Federal Register, Volume 76 Issue 214 (Friday, November 4, 2011)

[Federal Register Volume 76, Number 214 (Friday, November 4, 2011)]
[Rules and Regulations]
[Pages 68526-68607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28416]

[[Page 68525]]

Vol. 76

Friday,

No. 214

November 4, 2011

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 409, 424, and 484

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

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

[[Page 68526]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, and 484

[CMS-1353-F]
RIN 0938-AQ30

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

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

ACTION: Final rule.

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

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

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

Table of Contents

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

Acronyms

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

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

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Background

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

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

B. System for Payment of Home Health Services

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

C. Updates to the HH PPS

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

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

II. Provisions of the Proposed Rule and Response to Comments

A. Case-Mix Measurement

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

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

[[Page 68530]]

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

[[Page 68531]]

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

[[Page 68532]]

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

[[Page 68533]]

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

[[Page 68534]]

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

[[Page 68535]]

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

[[Page 68536]]

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

[[Page 68537]]

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

[[Page 68538]]

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

[[Page 68539]]

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

[[Page 68540]]

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

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

[[Page 68541]]

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

[[Page 68542]]

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

[[Page 68543]]

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

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

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

[[Page 68544]]

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

[[Page 68545]]

therapists, to provide home health therapy services. Current data
suggest that the percentage of therapy assistants that is reflected in
the therapy-wage weighted minutes used in the calculations of HH PPS
relative resource costs is too low. For our 2008 refinements, to
construct the relative resource costs for episodes, we used the labor
mix percentages reported in the Occupational Employment Statistics
(OES) data by the Bureau of Labor Statistics. In 2005, which is the
year of data that was used to develop the HH PPS refinements, the OES
data showed that 15 percent of physical therapy was provided by therapy
assistants and that 11 percent of occupational therapy was provided by
therapy assistants. This data was then used to develop the resource
costs for episodes which were used to develop the current HH PPS
payment weights. In 2008, the OES data showed that 19 percent of
physical therapy was provided by therapy assistants and that 13 percent
of occupational therapy was provided by therapy assistants. In
addition, by 2009, OES data has shown that the percentage of physical
therapy provided by therapy assistants was 20 percent and the
percentage of occupational therapy provided by therapy assistants was
16 percent. We noted that these statistics reflect the mix for all home
health providers. We also noted that in CY 2011, we began collecting G-
code data on HH PPS claims which will enable us to quantify the
percentage of therapy assistants who are providing therapy and to
assess how the percentages vary relative to the quantity of therapy
provided and the type of provider. We have since performed some
preliminary analysis on the G-code data, which is further discussed in
our responses to comments.
In the CY 2012 HH PPS proposed rule, we stated that we believe that
MedPAC has provided strong evidence that our reimbursement for episodes
with high therapy is too high. Also, based on MedPAC's analysis and our
own findings, we believe that the resource costs reflected in our
current case-mix weights for therapy episodes, in particular for those
episodes with high amounts of therapy, are higher than current actual
resource costs and that an adjustment to the HH PPS therapy case-mix
weights is warranted. We noted that fully addressing MedPAC's concerns
with the way the HH PPS factors therapy visits into the case-mix system
will be a complex process which will require more comprehensive
analysis and potentially additional structural changes to the HH PPS.
While we plan to address their concerns in a more comprehensive way in
future years, for CY 2012 we proposed to revise the current case-mix
weights by lowering the relative weights for episodes with high therapy
and increasing the weights for episodes with little or no therapy. It
should be noted that we proposed to revise the case-mix weights in a
budget neutral way. In other words, our proposal redistributed some HH
PPS dollars from high therapy payment groups to other HH PPS case-mix
groups, such as the groups with little or no therapy. We believe our
proposed revision to the payment weights would result in more accurate
HH PPS payments for targeted case-mix groups while addressing MedPAC
concerns that our reimbursement for therapy episodes is too high and
our reimbursement for non-therapy episodes is too low. Also, we believe
our proposed revision of the payment weights will discourage the
provision of unnecessary therapy services and will slow the growth of
nominal case-mix.
Our detailed approach, analysis, and case-mix revision methodology
which supported our proposal was described in our CY 2012 HH PPS
proposed rule. Before we described our approach to revise the case-mix
weights to address therapy incentives, we first explained the changes
we made to remove the hypertension diagnoses ICD-9-CM code 401.1,
Benign Essential Hypertension, and ICD-9-CM code 401.9, Unspecified
Essential Hypertension from our case-mix system. Our method of
redistributing the resources started with changes to the four-equation
model, which is the foundation for the subsequent revised payment
regression and creation of revised case-mix weights. The changes to the
four-equation model as described in the proposed rule are reiterated
below.
To examine the effects of removing the two hypertension codes 401.1
and 401.9 from the case-mix system and determine whether the thresholds
for the clinical severity indicators need to be changed if 401.1 and
401.9 are removed from the case-mix system, we estimated the four-
equation model with and without codes 401.1 and 401.9 in the
hypertension group. We used 2005 data for this estimation because we
wanted to achieve comparability between the current four-equation model
with the revised four-equation model without the two hypertension codes
using the same sample upon which we based the 2008 case-mix system
refinements. We estimated the revised four-equation model to maintain
the same variables we developed for our current four-equation model and
thereby minimize changes to our current model and scoring system. The
adjusted R-squared value for the four-equation model without codes
401.1 and 401.9 derived from 2005 data was 0.4621. We then used the
coefficients from the four-equation model without codes 401.1 and 401.9
to determine the points which would be associated with all the clinical
and functional severity levels found in our current four-equation
model, as described on Table 2a of the CY 2008 HH PPS final rule (Table
3). We note that Table 3 has been updated since the CY 2012 HH PPS
proposed rule to reflect OASIS-C items.
When comparing the four-equation model with the two hypertension
diagnoses (which is equivalent to our current model) to the four
equation model without the two hypertension diagnoses, there were some
differences in the points assigned to variables (Table 4). We detailed
these differences, which were no larger than one point in the 58 (out
of 225) variables affected. Table 3 shows the points for each variable
after the re-estimation of the four-equation model.
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In the CY 2012 HH PPS proposed rule, we also stated that we
examined how episodes in the sample shifted into a different clinical
severity level when going from a four-equation model that includes
401.1 and 401.9 to a four-equation model that does not include 401.1
and 401.9. It should be noted that a small number of episodes also
changed functional groups. In our analysis, we looked at the
distribution

