[Federal Register Volume 78, Number 91 (Friday, May 10, 2013)]
[Proposed Rules]
[Pages 27823-27852]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10389]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 418

[CMS-1449-P]
RIN 0938-AR64


Medicare Program; FY 2014 Hospice Wage Index and Payment Rate 
Update; Hospice Quality Reporting Requirements; and Updates on Payment 
Reform

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the hospice payment rates and 
the wage index for fiscal year (FY) 2014, and continue the phase out of 
the wage index budget neutrality adjustment factor (BNAF). Including 
the FY 2014 15 percent BNAF reduction, the total BNAF reduction in FY 
2014 will be 70 percent. The BNAF phase-out will continue with 
successive 15 percent reductions in FY 2015 and FY 2016. This proposed 
rule would also clarify how hospices are to report diagnoses on hospice 
claims, and proposes changes in

[[Page 27824]]

the requirements for the hospice quality reporting program.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 28, 2013.

ADDRESSES: In commenting, please refer to file code CMS-1449-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1449-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1449-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201 
(Because access to the interior of the Hubert H. Humphrey Building is 
not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850 If you intend to deliver your 
comments to the Baltimore address, call telephone number (410) 786-9994 
in advance to schedule your arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Debra Dean-Whittaker, (410) 786-0848 
for questions regarding the hospice experience of care survey. Robin 
Dowell, (410) 786-0060 for questions regarding quality reporting for 
hospices and collection of information requirements. Hillary Loeffler, 
(410) 786-0456 for general questions about hospice payment. Katherine 
Lucas, (410) 786-7723 for questions regarding payment reform. Anjana 
Patel, (410) 786-2120 for questions regarding the hospice wage index 
and payment rates. Kelly Vontran, (410) 786-0332 for questions on 
diagnosis reporting on hospice claims.

SUPPLEMENTARY INFORMATION: 
    Wage Index Addenda: In the past, the wage index addenda referred to 
in the preamble of our proposed and final rules were available in the 
Federal Register. However, the wage index addenda of the annual 
proposed and final rules will no longer be available in the Federal 
Register. Instead, these addenda will be available only through the 
Internet on the CMS Web site at: (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/index.html.) Readers who experience any 
problems accessing any of the wage index addenda related to the hospice 
payment rules that are posted on the CMS Web site identified above 
should contact Anjana Patel at 410-786-2120.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Costs, Benefits, and Transfers
II. Background
    A. Hospice Care
    B. History of the Medicare Hospice Benefit
    C. Services Covered by the Medicare Hospice Benefit
    D. Medicare Payment for Hospice Care
    E. Trends in Medicare Hospice Utilization
III. Provisions of the Proposed Rule
    A. Diagnosis Reporting on Hospice Claims
    1. ICD-9-CM Coding Guidelines
    2. Use of Nonspecific, Symptom Diagnoses
    3. Use of ``Mental, Behavioral and Neurodevelopmental Disorders'' 
ICD-9-CM Codes
    4. Guidance on Coding of Principal and Other, Additional, and/or 
Co-existing Diagnoses
    5. Transition to ICD-10-CM
    B. Proposed Update to the Hospice Quality Reporting Program
    1. Background and Statutory Authority
    2. Quality Measures for Hospice Quality Reporting Program and Data 
Submission Requirements for Payment Year FY 2014
    3. Quality Measures for Hospice Quality Reporting Program and Data 
Submission Requirements for Payment Year FY 2015 and Beyond
    4. Quality Measures for Hospice Quality Reporting Program for 
Payment Year FY 2016 and Beyond
    5. Public Availability of Data Submitted
    6. Proposed Adoption of the CMS Hospice Experience of Care Survey 
for the FY 2017 Payment Determination and That of Subsequent Fiscal 
Years
    7. Notice Pertaining To Reconsiderations Following APU 
Determinations
    C. FY 2014 Hospice Rate Update
    1. Hospice Wage Index
    2. FY 2014 Wage Index With an Additional 15 Percent Reduced Budget 
Neutrality Adjustment Factor (BNAF)
    3. Hospice Payment Update Percentage
    4. Proposed Updated FY 2014 Hospice Payment Rates
    D. Update on Hospice Payment Reform and Data Collection

[[Page 27825]]

    1. Update on Reform Options
    a. Rebasing the Routine Home Care (RHC) Rate
    b. Site of Service Adjustment for Hospice Patients in Nursing 
Facilities
    2. Reform Research Findings
    3. Additional Data Collection
    E. Technical and Clarifying Regulatory Text Change
IV. Collection of Information Requirements
    V. Response to Comments
    VI. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    1. Detailed Economic Analysis
    2. Regulatory Flexibility Act Analysis
    3. Unfunded Mandates Reform Act Analysis
VII. Federalism Analysis and Regulations Text

Acronyms

    Because of the many terms to which we refer by acronym in this 
proposed rule, we are listing the acronyms used and their corresponding 
meanings in alphabetical order below:
APU Annual Payment Update
BBA Balanced Budget Act of 1997
BNAF Budget Neutrality Adjustment Factor
BLS Bureau of Labor Statistics
CAHPS Consumer Assessment of Healthcare Providers and Systems
CBSA Core-Based Statistical Area
CMS Centers for Medicare & Medicaid Services
CCW Chronic Conditions Warehouse
CHC Continuous Home Care
COPD Chronic Obstructive Pulmonary Disease
CoPs Conditions of Participation
CR Change Request
CVA Cerebral Vascular Accident
DME Durable Medical Equipment
FEHC Family Evaluation of Hospice Care
FY Fiscal Year
GIP General Inpatient Care
HIS Hospice Item Set
HHS Health and Human Services
HQRP Hospice Quality Reporting Program
LUPA Low Utilization Payment Amount
MedPAC Medicare Payment Advisory Commission
MFP Multi-factor Productivity
MSA Metropolitan Statistical Area
NEC Not Elsewhere Classified
NPI National Provider Identifier
NQF National Quality Forum
OACT Office of the Actuary
OMB Office of Management and Budget
OIG Office of Inspector General
PRA Paperwork Reduction Act
PRRB Provider Reimbursement Review Board
QAPI Quality Assessment and Performance Improvement
QRP Quality Reporting Program
RFA Regulatory Flexibility Act
RHC Routine Home Care
SBA Small Business Administration
TEFRA Tax Equity and Fiscal Responsibility Act of 1982
TEP Technical Expert Panel

I. Executive Summary for This Proposed Rule

A. Purpose

    This rule proposes updates to the payment rates for hospice 
providers for fiscal year (FY) 2014 as required under section 1814 (i) 
of the Social Security Act (the Act). The proposed updates incorporate 
the use of updated hospital wage index data, the 5th year of the 7-year 
Budget Neutrality Adjustment Factor (BNAF) phase-out, and an update to 
the hospice payment rates by the hospice payment update percentage. 
Additionally, this proposed rule clarifies diagnosis reporting on 
hospice claims, provides an update on hospice payment reform and 
additional data collection requirements, and proposes changes to the 
quality reporting requirements for hospice providers.

B. Summary of the Major Provisions

    In this rule we propose to update the hospice payment rates for FY 
2014 by 1.8 percent as described in section III.C.3. The hospice wage 
index would be updated with more current wage data and the BNAF will be 
reduced by an additional 15 percent for a total BNAF reduction of 70 
percent as described in section III.C.2. The August 6, 2009 FY 2010 
Hospice Wage Index final rule (74 FR 39384) finalized a 10 percent 
reduced BNAF for FY 2010 as the first year of a 7-year phase-out of the 
BNAF, to be followed by an additional 15 percent per year reduction in 
the BNAF in each of the next 6 years. The total BNAF phase-out will be 
complete by FY 2016. This proposed rule also clarifies diagnosis 
reporting on hospice claims, especially regarding the use of non-
specific symptom diagnoses; provides an update on hospice payment 
reform and additional data collection requirements; proposes a 
technical regulations text change; and proposes changes to the hospice 
quality reporting program.

C. Summary of Costs, Benefits, and Transfers

                           Table 1--Transfers
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          Provision  description                        Total
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FY 2014 Hospice Payment Rate Update.......  The overall economic impact
                                             of this proposed rule is an
                                             estimated $180 million in
                                             increased payments to
                                             hospices.
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II. Background

A. Hospice Care

    Coping with a life-limiting illness can be an overwhelming 
experience, physically, emotionally and spiritually, for both the 
person and his or her family. Recognition that the care needs at end-
of-life are different from other health care needs is a foundation of 
the Medicare hospice benefit. Hospice is a compassionate care 
philosophy and practice for those who are terminally ill. It is a 
holistic approach to treatment that recognizes that the impending death 
of an individual warrants a change from curative to palliative care. 
Palliative care means ``patient and family-centered care that optimizes 
quality of life by anticipating, preventing, and treating suffering. 
Palliative care throughout the continuum of illness involves addressing 
physical, intellectual, emotional, social, and spiritual needs and to 
facilitate patient autonomy, access to information, and choice (42 CFR 
418.3).'' Palliative care is at the core of hospice philosophy and care 
practices. The person beginning hospice care, or his or her 
representative, needs to understand that his or her illness is no 
longer responding to medical interventions to cure or slow the 
progression of disease and then must choose to stop further curative 
attempts while palliative care continues and intensifies, as needed, 
for continued symptom management. As we stated in the June 5, 2008 
Hospice Conditions of Participation final rule (73 FR 32088), 
palliative care is an approach that ``optimizes quality of life by 
anticipating, preventing, and treating suffering''. The goal of 
palliative care in hospice is to improve the quality of life of 
individuals and their families facing the issues associated with life-
threatening illness through the prevention and relief of suffering by 
means of early identification, assessment and treatment of pain and 
other issues. In addition, palliative care in hospice includes 
coordinating care services, reducing unnecessary diagnostics or 
ineffective therapies, and offering ongoing conversations with 
individuals and their families about changes in the disease and shifts 
in the plan of care to meet the changing needs with disease progression 
as the individual approaches the end-of-life.
    Medicare hospice care is palliative care for individuals with a 
prognosis of living 6 months or less if the terminal illness runs its 
normal course. As generally accepted by the medical community, the term 
``terminal illness'' refers to an advanced and progressively 
deteriorating illness, and the illness is

[[Page 27826]]

diagnosed as incurable. When an individual is terminally ill, many 
health problems are brought on by underlying condition(s), as bodily 
systems are interdependent. In the June 5, 2008 Hospice Conditions of 
Participation final rule (73 FR 32088), we stated ``the medical 
director must consider the primary terminal condition, related 
diagnoses, current subjective and objective medical findings, current 
medication and treatment orders, and information about unrelated 
conditions when considering the initial certification of the terminal 
illness.'' As referenced in our regulations at 42 CFR 418.22(b)(1), to 
be eligible for Medicare hospice services, the beneficiary's attending 
physician (if any) and the hospice medical director must certify that 
the individual is terminally ill, that is, the individual's prognosis 
is for a life expectancy of 6 months or less if the terminal illness 
runs its normal course as defined in section 1861(dd)(3)(A) of the Act 
and further clarified in Sec.  418.3. The certification of terminal 
illness must include a brief narrative explanation of the clinical 
findings that supports a life expectancy of 6 months or less as part of 
the certification and recertification forms as stated in Sec.  
418.22(b)(3).
    The goal of hospice care is to make the hospice patient as 
physically and emotionally comfortable as possible, with minimal 
disruption to normal activities, while remaining primarily in the home 
environment. Hospice care uses an interdisciplinary approach to deliver 
medical, nursing, social, psychological, emotional, and spiritual 
services through the use of a broad spectrum of professional and other 
caregivers and volunteers. While the goal of hospice care is to allow 
for the individual to remain in his or her home environment, 
circumstances during the end-of-life may necessitate short-term 
inpatient admission to a hospital, skilled nursing facility (SNF), or 
hospice facility for procedures necessary for pain control or acute or 
chronic symptom management that cannot be managed in any other setting. 
These acute hospice care services are to ensure that any new or 
worsening symptoms are intensively addressed so that the individual can 
return to his or her home environment under routine hospice care. 
Short-term, intermittent, inpatient respite services are also available 
to the family of the hospice patient when needed to relieve the family 
or other caregivers. Additionally, an individual can receive continuous 
home care during a period of crisis in which an individual requires 
primarily continuous nursing care to achieve palliation or management 
of acute medical symptoms to maintain the individual at home. 
Continuous home care may be covered on a continuous basis for as much 
as 24 hours a day and these periods must be predominantly nursing care 
per our regulations at Sec.  418.204. A minimum of 8 hours of care must 
be furnished on a particular day to qualify for the continuous home 
care rate (Sec.  418.302(e)(4)).

B. History of the Medicare Hospice Benefit

    Before the creation of the Medicare hospice benefit, hospice was 
originally run by volunteers who cared for the dying. During the early 
development stages of the Medicare Hospice Benefit, hospice advocates, 
working with legislators, were clear that they wanted a Medicare 
benefit available that provided all-inclusive care for terminally-ill 
individuals, provided pain relief and symptom management, and offered 
the opportunity to die with dignity in the comfort of one's home rather 
than in an institutional setting.\1\ As stated in the August 22, 1983 
proposed rule entitled ``Medicare Program; Hospice Care'' (48 FR 
38146), ``the hospice experience in the United States has placed 
emphasis on home care. It offers physician services, specialized 
nursing services, and other forms of care in the home to enable the 
terminally ill individual to remain at home in the company of family 
and friends as long as possible.'' The concept of a beneficiary 
``electing'' the hospice benefit and being certified as terminally ill 
were two key components put into the legislation responsible for the 
creation of the Medicare hospice benefit (section 122 of the Tax Equity 
and Fiscal Responsibility Act of 1982 (TEFRA), (Pub. L. 97-248)). 
Section 122 of TEFRA created the Medicare hospice benefit, which was 
implemented on November 1, 1983 under section 1861(dd) of the Social 
Security Act (the Act), codified at 42 U.S.C. 1395x(dd), to provide 
coverage of hospice care for terminally ill Medicare beneficiaries who 
elected to receive care from a Medicare-certified, hospice. In Sec.  
418.54(c), our regulations stipulate that the comprehensive hospice 
assessment must identify the patient's physical, psychosocial, 
emotional, and spiritual needs related to the terminal illness and 
related conditions which must be addressed in order to promote the 
hospice patient's well-being, comfort, and dignity throughout the dying 
process. The comprehensive assessment must take into consideration the 
following factors: the nature and condition causing admission 
(including the presence or lack of objective data and subjective 
complaints); complications and risk factors that affect care planning; 
functional status; imminence of death; and severity of symptoms. The 
Medicare hospice benefit requires the hospice to cover all palliative 
care related to the terminal illness and related conditions. In the 
December 16, 1983 Hospice final rule, hospices are also to cover care 
for interventions to manage pain and symptoms (48 FR 56008). 
Clinically, related conditions are any physical or mental condition(s) 
that are related to or caused by either the terminal illness or the 
medications used to manage the terminal illness.\2\ Additionally, per 
the hospice Conditions of Participation at Sec.  418.56, hospice must 
provide all services necessary for the palliation and management of the 
terminal illness, related conditions and interventions to manage pain 
and symptoms. Therapy and interventions must be assessed and managed in 
terms of providing palliation and comfort without undue symptom burden 
for the hospice patient or family.\3\ For example, a hospice patient 
with lung cancer (the terminal illness) may receive inhalants for 
shortness of breath (related to the terminal condition). The patient 
may also suffer from metastatic bone pain (a related condition) and 
would be treated with opioid analgesics. As a result of the opioid 
therapy, the patient may suffer from constipation (an associated 
symptom) and requires a laxative for symptom relief. It is often not a 
single diagnosis that represents the terminal illness of the patient, 
but the combined effect of several conditions that makes the patient's 
condition terminal. We are restating what we communicated in the 
December 16, 1983 Hospice final rule regarding what is related versus 
unrelated to the terminal illness: ``. . . we believe that the unique 
physical condition of each terminally ill individual makes it necessary 
for these decisions to be made on a case-by-case basis. It is our 
general view that . . . ``hospices are required to provide virtually 
all the care that is needed by terminally ill patients'' (48 FR 56010 
through 56011). Therefore, unless there

[[Page 27827]]

is clear evidence that a condition is unrelated to the terminal 
illness, all services would be considered related. It is also the 
responsibility of the hospice physician to document why a patient's 
medical need(s) would be unrelated to the terminal illness.
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    \1\ Connor, Stephen. (2007). Development of Hospice and 
Palliative Care in the United States. OMEGA. 56(1), p89-99.
    \2\ Harder, PharmD, CGP, Julia. (2012). To Cover or Not To 
Cover: Guidelines for Covered Medications in Hospice Patients. The 
Clinician. 7(2), p1-3.
    \3\ Paolini, DO, Charlotte. (2001). Symptoms Management at End 
of Life. JAOA. 101(10). p609-615.
---------------------------------------------------------------------------

    The fundamental premise upon which the hospice benefit was designed 
was the ``revocation'' of traditional curative care and the 
``election'' of hospice care for end-of-life symptom management and 
maximization of quality of life as stated in the December 16, 1983 
Hospice final rule (48 FR 56008). After electing hospice care, the 
patient typically returns to the home from an institutionalized setting 
or remains in the home, to be surrounded by family and friends, and to 
prepare emotionally and spiritually for death while receiving expert 
symptom management and other supportive services. Election of hospice 
care also includes waiving curative treatment for the terminal 
prognosis, and instead receiving palliative care to manage pain or 
symptoms.
    The benefit was originally designed to cover hospice care for a 
finite period of time that roughly corresponded to a life expectancy of 
6 months or less. Initially, beneficiaries could receive three election 
periods: two 90-day periods and one 30-day period. Currently, Medicare 
beneficiaries can elect hospice care for two 90-day periods and an 
unlimited number of subsequent 60-day periods; however, the expectation 
remains that beneficiaries have a life expectancy of 6 months or less 
if the terminal illness runs its normal course.

