 
certain requirements that an agency must meet when it promulgates a 
final rule that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. We have reviewed this final rule under the threshold 
criteria of Executive Order 13132, Federalism, and have determined that 
it will not have substantial direct effects on the rights, roles, and 
responsibilities of states, local or tribal governments.

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.

[[Page 68717]]

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).


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


Sec.  409.43  Plan of care requirements.

* * * * *
    (e) * * *
    (1) * * *
    (iii) Discharge with goals met and/or no expectation of a return to 
home health care and the patient returns to home health care during the 
60-day episode.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
3. 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).


Sec.  424.22  [Amended]

0
4. Section 424.22 is amended by redesignating paragraph (a)(1)(v)(B)(1) 
as paragraph (a)(2) and removing reserved paragraph (a)(1)(v)(B)(2).

PART 484--HOME HEALTH SERVICES

0
5. 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.


0
6. Section 484.205 is amended by revising paragraphs (d) and (e) to 
read as follows:


Sec.  484.205  Basis of payment.

* * * * *
    (d) Partial episode payment adjustment. (1) An HHA receives a 
national 60-day episode payment of a predetermined rate for home health 
services unless CMS determines an intervening event, defined as a 
beneficiary elected transfer or discharge with goals met or no 
expectation of return to home health and the beneficiary returned to 
home health during the 60-day episode, warrants a new 60-day episode 
for purposes of payment. A start of care OASIS assessment and physician 
certification of the new plan of care are required.
    (2) The PEP adjustment will not apply in situations of transfers 
among HHAs of common ownership. Those situations will be considered 
services provided under arrangement on behalf of the originating HHA by 
the receiving HHA with the common ownership interest for the balance of 
the 60-day episode. The common ownership exception to the transfer PEP 
adjustment does not apply if the beneficiary moves to a different MSA 
or Non-MSA during the 60-day episode before the transfer to the 
receiving HHA. The transferring HHA in situations of common ownership 
not only serves as a billing agent, but must also exercise professional 
responsibility over the arranged-for services in order for services 
provided under arrangements to be paid.
    (3) If the intervening event warrants a new 60-day episode payment 
and a new physician certification and a new plan of care, the initial 
HHA receives a partial episode payment adjustment reflecting the length 
of time the patient remained under its care. A partial episode payment 
adjustment is determined in accordance with Sec.  484.235.
    (e) Outlier payment. An HHA receives a national 60-day episode 
payment of a predetermined rate for a home health service, unless the 
imputed cost of the 60-day episode exceeds a threshold amount. The 
outlier payment is defined to be a proportion of the imputed costs 
beyond the threshold. An outlier payment is a payment in addition to 
the national 60-day episode payment. The total of all outlier payments 
is limited to no more than 2.5 percent of total outlays under the HHA 
PPS. An outlier payment is determined in accordance with Sec.  484.240.

0
7. Section 484.220 is amended by revising paragraph (a)(3) and adding 
paragraphs (a)(4), (5), and (6) to read as follows:


Sec.  484.220  Calculation of the adjusted national prospective 60-day 
episode payment rate for case-mix and area wage levels.

* * * * *
    (a) * * *
    (3) For CY 2011, the adjustment is 3.79 percent.
    (4) For CY 2012, the adjustment is 3.79 percent.
    (5) For CY 2013, the adjustment is 1.32 percent.
    (6) For CY 2016, CY 2017, and CY 2018, the adjustment is 0.97 
percent in each year.
* * * * *

0
8. Section 484.225 is revised to read as follows:


Sec.  484.225  Annual update of the unadjusted national prospective 60-
day episode payment rate.

    (a) CMS updates the unadjusted national 60-day episode payment rate 
on a fiscal year basis (as defined in section 1895(b)(1)(B) of the 
Act).
    (b) For 2007 and subsequent calendar years, in accordance with 
section 1895(b)(3)(B)(v) of the Act, in the case of a home health 
agency that submits home health quality data, as specified by the 
Secretary, the unadjusted national prospective 60-day episode rate is 
equal to the rate for the previous calendar year increased by the 
applicable home health market basket index amount.
    (c) For 2007 and subsequent calendar years, in accordance with 
section 1895(b)(3)(B)(v) of the Act, in the case of a home health 
agency that does not submit home health quality data, as specified by 
the Secretary, the unadjusted national prospective 60-day episode rate 
is equal to the rate for the previous calendar year increased by the 
applicable home health market basket index amount minus 2 percentage 
points. Any reduction of the percentage change will apply only to the 
calendar year involved and will not be taken into account in computing 
the prospective payment amount for a subsequent calendar year.