[[Page 68553]]

of episodes in each clinical severity level (low, medium, high) by the
four-equation model indicators (early/late episodes and low/high
therapy episodes). When comparing the distribution of episodes using
the four-equation model without the 401.1 and 401.9 hypertension codes
to the distribution of episodes using the four-equation model with the
hypertension codes (our current four-equation model), there was a
similar distribution of episodes between the low, medium and high
clinical levels, for each of the four-equation model indicators. We
also looked at the distribution of episodes in each functional severity
level by the four-equation model indicator. There was also a very
similar distribution of episodes for the three functional severity
levels using the four-equation model without the two hypertension codes
compared to the distribution of episodes using the current four-
equation model, for each of the four-equation model indicators. Since
the four-equation model without the hypertension codes 401.1 and 401.9
had similar clinical and functional distributions of episodes as the
current model, we decided that it was not necessary to change the
thresholds for the clinical and functional severity levels.
We revised the payment regression model using the clinical and
functional severity groups constituted after removal of the
hypertension codes. In addition, as we described in the proposed rule,
at this stage of case-mix system redevelopment, we decided to implement
a revision of the weights using a new method of decelerating therapy
resources with higher numbers of therapy visits. The new method
involved the removal of the therapy visit step indicators from the
payment regression model (a step indicator is a subgroup of episodes
defined by a range of therapy visits, such as 7 to 9 therapy visits).
This approach has the advantage of staging the introduction of clinical
and functional severity levels into the model as a separate step, to
avoid excessive influence on the clinical and functional effects from
numerous therapy step variables that would otherwise be simultaneously
entered into the regression. In other words, we eliminated the therapy
visit step indicators from the payment regression model to ensure that
more of the resource use would be captured by clinical and functional
variables, rather than therapy variables. Later, we implemented a
method to account for the resource use for the therapy step variables.
The new payment regression model that was developed estimated the
relationship between an episode's total resource cost (as measured in
dollars corresponding to wage weighted minutes) and the clinical
severity indicators, functional severity indicators, and four-equation
indicators (early/late episodes and low/high therapy services).
It should be noted that for the payment regression model, we used
data from 2007, which is the most recent data available before the
implementation of the HH PPS refinements. The coefficients for the
payment regression model using 2007 data can be found in Table 5. The
adjusted R-squared value for the payment regression model using 2007
data is 0.3769.
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The raw weights for each of the 153 groups were then calculated
based on the payment regression model. It should be noted that the raw
weights do not change across the graduated therapy steps between the
therapy thresholds. In the next step of weight revision, the weights
associated with 0 to 5 therapy visits were increased. The weights
associated with 14-15 therapy visits were decreased and the weights
associated with 20+ therapy visits were further decreased as well.
These adjustments were made to discourage inappropriate use of therapy
while addressing concerns that non-therapy services are undervalued. As
stated in the CY 2012 HH PPS proposed rule, the larger reduction factor
for episodes with 20 or more therapy visits compared to the reduction
factor for episodes with 14 to 15 therapy visits implemented a more
aggressive deceleration than we used in the current weights. Currently,
there is a high payment weight associated with the 20 or more therapy
visit threshold to capture the costs associated with providing 20
therapy visits, as well as numbers of therapy visits well beyond 20
therapy visits. As a result, there is a large increase in the payment
weight between the 18-19 therapy visit step and the 20 or more therapy
visit threshold. This large increase in the payment weight may create
incentives for agencies to provide unnecessary therapy visits to reach
the 20 therapy visit threshold, and may explain MedPAC's observation
that there was a larger increase in the number of episodes in the 20 or
more therapy visit group than the 14 or more therapy visit group. By
implementing a larger reduction to episodes with 20 or more therapy
visits, we will provide a disincentive for agencies to pad episodes
just to 20 visits or slightly more, to be able to realize a large
margin from that threshold, which was designed to pay for not only
episodes involving 20 or just above 20 therapy visits, but also
episodes involving considerably more than 20 therapy visits.
After the adjustments were applied to the raw weights, the weights
were further adjusted to create an increase in the payment weights for
the therapy visit steps between the therapy thresholds. Weights with
the same