C. Services Covered by the Medicare Hospice Benefit

    To be covered under the Medicare hospice benefit, hospice services 
must be reasonable and necessary for the palliation and management of 
the terminal illness and related conditions. Section 1861(dd)(1) of the 
Act establishes the services that are to be rendered by a Medicare 
certified hospice program. These covered services include: nursing 
care; physical therapy; occupational therapy; speech-language pathology 
therapy; medical social services; home health aide services (now called 
hospice aide services); physician services; homemaker services; medical 
supplies (including drugs and biologics); medical appliances; 
counseling services (including dietary counseling); short-term 
inpatient care (including both respite care and procedures necessary 
for pain control and acute or chronic symptom management) in a 
hospital, nursing facility, or hospice inpatient facility; continuous 
home care during periods of crisis and only as necessary to maintain 
the terminally ill individual at home; and any other item or service 
which is specified in the plan of care and for which payment may 
otherwise be made under Medicare, in accordance with Title XVIII of the 
Act.
    Section 1814(a)(7)(B) of the Act requires that a written plan for 
providing hospice care to a beneficiary who is a hospice patient be 
established before care is provided by, or under arrangements made by, 
that hospice program and that the written plan be periodically reviewed 
by the beneficiary's attending physician (if any), the hospice medical 
director, and an interdisciplinary group (described in section 
1861(dd)(2)(B)) of the Act.
    The services offered under the hospice benefit must be available, 
as needed, to beneficiaries 24 hours a day, 7 days a week (section 
1861(dd)(2)(A)(i) of the Act). Upon the implementation of the hospice 
benefit, the Congress expected hospices to continue to use volunteer 
services, though these services are not to be reimbursed. The hospice 
interdisciplinary group should be comprised of paid hospice employees 
as well as hospice volunteers, as stated in the August 22, 1983 Hospice 
proposed rule (48 FR 38149). This expectation is in line with the 
history of hospice and philosophy of holistic, comprehensive, 
compassionate, end-of-life care.
    The National Hospice Study was initiated in 1980 through a grant 
sponsored by the Robert Wood Johnson and John A. Hartford Foundations 
and CMS (formerly, the Health Care Financing Administration (HCFA). The 
study was conducted between October 1980 and March 1983. The study 
summarized the hospice care philosophy as the following:
     Patient and family know of the terminal condition.
     Further medical treatment and intervention are indicated 
only on a supportive basis.
     Pain control should be available to patients as needed to 
prevent rather than to just ameliorate pain.
     Interdisciplinary teamwork is essential in caring for 
patient and family.
     Family members and friends should be active in providing 
support during the death and bereavement process.
     Trained volunteers should provide additional support as 
needed.
    In the August 22, 1983 Hospice proposed rule (48 FR 38149) we 
stated ``the hospice benefit and the resulting Medicare reimbursement 
is not intended to diminish the voluntary spirit of hospices''.

D. Medicare Payment for Hospice Care

    Sections 1812(d), 1813(a)(4), 1814(a)(7), 1814(i), and 1861(dd) of 
the Act, and our regulations in 42 CFR part 418, establish eligibility 
requirements, payment standards and procedures, define covered 
services, and delineate the conditions a hospice must meet to be 
approved for participation in the Medicare program. Part 418, subpart 
G, provides for a per diem payment in one of four prospectively-
determined rate categories of hospice care (routine home care, 
continuous home care, inpatient respite care, and general inpatient 
care) to hospices, based on each day a qualified Medicare beneficiary 
is under hospice election. This per diem payment is to include all of 
the services needed to manage the beneficiaries' care, as required by 
section 1861(dd)(1) of the Act. There has been little change in the 
hospice payment structure since the benefit's inception. The per diem 
rate based on level of care was established in 1983, and this payment 
structure remains today with some adjustments, as noted below:
1. Omnibus Budget Reconciliation Act of 1989
    Section 6005(a) of the Omnibus Budget Reconciliation Act of 1989 
(Pub. L 101-239) amended section 1814(i)(1)(C) of the Act and provided 
for the following two changes in the methodology concerning updating 
the daily payment rates: (1) effective January 1, 1990, the daily 
payment rates for routine home care and other services in included in 
hospice care were increased to equal 120 percent of the rates in effect 
on September 30, 1989; and (2) the daily payment rate for routine home 
care and other services included in hospice care for fiscal years 
beginning on or after October 1, 1990, were the payment rates in effect 
during the previous Federal fiscal year increased by the hospital 
market basket percentage increase.
2. Balanced Budget Act of 1997
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L 
105-33) amended section 1814(i)(1)(C)(ii)(VI) of the Act to establish 
updates to hospice rates for FYs 1998 through 2002 Hospice rates were 
updated by a factor equal to the hospital market basket percentage 
increase, minus 1 percentage point. Payment rates for FYs since 2002 
have been updated according to section 1814(i)(1)(C)(ii)(VII) of the 
Act, which states that the update to the payment rates for subsequent 
fiscal years will be the hospital market basket percentage increase for 
the FY. The Social Security

[[Page 27828]]

Act requires us to use the inpatient hospital market basket to 
determine hospice payment rates.
3. Hospice Wage Index Final Rule for FY 1998
    In the August 8, 1997 FY 1998 Hospice Wage Index final rule (62 FR 
42860), we implemented a new methodology for calculating the hospice 
wage index based on the recommendations of a negotiated rulemaking 
committee. The original hospice wage index was based on 1981 Bureau of 
Labor Statistics hospital data and had not been updated since 1983. In 
1994, because of disparity in wages from one geographical location to 
another, the Hospice Wage Index Negotiated Rulemaking Committee was 
formed to negotiate a new wage index methodology that could be accepted 
by the industry and the government. This Committee was comprised of 
representatives from national hospice associations; rural, urban, large 
and small hospices, and multi-site hospices; consumer groups; and a 
government representative. The Committee decided that in updating the 
hospice wage index, aggregate Medicare payments to hospices would 
remain budget neutral to payments calculated using the 1983 wage index, 
to cushion the impact of using a new wage index methodology. To 
implement this policy, a Budget Neutrality Adjustment Factor (BNAF) 
would be computed and applied annually to the pre-floor, pre-
reclassified hospital wage index when deriving the hospice wage index, 
subject to a wage index floor.
4. Hospice Wage Index Final Rule for FY 2010
    Inpatient hospital pre-floor and pre-reclassified wage index 
values, as described in the 1997 Hospice Wage Index final rule are 
subject to either a budget neutrality adjustment or application of the 
wage index floor. Wage index values of 0.8 or greater are adjusted by 
the budget neutrality adjustment factor (BNAF). Starting in FY 2010, a 
7-year phase-out of the BNAF began (August 6, 2009 FY 2010 Hospice Wage 
Index final rule, 74 FR 39384), with a 10 percent reduction in FY 2010, 
and additional 15 percent reduction for a total of 25 percent in FY 
2011, an additional 15 percent reduction for a total 40 percent in FY 
2012, and an additional 15 percent reduction for a total of 55 percent 
in FY 2013. The phase-out will continue with an additional 15 percent 
reduction for a total reduction of 70 percent in FY 2014, an additional 
15 percent reduction for a total reduction of 85 percent in FY 2015, 
and an additional 15 percent reduction for complete elimination in FY 
2016. Note that the BNAF is an adjustment which increases the hospice 
wage index value. Therefore the BNAF reduction is a reduction in the 
amount of the BNAF increase applied to the hospice wage index value. It 
is not a reduction in the hospice wage index value, or in the hospice 
payment rates.
5. The Affordable Care Act
    Starting with FY 2013 (and in subsequent fiscal years), the market 
basket percentage update under the hospice payment system referenced in 
sections 1814(i)(1)(C)(ii)(VII) and 1814(i)(1)(C)(iii) of the Act will 
be annually reduced by changes in economy-wide productivity, as 
specified in section 1886(b)(3)(B)(xi)(II) of the Act, as amended by 
section 3132(a) of the Patient Protection and Affordable Care Act of 
2010 (Pub. L 111-148) as amended by the Health Care and Education 
Reconciliation Act of 2010 (Pub. L 111-152) (the Affordable Care Act)). 
In FY 2013 through FY 2019, the market basket percentage update under 
the hospice payment system will be reduced by an additional 0.3 
percentage point (although for FY 2014 to FY 2019, the potential 0.3 
percentage point reduction is subject to suspension under conditions as 
specified in section 1814(i)(1)(C)(v) of the Act).
    In addition, sections 1814(i)(5)(A) through (C) of the Act, as 
amended by section 3132(a) of the Affordable Care Act, require hospices 
to begin submitting quality data, based on measures to be specified by 
the Secretary, for FY 2014 and subsequent fiscal years. Beginning in FY 
2014, hospices which fail to report quality data will have their market 
basket update reduced by 2 percentage points.
    Section 1814(a)(7)(D)(i) of the Act was amended by section 3132 
(b)(2)(D)(i) of the Affordable Care Act, and requires, effective 
January 1, 2011, that a hospice physician or nurse practitioner have a 
face-to-face encounter with an individual to determine continued 
eligibility of the individual for hospice care prior to the 180th-day 
recertification and each subsequent recertification and attest that 
such visit took place. When implementing this provision, we decided 
that the 180th-day recertification and subsequent recertifications 
corresponded to the recertification for a beneficiary's third or 
subsequent benefit periods (August 4, 2011 FY 2012 Hospice Wage Index 
final rule (76 FR 47314)).
    Further, section 1814(i) of the Act, as amended by section 3132(a) 
of the Affordable Care Act, authorizes the Secretary to collect 
additional data and information determined appropriate to revise 
payments for hospice care and other purposes. The types of data and 
information suggested in the Affordable Care Act would capture accurate 
resource utilization, which could be collected on claims, cost reports, 
and possibly other mechanisms, as the Secretary determines to be 
appropriate. The data collected may be used to revise the methodology 
for determining the payment rates for routine home care and other 
services included in hospice care, no earlier than October 1, 2013, as 
described in section 1814(i)(6)(D) of the Act. In addition, we are 
required to consult with hospice programs and the Medicare Payment 
Advisory Commission (MedPAC) regarding additional data collection and 
payment revision options.
6. Hospice Wage Index Final Rule for FY 2012
    When the Medicare hospice benefit was implemented, the Congress 
included an aggregate cap on hospice payments, which limits the total 
aggregate payments any individual hospice provider can receive in a 
year. The Congress stipulated that a ``cap amount'' be computed each 
year. The cap amount was set at $6,500 per beneficiary when first 
enacted in 1983 and is adjusted annually by the change in the medical 
care expenditure category of the consumer price index for urban 
consumers from March 1984 to March of the cap year (section 
1814(i)(2)(B) of the Act). The cap year is defined as the period from 
November 1st to October 31st. As we stated in the August 4, 2011 FY 
2012 Hospice Wage Index final rule (76 FR 47308 through 47314), for the 
2012 cap year and subsequent cap years, the hospice aggregate cap will 
be calculated using the patient-by-patient proportional methodology, 
within certain limits. We will allow existing hospices the option of 
having their cap calculated via the original streamlined methodology, 
also within certain limits. New hospices will have their cap 
determinations calculated using the patient-by-patient proportional 
methodology. The patient-by-patient proportional methodology and the 
streamlined methodology are two different methodologies for counting 
beneficiaries when calculating the hospice aggregate cap. A detailed 
explanation of these methods is found in the August 4, 2011 FY 2012 
Hospice Wage Index final rule (76 FR 47308 through 47314). If a 
hospice's total Medicare reimbursement for the cap year exceeded the 
hospice aggregate

[[Page 27829]]

cap, then the hospice would have to repay the excess back to Medicare.

E. Trends in Medicare Hospice Utilization

    Since the implementation of the hospice benefit in 1983, and 
especially within the last decade, there has been substantial growth in 
hospice utilization. The number of Medicare beneficiaries receiving 
hospice services has grown from 513,000 in FY 2000 to over 1.3 million 
in FY 2012. Similarly, Medicare hospice expenditures have risen from 
$2.9 billion in FY 2000 to $14.7 billion in FY 2012. Our Office of the 
Actuary (OACT) projects that hospice expenditures are expected to 
continue to increase by approximately 8 percent annually, reflecting an 
increase in the number of Medicare beneficiaries, more beneficiary 
awareness of the Medicare hospice benefit for end-of-life care, and a 
growing preference for care provided in home and community-based 
settings. However, this increased spending is partly due to an 
increased average lifetime length of stay for beneficiaries, from 54 
days in 2000 to 86 days in FY 2010, an increase of 59 percent.
    There have also been noted changes in the diagnosis patterns among 
Medicare hospice enrollees, with a growing percentage of beneficiaries 
with non-cancer diagnoses. Specifically, there were notable increases 
between 2002 and 2007 in neurologically-based diagnoses, including 
various dementia diagnoses. Additionally, there have been significant 
increases in the use of non-specific, symptom-classified diagnoses, 
such as ``debility'' and ``adult failure to thrive.'' In FY 2012, both 
``debility'' and ``adult failure to thrive'' were in the top five 
claims-reported hospice diagnoses and were the first and third most 
common hospice diagnoses, respectively (see table 2 below).

 Table 2--The Top Twenty Principal Hospice Diagnoses, FY 2002, FY 2007,
                                 FY 2012
------------------------------------------------------------------------
                   ICD-9/Reported
     Rank       Principal Diagnosis    Total patients      Percentage
------------------------------------------------------------------------
                   Year: 2002 Total Patients = 663,406
------------------------------------------------------------------------
1............  162.9 Lung Cancer....            73,769                11
2............  428.0 Congestive                 45,951                 7
                Heart Failure.
3............  799.3 Debility                   36,999                 6
                Unspecified.
4............  496 COPD.............            35,197                 5
5............  331.0 Alzheimer's                28,787                 4
                Disease.
6............  436 CVA/Stroke.......            26,897                 4
7............  185 Prostate Cancer..            20,262                 3
8............  783.7 Adult Failure              18,304                 3
                To Thrive.
9............  174.9 Breast Cancer..            17,812                 3
10...........  290.0 Senile                     16,999                 3
                Dementia, Uncomp..
11...........  153.0 Colon Cancer...            16,379                 2
12...........  157.9 Pancreatic                 15,427                 2
                Cancer.
13...........  294.8 Organic Brain              10,394                 2
                Synd Nec.
14...........  429.9 Heart Disease              10,332                 2
                Unspecified.
15...........  154.0 Rectosigmoid                8,956                 1
                Colon Cancer.
16...........  332.0 Parkinson's                 8,865                 1
                Disease.
17...........  586 Renal Failure                 8,764                 1
                Unspecified.
18...........  585 Chronic Renal                 8,599                 1
                Failure (End 2005).
19...........  183.0 Ovarian Cancer.             7,432                 1
20...........  188.9 Bladder Cancer.             6,916                 1
------------------------------------------------------------------------
                  Year: 2007 Total Patients = 1,039,099
------------------------------------------------------------------------
1............  799.3 Debility                   90,150                 9
                Unspecified.
2............  162.9 Lung Cancer....            86,954                 8
3............  428.0 Congestive                 77,836                 7
                Heart Failure.
4............  496 COPD.............            60,815                 6
5............  783.7 Adult Failure              58,303                 6
                To Thrive.
6............  331.0 Alzheimer's                58,200                 6
                Disease.
7............  290.0 Senile Dementia            37,667                 4
                Uncomp..
8............  436 CVA/Stroke.......            31,800                 3
9............  429.9 Heart Disease              22,170                 2
                Unspecified.
10...........  185 Prostate Cancer..            22,086                 2
11...........  174.9 Breast Cancer..            20,378                 2
12...........  157.9 Pancreas                   19,082                 2
                Unspecified.
13...........  153.9 Colon Cancer...            19,080                 2
14...........  294.8 Organic Brain              17,697                 2
                Syndrome NEC.
15...........  332.0 Parkinson's                16,524                 2
                Disease.
16...........  294.10 Dementia In               15,777                 2
                Other Diseases w/o
                Behav. Dist..
17...........  586 Renal Failure                12,188                 1
                Unspecified.
18...........  585.6 End Stage Renal            11,196                 1
                Disease.
19...........  188.9 Bladder Cancer.             8,806                 1
20...........  183.0 Ovarian Cancer.             8,434                 1
------------------------------------------------------------------------
                  Year: 2012 Total Patients = 1,328,651
------------------------------------------------------------------------
1............  799.3 Debility                  161,163                12
                Unspecified.
2............  162.9 Lung Cancer....            89,636                 7
3............  783.7 Adult Failure              86,467                 7
                To Thrive.
4............  428.0 Congestive                 84,333                 6
                Heart Failure.
5............  496 COPD.............            74,786                 6

[[Page 27830]]

 
6............  331.0 Alzheimer's                64,199                 5
                Disease.
7............  290.0 Senile                     56,234                 4
                Dementia, Uncomp..
8............  429.9 Heart Disease              32,081                 2
                Unspecified.
9............  436 CVA/Stroke.......            31,987                 2
10...........  294.10 Dementia In               27,417                 2
                Other Diseases w/o
                Behavioral Dist..
11...........  174.9 Breast Cancer..            22,421                 2
12...........  153.9 Colon Cancer...            22,197                 2
13...........  157.9 Pancreatic                 22,007                 2
                Cancer.
14...........  332.0 Parkinson's                21,183                 2
                Disease.
15...........  185 Prostate Cancer..            21,042                 2
16...........  294.8 Other                      17,762                 1
                Persistent Mental
                Dis.-classified
                elsewhere.
17...........  585.6 End Stage Renal            17,545                 1
                Disease.
18...........  518.81 Respiratory               12,962                 1
                Failure.
19...........  294.11 Dementia In               11,751                 1
                Other Diseases w/
                Behavioral Dist.
20...........  188.9 Bladder Cancer.            10,511                 1
------------------------------------------------------------------------
Source: FY 2002, 2007, and 2012 hospice claims data from the Chronic
  Condition Warehouse (CCW), accessed on February 14 and February 20,
  2013.
Note(s): The frequencies shown represent beneficiaries that had a least
  one claim with the specific ICD-9 code listed as the principal
  diagnosis. Beneficiaries could be represented multiple times in the
  results if they have multiple claims during that time period with
  different principal diagnoses.