Sec.  484.230  [Amended]

0
9. Section 484.230 is amended by removing the last sentence.

0
10. Section 484.240 is amended by revising paragraphs (b) and (e) and 
adding paragraph (f) to read as follows:


Sec.  484.240  Methodology used for the calculation of the outlier 
payment.

* * * * *
    (b) The outlier threshold for each case-mix group is the episode 
payment amount for that group, or the PEP adjustment amount for the 
episode, plus a fixed dollar loss amount that is the same for all case-
mix groups.
* * * * *
    (e) The fixed dollar loss amount and the loss sharing proportion 
are chosen so that the estimated total outlier payment is no more than 
2.5 percent of total payment under home health PPS.
    (f) The total amount of outlier payments to a specific home health 
agency for a year may not exceed an amount equal to 10 percent of the 
total

[[Page 68718]]

payments to the specific agency under home health PPS for the year.


Sec.  484.245  [Removed and Reserved]

0
11. Section 484.245 is removed and reserved.


Sec.  484.250  [Amended]

0
12. Section 484.250(a)(2) is amended by removing the reference ``Sec.  
484.225(i) of this subpart'' and adding in its place the reference 
``Sec.  484.225(c)''.

0
13. Subpart F is added to read as follows:
Subpart F--Home Health Value-Based Purchasing (HHVBP) Model Components 
for Competing Home Health Agencies within State Boundaries
Sec.
484.300 Basis and scope of subpart.
484.305 Definitions.
484.310 Applicability of the Home Health Value-Based Purchasing 
(HHVBP) model.
484.315 Data reporting for measures and evaluation under the Home 
Health Value-Based Purchasing (HHVBP) Model.
484.320 Calculation of the Total Performance Score.
484.325 Payments for home health services under Home Health Value-
Based Purchasing (HHVBP) Model.
484.330 Process for determining and applying the value-based payment 
adjustment under the Home Health Value-Based Purchasing (HHVBP) 
Model.

Subpart F--Home Health Value-Based Purchasing (HHVBP) Model 
Components for Competing Home Health Agencies Within State 
Boundaries


Sec.  484.300  Basis and scope of subpart.

    This subpart is established under sections 1102, 1115A, and 1871 of 
the Act (42 U.S.C. 1315a), which authorizes the Secretary to issue 
regulations to operate the Medicare program and test innovative payment 
and service delivery models to improve coordination, quality, and 
efficiency of health care services furnished under Title XVIII.


Sec.  484.305  Definitions.

    As used in this subpart--
    Applicable measure means a measure for which the competing HHA has 
provided 20 home health episodes of care per year.
    Applicable percent means a maximum upward or downward adjustment 
for a given performance year, not to exceed the following:
    (1) For CY 2018, 3-percent.
    (2) For CY 2019, 5-percent.
    (3) For CY 2020, 6-percent.
    (4) For CY 2021, 7-percent.
    (5) For CY 2022, 8-percent.
    Benchmark refers to the mean of the top decile of Medicare-
certified HHA performance on the specified quality measure during the 
baseline period, calculated separately for the larger-volume and 
smaller-volume cohorts within each state.
    Competing home health agency or agencies means an agency or 
agencies:
    (1) That has or have a current Medicare certification; and,
    (2) Is or are being paid by CMS for home health care delivered 
within any of the states specified in Sec.  484.310.
    Home health prospective payment system (HH PPS) refers to the basis 
of payment for home health agencies as set forth in Sec. Sec.  484.200 
through 484.245.
    Larger-volume cohort means the group of competing home health 
agencies within the boundaries of selected states that are 
participating in HHCAHPs in accordance with Sec.  484.250.
    Linear exchange function is the means to translate a competing 
HHA's Total Performance Score into a value-based payment adjustment 
percentage.
    New measures means those measures to be reported by competing HHAs 
under the HHVBP Model that are not otherwise reported by Medicare-
certified HHAs to CMS and were identified to fill gaps to cover 
National Quality Strategy Domains not completely covered by existing 
measures in the home health setting.
    Payment adjustment means the amount by which a competing HHA's 
final claim payment amount under the HH PPS is changed in accordance 
with the methodology described in Sec.  484.325.
    Performance period means the time period during which data are 
collected for the purpose of calculating a competing HHA's performance 
on measures.
    Selected state(s) means those nine states that were randomly 
selected to compete/participate in the HHVBP Model via a computer 
algorithm designed for random selection and identified at Sec.  
484.310(b).
    Smaller-volume cohort means the group of competing home health 
agencies within the boundaries of selected states that are exempt from 
participation in HHCAHPs in accordance with Sec.  484.250.
    Starter set means the quality measures selected for the first year 
of this model.
    Total Performance Score means the numeric score ranging from 0 to 
100 awarded to each competing HHA based on its performance under the 
HHVBP Model.
    Value-based purchasing means measuring, reporting, and rewarding 
excellence in health care delivery that takes into consideration 
quality, efficiency, and alignment of incentives. Effective health care 
services and high performing health care providers may be rewarded with 
improved reputations through public reporting, enhanced payments 
through differential reimbursements, and increased market share through 
purchaser, payer, and/or consumer selection.