[[Page 68555]]

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

[[Page 68556]]

episodes by multiplying the number of visits, by discipline, by the
average cost-per-visit, by discipline, calculated from the provider's
MCR. Due to data incompleteness and reliability issues related to costs
and payments for non-routine medical supplies (NRS), we did not include
NRS in our estimate of the costs or payments.
We compared the costs of these episodes to their Medicare payment.
Our analysis of the differences in episodes' costs and reimbursements
suggests that payment on average exceeds costs by about 30-percent for
normal episodes with 14 or more therapy visits. We defined normal
episodes as non-LUPA, non-PEP, non-outlier episodes. Because the
reimbursement for episodes with at least 14 therapy visits is high, the
30 percent estimate represents a large financial incentive. For
instance, our analysis shows that in 2009, the average amount that
payment exceeded cost for a normal episode with 14-19 therapy visits
was more than $1100 (Table 6) and the average amount that payment
exceeded costs for a normal episode with 20 or more therapy visits was
more than $1500 (Table 7). We note that the average amount that payment
exceeded costs for a normal episode with 1 to 5 therapy visits was
around $300. Ideally, we wish to avoid marked differences in the amount
that payment exceeds costs for different types of episodes to lessen
the incentive to admit certain types of patients to maximize Medicare
reimbursements.
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We conducted a simulation to examine our proposal's impact on
margins and profit for different categories of episodes, using the data
from the MCR providers that was also found in the 20 percent sample of
2009 claims from which we estimate the proposed rule's reimbursement
impacts. The analysis was based on 3,361 providers whose MCR period was
precisely matched to the time period covered by the claims (that is,
MCR periods had to begin and end in 2009). Although this sample was
smaller than the cleaned CR sample from which we estimated per-episode
costs and payments in 2009, the distributions of provider
characteristics were changed little by the reduction in agencies. The
simulation incorporated the proposed payment weights and the other
payment parameters in our proposal (that is, a 5.06 percent payment
reduction due to nominal case-mix growth, the wage index, and rate
updates). The simulation updated the costs of episodes to 2012 dollars
using the market basket increase and estimated the payment for episodes
in terms of 2012 dollars. This analysis suggested that all episodes
would have payments in excess of estimated costs, except for some
episodes in the 20 or more therapy visit group. We note that about half
of the episodes with 20 or more therapy visits would break even or
retain a positive margin under the proposed revised case-mix weights.
About 6 percent of episodes nationally in 2009 had 20 or more therapy
visits. However, the results of this analysis also indicated that the
revised case-mix weights in the proposed rule would result in episodes
with 14 or more therapy visits having considerably less payments in
excess of estimated costs than episodes with less than 14 therapy
visits.
We note that our analyses of the costs to reimbursement for high
therapy episodes clearly indicates that we are currently overpaying for
these episodes and we believe an adjustment to the case-mix weights for
high therapy weights is necessary. However, based on the results of our
simulation analysis on our proposed weights, we decided to test whether
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adjustment factors would result in more even payments in excess of
estimated costs across therapy and non-therapy episodes. As stated in
the proposed rule, we examined a number of different sets of
adjustments when developing the payment weights. One of the sets of
adjustments was an adjustment where the weights associated with 0 to 5
therapy visits were increased by 3.75 percent, the weights associated
with 14-15 therapy visits were decreased by 2.5 percent, and the
weights associated with 20+ therapy visits were decreased by 5 percent.
We applied this set of adjustments in the same manner as the
adjustments we originally proposed. When re-running the simulation
analysis on these new weights, we saw relatively even payments in
excess of estimated costs across the various types of episodes,