III. Provisions of the Proposed Rule

A. Diagnosis Reporting on Hospice Claims

    This section is a clarification of existing ICD-9-CM coding 
guidelines. No proposals are being made in this proposed rule with 
regards to diagnosis coding. These clarifications are not intended to 
preclude any clinical judgment in determining a beneficiary's 
eligibility for hospice services, rather these clarifications are to 
address current and ongoing diagnosis reporting patterns noted on 
hospice claims. A beneficiary who elects hospice care and meets our 
eligibility requirements at Sec.  418.20, is admitted to the hospice 
and receives hospice care prior to any claim submission, which occurs 
at the end of each calendar month while under hospice services, or upon 
the death or discharge of the beneficiary, whichever occurs first. In 
the July 27, 2012 FY 2013 Hospice Wage Index notice (77 FR 44247), we 
provided in-depth information regarding longstanding, existing ICD-9-CM 
coding guidelines. We also discussed related versus unrelated diagnosis 
reporting on claims and clarified that ``all of a patient's coexisting 
or additional diagnoses'' related to the terminal illness or related 
conditions should be reported on the hospice claims. Based on analysis 
of preliminary claims data from the first quarter of FY 2013 (October 
1, 2012 through December 31, 2012), 72 percent of providers still only 
report one diagnosis on the hospice claim. This hospice diagnosis data 
is comparable to the hospice diagnosis data reported in the July 27, 
2012 FY 2013 Hospice Wage Index notice (77 FR 44242), in which we 
stated that over 77 percent of the hospice claims reported only a 
principal diagnosis. Therefore, in this year's proposed rule, we are 
further clarifying the ICD-9-CM coding guidelines and CMS' expectations 
for diagnosis reporting on the hospice claims in order to ensure the 
Medicare hospice beneficiaries are receiving the holistic comprehensive 
hospice services based on the initial and ongoing comprehensive 
assessment and the individualized hospice plan of care. Eligibility for 
hospice services is based on meeting the eligibility requirements as 
stated in Sec.  418.20 of our regulations. For beneficiaries eligible 
for the Medicare hospice benefit, access to hospice care or the 
continuation of hospice care should not be affected or limited by the 
following ICD-9-CM coding guidelines for diagnosis reporting on claims.
1. ICD-9-CM Coding Guidelines
    As previously reported in Section II.E of this proposed rule there 
have been noted changes in reported hospice diagnosis patterns with the 
top reported hospice diagnoses being non-cancer diagnoses. The hospice 
benefit covers all care for the terminal illness, related conditions, 
and for the management of pain and symptoms. As noted in the ICD-9-CM 
Official Guidelines for Coding and Reporting, effective October 1, 
2011, available at the CMS Web site at the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/ICD9ProviderDiagnosticCodes/ or on the CDC's Web 
site at: http://www.cdc.gov/nchs/data/icd9/icd9cm_guidelines_2011.pdf, ``these coding and reporting guidelines are a set of rules 
that have been developed to accompany and complement the official 
conventions and instructions provided with the ICD-9-CM itself. 
Adherence to these guidelines when assigning ICD-9-CM diagnosis and 
procedure codes is required under the Health Insurance Portability and 
Accountability Act (HIPAA).''
    Additionally, in our regulations at 45 CFR 162.1002, the Secretary 
adopted the ICD-9-CM code set, including The Official ICD-9-CM 
Guidelines for Coding and Reporting. The CMS' Hospice Claims Processing 
manual (Pub 100-04, chapter 11) requires that hospice claims include 
other diagnoses ``as required by ICD-9-CM Coding Guidelines'' available 
at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c11.pdf. HIPAA, federal regulations, and the Medicare 
hospice claims processing manual all require that these ICD-9-CM Coding 
Guidelines be applied to the coding and reporting of diagnoses on 
hospice claims. Regarding diagnosis reporting on hospice claims, we 
clarified in our July 27, 2012 FY 2013 Hospice Wage Index notice (77 FR 
44247 through 44248) that all providers should code and report the 
principal diagnosis as well as all coexisting and additional diagnoses 
related to the terminal condition or related conditions to more fully 
describe the Medicare patients they are treating.
    We are actively collecting and analyzing hospice data for 
evaluation of hospice payment reform methodologies as mandated in 
section 3132(a) of the Affordable Care Act. To adequately account for 
any clinical complexities a given hospice patient might have as a 
result of related conditions, these related conditions must be included 
on

[[Page 27831]]

the Medicare hospice claim. Some hospice providers already report 
related additional and coexisting diagnoses on their claims; however, 
the majority of hospice providers do not report this information. The 
reporting of only one principal diagnosis does not lend to a 
comprehensive, holistic, and accurate description of the beneficiaries' 
end-of-life conditions and may not fully reflect the individualized 
needs in the individual's required hospice plan of care. As a result, 
analysis of current claims data does not allow us to appropriately 
determine whether case-mix adjustment, or other considered methods 
would or would not be a reasonable approach to, or part of, hospice 
payment reform. Ongoing hospice data analysis is available on the CMS 
Hospice Center Web page at: http://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.html.
2. Use of Nonspecific, Symptom Diagnoses
    As mentioned in section II.E, of this proposed rule, there have 
been changes in the reported hospice principal diagnoses since the 
inception of the Medicare hospice benefit. In 1983, the most common 
reported hospice diagnoses were cancer diagnoses. Over time, and with 
the advancements in medical technology and interventions, there has 
been a notable shift in the most commonly reported hospice diagnoses 
from cancers to non-cancer terminal illnesses, such as ``debility'' and 
``adult failure to thrive,'' which are considered to be nonspecific, 
symptom diagnoses according to ICD-9-CM Coding Guidelines and are under 
the ICD-9-CM classification of ``Symptoms, Signs and Ill-defined 
Conditions''.
    Codes under the classification, ``Symptoms, Signs, and Ill-defined 
Conditions'', are not to be used as principal diagnosis when a related 
definitive diagnosis has been established or confirmed by the provider. 
``Debility'' is medically defined as: an unspecified syndrome 
characterized by unexplained weight loss, malnutrition, functional 
decline, multiple chronic conditions contributing to the terminal 
progression, and increasing frequency of outpatient visits, emergency 
department visits and/or hospitalizations. ``Debility'' is associated 
with multiple primary conditions. The individual diagnosed with 
``Debility'' may have multiple comorbid conditions that individually, 
may not deem the individual to be terminally ill. However, the 
collective presence of these multiple comorbid conditions will 
contribute to the terminal status of the individual. Data analysis 
using FY 2012 claims data for those beneficiaries with a reported 
principal hospice diagnosis of ``debility,'' and reported secondary 
diagnoses, shows that congestive heart failure, coronary artery 
disease, heart disease, atrial fibrillation, Parkinson's disease, 
Alzheimer's disease, renal failure, chronic kidney disease, and chronic 
obstructive pulmonary disease are among the most common secondary 
diagnoses reported. ``Adult Failure to Thrive'' is often used 
interchangeably with ``Debility'' as a primary hospice diagnosis. 
Despite the specificity of ICD-9-CM Coding Guidelines, it is unclear as 
to why these two diagnoses are often used interchangeably. ``Adult 
Failure to Thrive'' is defined as undefined weight loss, decreasing 
anthromorphic measurements, and a Palliative Performance Scale < 40 
percent. It is also associated with multiple primary conditions 
contributing to the physical and functional decline of the individual. 
Four syndromes known to be individually predictive of adverse outcomes 
in older adults are repeatedly cited as prevalent in patients with 
``adult failure to thrive'' impaired physical functioning, 
malnutrition, depression, and cognitive impairment. Data analysis using 
FY 2012 claims data for those beneficiaries with a reported principal 
hospice diagnosis of ``adult failure to thrive,'' and reported 
secondary diagnoses, shows that pneumonia, cerebral vascular accident 
(stroke), atrial fibrillation, heart disease, Alzheimer's disease, 
congestive heart failure, and Parkinson's disease are among the most 
common secondary diagnoses reported.
    By the nature of the clinical criteria of ``debility'' and ``adult 
failure to thrive'', these symptom syndromes are the result of multiple 
primary conditions that contribute to the terminal decline. If any or 
all of these multiple primary conditions have been or are being treated 
or managed by a health care provider, or if medications have been 
prescribed for the patient to treat or manage any or all of these 
multiple primary conditions, we believe that these conditions meet the 
criteria of being established and/or confirmed by the beneficiary's 
health care provider and, thus, ``debility'' or ``adult failure to 
thrive'' would not be listed as the principal hospice diagnosis per 
ICD-9-CM coding guidelines.
    Moreover, at the initial hospice election period, an eligible 
Medicare beneficiary must be certified as terminally ill. This 
certification is based on the recommendation of the medical director in 
consultation with, or with input from, the beneficiary's attending 
physician (if any) and a comprehensive assessment of all body systems. 
Per our regulations at Sec.  418.25, Admission to Hospice Care, ``in 
reaching a decision to certify that the patient is terminally ill, the 
hospice medical director must consider at least the following 
information:
     Diagnosis of the terminal condition of the patient.
     Other health conditions, whether related or unrelated to 
the terminal condition.
     Current clinical relevant information supporting all 
diagnoses.''
    All physical, emotional, and spiritual issues are assessed and an 
individualized, specific hospice plan of care is established by the 
hospice interdisciplinary team. A reported principal hospice diagnosis 
in the non-specific ICD-9-CM category, ``Symptoms, Signs, and Ill-
Defined Conditions'', such as ``debility'' or ``adult failure to 
thrive,'' does not encompass the comprehensive, holistic nature of the 
assessment and care to be provided under the Medicare hospice benefit. 
For the eligible Medicare beneficiary who has elected the Medicare 
hospice benefit, and has been certified as terminally ill per the 
eligibility criteria, the hospice benefit provides services for all 
care related to the terminal illness, related conditions, and, for the 
management of pain and symptoms that result from the terminal illness 
and related conditions. If a non-specific, ill-defined diagnosis is 
reported as the principal hospice diagnosis, a comprehensive, 
individualized patient-centered plan of care, as required, may be 
difficult to accurately develop and implement, and, as a result, the 
hospice beneficiary may not receive the full benefit of hospice 
services. According to the hospice Conditions of Participation at Sec.  
418.56, ``The hospice must develop an individualized written plan of 
care for each patient. The plan of care must reflect patient and family 
goals and interventions based on the problems identified in the 
initial, comprehensive, and updated comprehensive assessments. The plan 
of care must include all services necessary for the palliation and 
management of the terminal illness and related conditions, including 
the following:
    1. Interventions to manage pain and symptoms.
    2. A detailed statement of the scope and frequency of services 
necessary to meet the specific patient and family needs.

[[Page 27832]]

    3. Measurable outcomes anticipated from implementing and 
coordinating the plan of care.
    4. Drugs and treatment necessary to meet the needs of the patient.
    5. Medical supplies and appliances to meet the needs of the 
patient.
    6. The interdisciplinary group's documentation of the patient's or 
representative's level of understanding, involvement, and agreement 
with the plan of care, in accordance with the hospice's own policies, 
in the clinical record''(42 CFR 418.56(c)).
    A comprehensive hospice plan of care starts with accurate and 
thorough assessment and identification of the conditions contributing 
to the terminal illness and decline. ``Debility'' and ``adult failure 
to thrive'' are not appropriate principal diagnoses in the terminally 
ill population as these diagnoses are incongruous to the comprehensive 
nature of the hospice assessment, the specific, individualized hospice 
plan of and care, and the hospice services provided. CMS is aware that 
diagnosing diseases is not always a perfect science but the expectation 
is that based on the comprehensive hospice assessment, the certifying 
physicians are using their best clinical judgment in determining the 
principal diagnosis and related conditions.
    In this proposed rule, we would clarify that ``debility'' and 
``adult failure to thrive'' would not be used as principal hospice 
diagnoses on the hospice claim form. When reported as a principal 
diagnosis, these would be considered questionable encounters for 
hospice care, and the claim would be returned to the provider for a 
more definitive principal diagnosis. ``Debility'' and ``adult failure 
to thrive'' could be listed on the hospice claim as other, additional, 
or coexisting diagnoses. We believe that the private sector requires 
that ICD-9-CM coding guidelines be followed; this includes not allowing 
``debility'' and ``adult failure to thrive'' as principal diagnoses on 
private sector hospice claims. The principal diagnosis listed should be 
determined by the certifying hospice physician(s) as the diagnosis most 
contributory to the terminal condition. When there are two or more 
interrelated conditions (such as diseases in the same ICD-9-CM chapter 
or manifestations characteristically associated with a certain disease) 
potentially meeting the definition of principal diagnosis, either 
condition may be sequenced first, unless the circumstances of the 
admission, the therapy provided, the Tabular List, or the Alphabetic 
Index indicate otherwise. In the unusual instance when two or more 
diagnoses equally meet the criteria for principal diagnosis as 
determined by the circumstances of admission, diagnostic workup and/or 
therapy provided, and the Alphabetic Index, Tabular List, or other 
coding guidelines do not provide sequencing direction, any one of the 
diagnoses may be sequenced first. We expect hospice providers to code 
the most definitive, contributory terminal diagnosis in the principal 
diagnosis field with all other related conditions in the additional 
diagnoses fields for hospice claims reporting. As stated previously, 
these clarifications are not intended to preclude any clinical judgment 
in determining a beneficiary's eligibility for hospice services. 
Therefore, CMS does not expect that these coding clarifications will 
create any limitations or barriers to accessing Medicare hospice 
services by eligible Medicare beneficiaries as coding on claims occurs 
after the beneficiary has elected and accessed hospice services. In 
fact, adherence to the ICD-9-CM coding guidelines should promote access 
to appropriate and comprehensive hospice services. We solicit comments 
regarding these ICD-9-CM coding guideline clarifications.
3. Use of ``Mental, Behavioral and Neurodevelopmental Disorders'' ICD-
9-CM Codes
    Another concerning trend noted in the top twenty claims-reported 
principal hospice diagnoses is the use of codes that fall under the 
classification of ``Mental, Behavioral and Neurodevelopmental 
Disorders.'' There are several codes that fall under this 
classification that encompass multiple dementia diagnoses that are 
frequently reported principal hospice diagnoses on hospice claims, but 
are not appropriate principal diagnoses per ICD-9-CM Coding Guidelines. 
Some of these ICD-9-CM codes are considered manifestation codes. In 
accordance with the 2012 ICD-9-CM Coding Guidelines, certain conditions 
have both an underlying etiology and multiple body system 
manifestations due to the underlying etiology. For such conditions, the 
ICD-9-CM has a coding convention that requires the underlying condition 
be sequenced first followed by the manifestation. Wherever such a 
combination exists, there is a ``use additional code'' note at the 
etiology code, and a ``code first'' note at the manifestation code. 
These instructional notes indicate the proper sequencing order of the 
codes, etiology followed by manifestation.'' In most cases, these 
manifestation codes will have in the code title, ``in diseases 
classified elsewhere'' or ``in conditions classified elsewhere.'' Codes 
with this in the title are a component of the etiology/manifestation 
convention. The codes with ``in diseases classified elsewhere'' or ``in 
conditions classified elsewhere'' in the title indicates that it is a 
manifestation code. ``In diseases classified elsewhere'' or ``in 
conditions classified elsewhere'' codes are never permitted to be used 
as first listed or principal diagnosis codes and they must be listed 
following the underlying condition.
    However, there are manifestation codes that do not have ``in 
diseases classified elsewhere'' or ``in conditions classified 
elsewhere'' in their title. For such codes a ``use additional code'' 
note would still be present, and the rules for coding sequencing still 
apply. We note that several dementia codes which are not allowable as 
principal diagnoses per ICD-9-CM coding guidelines are under the 
classification of ``Mental, Behavioral and Neurodevelopmental 
Disorders.'' According to the ICD-9-CM coding guidelines for ``Mental, 
Behavioral and Neurodevelopmental Disorders'', dementias that fall 
under this category are ``most commonly a secondary manifestation of an 
underlying causal condition.'' Data analysis using FY 2012 claims data 
for those beneficiaries with a reported principal hospice diagnosis of 
a dementia classified under ``Mental, Behavioral and Neurodevelopmental 
Disorders'' and reported secondary diagnoses shows that Alzheimer's 
disease, Parkinson's disease, and stroke were the among the most common 
secondary diagnoses reported. Therefore, we are further reiterating the 
importance of following the ICD-9-CM coding guidelines for diagnosis 
reporting on the hospice claims submission.
    There are, however, other ICD-9-CM dementia codes, such as those 
for Alzheimer's disease and others that fall under the ICD-9-CM 
classification, ``Diseases of the Nervous System and Sense Organs'' 
which are acceptable as principal diagnoses per ICD-9-CM coding 
guidelines. However, there are also dementia codes under this 
classification that do have manifestation/etiology or sequencing 
conventions; therefore, it is imperative that hospice providers follow 
ICD-9-CM coding guidelines and sequencing rules for all diagnoses and 
pay particular attention to dementia coding as there are dementia codes 
found in more than one ICD-9-CM classification chapter and there are 
multiple coding guidelines associated with these dementia conditions.