Sec.  484.310  Applicability of the Home Health Value-Based Purchasing 
(HHVBP) Model.

    (a) General rule. The HHVBP Model applies to all Medicare-certified 
home health agencies (HHAs) in selected states.
    (b) Selected states. Nine states have been selected in accordance 
with CMS's selection methodology. All Medicare-certified HHAs that 
provide services in Massachusetts, Maryland, North Carolina, Florida, 
Washington, Arizona, Iowa, Nebraska, and Tennessee will be required to 
compete in this model.


Sec.  484.315  Data reporting for measures and evaluation under the 
Home Health Value-Based Purchasing (HHVBP) Model.

    (a) Competing home health agencies will be evaluated using a 
starter set of quality measures.
    (b) Competing home health agencies in selected states will be 
required to report information on New Measures, as determined 
appropriate by the Secretary, to CMS in the form, manner, and at a time 
specified by the Secretary.
    (c) Competing home health agencies in selected states will be 
required to collect and report such information as the Secretary 
determines is necessary for purposes of monitoring and evaluating the 
HHVBP Model under section 1115A(b)(4) of the Act (42 U.S.C. 1315a).


Sec.  484.320  Calculation of the Total Performance Score.

    A competing home health agency's Total Performance Score for a 
model year is calculated as follows:
    (a) CMS will award points to the competing home health agency for 
performance on each of the applicable measures in the starter set, 
excluding the New Measures.
    (b) CMS will award points to the competing home health agency for 
reporting on each of the New Measures in the starter set, worth up to 
ten percent of the Total Performance Score.
    (c) CMS will sum all points awarded for each applicable measure 
excluding the New Measures in the starter set, weighted equally at the 
individual measure level, to calculate a value worth 90-percent of the 
Total Performance Score.

[[Page 68719]]

    (d) The sum of the points awarded to a competing HHA for each 
applicable measure in the starter set and the points awarded to a 
competing HHA for reporting data on each New Measure is the competing 
HHA's Total Performance Score for the calendar year.


Sec.  484.325  Payments for home health services under Home Health 
Value-Based Purchasing (HHVBP) Model.

    CMS will determine a payment adjustment up to the maximum 
applicable percentage, upward or downward, under the HHVBP Model for 
each competing home health agency based on the agency's Total 
Performance Score using a linear exchange function. Payment adjustments 
made under the HHVBP Model will be calculated as a percentage of 
otherwise-applicable payments for home health services provided under 
section 1895 of the Act (42 U.S.C. 1395fff).


Sec.  484.330  Process for determining and applying the value-based 
payment adjustment under the Home Health Value-Based Purchasing (HHVBP) 
Model.

    (a) General. Competing home health agencies will be ranked within 
the larger-volume and smaller-volume cohorts in selected states based 
on the performance standards that apply to the HHVBP Model for the 
baseline year, and CMS will make value-based payment adjustments to the 
competing HHAs as specified in this section.
    (b) Calculation of the value-based payment adjustment amount. The 
value-based payment adjustment amount is calculated by multiplying the 
Home Health Prospective Payment final claim payment amount as 
calculated in accordance with Sec.  484.205 by the payment adjustment 
percentage.
    (c) Calculation of the payment adjustment percentage. The payment 
adjustment percentage is calculated as the product of: The applicable 
percent as defined in Sec.  484.320, the competing HHA's Total 
Performance Score divided by 100, and the linear exchange function 
slope.

    Dated: October 27, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 28, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-27931 Filed 10-29-15; 4:15 pm]
BILLING CODE 4120-01-P