including episodes with 14-19 therapy visits, episodes with 20-25
visits, episodes with low therapy, and non-therapy episodes. It should
be noted that episodes with 26 or more therapy visits did not have
payments in excess of estimated costs; however, we believe there are
efficiencies used when providing these high therapy episodes and that
the costs we estimated for these episodes are higher than actual costs.
In addition, some of these high therapy episodes may be eligible for
outlier payments. As a result of the findings from the simulation
analysis, which show relatively even payments in excess of estimated
costs across episodes, we are finalizing these new weights created
using the new adjustment factors.
We note that for future rulemaking, we plan to do further analysis
using audited CRs, if available, and data on the use of therapy
assistants (G-code data) and we plan to make adjustments accordingly.
In the CY 2011 HH PPS final rule, we finalized a requirement that HHAs
report G-codes on the HH PPS claims which differentiate therapy
provided by a qualified therapist versus therapy provided by a therapy
assistant. We have preliminary data using claims from early in the
period after reporting of the G-codes began in 2011. We have assessed
how the percentages of therapy provided by a therapy assistant vary
relative to the quantity of therapy provided. In our analysis, we
looked at claims which had a start date on or after April 1, 2011 and
examined the percentage of therapy provided by therapy assistants for
various levels of therapy, such as episodes with 1-5 therapy visits, 6-
9 therapy visits, 10-13 therapy visits, 14-19 therapy visits, and 20+
therapy visits. In addition, we looked at the percentages of therapy
provided by therapy assistants when episodes from all providers were
included and when episodes from providers in areas where suspect
billing practices are relatively widespread were excluded. The results
from these two analyses were similar.
Table 8 shows the percentage of therapy visits provided by therapy
assistants when providers in areas associated with suspect billing
practices are excluded. The overall results suggest that on average our
assumptions, built into the resource cost estimates concerning the
share of physical therapy assistants in the labor force are somewhat
lower than reported so far in the G-code data. In 2007 (the data year
used to estimate the payment regression leading to the relative
weights), the assumption concerning the proportion of the labor share
for physical therapy assistants was 17 percent. The national average in
the initial G-code data for physical therapy assistants is 22.1
percent. For occupational therapy, the results were different. The
assumption concerning the labor share proportion for occupational
therapy assistants was 12 percent, while the national average in the G-
code data for occupational therapy assistants is very similar, 11.8
percent.
Further results from the G-code data show that there is variation
in the percentage of physical therapy provided by therapy assistants
and the percentage of occupational therapy provided by therapy
assistants when different levels of therapy are provided. The initial
G-code data suggest the percentages of physical therapy visits provided
by therapy assistants for episodes with 14-19 therapy visits and 20+
therapy visits are 25.9 percent and 29.0 percent, respectively. We note
that these results seem to indicate that providers may be using more
therapy assistants for episodes with high therapy, and therefore, the
costs for these high therapy episodes may be even less than what was
reflected in our earlier cost-to-reimbursement analyses. Furthermore,
we note that the OES data produced by the Bureau of Labor Statistics
showed that in 2009, 20 percent of physical therapy was provided by
therapy assistants and that 16 percent of occupational therapy was
provided by therapy assistants.
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We believe our analysis of the G-codes indicates that the new
adjustments to the case-mix weights may be conservative. We have
decided to use a conservative approach while we wait for more complete
data. We will continue to analyze data as they become available and may
make further adjustments to the case-mix weights if necessary.
Comment: Commenters stated that CMS should develop the necessary
objective clinical and financial data to support any change in case-mix
weights for therapy related episodes prior to