[[Page 27833]]

    Again, these clarifications are not intended to preclude any 
clinical judgment in determining a beneficiary's eligibility for 
hospice services; rather these are clarifications regarding the 
reporting of dementia diagnoses on the hospice claims. We are restating 
that CMS expects hospice providers to code the most definitive, 
contributory terminal illness in the principal diagnosis field with all 
other related conditions in the additional diagnoses fields for hospice 
claims reporting. The reporting of accurate diagnoses of the principal 
terminal condition and all related conditions is keeping with the 
intent of the comprehensive, holistic nature of the Medicare hospice 
benefit. By adhering to these comprehensive assessment and diagnostic 
principals and coding guidelines, CMS expects that there will be no 
limitations or barriers to access to hospice care by eligible Medicare 
beneficiaries, and should; in fact, promote appropriate and 
comprehensive hospice services as per the original intent of the 
Medicare hospice benefit as proposed and finalized in the 1983 rules. 
We solicit comments regarding these ICD-9-CM coding guideline 
clarifications.

4. Guidance on Coding of Principal and Other, Additional, and/or Co-
Existing Diagnoses

a. General Rules for Principal Diagnosis
    Based on the ICD-9-CM coding guidelines, the circumstances of an 
inpatient admission always govern the selection of principal diagnosis. 
The principal diagnosis is defined in the Uniform Hospital Discharge 
Data Set (UHDDS) as ``that condition established after study to be 
chiefly responsible for occasioning the admission of the patient to the 
hospital for care.'' In analyzing frequently reported principal hospice 
diagnoses, data analysis revealed differences between reported 
principal hospice diagnoses and reported principal hospital diagnoses 
in patients who elected hospice within 3 days of discharge from the 
hospital. In analyzing data on cancer diagnoses of Medicare hospice 
beneficiaries for 2009 through 2011, Table 3 below shows that 
beneficiaries with a hospital-reported principal cancer diagnosis that 
elected hospice within three days of hospital discharge did not always 
have a hospice-reported principal cancer diagnosis. Although ICD-9-CM 
Coding Guidelines specify that the circumstances of an inpatient 
hospital admission diagnosis are to be used in determining the 
selection of a principal diagnosis, this guideline is not always being 
adhered to for the selection of the principal hospice diagnosis 
following a hospice beneficiary's inpatient hospitalization. It is 
unclear as to why there is this discrepancy in the hospital/hospice 
diagnosis patterns as ICD-9-CM Coding Guidelines are specific regarding 
principal diagnosis selection.

  Table 3--Principal Hospice Diagnoses and Incidence of Same Diagnoses From Hospitalizations Within Three Days
                                     Prior to Hospice Election, FY 2009-2011
----------------------------------------------------------------------------------------------------------------
                      ICD-9 Diagnoses                         Instances of        . . . That then also became
-----------------------------------------------------------     principal         hospice principal diagnosis
                                                                hospital     -----------------------------------
                                                             diagnosis . . .                    Percent of total
                                             ICD-9 Code    ------------------                     instances of
                  Label                        ranges                              Number           principal
                                                                 Number                             hospital
                                                                                                    diagnosis
----------------------------------------------------------------------------------------------------------------
Lung & Chest Cavity Cancer..............          162-165s            32,428            27,939              86.2
Colo-Rectal Cancer......................          153-154s            10,360             8,270              79.8
Blood & Lymphatic Cancer................          200-208s            15,491            12,747              82.3
Breast Cancer...........................          174-175s             1,881             1,651              87.8
Pancreatic Cancer.......................              157s            11,334             9,887              87.2
Prostate Cancer.........................              185s             1,764             1,520              86.2
Liver Cancer............................          155-156s             6,710             5,009              74.6
Bladder Cancer..........................              188s             2,844             2,218              78.0
----------------------------------------------------------------------------------------------------------------
Source: FY 2009-2011 Hospice claims matched with hospital inpatient claims where no more than three days passed
  between hospital discharge and hospice admission.
Note(s): Data sources included the Hospice Claims File (FYs 2009-2011) and the Hospitalizations File (FY 2009
  through 2011). These two files were combined and records utilized for analysis were trimmed where Hospital
  Beneficiary ID equaled Hospice Beneficiary ID and Hospice Admit Date was within three days of Hospital
  Discharge Date. The data included the beneficiaries' ID number, their hospice admission date, the ICD-9 code
  for their principal hospice diagnosis, the hospital discharge date, and the ICD-9 code for their admitting
  hospital diagnosis.

    Further, ICD-9-CM coding guidelines state, to list first the 
diagnosis shown in the medical record to be chiefly responsible for the 
services provided and to list additional codes that describe any 
coexisting conditions.
b. General Rules for Other (Additional) Diagnoses
    For reporting purposes the definition for ``other diagnoses'' is 
interpreted as additional conditions that affect patient care in terms 
of requiring:
     clinical evaluation; or
     therapeutic treatment; or
     diagnostic procedures; or
     extended length of hospital stay; or
     increased nursing care and/or monitoring.
    The UHDDS item 11-b defines Other Diagnoses as ``all 
conditions that coexist at the time of admission, that develop 
subsequently, or that affect the treatment received and/or the length 
of stay''. Section IV.K of the ICD-9-CM Coding Guidelines addresses 
outpatient settings, and instructs providers to ``code all documented 
conditions at the time of the encounter/visit, and require or affect 
patient care treatment or management.'' These guidelines for 
determining principal and other diagnoses are stated in the ICD-9-CM 
Coding Guidelines.
    We do not believe that requiring the reporting of other, 
additional, and/or coexisting diagnoses that are related to the 
terminal illness and related conditions would create a clinical or 
administrative burden on hospices. We note that some hospice providers 
are already reporting these diagnoses on their claims. Information on a 
patient's related and unrelated diagnoses should already be included as 
part of the hospice comprehensive assessment and appropriate 
interventions for the palliation and management of the terminal illness 
and related conditions should be incorporated into the patient's plan 
of care, as determined by the hospice interdisciplinary group

[[Page 27834]]

(IDG). The hospice Conditions of Participation (CoPs) at Sec.  
418.54(c)(2) require that the comprehensive assessment ``include 
complications and risk factors that affect care planning.'' The CoPs at 
Sec.  418.56(e)(4) require that the hospice IDG ``provide for an 
ongoing sharing of information with other non-hospice healthcare 
providers furnishing services unrelated to the terminal illness and 
related conditions.'' It is common for hospices to include the related 
and unrelated diagnoses on the comprehensive assessment in order to 
assure coordinated, holistic, patient care and to monitor the 
effectiveness of the care that is delivered.
    With the specificity of both the ICD-9-CM coding guidelines and the 
ICD-10-CM coding guidelines, it is expected that complete, 
comprehensive coding will be applied to hospice claims submissions. 
Hospice providers are expected to report all coexisting or additional 
diagnoses related to the terminal illness and related conditions on the 
hospice claim to be in compliance with existing policy, and provide the 
data needed for evaluating potential hospice payment reform 
methodologies. This accurate coding of the principal hospice diagnosis 
and the other, additional, and/or coexisting diagnoses is in keeping 
with the comprehensive assessment and incorporated into the 
individualized hospice plan of care to aid hospices in identifying and 
meeting the hospice beneficiaries' needs. Currently, the hospice claim 
includes a field for the patient's principal hospice diagnosis, but 
allows for up to 17 additional diagnoses on the paper UB-04 claim, and 
up to 24 additional diagnoses on the 837I 5010 electronic claim.
5. Transition to ICD-10-CM
    We note that ICD-10-CM will replace the ICD-9-CM on October 1, 
2014. We would apply the coding clarifications discussed above to the 
ICD-10-CM coding guidelines, as well as the ICD-9-CM guidelines. A 
critical issue associated with the transition to ICD-10-CM involves the 
matter of crosswalking between the ICD-9-CM and ICD-10-CM code sets. 
The term ``crosswalking'' is generally defined as the act of mapping or 
translating a code in one code set to a code or codes in another code 
set. (The terms ``crosswalking'' and ``mapping'' are sometimes used 
interchangeably.) Understanding crosswalking will be important to 
physicians during the transition phase when learning which new ICD-10 
code to use in place of an ICD-9 code. The National Center for Health 
Statistics (NCHS) has developed what is known as a ``General 
Equivalence Mappings'' (GEMs) for the diagnosis codes. Likewise, we 
have developed the GEMs for the procedure codes. The GEMs are 
considered to be the authoritative source for crosswalking between ICD-
10 and ICD-9. The GEMs are data files that list the ICD-9 and ICD-10 
codes and the attributes of the mapping between the two code sets. 
There is a file for mapping from ICD-10 to ICD-9 and another for 
mapping from ICD-9 to ICD-10. The GEMs files are available for free and 
can be downloaded from the NCHS Web site, www.cdc.gov/nchs/icd/icd10cm.htm. Hospices should not substitute crosswalking for learning 
and fully implementing ICD-10-CM into their procedures. Additional 
information regarding the transition to ICD-10-CM is available through 
the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html?redirect=/icd10 and ICD-10-CM coding guidelines can be found 
on the CDC's Web site at www.cdc.gov/nchs/data/icd10/10cmguidelines2012.pdf.

B. Proposed Update to the Hospice Quality Reporting Program

1. Background and Statutory Authority
    Section 3004 of the Affordable Care Act amended the Act to 
authorize a quality reporting program for hospices. Section 
1814(i)(5)(A)(i) of the Act requires that beginning with FY 2014 and 
each subsequent FY, the Secretary shall reduce the market basket update 
by 2 percentage points for any hospice that does not comply with the 
quality data submission requirements with respect to that FY. Depending 
on the amount of the annual update for a particular year, a reduction 
of 2 percentage points could result in the annual market basket update 
being less than 0.0 percent for a FY and may result in payment rates 
that are less than payment rates for the preceding FY. Any reduction 
based on failure to comply with the reporting requirements, as required 
by section 1814(i)(5)(B) of the Act, would apply only for the 
particular FY involved. Any such reduction would not be cumulative or 
be taken into account in computing the payment amount for subsequent 
FYs.
    Section 1814(i)(5)(C) of the Act requires that each hospice submit 
data to the Secretary on quality measures specified by the Secretary. 
The data must be submitted in a form, manner, and at a time specified 
by the Secretary. Any measures selected by the Secretary must have been 
endorsed by the consensus-based entity which holds a contract regarding 
performance measurement with the Secretary under section 1890(a) of the 
Act. This contract is currently held by the National Quality Forum 
(NQF). However, section 1814(i)(5)(D)(ii) of the Act provides that in 
the case of a specified area or medical topic determined appropriate by 
the Secretary for which a feasible and practical measure has not been 
endorsed by the consensus-based entity, the Secretary may specify 
measures that are not so endorsed as long as due consideration is given 
to measures that have been endorsed or adopted by a consensus-based 
organization identified by the Secretary. Section 1814(i)(5)(D)(iii) of 
the Act requires that the Secretary publish selected measures 
applicable with respect to FY 2014 no later than October 1, 2012.
2. Quality Measures for Hospice Quality Reporting Program and Data 
Submission Requirements for Payment Year FY 2014
    The successful development of a Hospice Quality Reporting Program 
(HQRP) that promotes the delivery of high quality healthcare services 
is our paramount concern. We seek to adopt measures for the HQRP that 
promote efficient and safer care. Our measure selection activities for 
the HQRP takes into consideration input we receive from the Measure 
Applications Partnership (MAP), convened by the National Quality Forum 
(NQF), as part of a pre-rulemaking process that we have established and 
are required to follow under section 1890A of the Act. The MAP is a 
public-private partnership comprised of multi-stakeholder groups 
convened by the NQF for the primary purpose of providing input to CMS 
on the selection of certain categories of quality and efficiency 
measures, as required by section 1890A(a)(3) of the Act. By February 
1st of each year, the NQF must provide that input to CMS. Input from 
the MAP is located at: (http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx). For 
more details about the pre-rulemaking process, see the FY 2013 IPPS/
LTCH PPS final rule (77 FR at 53376 (August 31, 2012)).
    We also take into account national priorities, such as those 
established by the National Priorities Partnership at (http://www.qualityforum.org/npp/), the HHS Strategic Plan http://www.hhs.gov/secretary/about/priorities/priorities.html), and the National Strategy 
for Quality Improvement in Healthcare located at (http://www.healthcare.gov/news/reports/nationalqualitystrategy032011.pdf). To 
the extent practicable, we have sought to adopt measures that have been

[[Page 27835]]

endorsed by the national consensus organization, recommended by multi-
stakeholder organizations, and developed with the input of providers, 
purchasers/payers, and other stakeholders.
    As stated in the August 4, 2011 FY 2012 Hospice Wage Index final 
rule (76 FR 47302, 47320), to meet the quality reporting requirements 
for hospices for the FY 2014 payment determination as set forth in 
section 1814(i)(5) of the Act, we finalized the requirement that 
hospices report two measures:
     An NQF-endorsed measure that is related to pain 
management, NQF 0209. The data collection period for this 
measure was October 1, 2012 through December 31, 2012, and the data 
submission deadline was April 1, 2013. The data for this measure are 
collected at the patient level, but are reported in the aggregate for 
all patients cared for within the reporting period, regardless of 
payer.
     A structural measure that is not endorsed by NQF: 
Participation in a Quality Assessment and Performance Improvement 
(QAPI) program that includes at least three quality indicators related 
to patient care. The data collection period for this measure was 
October 1, 2012 through December 31, 2012, and the data submission 
deadline was January 31, 2013. Hospices are not asked to report their 
level of performance on these patient care related indicators.
    Hospices failing to report quality data before the specified 
deadline in 2013, would have their market basket update reduced by 2 
percentage points in FY 2014. Hospice programs would be evaluated for 
purposes of the quality reporting program based on whether or not they 
submit data, not based on their performance level on required measures.
    For the FY 2014 payment determination, hospices were asked to 
provide identifying information, and then complete a web based data 
entry for the required measures. For hospices that could not complete 
the web based data entry, a downloadable data entry form was made 
available upon request. Electronic data submission would be required 
for the FY 2015 payment determination and beyond; there would be no 
other data submission method available.
3. Quality Measures for Hospice Quality Reporting Program and Data 
Submission Requirements for Payment Year FY 2015 and Beyond
    In the November 8, 2012 CY 2013 Home Health Prospective Payment 
System Rate Update final rule (77 FR 67068, 67133), to meet the quality 
reporting requirements for hospices for the FY 2015 payment 
determination and each subsequent year, as set forth in section 
1814(i)(5) of the Act, we finalized the requirement that hospices 
report two measures:
     The NQF-endorsed measure that is related to pain 
management, NQF 0209
     The structural measure: Participation in a Quality 
Assessment and Performance Improvement (QAPI) Program that includes at 
least three quality indicators related to patient care. We did not 
extend the requirement that hospices complete a check list of their 
patient care indicators and indicate the data sources they used for 
their quality indicators.
    In this rule, we propose that the structural measure related to 
QAPI indicators and the NQF 0209 pain measure would not be 
required for the hospice quality reporting program beyond data 
submission for the FY 2015 payment determination. The original intent 
of the structural measure was for hospices to submit information about 
number, type, and data source of quality indicators used as a part of 
their QAPI Program. Data gathered as part of the structural measure 
were used to ascertain the breadth and context of existing hospice QAPI 
programs to inform future measure development activities including the 
data collection approach for the first year of required reporting (FY 
2014). To date, hospices have reported two cycles worth of structural 
measure data to CMS:
     Voluntary reporting period (submitted to CMS by January 
31, 2012)--For the voluntary reporting period hospices submitted free 
text data describing each quality indicator in their QAPI programs; 
data regarding number and data source of quality indicators were also 
submitted.
     FY 2014 (submitted to CMS by January 31, 2013)--For the FY 
2014 cycle, hospices submitted data about the topic areas of care 
addressed by quality indicators in their QAPI Programs, using a drop-
down menu checklist rather than free text to reduce burden. Data 
regarding number and data source of quality indicators were also 
submitted.

CMS has analyzed data from both reporting periods. Findings from the 
voluntary reporting period showed that hospices use quality indicators 
that address a wide range of patient care related topics and that there 
is great variation in how hospices collect and use ``standardized'' 
quality indicators. The majority of reported indicators addressed 
patient safety and physical symptom management. Likewise, findings from 
analysis of the FY 2014 structural measure data reiterated findings 
from the voluntary reporting period.
    Other topics addressed included management of psychosocial aspects 
of care, bereavement and grief, communication, and care coordination. 
Overall, findings from both data collections of the structural measure 
have provided adequate information on hospice's patient care-related 
indicators making further reporting on the structural measure 
unnecessary.
    In addition, we have determined that the NQF 0209 measure 
as it is currently collected and reported by hospices is not suitable 
for long term use as part of the Hospice Quality Reporting Program 
(HQRP). In making this decision, we considered findings from the 
Voluntary Reporting Period and the Hospice Item Set pilot. We will also 
examine data from the first year of reporting on the measure (impacting 
FY 2014 APU determination). In addition, we considered stakeholder 
input including comments submitted during rulemaking, expert input from 
a Technical Expert Panel (TEP), and provider questions and comments 
submitted to the hospice quality help desk during the 2012/2013 data 
collection and reporting period. There are two central concerns with 
the NQF 0209 measure. First, the measure does not easily 
correspond with the clinical processes for pain management, resulting 
in variance in what hospices collect, aggregate, and report. This 
concern could potentially be addressed by extensive and ongoing 
provider training or standardizing data collection. However, even with 
extensive training and the use of a standardized item set during the 
pilot test, the data showed continued variance in implementation of the 
measure. Second, there is a high rate of patient exclusion due to 
patient ineligibility for the measure and patients' denying pain at the 
initial assessment. This high rate of patient exclusion from the 
measure results in a small denominator and creates validity concerns. 
These concerns cannot be addressed by training or standardizing data 
collection. We recognize the value of measuring hospices' ability to 
achieve patient comfort and the desire to include a patient outcome 
measure such as the NQF 0209 in the HQRP. By removing the 
requirement that hospices submit the NQF 0209 measure, pain 
comfort would not be measured as part of the HQRP. However, we plan to 
collect two other measures that reflect care for pain. The standardized 
item set that CMS has developed contains data

[[Page 27836]]

elements to collect 7 quality measures endorsed by NQF for hospice. 
Among these are two process measures related to pain: The NQF 
1634, Pain screening, and NQF 1637, pain assessment. 
However, while these measures provide insight about screening and 
assessment of patients, they do not offer information about patient 
comfort related to pain. An alternative proposal would be to retain NQF 
0209 until a more suitable outcome measure was available for 
use in the HQRP, in order to maintain a focus on achieving patient 
comfort. We also recognize the importance of adherence to standardized 
data collection specifications when producing measures for public 
reporting. We intend to work toward the HQRP's future inclusion of an 
improved pain outcome measure. We solicit comment on the removal of the 
checklist and data source questions from the structural measure, and 
the removal of the NQF 0209 measure. We also solicit comment 
on the alternative proposal of maintaining NQF 0209 until 
another pain outcome measure is available.
4. Quality Measures for Hospice Quality Reporting Program for Payment 
Year FY 2016 and Beyond
    As stated in the November 8, 2012 CY 2013 Home Health Prospective 
Payment System Rate Update final rule (77 FR 67068, 67133), we 
considered an expansion of the required measures to include additional 
measures endorsed by NQF. We also stated that to support the 
standardized collection and calculation of quality measures, collection 
of the needed data elements would require a standardized data 
collection instrument. We have developed and tested a hospice patient-
level item set to be used by all hospices to collect and submit 
standardized data items about each patient admitted to hospice. We 
contracted with RTI International to support the development of the 
Hospice Item Set (HIS) for use as part of the HQRP. In developing the 
HIS, RTI focused on the NQF endorsed measures that had evidence of use 
and/or testing with hospice providers. Most of these measures were 
initially developed during the PEACE (Prepare, Embrace, Attend, 
Communicate, and Empower) Project, which was funded by CMS to develop 
and test an initial set of quality measures for use in hospice and 
palliative care. The PEACE project, which ended in 2008, resulted in 
the identification of recommended quality measure and data collection 
tools that hospice providers could use in their Quality Assessment and 
Performance Improvement (QAPI) programs to assess quality of care and 
target areas for improvement. Additional information on the PEACE 
project can be found at http://www.thecarolinascenter.org/default.aspx?pageid=24.
    Most of the measures endorsed by NQF are already widely in use by 
hospices nationwide as part of their internal Quality Reporting and 
Performance Improvement (QAPI) programs. Data we received from hospices 
during the Voluntary Reporting Period in 2011 showed that hospices had 
implemented and were using the PEACE measures. Some of the PEACE 
measures were endorsed by NQF in February, 2012, and are listed below 
with their NQF endorsement numbers. The HIS standardizes the collection 
of the data elements that are needed to calculate seven of the NQF 
endorsed measures. The HIS was pilot tested during the early summer of 
2012. The primary objective of the pilot was to explore data collection 
methods and the feasibility of implementing a patient-level item set 
for possible future use as part of the HQRP.
    In developing the standardized HIS, we considered comments offered 
in response to the July 13, 2012 CY 2013 Home Health Prospective 
Payment System Rate Update proposed rule (77 FR 41548, 41573). We have 
included data items that support the following NQF endorsed measures 
for hospice:

 NQF 1617 Patients Treated with an Opioid who are 
Given a Bowel Regimen
 NQF 1634 Pain Screening
 NQF 1637 Pain Assessment
 NQF 1638 Dyspnea Treatment
 NQF 1639 Dyspnea Screening
 NQF 1641 Treatment Preferences
 NQF 1647 Beliefs/Values Addressed (if desired by the 
patient)
    To achieve a comprehensive set of hospice quality measures 
available for widespread use for quality improvement and informed 
decision making, and to carry out our commitment to develop a quality 
reporting program for hospices that uses standardized methods to 
collect data needed to calculate quality measures, we propose the 
implementation of the HIS in July 2014. We believe that to support the 
standardized collection and calculation of any or all of the hospice 
quality measures listed above, it is necessary to use a standardized 
data collection mechanism. The HIS was developed specifically for this 
data collection purpose. We expect the HIS Paperwork Reduction Act 
(PRA) package to post on or within several days after the publication 
of this FY 2014 Hospice proposed rule. The HIS will be posted on the 
Paperwork Reduction Act (PRA) area of the CMS.gov Web site at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/index.html.
    We propose that hospices begin the use and submission of the HIS in 
July 2014. To meet the quality reporting requirements for hospices for 
the FY 2016 payment determination and each subsequent year, we propose 
regular and ongoing electronic submission of the HIS data for each 
patient admitted to hospice on or after July 1, 2014, regardless of 
payer. Hospices would be required to complete and submit an admission 
HIS and a discharge HIS for each patient. Hospices failing to report 
quality data via the HIS in 2014 would have their market basket update 
reduced by 2 percentage points in FY 2016. Hospice programs would be 
evaluated for purposes of the quality reporting program based on 
whether or not they submit data, instead of their performance level on 
required measures. If our proposals for use of the Hospice Item Set are 
finalized, we plan to provide Hospices with further information and 
details about use of the Hospice Item Set. We will provide this 
information through venues such as postings on the Hospice Quality 
Reporting Program Web page, Special Open Door Forums, announcements in 
the CMS E-News, providers training, and National Provider calls. 
Electronic data submission would be required for HIS submission in CY 
2014 and beyond; there would be no other data submission method 
available. We would make available submission software for the HIS to 
hospices at no cost. We would also provide reports to individual 
hospices on their performance on the measures calculated from data 
submitted via the HIS. The specifics of the reporting system and 
precisely when specific measures would be made available have not yet 
been determined. We would report to providers on the following measures 
on a schedule to be determined:
 NQF 1617 Patients Treated with an Opioid who are 
Given a Bowel Regimen
 NQF 1634 Pain Screening
 NQF 1637 Pain Assessment
 NQF 1638 Dyspnea Treatment
 NQF 1639 Dyspnea Screening
 NQF 1641 Treatment Preferences
 NQF 1647 Beliefs/Values Addressed (if desired by the 
patient)

[[Page 27837]]



                                             Table 4--Summary Tables
----------------------------------------------------------------------------------------------------------------
          Data collection                  Data submission              APU Impact             Measure name
----------------------------------------------------------------------------------------------------------------
                                   Finalized in the CY 2013 HH PPS Final Rule
----------------------------------------------------------------------------------------------------------------
1/1/2013-12/31/2013................  4/1/2014...................  FY 2015 (10/1/2014)...  Structural/QAPI
                                                                                           measure, NQF 0209.
----------------------------------------------------------------------------------------------------------------
                                         Proposed in this Proposed Rule
----------------------------------------------------------------------------------------------------------------
7/1/2014-12/31/2014................  Rolling....................  FY 2016 (10/1/2015)...  Hospice and Palliative
                                                                                           Care--Pain Screening,
                                                                                           NQF 1634.
7/1/2014-12/31/2014................  Rolling....................  FY 2016 (10/1/2015)...  Hospice and Palliative
                                                                                           Care--Pain
                                                                                           Assessment, NQF
                                                                                           1637.
7/1/2014-12/31/2014................  Rolling....................  FY 2016 (10/1/2015)...  Hospice and Palliative
                                                                                           Care--Dyspnea
                                                                                           Screening, NQF 1639.
7/1/2014-12/31/2014................  Rolling....................  FY 2016 (10/1/2015)...  Hospice and Palliative
                                                                                           Care--Dyspnea
                                                                                           Treatment, NQF 1638.
7/1/2014-12/31/2014................  Rolling....................  FY 2016 (10/1/2015)...  Patients Treated with
                                                                                           an Opioid who are
                                                                                           Given a Bowel
                                                                                           Regimen, NQF 1617.
7/1/2014-12/31/2014................  Rolling....................  FY 2016 (10/1/2015)...  Hospice and Palliative
                                                                                           Care--Treatment
                                                                                           Preferences, NQF
                                                                                           1641.
7/1/2014-12/31/2014................  Rolling....................  FY 2016 (10/1/2015)...  Beliefs/Values
                                                                                           Addressed (if desired
                                                                                           by patient), NQF
                                                                                           1647.
----------------------------------------------------------------------------------------------------------------

    As stated in the August 4, 2011 FY 2012 Hospice Wage Index final 
rule (76 FR 47302, 47320), we finalized that all hospice quality 
reporting periods subsequent to that for Payment Year FY 2014 would be 
based on a CY instead of a calendar quarter and for FY 2015 and beyond, 
the data submission deadline would be April 1st of each year. Our 
proposal to implement the HIS in July 2014 would negate the CY data 
collection requirement and the April 1st data submission deadline. We 
would provide details on data collection and submission timing prior to 
implementation of the HIS in July 2014.
5. Public Availability of Data Submitted
    Under section 1814(i)(5)(E) of the Act, the Secretary is required 
to establish procedures for making any quality data submitted by 
hospices available to the public. The procedures ensure that a hospice 
would have the opportunity to review the data regarding the hospice's 
respective program before it is made public. In addition, under section 
1814(i)(5)(E) of the Act, the Secretary is authorized to report quality 
measures that relate to services furnished by a hospice on the CMS Web 
site. We recognize that public reporting of quality data is a vital 
component of a robust quality reporting program and are fully committed 
to developing the necessary systems for public reporting of hospice 
quality data. We also recognize it is essential that the data made 
available to the public be meaningful and that comparing performance 
between hospices requires that measures be constructed from data 
collected in a standardized and uniform manner. The development and 
implementation of a standardized data set for hospices must precede 
public reporting of hospice quality measures. Once hospices have 
implemented the standardized data collection approach, we will have the 
data needed to establish the scientific soundness of the quality 
measures that can be calculated using the standardized data collection. 
It is critical to establish the reliability and validity of the 
measures prior to public reporting in order to demonstrate the ability 
of the measures to distinguish between the quality of services 
provided. To establish reliability and validity of the quality 
measures, at least four quarters of data will need to be analyzed. 
Typically the first two quarters of data reflect the learning curve of 
the providers as they adopt a standardized data collection; these data 
are not used to establish reliability and validity. This means that if 
the proposal to begin data collection in CY 2014 (Q3) is finalized, the 
data from CY 2014 (Q3, Q4) would not be used for assessing validity and 
reliability of the quality measures. Data collected by hospices during 
CY 2015 would be analyzed starting in CY 2015. Decisions about whether 
to report some or all of the quality measures publicly would be based 
on the findings of analysis of the CY 2015 data. In addition, as noted, 
the Affordable Care Act requires that reporting be made public on a CMS 
Web site and that providers have an opportunity to review their data 
prior to public reporting. CMS will develop the infrastructure for 
public reporting, and provide hospices an opportunity to review their 
data. In light of all the steps required prior to data being publicly 
reported, we anticipate that public reporting will not be implemented 
in FY 2016. Public reporting may occur during the FY 2018 APU year, 
allowing ample time for data analysis, review of measures' 
appropriateness for use for public reporting, and allowing hospices the 
required time to review their own data prior to public reporting. We 
will announce the timeline for public reporting of data in future 
rulemaking. We welcome public comment on what we should consider when 
developing future proposals related to public reporting.
6. Proposed Adoption of the CMS Hospice Experience of Care Survey for 
the FY 2017 Payment Determination and That of Subsequent Fiscal Years
    In the CY 2013 Home Health Prospective Payment System Rate Update 
final rule (77 FR 67135), we stated that were considering the use of a 
patient/family experience of care survey in addition to other hospice 
quality of care (clinical) measures. We are currently developing a 
Hospice Experience of Care Survey questionnaire drawing heavily on 
questionnaires in the public domain such as the Family Evaluation of 
Hospice Care (FEHC). The Hospice Experience of Care Survey would treat 
the dying patient and his or her informal caregivers (family members or 
friends) as the unit of care.
    Before the development of this survey, there was no official 
national standard experience of care survey that included standard 
survey administration protocols. This is one reason we did not adopt 
the FEHC as