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

[[Page 68559]]

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

[[Page 68560]]

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

[[Page 68561]]

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

[[Page 68562]]

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

[[Page 68563]]

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

[[Page 68564]]

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

[[Page 68565]]

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

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

We reiterate that we used the same methodology described in the
proposed rule when developing the new revised case-mix weights. To
ensure that the revised weights result in approximately the same
aggregate expenditures as we incurred in 2009, the budget neutrality
factor applied to the weights changed slightly from 1.2847 to 1.2832.
The new revised case-mix weights can be seen in Table 11.
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BILLING CODE 4120-01-C
As stated earlier in our responses to comments, we performed a
simulation analysis on the new revised weights. When re-running the
simulation analysis on these new weights, we saw relatively even
payments in excess of estimated costs across the various types of
episodes, including but not limited to the episodes with 14-19 therapy
visits, episodes with 20-25 visits, and non-therapy episodes. We note
that in our analysis, we looked at various groups of episodes, such as
non-therapy episodes, episodes with 1-5 therapy visits, episodes with
6-9 therapy visits, episodes with 10-13 therapy visits, episodes with
14-19 therapy visits and episodes with 20-25 therapy visits, as well as
episodes with 26+ therapy visits. The analysis showed an even, similar
payment in excess of estimated costs between almost all of the groups
of episodes, except for episodes with 26+ therapy visits. We also note
that in our sample, episodes with 20-25 visits are 64 percent of all of
the episodes with 20+ therapy visits.
In addition, when performing a regression of the episode's total
resource (dependent variable) using the new revised case-mix weights
(independent variable), the R-squared value is 0.5436, which is
slightly higher than the R-squared value for the proposed weights. As
more data becomes available, such as G-code data and possibly audited
CR data, we may further implement changes to the weights in future
rulemaking.

C. Outlier Policy

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

[[Page 68573]]

At the writing of this final rule, the most current 2010 claims
data shows the outlier payment outlay has increased from 1.68 to 1.91
percent of total 2010 HH expenditures. We recognize that this
percentage still falls below the 2.5 percent outlier target. We believe
it is necessary to finalize the outlier policy 0.67 FDL ratio and 0.80
loss-sharing ratio as proposed to ensure we do not violate the
statutory mandate to not exceed 2.5 percent of expected HH expenditures
in outlier payments. We also note that an expected correction to a
claims processing error related to the outlier cap may change the final
outlier expenditures in CY 2010.
We assure commenters that we intend to thoroughly analyze ways to
improve the HH PPS's ability to identify patient severity and cost,
address possible home health access issues for high cost patients, and
investigate options for improving the HH PPS outlier policies as part
of the home health study.
Comment: A number of commenters specifically suggested that the
cost sharing ratio of 0.80 be increased rather than lowering the FDL
and that CMS should move away from using the low utilization payment
adjustment (LUPA) as the proxy for actual cost in computing the outlier
payment, believing that actual agency-specific costs subject to a cap
or a per visit outlier cap would further reduce outlier abuse and
better compensate agencies that use the outlier provision judiciously.
Many commenters expressed their belief that outlier payments should
play an important part in addressing the needs of patients whose
extraordinary costs are beyond the compensation offered by regular HH
PPS payments. One of the commenters stated that CMS continues to focus
on the outlier payment boost as if it were a profit-making tool for
HHAs even though most outlier episodes lose money. Another commenter
requested in particular that CMS exempt special needs certified HHAs
that serve high-cost patients with multiple clinical issues from the 10
percent outlier cap threshold. One such commenter added that CMS should
further evaluate the outlier threshold in relationship to non-routine
supplies (NRS) due to this commenter's concern that patients with
complex wounds might be adversely impacted.
Response: We reiterate that we intend to analyze alternatives to
our current outlier policy as part of the home health study mandated by
section 3131 of the Affordable Care Act. The study calls for CMS to
investigate improvements to the HH PPS to account for patients with
varying severity of illness. We agree with commenters that the current
HH PPS outlier payments play an important role in addressing the needs
of patients whose costs are beyond the compensation offered by regular
HH PPS payments. Regarding possible exemptions for special needs
certified HHAs that serve high-cost patients with multiple clinical
issues from the 10 percent outlier cap threshold, we note that section
3131(b) of the Affordable Care Act does not allow for exceptions to the
mandate of the outlier policy which reduces estimated aggregate HH
payments by 5 percent, allows no more than an estimated 2.5 percent of
aggregate HH payments to be outlier payments, and requires the 10
percent agency-level outlier cap. We do not have statutory authority to
exempt any providers from the 10 percent outlier cap. Lastly, we will
also include the commenter's suggested NRS analysis as part of the
Affordable Care Act-mandated home health access study.
In summary, as described above, preliminary analysis of partial
2010 claims described in the proposed rule indicated outlier payments
to be approximately 1.68 percent of total HH PPS payments. For this
final rule, we have updated our analysis with a full year of CY 2010
data. The data show the outlier payment percentage has increased to
1.91 percent of total HH PPS payments.
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To ensure that we adhere to our statutory mandate to expend no more
than 2.5 percent of expected total HH PPS payments in outlier payments,
we are maintaining our current policies of a FDL ratio of 0.67 and a
loss-sharing ratio of 0.80 for CY 2012. Table 18 from our proposed rule
has been updated and shows the outlier payment history as a percentage
of total HH PPS payments between Calendar Years 2004 and 2010.