[[Page 27838]]

our experience of care survey. In addition, topic areas that were not 
addressed by the FEHC were identified by the public as important to 
their experiences. The Hospice Experience of Care Survey would include 
detailed survey administration protocols which would allow for 
comparisons across hospices. The survey would focus on topics that are 
important to hospice users and for which informal caregivers are the 
best source for gathering this information. In addition, the ``About 
You'' section of the instrument includes demographic characteristics of 
the patients and their caregivers which can be used to feed into case 
mix adjustments of the publicly reported data.
    The Hospice Experience of Care Survey now under development would 
seek information from informal caregivers of patients who died while 
enrolled in hospices. We plan to field the questionnaires after the 
patient's death. Fielding timelines would be established to give the 
respondent some time from the death of their loved one, while 
simultaneously not delaying so long that the respondent is likely to 
forget details of the hospice experience. Caregivers would be presented 
with a set of standardized questions about their own experiences and 
the experiences of the patient in hospice care. During national 
implementation of this survey, hospices would be required to offer the 
survey, but individual caregivers would respond only if they 
voluntarily chose to do so.
    The Hospice Experience of Care Survey captures such topics as 
hospice provider communications with patients and family members, 
hospice provider care, and patient and family member characteristics. 
The survey would allow the informal caregiver (family member or friend) 
to provide an overall rating of the hospice care their patient 
received, and would ask if they would recommend ``this hospice'' to 
others.
    The Hospice Experience of Care Survey is undergoing development in 
accordance with the principles used in the development of the Consumer 
Assessment of Healthcare Providers and Systems (CAHPS[supreg]) surveys. 
Therefore, we are--
     Obtaining input from consumers and stakeholders regarding 
how hospice patients perceive hospice care and what elements in hospice 
programs are of greatest importance to patients and informal 
caregivers.
     Drafting a version of the hospice questionnaire that would 
be cognitively tested with a small number of respondents in both 
English and Spanish. This type of testing will allow us to assess how 
respondents interpret and respond to individual questionnaire items.
     Providing a pilot test of the Hospice Experience of Care 
Survey instrument after the development of an initial questionnaire is 
completed. This pilot test would allow us to review survey 
implementation procedures and use statistical analysis of the survey 
results to select the final set of questions. In addition, it will 
allow us to select variables which may be used in the case mix 
adjustment of survey results for public reporting.
    The Hospice Experience of Care Survey, as well as the CAHPS[supreg] 
family of surveys, focuses on patient perspectives on the experience of 
care, rather than on patient satisfaction. CAHPS[supreg] data 
complements other data, including clinical measures. CAHPS[supreg] 
surveys are specifically intended to focus on issues where the patient 
(or in this case the caregiver) is the best source of information. We 
intend the Hospice Experience of Care Survey to have a similar focus.
    We are planning to move forward with a model of survey 
administration in which we would approve and train survey vendors to 
administer the survey on behalf of hospices. Hospices would be required 
to contract with an approved survey vendor and to provide the sampling 
frame to the approved vendor on a monthly basis. The following are 
proposed key dates for the national implementation of the Hospice 
Experience of Care Survey:
     Based on the model of CMS-implemented CAHPS[supreg] 
surveys (that is, Hospital CAHPS[supreg] and Home Health Care 
CAHPS[supreg]), we propose that hospices would contract with a CMS-
approved survey vendor to conduct a ``dry run'' of the survey for at 
least 1 month in the first quarter of CY 2015 (January 2015 through 
March 2015). Vendors would submit data on the hospice's behalf to the 
CMS hospice patient experience data center. The deadline for data 
submission has not yet been finalized. For the ``dry run'' the survey 
vendor would follow all the national implementation procedures, but the 
data would not be publicly reported. The dry run would provide hospices 
and their vendors with the opportunity to work together under ``test'' 
conditions before they are required to start publicly reporting data.
    We propose that hospices would contract with CMS-approved vendors 
to begin continuous monthly data collection starting April 1, 2015. 
Data submission dates are being developed; however, we expect that data 
would be submitted quarterly.
     We propose that the FY 2017 Annual Payment Update (APU) 
determination, based in part on the Hospice Experience of Care Survey, 
would include a dry run for at least 1 month in the first quarter of CY 
2015 (January 2015, February 2015, and/or March 2015) plus 3 quarters 
of continuous monthly participation (April 1, 2015 through December 31, 
2015).
     We propose that subsequent APU determinations would be 
based upon 4 quarters of continuous monthly participation from January 
1 through December 31 of the relevant CY.
     We propose to exempt very small hospices from the survey 
requirements. Hospices that had fewer than 50 unduplicated or unique 
deceased patients in the period from January 1, 2014 through December 
31, 2014 would be exempt from the Hospice Experience of Care Survey 
data collection and reporting requirements for the FY 2017 payment 
determination. The hospices would be required to submit their patient 
counts for the period of January 1, 2014 through December 31, 2014 to 
CMS. Data submission procedures would be further specified in future 
rules. There would be similar exemptions for subsequent APU 
determinations. However, a hospice would need to submit to CMS their 
patient count for each future period to qualify for this exemption.
    As part of the national implementation, we would develop technical 
specifications for vendors to follow and would issue a detailed survey 
guidelines manual prior to the dry run months.
    In addition, there would be a Web site devoted specifically to the 
Hospice Survey. It would include information and updates regarding 
survey implementation and technical assistance. Hospices interested in 
viewing similar model Web sites are encouraged to visit the Hospital 
CAHPS[supreg] Web site at www.hcahpsonline.org or to the Home Health 
Care CAHPS[supreg] Web site at https://homehealthcahps.org. On these 
Web sites, viewers can see and download the detailed manuals about the 
surveys (the Quality Assurance Guidelines for Hospital CAHPS[supreg] 
and the Protocols and Guidelines Manual for Home Health Care 
CAHPS[supreg]), as well as obtain information about the surveys' 
histories, data submission information, and survey updates.
    Consistent with our other implemented surveys, we would provide an 
email address and toll-free telephone number for technical assistance.

[[Page 27839]]

    The Affordable Care Act requires that beginning with FY 2014 and 
each subsequent FY, the Secretary shall reduce the market basket update 
by 2 percentage points for any hospice that does not comply with the 
quality data submission requirements with respect to the FY. Any such 
reduction would not be cumulative and would not be taken into account 
in computing the payment amount for subsequent FYs. In the November 8, 
2012 CY 2013 Home Health Prospective Payment System final rule (77 FR 
67068), it was stated that all hospice quality reporting periods 
subsequent to that for Payment Year 2014 be based on a CY rather than 
on a FY. With the proposed dry run timeline of least 1 month in the 
first quarter of CY 2015 and data collection beginning April 1, 2015, 
we propose that the survey requirements be part of the Hospice Quality 
Reporting Program requirements for the FY 2017 payment determination. 
We are proposing that to meet the FY 2017 requirements, hospices would 
participate in a dry run for at least 1 month of the first quarter of 
CY 2015 (January 2015, February 2015, and/or March 2015) and must 
collect the survey data on a monthly basis from April 1, 2015 through 
December 31, 2015.
    In summary, we are proposing to start the Hospice Experience of 
Care Survey requirements with a test run for at least 1 month in the 
first quarter of CY 2015 with continuous monthly data collection 
beginning April 1, 2015, to meet the annual payment update requirements 
for FY 2017. We are proposing to add the Hospice Experience of Care 
Survey requirements to the Hospice quality reporting program 
requirements for the FY 2017 annual payment update. Participating 
hospices would have to contract with an approved Hospice Experience of 
Care Survey vendor to conduct the survey on their behalf.
7. Notice Pertaining to Reconsiderations Following APU Determinations
    At the conclusion of any given quality data reporting period, we 
would review the data received from each hospice during that reporting 
period to determine if the hospice has met the reporting requirements. 
Hospices that are found to be non-compliant with the reporting 
requirements set forth for that reporting cycle could receive a 
reduction in the amount of 2 percentage points to their annual payment 
update for the upcoming payment year.
    We are aware that there may be situations when a hospice has 
evidence to dispute a finding of non-compliance. We further understand 
that there may be times when a provider may be prevented from 
submitting quality data due to the occurrence of extraordinary 
circumstances beyond their control (for example, natural disasters). It 
is our goal not to penalize hospice providers in these circumstances or 
to unduly increase their burden during these times.
    Other CMS Quality Reporting Programs, such as Home Health Quality 
Reporting and Inpatient Quality Reporting, include an opportunity for 
providers to request a reconsideration pertaining to their APU 
determinations. We are aware of the potential need for providers to 
request reconsideration and that we will be making APU determinations 
for FY 2014 in the coming months. Therefore, to be consistent with 
other established quality reporting programs, we are using this 
proposed rule to notify providers of our intent to provide a process 
that would allow hospices to request reconsiderations pertaining to 
their FY 2014 and subsequent years' payment determinations.
    Specifically, as part of the reconsideration process for hospices 
beginning with the FY 2014 payment determinations, hospices found to be 
non-compliant with the reporting requirements during a given reporting 
cycle would be notified of that finding. The purpose of this 
notification is to put hospices on notice of the following: (1) That 
they have been identified as being non-compliant with section 3004 of 
the Affordable Care Act for the reporting cycle in question; (2) that 
they would be scheduled to receive a reduction in the amount of 2 
percentage points to the annual payment update to the applicable fiscal 
year; (3) that they may file a request for reconsideration if they 
believe that the finding of non-compliance is erroneous, or that if 
they were non-compliant, they have a valid and justifiable excuse for 
this non-compliance; and, (4) that they must follow a defined process 
on how to file a request for reconsideration, which would be described 
in the notification.
    Upon the conclusion of our review of each request for 
reconsideration, we would render a decision. We could reverse our 
initial finding of non-compliance if: (1) The hospice provides proof of 
full compliance with the all requirements during the reporting period; 
or (2) the hospice was not able to comply with requirements during the 
reporting period, and it provides adequate proof of a valid or 
justifiable excuse for this non-compliance. We would uphold our initial 
finding of non-compliance if the hospice could not show any 
justification for non-compliance.
    We would provide details of the reconsideration process, including 
mechanisms of notification, time frames and mechanisms for filing 
requests for reconsideration, required content for requests, required 
supporting documentation, and mechanisms of notification of final 
determinations on the HQRP section of cms.gov and by program 
instruction this spring.

C. FY 2014 Rate Update

1. Hospice Wage Index
    The hospice wage index is used to adjust payment rates for hospice 
agencies under the Medicare program to reflect local differences in 
area wage levels based on the location where services are furnished. 
The hospice wage index utilizes the wage adjustment factors used by the 
Secretary for purposes of section 1886(d)(3)(E) of the Act for hospital 
wage adjustments and our regulations at Sec.  418.306(c) require each 
labor market to be established using the most current hospital wage 
data available, including any changes by the Office of Management and 
Budget (OMB) to the Metropolitan Statistical Areas (MSAs) definitions. 
We have consistently used the pre-floor, pre-reclassified hospital wage 
index when deriving the hospice wage index. In our August 4, 2005 FY 
2006 Hospice Wage Index final rule (70 FR 45130), we began adopting the 
revised labor market area definitions as discussed in the OMB Bulletin 
No. 03-04 (June 6, 2003). This bulletin announced revised definitions 
for MSAs and the creation of Core-Based Statistical Areas (CBSAs). The 
bulletin is available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In the FY 2006 Hospice Wage Index final rule, we 
implemented a 1-year transition policy using a 50/50 blend of the CBSA-
based wage index values and the MSA-based wage index values for FY 
2006. The one-year transition policy ended on September 30, 2006. For 
FY 2007 and beyond, we have used CBSAs exclusively to calculate wage 
index values. OMB has published subsequent bulletins regarding CBSA 
changes. The most recent CBSA changes used for the FY 2014 hospice wage 
index are found in OMB Bulletin 10-02, available at: http://www.whitehouse.gov/sites/default/files/omb/assets/bulletins/b10-02.pdf.
    When adopting OMB's new labor market designations in FY 2006, we 
identified some geographic areas where there were no hospitals, and 
thus, no hospital wage index data, which to base

[[Page 27840]]

the calculation of the hospice wage index. We also adopted the policy 
that for urban labor markets without a hospital from which hospital 
wage index data could be derived, all of the CBSAs within the state 
would be used to calculate a statewide urban average pre-floor, pre-
reclassified hospital wage index value to use as a reasonable proxy for 
these areas in our August 6, 2009 FY 2010 Hospice Wage Index final rule 
(74 FR 39386). In FY 2014, the only CBSA without a hospital from which 
hospital wage data could be derived is 25980, Hinesville-Fort Stewart, 
Georgia.
    In our August 31, 2007 FY 2008 Hospice Wage Index final rule (72 FR 
50214), we implemented a new methodology to update the hospice wage 
index for rural areas without a hospital, and thus no hospital wage 
data. In cases where there was a rural area without rural hospital wage 
data, we used the average pre-floor, pre-reclassified hospital wage 
index data from all contiguous CBSAs to represent a reasonable proxy 
for the rural area. In our August 31, 2007 FY 2008 Hospice Wage Index 
final rule, we noted that we interpret the term ``contiguous'' to mean 
sharing a border (72 FR 50217). Currently, the only rural area without 
a hospital from which hospital wage data could be derived is Puerto 
Rico. However, our policy of imputing a rural pre-floor, pre-
reclassified hospital wage index based on the pre-floor, pre-
reclassified hospital wage index (or indices) of CBSAs contiguous to a 
rural area without a hospital from which hospital wage data could be 
derived does not recognize the unique circumstances of Puerto Rico. 
While we have not identified an alternative methodology for imputing a 
pre-floor, pre-reclassified hospital wage index for rural Puerto Rico, 
we will continue to evaluate the feasibility of using existing hospital 
wage data and, possibly, wage data from other sources. For FY 2008 
through FY 2013, we have used the most recent pre-floor, pre-
reclassified hospital wage index available for Puerto Rico, which is 
0.4047. In this proposed rule, for FY 2014, we continue to use the most 
recent pre-floor, pre-reclassified hospital wage index value available 
for Puerto Rico, which is 0.4047.
    For FY 2014, we would use the 2013 pre-floor, pre-reclassified 
hospital wage index to derive the applicable wage index values for the 
hospice wage. We would continue to use the pre-floor, pre-reclassified 
hospital wage data as a basis to determine the hospice wage index 
values because hospitals and hospices both compete in the same labor 
markets, and therefore, experience similar wage-related costs. We 
believe the use of the pre-floor, pre-reclassified hospital wage index 
data, as a basis for the hospice wage index, results in the appropriate 
adjustment to the labor portion of the costs. The FY 2014 hospice wage 
index values presented in this proposed rule were computed consistent 
with our pre-floor, pre-reclassified hospital (IPPS) wage index policy 
(that is, our historical policy of not taking into account IPPS 
geographic reclassifications in determining payments for hospice). The 
FY 2013 pre-floor, pre-reclassified hospital wage index does not 
reflect OMB's new area delineations, based on the 2010 Census, as 
outlined in OMB Bulletin 13-01, released on February 28, 2013. 
Moreover, the proposed FY 2014 pre-floor, pre-reclassified hospital 
wage index does not contain OMB's new area delineations because those 
changes will be in the FY 2014 IPPS proposed rule, which will be 
published in the Federal Register, in the near future. CMS intends to 
propose changes to the FY 2015 hospital wage index based on the newest 
CBSA changes in the FY 2015 IPPS proposed rule. Therefore, if CMS 
incorporates OMB's new area delineations, based on the 2010 Census, in 
the FY 2015 hospital wage index, those changes would also be reflected 
in the FY 2016 hospice wage index.
2. FY 2014 Hospice Wage Index With an Additional 15 Percent Reduced 
Budget Neutrality Adjustment Factor (BNAF)
    This proposed rule would update the hospice wage index values for 
FY 2014 using the FY 2013 pre-floor, pre-reclassified hospital wage 
index. As described in the August 8, 1997 Hospice Wage Index final rule 
(62 FR 42860), the pre-floor and pre-reclassified hospital wage index 
is used as the raw wage index for the hospice benefit. These raw wage 
index values are then subject to either a budget neutrality adjustment 
or application of the hospice floor to compute the hospice wage index 
used to determine payments to hospices. Pre-floor, pre-reclassified 
hospital wage index values below 0.8 are adjusted by either: (1) The 
hospice budget neutrality adjustment factor (BNAF); or (2) the hospice 
floor subject to a maximum wage index value of 0.8; whichever results 
in the greater value.
    The BNAF is calculated by computing estimated payments using the 
most recent, completed year of hospice claims data. The units (days or 
hours) from those claims are multiplied by the updated hospice payment 
rates to calculate estimated payments. For the FY 2014 Hospice Wage 
Index proposed rule, that means estimating payments for FY 2014 using 
units (days or hours) from FY 2012 hospice claims data, and applying 
the FY 2014 hospice payment rates. The FY 2014 hospice wage index 
values are then applied to the labor portion of the payments. The 
procedure is repeated using the same units from the claims data and the 
same payment rates, but using the 1983 Bureau of Labor Statistics 
(BLS)-based wage index instead of the updated raw pre-floor, pre-
reclassified hospital wage index (note that both wage indices include 
their respective floor adjustments). The total payments are then 
compared, and the adjustment required to make total payments equal is 
computed; that adjustment factor is the BNAF.
    The August 6, 2009 FY 2010 Hospice Wage Index final rule finalized 
a provision to phase out the BNAF over 7 years, with a 10 percent 
reduction in the BNAF in FY 2010, and an additional 15 percent 
reduction in each of the next 6 years, with complete phase out in FY 
2016 (74 FR 39384). Once the BNAF is completely phased out, the hospice 
floor adjustment would simply consist of increasing any wage index 
value less than 0.8 by 15 percent, subject to a maximum wage index 
value of 0.8. Therefore, in accordance with the FY 2010 Hospice Wage 
final rule, the BNAF for FY 2014 will be reduced by an additional 15 
percent for a total BNAF reduction of 70 percent (10 percent from FY 
2010, an additional 15 percent from FY 2011, an additional 15 percent 
for FY 2012, an additional 15 percent for FY 2013 and an additional 15 
percent in FY 2014).
    The unreduced BNAF for FY 2014 is 0.061498 (or 6.1498 percent). A 
70 percent reduction to the BNAF is computed to be 0.018449 (or 1.8449 
percent). For FY 2014, this is mathematically equivalent to taking 30 
percent of the unreduced BNAF value, or multiplying 0.061498 by 0.30, 
which equals 0.018449 (1.8449 percent). The BNAF of 1.8449 percent 
reflects a 70 percent reduction in the BNAF. The 70 percent reduced 
BNAF (1.8449 percent) was applied to the pre-floor, pre-reclassified 
hospital wage index values of 0.8 or greater.
    The 10 percent reduced BNAF for FY 2010 was 0.055598, based on a 
full BNAF of 0.061775; the additional 15 percent reduced BNAF FY 2011 
(for a cumulative reduction of 25 percent) was 0.045422, based on a 
full BNAF of 0.060562; the additional 15 percent reduced BNAF for FY 
2012 (for a cumulative reduction of 40 percent) was 0.035156, based on 
a full BNAF of 0.058593; the additional 15 percent reduced BNAF for FY 
2013 (for a cumulative reduction of 55 percent) was 0.027197, based on 
a full BNAF of

[[Page 27841]]

0.060438; and the additional 15 percent reduced BNAF for FY 2014 (for a 
cumulative reduction of 70 percent) is 0.018449, based on a full BNAF 
of 0.061498.
    Hospital wage index values which are less than 0.8 are subject to 
the hospice floor calculation. For example, if in FY 2013, County A had 
a pre-floor, pre-reclassified hospital wage index (raw wage index) 
value of 0.3994, we would perform the following calculations using the 
budget-neutrality factor (which for this example is an unreduced BNAF 
of 0.061498, less 70 percent, or 0.018449) and the hospice floor to 
determine County A's hospice wage index:
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by 1 + 70 percent reduced BNAF: (0.3994 x 1.018449 = 
0.4068); Pre-floor, pre-reclassified hospital wage index value below 
0.8 multiplied by 1 + hospice floor: (0.3994 x 1.15 = 0.4593).Based on 
these calculations, County A's hospice wage index would be 0.4593. The 
BNAF may be updated for the final rule based on availability of more 
complete data.
    An addendum A and Addendum B with the FY 2014 wage index values for 
rural and urban areas will not be published in the Federal Register. 
The FY 2014 wage index values for rural areas and urban areas are 
available via the internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/index.html. The hospice wage index for 
FY 2014 set forth in this proposed rule includes the BNAF reduction and 
would be effective October 1, 2013 through September 30, 2014.
3. Hospice Payment Update Percentage
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended 
section 1814(i)(1)(C)(ii)(VI) of the Act to establish updates to 
hospice rates for FYs 1998 through 2002. Hospice rates were to be 
updated by a factor equal to the market basket index, minus 1 
percentage point. Payment rates for FYs since 2002 have been updated 
according to section 1814(i)(1)(C)(ii)(VII) of the Act, which states 
that the update to the payment rates for subsequent FYs must be the 
market basket percentage for that FY. The Act requires us to use the 
inpatient hospital market basket to determine the hospice payment rate 
update. In addition, section 3401(g) of the Affordable Care Act 
mandates that, starting with FY 2013 (and in subsequent FYs), the 
hospice payment update percentage will be annually reduced by changes 
in economy-wide productivity as specified in section 
1886(b)(3)(B)(xi)(II) of the Act. In addition, section 3401(g) of the 
Affordable Care Act also mandates that in FY 2013 through FY 2019, the 
hospice payment update percentage will be reduced by an additional 0.3 
percentage point (although for FY 2014 to FY 2019, the potential 0.3 
percentage point reduction is subject to suspension under conditions 
specified in section 1814(i)(1)(C)(v) of the Act). The proposed hospice 
payment update percentage for FY 2014 is based on the inpatient 
hospital market basket update of 2.5 percent (based on IHS Global 
Insight, Inc.'s first quarter 2013 forecast with historical data 
through the fourth quarter of 2012). A detailed description of how the 
inpatient hospital market basket is derived will be available in the FY 
2014 IPPS proposed rule, which will be published in the Federal 
Register, in the near future. Due to the requirements at 
1886(b)(3)(B)(xi)(II) and 1814(i)(1)(C)(v) of the Act, the estimated 
inpatient hospital market basket update for FY 2014 of 2.5 percent must 
be reduced by a productivity adjustment as mandated by Affordable Care 
Act (currently estimated to be 0.4 percentage point for FY 2014). The 
estimated inpatient hospital market basket for FY 2014 is reduced 
further by a 0.3 percentage point, as mandated by the Affordable Care 
Act. In effect, the proposed hospice payment update percentage for FY 
2014 is 1.8 percent. We are also proposing that if more recent data are 
subsequently available (for example, a more recent estimate of the 
inpatient hospital market basket and productivity adjustment), we would 
use such data, if appropriate, to determine the FY 2014 market basket 
update and the multi-factor productivity MFP adjustment in the FY 2014 
Hospice PPS final rule.
    Currently, the labor portion of the hospice payment rates is as 
follows: for Routine Home Care, 68.71 percent; for Continuous Home 
Care, 68.71 percent; for General Inpatient Care, 64.01 percent; and for 
Respite Care, 54.13 percent. The non-labor portion is equal to 100 
percent minus the labor portion for each level of care. Therefore, the 
non-labor portion of the payment rates is as follows: for Routine Home 
Care, 31.29 percent; for Continuous Home Care, 31.29 percent; for 
General Inpatient Care, 35.99 percent; and for Respite Care, 45.87 
percent.
4. Proposed Updated FY 2014 Hospice Payment Rates
    Historically, the hospice rate update has been published through a 
separate administrative instruction issued annually in the summer to 
provide adequate time to implement system change requirements; however, 
starting in this FY 2014 rule and for subsequent fiscal years, we 
propose to use rulemaking as the means to propose hospice payment 
rates. This change is proposed to be consistent with the rate update 
process in other Medicare benefits, and should provide rate information 
to hospices as quickly as, or earlier than, when rates are published in 
an administrative instruction.
    There are four payment categories that are distinguished by the 
location and intensity of the services provided. The base payments are 
adjusted for geographic differences in wages by multiplying the labor 
share, which varies by category, of each base rate by the applicable 
hospice wage index. A hospice is paid the routine home care rate for 
each day the beneficiary is enrolled in hospice, unless the hospice 
provides continuous home care, inpatient respite care, or general 
inpatient care. Continuous home care is provided during a period of 
patient crisis to maintain the patient at home, inpatient respite care 
is short-term care to allow the usual caregiver to rest, and general 
inpatient care is to treat symptoms that cannot be managed in another 
setting.
    The proposed FY 2014 payment rates would be the FY 2013 payment 
rates, increased by 1.8 percent, which is the proposed hospice payment 
update percentage for FY 2014 as discussed in section III.C.3. The 
proposed FY 2014 hospice payment rates would be effective for care and 
services furnished on or after October 1, 2013, through September 30, 
2014.

[[Page 27842]]



                        Table 5--Proposed FY 2014 Hospice Payment Rates Updated by the Proposed Hospice Payment Update Percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Multiply by
                                                                                            the FY 2014                                      Non-Labor
                                                                              FY 2013        proposed         FY 2014     Labor Share of   share of the
                   Code                              Description           payment rates      hospice        Proposed      the proposed      proposed
                                                                                          payment update   payment rate    payment rate    payment rate
                                                                                          of 1.8 percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
651.......................................  Routine Home Care...........         $153.45         x 1.018         $156.21         $107.33          $48.88
652.......................................  Continuous Home Care........          895.56         x 1.018          911.68          626.42          285.26
                                            Full Rate = 24 hours of care
                                            $=37.99 hourly rate
655.......................................  Inpatient Respite Care......          158.72         x 1.018          161.58           87.46           74.12
656.......................................  General Inpatient Care......          682.59         x 1.018          694.88          444.79          250.09
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Congress required in sections 1814(i)(5)(A) through (C) of the 
Act that hospices begin submitting quality data, based on measures to 
be specified by the Secretary. Beginning in FY 2014, hospices which 
fail to report quality data will have their market basket update 
reduced by 2 percentage points. In the August 4, 2011 FY 2012 Hospice 
Wage Index final rule (76 FR 47320 through 47324), we implemented a 
hospice Quality Reporting Program (QRP) as required by section 3004 of 
the Affordable Care Act. Hospices were required to begin collecting 
quality data in October 2012, and submit that quality data in 2013. 
Hospices failing to report quality data in 2013 will have their market 
basket update reduced by 2 percentage points in FY 2014.

  Table 6--Proposed FY 2014 Hospice Payment Rates Updated by the Proposed Hospice Payment Update Percentage for
                              Hospices That DO NOT Submit the Required Quality Data
----------------------------------------------------------------------------------------------------------------
                                                                               Multiply by the
                                                                              FY 2014 proposed
                                                                               hospice payment
                                                                                   update
                Code                      Description       FY 2013  payment    percentage of   FY 2014 Proposed
                                                                  rates          1.8 percent      payment rate
                                                                               percent minus 2
                                                                                 percentage
                                                                                points (-0.2)
----------------------------------------------------------------------------------------------------------------
651................................  Routine Home care....           $153.45           x 0.998           $153.14
652................................  Continuous Home Care             895.56           x 0.998            893.77
                                      Full Rate= 24 hours
                                      of care $=37.99
                                      hourly rate.
655................................  Inpatient Respite                158.72           x 0.998            158.40
                                      Care.
656................................  General Inpatient                682.59           x 0.998            681.22
                                      Care.
----------------------------------------------------------------------------------------------------------------

    A Change Request with the finalized hospice payment rates, a 
finalized hospice wage index, the Pricier for FY 2014, and the hospice 
cap amount for the cap year ending October 31, 2013 would continue to 
be issued in the summer.

D. Update on Hospice Payment Reform and Data Collection

    In 2010, the Congress amended section 1814(i)(6) of the Act with 
section 3132(a) of the Affordable Care Act. The amendment authorized 
the Secretary to collect additional data and information determined 
appropriate to revise payments for hospice care and for other purposes. 
The types of data and information described in the Act would capture 
resource utilization and other measures of cost, which can be collected 
on claims, cost reports, and possibly other mechanisms as we determine 
to be appropriate. The data collected may be used to revise the 
methodology for determining the payment rates for routine home care and 
other services included in hospice care, no earlier than October 1, 
2013, as described in section 1814(i)(6)(D) of the Act. In addition, we 
are required to consult with hospice programs and the Medicare Payment 
Advisory Commission (MedPAC) regarding additional data collection and 
payment revision options.
    This section of the proposed rule contains three subsections which 
update the public or discuss different aspects of hospice payment 
reform; there are no proposals in any of these three subsections.
1. Update on Reform Options
    Our hospice contractor, Abt Associates, continues to conduct 
research and analyses, to identify potential data collection needs, and 
to research and develop hospice payment model options. To date, we 
completed an environmental scan; a draft analytic plan; and convened 
technical advisory panel meetings under the initial contract with Abt 
in 2010. We are continuing with these efforts under a contract awarded 
in September 2011. In June 2012, we convened stakeholder meetings where 
research findings were presented on potential payment system 
vulnerabilities; utilization of the Medicare hospice benefit, including 
general inpatient care use during the period the beneficiary is 
enrolled in hospice care; analysis of hospice cost reports; and the 
effects of the face-to-face encounter requirement. These and other 
findings are described in the Abt Hospice Study Technical Report, which 
is available on the CMS Hospice Center Web page, at http://www.cms.gov/Center/Provider-Type/Hospice-Center.html.
    Additionally, we continue to conduct analyses of various payment 
reform model options under consideration. These models include a U-
shaped model of resource use which MedPAC recommended that we adopt, 
and which is described in Chapter 6 of its March,

[[Page 27843]]

2009 report entitled ``Report to the Congress: Medicare Payment 
Policy'' (available online at: http://www.medpac.gov/chapters/Mar09_Ch06.pdf). MedPAC determined that the level of Medicare payment to a 
hospice under the current per diem payment system is constant 
throughout a hospice patient's stay. The report noted that the 
constancy of the per diem payment over the course of a hospice stay is 
misaligned with a hospice's costs during the stay. A hospice's costs 
typically follow a U-shaped curve, with higher costs at the beginning 
and end of a stay, and lower costs in the middle of the stay. This cost 
curve reflects hospices' higher service intensity at the time of the 
patient's admission and the time surrounding the patient's death 
(MedPAC, page 358). Payment under a U-shaped model would be higher at 
the beginning and end of a hospice stay, and lower in the middle 
portion of the stay.
    The analysis found that very short hospice stays have a flatter 
curve than the U-shaped curve seen for longer stays, and that average 
hospice costs are much higher. These short stays are less U-shaped 
because there is not a lower-cost middle period between the time of 
admission and the time of death. As such, we are also considering a 
tiered approach, with payment tiers based on the length of stay. For 
example, payment for stays of 5 days or less (which occurred for about 
25 percent of hospice beneficiaries in 2011) could be made under a per 
diem system that accounts for the higher hospice costs, with no 
variation in the rate based on length of stay as would occur under a U-
shaped model. Payment for longer stays, where costs follow more of a U-
shape, could be made under a tier based on the U-shaped payment model, 
where the per diem amount fluctuates depending upon whether the days 
billed are at the beginning, middle, or end of the stay.
    Another option is to analyze whether a short-stay add-on payment, 
similar to the home health Low Utilization Payment Amount (LUPA) add-
on, would improve payment accuracy if we retain the current per diem 
system. The LUPA add-on is made for home health patients who require 
four or fewer visits during the 60-day episode. These home health 
episodes are paid based on the visits actually furnished during the 
episode. For LUPA episodes that occur as the only episode or the first 
episode in a sequence of adjacent home health episodes for a given 
beneficiary, an increased payment is made to account for the front-
loading of costs (see http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/HomeHlthProspaymt.pdf for more information).
    Finally, as we collect more accurate diagnosis data, including data 
on related conditions, we would also evaluate whether case-mix should 
play a role in determining payments.
a. Rebasing the Routine Home Care (RHC) Rate
    We are updating our review of the hospice RHC rate, but are not 
including any proposals at this time. Rebasing the RHC rate involves 
using the existing components that make up the rate, and recalculating 
based on more current data. RHC is the basic level of care under the 
Hospice benefit, where a beneficiary receives hospice care, but remains 
at home. With this level of care, hospice providers are reimbursed per 
day regardless of the volume or intensity of services provided to a 
beneficiary on any given day. It is anticipated that there will be days 
when a beneficiary does not require any services, as well as days when 
a beneficiary requires several visits from the hospice provider.
    When the hospice benefit was created in 1983, the RHC base payment 
rate was set using nine different components of cost from a relatively 
small set of hospices (n=26) that were participating in a CMS hospice 
demonstration, as described in the December 16, 1983 Hospice final rule 
(48 FR 56008). The nine cost components were: nursing care ($16.25); 
home health aide ($12.74); social services/therapy ($3.23); home 
respite ($1.46); interdisciplinary group ($2.78); drugs ($1.18); 
supplies ($4.49); equipment ($1.13); and outpatient hospital therapies 
($2.99). The sum of all the components' costs equaled the base payment 
rate for RHC as stated in that 1983 hospice final rule. The original 
RHC rate was set at $46.25. In addition to RHC, we also established 
three other levels of care for hospice care from data obtained from the 
Medicare hospice demonstration project: Continuous Home Care (CHC), 
Inpatient Respite Care (IRC) and General Inpatient Care (GIP).
    It is CMS' intent to ensure that reimbursement rates under the 
Hospice benefit align as closely as possible with the average costs 
hospices incur when efficiently providing covered services to 
beneficiaries. As we continue to gather and analyze more data for 
payment reform, we have found evidence of a potential misalignment 
between the current RHC payment rate and the cost of providing RHC. One 
potential option to address this misalignment could be to rebase the 
hospice RHC rate, though we are not proposing to do so at this time, so 
that the cost categories established in the rate reflect the changes in 
the utilization of hospice services provided for palliation and 
management of terminally ill patients. However, we are still evaluating 
data and are currently not proposing any changes to address the 
misalignment.
    At this time, we do not have the data to support rebasing six of 
the nine cost components described in the 1983 final rule. Information 
on the utilization of drugs, supplies, and equipment is not available 
from hospice claims data, and the corresponding information that is 
available from cost reports, such as outpatient hospital therapies, is 
not sufficiently detailed to allow for rebasing. One approach to 
consider in more closely aligning RHC payments with costs is to rebase 
the three clinical service components (nursing, home health aide, 
social services/therapy) that currently comprise 69.7 percent of the 
RHC rate by calculating the average cost per day, weighted by the 
number of RHC days, for each of the three components using FY 2011 cost 
report data matched to FY 2011 claims data. As part of rebasing the RHC 
rate we would then inflate the 1983 cost per day for each of the six 
remaining components by a factor of 3.1704, which corresponds to the 
market basket increases between 1983 and 2011.\4\ We note that our cost 
report analysis thus far found that drug costs over the years have 
declined, and the other non-labor components are plateauing. A detailed 
methodology for rebasing the clinical service components of the RHC 
rate can be found in the Abt Hospice Study Technical Report which is 
published with this proposed rule at http://www.cms.gov/Center/Provider-Type/Hospice-Center.html.
---------------------------------------------------------------------------

    \4\ The original RHC rate in 1983 was $46.25. The FY 2011 rate 
for RHC was $146.63. $146.63/46.25 = 3.1704.
---------------------------------------------------------------------------

    Using the methodology described above, the rebased amount for FY 
2011 would be $130.54 as described in Table 7 below.