D. CY 2012 Rate Update

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

[[Page 68574]]

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

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

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

[[Page 68576]]

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

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

Increase in Number of Pressure Ulcers Measure

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

[[Page 68577]]

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

[[Page 68578]]

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

[[Page 68579]]

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

[[Page 68580]]

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

[[Page 68581]]

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

[[Page 68582]]

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

[[Page 68583]]

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

[[Page 68584]]

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

[[Page 68585]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.021

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

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[GRAPHIC] [TIFF OMITTED] TR04NO11.022

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

[[Page 68587]]

[GRAPHIC] [TIFF OMITTED] TR04NO11.023

e. Nonroutine Medical Supply Conversion Factor Update
Payments for nonroutine medical supplies (NRS) are computed by
multiplying the relative weight for a particular severity level by the
NRS conversion factor. We increase CY 2011 NRS conversion factor
($52.54) by the CY 2012 HH PPS payment update percentage of 1.4
percent. The final updated CY 2012 NRS conversion factor for 2012
appears in Table 17. For CY 2012, the NRS conversion factor is $53.28.
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Using the NRS conversion factor ($53.28) for CY 2012, the payment
amounts for the various severity levels are shown in Table 18.

[[Page 68588]]

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For HHAs that do not submit the required quality data, we again
begin with the CY 2011 NRS conversion factor. We increase the CY 2011
NRS conversion factor ($52.54) by the CY 2012 HH PPS payment update
percentage of 1.4 percent minus 2 percentage points, or -0.6 percent.
The CY 2012 NRS conversion factor ($52.22) for HHAs that do not submit
quality data is shown in Table 19.
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The payment amounts for the various severity levels based on the
updated conversion factor ($52.22) for HHAs that do not submit quality
data are calculated in Table 20.
[GRAPHIC] [TIFF OMITTED] TR04NO11.027

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

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BILLING CODE 4120-01-C

E. Therapy Corrections and Clarifications

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

[[Page 68591]]

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

[[Page 68592]]

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

[[Page 68593]]

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

F. Home Health Face-to-Face Encounter

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

[[Page 68594]]

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

[[Page 68595]]

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

[[Page 68596]]

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

[[Page 68597]]

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

G. Payment Reform: Home Health Study and Report

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

[[Page 68598]]

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

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

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

[[Page 68599]]

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

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

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

[[Page 68600]]

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

III. Collection of Information Requirements

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

IV. Regulatory Impact Analysis

A. Introduction

We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4),
and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. A regulatory impact analysis (RIA) must be prepared for
major rules with economically significant effects ($100 million or more
in any 1 year). This final rule has been designated an ``economically
significant'' rule under section 3(f)(1) of Executive Order 12866 and a
major rule under the Congressional Review Act. Accordingly, the rule
has been reviewed by the Office of Management and Budget.

B. Statement of Need

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

[[Page 68601]]

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

C. Overall Impact

The update set forth in this final rule applies to Medicare
payments under HH PPS in CY 2012. Accordingly, the following analysis
describes the impact in CY 2012 only. We estimate that the net impact
of the proposals in this rule is approximately $430 million in CY 2012
savings. The $430 million impact due to the proposed CY 2012 HH PPS
rule reflects the distributional effects of an updated wage index ($10
million increase) plus the 1.4 percent HH PPS payment update percentage
($280 million increase), for a total increase of $290 million. The 3.79
percent case-mix adjustment applicable to the national standardized 60-
day episode rates ($720 million decrease) plus the combined wage index
and HH PPS payment update percentage ($290 million increase) results in
a total savings of $430 million in CY 2012. The $430 million in savings
is reflected in the first row of column 3 of Table 26 as a 2.31 percent
decrease in expenditures when comparing the current CY 2011 HH PPS to
the CY 2012 HH PPS.
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Most hospitals and most other providers and
suppliers are small entities, either by nonprofit status or by having
revenues of less than $7.0 million to $34.5 million in any 1 year. For
the purposes of the RFA, our updated data show that approximately 98
percent of HHAs are considered to be small businesses according to the
Small Business Administration's size standards with total revenues of
$13.5 million or less in any 1 year. Individuals and States are not
included in the definition of a small entity. The Secretary has
determined that this final rule would have a significant economic
impact on a substantial number of small entities. We define small HHAs
as those with total revenues of $13.5 million or less in any 1 year.
Analysis reveals a 2.62 percent decrease in estimated payments to small
HHAs in CY 2012.
A discussion on the alternatives considered is presented in section
V.E. below. The following analysis, with the rest of the preamble,
constitutes our final RFA analysis.
In this final rule, we have stated that our analysis reveals that
nominal case-mix continues to grow under the HH PPS. Specifically,
nominal case-mix has grown from the 17.45 percent growth identified in
our analysis for CY 2011 rulemaking to 19.03 percent for this year's
rulemaking (see further discussion in sections II.A. and II.B.).
Nominal case-mix is an increase in case-mix that is not due to an
increase in patient acuity. We believe it is appropriate to reduce the
HH PPS rates to account for the increase in nominal case-mix, so as to
move towards more accurate payment for the delivery of home health
services. Our analysis shows that smaller HHAs are impacted slightly
more than are larger HHAs by the provisions of this rule.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has fewer than 100 beds. This final rule applies
only to HHAs. Therefore, the Secretary has determined that this final
rule would not have a significant economic impact on the operations of
small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2011, that
threshold is approximately $136 million. This final rule is not
anticipated to impose spending costs on State, local, or Tribal
governments in the aggregate, or by the private sector, of $136 million
or more.

D. Detailed Economic Analysis

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

[[Page 68602]]

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

[[Page 68603]]

are estimated to see a 0.53 percent increase in payments. Voluntary
not-for-profit HHAs are estimated to see a 0.52 percent increase in
payments, while for-profit HHAs are estimated to see a 3.49 percent
decrease in payments in CY 2012. Rural agencies are estimated to see a
1.52 percent decrease in payments in CY 2012, while urban agencies are
estimated to see a 2.45 percent decrease in payments. Rural,
freestanding, voluntary not-for-profit HHAs are estimated to see a 1.56
percent increase in payments. As described above, we believe the
considerable variation in some of the estimated impacts is due mainly
to the distributional effects of the recalibration of the case-mix
weights.
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TR04NO11.031

BILLING CODE 4120-01-C

E. Alternatives Considered

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

[[Page 68605]]

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

F. Accounting Statement and Table

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

G. Conclusion

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

[[Page 68606]]

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

V. Federalism Analysis

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

List of Subjects

42 CFR Part 409

Health facilities, Medicare.

42 CFR Part 424

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

42 CFR Part 484

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

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

PART 409--HOSPITAL INSURANCE BENEFITS

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

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

Subpart E--Home Health Services Under Hospital Insurance

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

Sec. 409.42 Beneficiary qualifications for coverage of services.

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

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

Sec. 409.44 Skilled services requirements.

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

PART 424--CONDITIONS FOR MEDICARE PAYMENT

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

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

Subpart B--Certification and Plan Requirements

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

Sec. 424.22 Requirements for home health services.

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

[[Page 68607]]

PART 484--HOME HEALTH SERVICES

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

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

Subpart E--Prospective Payment System for Home Health Agencies

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

Sec. 484.250 Patient assessment data.

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

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

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