[[Page 27844]]



                      Table 7--Comparison of RHC Rate Cost Components From 1983 to FY 2011
----------------------------------------------------------------------------------------------------------------
                                                                    1983 Final
                         RHC components                            rule cost per     Inflation     FY 2011 Cost
                                                                        day           factor          per day
----------------------------------------------------------------------------------------------------------------
Nursing Care....................................................          $16.25             N/A          $56.54
Home Health Aide................................................           12.74             N/A           19.24
Social Services/Therapy.........................................            3.23             N/A           10.29
Home respite....................................................            1.46        x 3.1704            4.63
Interdisciplinary group.........................................            2.78        x 3.1704            8.81
Drugs...........................................................            1.18        x 3.1704            3.74
Supplies........................................................            4.49        x 3.1704           14.23
Equipment.......................................................            1.13        x 3.1704            3.58
Outpatient Hospital Therapies...................................            2.99        x 3.1704            9.48
                                                                 -----------------------------------------------
    Total.......................................................           46.25  ..............          130.54
----------------------------------------------------------------------------------------------------------------
Source: 1983 Final Rule and FY 2011 hospice cost report and claims data.
Note(s): The costs per day for the clinical services components (nursing care, home health aide and social
  services/therapy) were calculated based on the cost per minute for each discipline using cost report data
  multiplied by the RHC minutes for each discipline per RHC day from claims data to compute the cost of a
  discipline per RHC day. The average cost per day across all hospices in our sample was weighted by the number
  of RHC days. Of the 2,717 FY 2011 hospice cost reports for freestanding and facility-based hospices that were
  matched to FY 2011 claims data, we excluded: (1) cost reports with period less than 10 months or greater than
  14 months; (2) cost reports with missing information or negative reported values for total costs or payments;
  (3) providers in the highest and lowest percentile (1% and 99%) in costs per days across all levels of care;
  (4) the top and bottom 5% of provider margin; and (5) providers were excluded if the log payment to cost ratio
  was greater than the 90th or less than the 10th percentile of this value across all providers plus or minus
  1.5 times the range between the 10th and 90th percentiles of this log ratio. The number of hospices remaining
  in our sample was 2,140 representing 73.1 percent of RHC days in 2011.

    For example, if we were to apply the rebased amounts for the 
clinical services components of RHC to FY 2014, we would inflate the FY 
2011 rebased amount to FY 2013 levels. We first inflated the FY 2011 
rebased rate by full hospital market basket of 3.0 percent for FY 2012. 
The FY 2012 rebased rate would be $134.46 ($130.54 x 1.03=$134.46). We 
then inflated the FY 2012 rebased rate by full hospital market basket 
of 2.6 percent for FY 2013. The FY 2013 rebased rate would be $137.96 
($134.46 x 1.026= $137.96). Finally, we inflated the rebased FY 2013 
rate ($137.96) by applying the proposed hospice payment update 
percentage of 1.8 percent to calculate a FY 2014 rebased RHC rate. 
Therefore, the FY 2014 rebased rate would be $140.44, a 10.1 percent 
reduction in the FY 2014 proposed RHC payment rate of $156.21, or an 
estimated reduction in payments to hospices of $1.6 billion in FY 2014. 
Rebasing the clinical service components of the RHC payment is one of 
several approaches to hospice payment reform that CMS could consider 
for revising the RHC payment rate. As outlined in the Affordable Care 
Act, hospice payment reform must be done in a budget neutral manner. As 
rebasing would be considered part of hospice payment reform, any 
savings achieved through the reduction of the RHC rate would need to be 
redistributed in a budget neutral manner.
b. Site of Service Adjustment for Hospice Patients in Nursing 
Facilities
    As part of future hospice payment reform, we are considering an OIG 
recommendation to reduce payments to Medicare hospices for 
beneficiaries in nursing facilities who are receiving hospice care. The 
OIG's July 2011 report entitled ``Medicare Hospices that Focus on 
Nursing Facility Residents,'' (available at https://oig.hhs.gov/oei/reports/oei-02-10-00070.pdf) studied hospice patients in nursing 
facilities. This report noted the growth of hospice services provided 
to beneficiaries in nursing facilities, and discussed hospices that 
have a high percentage of their beneficiaries in nursing facilities. 
The OIG's report noted that the current payment structure provides 
incentives for hospices to seek out beneficiaries in nursing 
facilities, as these beneficiaries often receive longer but less 
complex care. The OIG noted that unlike private homes, nursing 
facilities are staffed with professional caregivers and are often paid 
by third-party payers, such as Medicaid. These facilities are required 
to provide personal care services, which are similar to hospice aide 
services that are paid for under the hospice benefit. To lessen this 
incentive, the OIG recommended that we reduce Medicare payments for 
hospice care provided in nursing facilities.
    In addition, the March 2012 Medicare Payment Advisory Commission 
(MedPAC) report entitled ``Report to Congress: Medicare Payment 
Policy'' noted that hospices with a higher share of their patients in 
nursing facilities have margins as high as 13.8 percent (pages 302 and 
303). MedPAC attributed these higher margins to possible efficiencies 
in the nursing home setting (multiple patients in a single setting, 
reduced driving time and mileage), and to reduced workload due to an 
overlap in aide services and supplies provided by the nursing facility.
    In response to both MedPAC's and OIG's concerns about possible 
duplication of aide services provided both by the hospice and the 
nursing facility, we conducted an analysis of the number and length of 
aide visits per day using 2011 hospice claims data. Table 8 below 
describes the number and length of aide visits for RHC beneficiaries at 
home (including patients in an assisted living facility) compared to 
RHC beneficiaries in a NF or SNF.

                              Table 8--Hospice Routine Home Care Aide Services 2011
----------------------------------------------------------------------------------------------------------------
                                             Sites of service                           Difference
                                 -------------------------------------------------------------------------------
                                     Home Q5001/2       NF/SNF Q5003/4        NF/SNF-Home              %
----------------------------------------------------------------------------------------------------------------
Number of beneficiaries.........             769,640             302,004           (467,636)  ..................
Total days......................          58,637,171          22,946,972        (35,690,199)  ..................
Total visits....................          16,625,635           8,501,366         (8,124,269)  ..................
Total minutes...................       1,223,254,095         584,825,520       (638,428,575)  ..................

[[Page 27845]]

 
Visits per beneficiary..........                21.6                28.1                 6.5                30.3
Minutes per visit...............                73.6                68.8               (4.8)                 6.5
Total visits/day................                0.28                0.37                0.09                30.7
Total minutes/day...............               20.86               25.49                4.62                22.2
----------------------------------------------------------------------------------------------------------------
Source: Abt Associates Hospice Claims Data File, 2011.

    Table 8 demonstrates that hospice patients in a NF/SNF receive more 
visits than patients at home, though the length of those visits is 
shorter. Average minutes per day shows that RHC patients in a NF/SNF 
had hospice aide services of longer duration (25.49 minutes) than RHC 
patients at home (20.86 minutes). The Medicare Conditions of 
Participation (CoPs) require that hospices provide services at the same 
level and to the same extent as those services would be provided if the 
NF/SNF resident were in his or her home. Hospices provide aide services 
to beneficiaries at home depending on the beneficiaries' needs. It 
seems reasonable to expect that a beneficiary who has a paid caregiver 
(that is, a NF/SNF aide) does not need as many services from the 
hospice aide, because those services are being provided by the paid 
caregiver. As described in the June 5, 2008 Hospice Conditions of 
Participation final rule (73 FR 32095), ``[h]ospice care is meant to 
supplement the care provided by the patient's caregiver.'' Given the 
presence of the paid caregiver in the NF/SNF, we would expect that on 
average, there would be fewer hospice aide services provided to hospice 
patients in a NF/SNF than to hospice patients at home.
    It is not clear why hospice patients in nursing facilities are 
receiving more minutes per day of aide services than hospice patients 
at home. We used regression analysis to control for age, gender, 
diagnosis, length of stay, and provider characteristics (ownership 
status, base, size, age of hospice, geographic location) when analyzing 
the visit data. However, we still found that significantly more aide 
services were provided to NF/SNF patients than to patients at home, 
even after controlling for patient and provider characteristics.
    The June 5, 2008 Hospice Conditions of Participation final rule (73 
FR 32088) preamble details the requirements related to aide services 
provided to hospice patients residing in a nursing facility. These 
requirements can also be found at Sec.  418.112(c)(4) through (5). The 
CoPs require a written agreement between the hospice and NF/SNF, which 
specifies that the NF/SNF should continue to provide the aide services 
that are provided prior to the hospice election, to meet the patient's 
needs at that same level of care as if the patient were at home. These 
services include providing 24 hour room and board care, meeting the 
patient's personal care needs, and to the degree permitted by State 
law, administering medications or therapies. There should be no 
reduction of NF/SNF aide services to a patient in anticipation of a 
future hospice election, or once the patient (or his/her 
representative) elects the hospice benefit. As such, hospice patients 
in nursing facilities should have much, if not most, of their need for 
aide services provided by the facility's aide. As stated previously, we 
would expect that, on average, the hospice aide would be providing 
fewer services to nursing facility patients than to patients at home.
    Table 8 suggests that the hospice aide may be replacing the 
facility aide, rather than supplementing or augmenting the care of the 
facility aide. Or, as the OIG and MedPAC identified, there could be an 
overlap in aide services when a hospice beneficiary is in a NF/SNF. It 
would not be appropriate for the Medicare hospice benefit to subsidize 
the nursing home benefit by providing aide services that the facility 
aide should provide. Section 1862(a)(1)(C) of the Social Security Act 
(the Act) forbids payment for any items or services which are not 
reasonable and necessary for the palliation and management of the 
terminal illness. Services which are not needed, or which are 
duplicative of those to be provided by the facility aide, would not be 
reasonable and necessary.
    At this time, we are not proposing to make a site of service 
adjustment to reduce payments for RHC patients in a nursing facility. 
Any reform option considering reduced payments for RHC care provided to 
hospice patients in a NF or SNF should not result in a reduction in the 
services that hospice patients in NFs or SNFs receive, but would 
instead be a shifting of who provides those aide services; some of the 
services currently provided by the hospice aide would be provided by 
the facility aide as expected. As such, we do not expect that the 
quality of care to hospice patients in a NF/SNF would be diminished. If 
such a policy were to be proposed and implemented, it would be made in 
a budget neutral manner as required by the Affordable Care Act. In 
addition, we would monitor for any unintended consequences.
2. Reform Research Findings
    We have conducted a number of analyses to better understand hospice 
utilization and trends, to identify vulnerabilities in the payment 
system, and to develop and test models that would more accurately match 
hospice resource use with Medicare payments. We posted the Abt Hospice 
Study Technical Report on hospice payment reform on our hospice center 
Web page, located at: http://www.cms.gov/Center/Provider-Type/Hospice-Center.html. The report summarizes research findings related to 
resource use and payment system vulnerabilities.
    The report also includes a discussion of hospice cost report 
analyses. Overall, the total cost per election period has not 
significantly increased from 2007 to 2010, in real dollars. Inpatient 
costs constitute about 14 percent of hospice costs across freestanding 
hospice providers that reported inpatient costs. About one-third of 
providers reported no inpatient costs. It appeared that some providers 
with no inpatient costs were substituting continuous home care (CHC) 
for GIP, based on analysis of the proportion of CHC days. Visiting 
services (for example, direct labor costs for nurses, aides, social 
workers, counselors, and therapists) account for about two-thirds of 
hospice costs, and have trended upward from 2004 to 2010. Nursing care, 
hospice aides, and medical social services comprise 90 percent of 
visiting service costs.
    Other hospice service costs include non-labor costs such as drugs, 
durable medical equipment (DME), supplies, imaging, patient 
transportation, and outpatient services. These types of services 
represent about 20 to 25 percent of total hospice costs. Drugs, DME, 
and supplies account for 90

[[Page 27846]]

percent of these other hospice services costs. Drug costs have trended 
downward over time, while medical supply costs have remained steady. 
Finally, in examining non-reimbursable costs, we found that 26 percent 
of providers in 2010 showed no bereavement costs on their cost report, 
even though bereavement services are required by statute; it is unclear 
if bereavement services were not provided or if bereavement costs were 
not correctly reported.
    The report also describes an analysis of GIP utilization. In 2010 
through 2011, a quarter of all hospice beneficiaries had at least one 
GIP stay, with a quarter of those stays associated with cancer 
diagnoses. While most GIP stays were 2 days long, the average GIP 
length of stay was 5.66 days, reflecting a small number of extremely 
long GIP stays. Sixty-five percent of GIP stays were provided in a 
hospice inpatient unit. Almost 80 percent of hospices provided at least 
one GIP day in 2010 through 2011. Hospices that provided GIP tended to 
be older and larger.
    The Abt Hospice Study Technical Report also provides descriptive 
statistics for all beneficiaries and for 3 major sites of routine home 
care services. It includes visit data findings, including visits per 
day, visits per beneficiary, minutes per day, and minutes per 
beneficiary for key disciplines reported on hospice claims. 
Additionally, there are several figures which depict the U-shaped curve 
for key personnel by length of stay. The curves show that resource use 
tends to follow a U-shaped curve, but one which is higher at the 
beginning rather than at the end of the hospice stay. There was little 
evidence that strong differences in the U-shape exist across most 
subgroups (for example, freestanding vs. provider-based, ownership 
status, patient diagnosis).
    For more detailed information on these findings, and a description 
of the methods used, see the Abt Hospice Study Technical Report, which 
is posted on the hospice center Web page (http://www.cms.gov/Center/Provider-Type/Hospice-Center.html). We have also posted a review of 
pertinent hospice literature as of December 2012 on the hospice center 
Web page. This should be considered an evolving document, as Abt 
Associates updates the review periodically. We encourage interested 
stakeholders to review this update on our progress. We will continue to 
collaborate with other federal experts regarding hospice payment reform 
research efforts and to update stakeholders on our progress on hospice 
payment reform.
3. Additional Data Collection
    Over the past several years, MedPAC, the Government Accountability 
Office (GAO), and the HHS Office of Inspector General (OIG) have also 
recommended that we collect more comprehensive data in order to better 
understand the utilization of the Medicare hospice benefit. In December 
2012, we posted a document to our Hospice Center Web page (http://www.cms.gov/Center/Provider-Type/Hospice-Center.html) describing 
additional data collection which we are considering, and noting that 
cost report revisions are forthcoming. We received 65 comments about 
the claims data collection items under consideration, which are briefly 
summarized below.
     Line item visit data, including length of visit in 15-
minute increments, for hospice chaplains and counselors providing care 
to hospice beneficiaries. Commenters were supportive, but suggested we 
include phone calls by chaplains and counselors, and allow reporting of 
chaplain time spent officiating or attending beneficiary funerals, as 
this is part of their service to families. A few suggested that we have 
a separate category for Bereavement Counseling to acknowledge this 
requirement even if it is not subject to reimbursement. Several 
suggested we define ``other counselors.''
     Line item visit data, including length of visits in 15-
minute increments, for hospice staff providing care to hospice patients 
receiving GIP in a hospital or nursing facility, but not for hospice 
patients receiving GIP in a hospice facility. Our suggestion to collect 
GIP visit data did not include visits by non-hospice staff, and was 
focused on patients in a hospital or nursing facility only. Therefore, 
GIP visits to hospice patients in hospice inpatient facilities continue 
to be reported as weekly totals, without including the length of 
visits. Commenters were generally supportive, provided the visits were 
for hospice staff only. Several comments noted that this would be no 
more difficult than what already occurs when recording visits to 
patients' homes.
     The National Provider Identifier (NPI) of facilities where 
hospice patients are receiving care. Most commenters noted that it 
would not be difficult to get this information and enter it into their 
systems. A few commenters noted that sometimes patients are in more 
than one facility type during a claim period, but that there is only 
space for one NPI on the claim.
     Post-mortem visits on the calendar day of death. 
Commenters suggested we collect visit data for various timeframes after 
the time of death, rather than the calendar day of death, since many 
deaths occur late at night. They suggested we clarify what we mean by 
time of death (time death actually occurs, or time the death is 
pronounced). Several commenters suggested we gather post-mortem visit 
data regardless of level of care or site of service.
     Any durable medical equipment (DME) provided by the 
hospice. Some commenters indicated that this would be difficult to 
collect and record on claims. Many indicated that DME suppliers bill 
them monthly, and waiting for the DME invoice would cause a delay in 
submission of their claims. They also noted that it would take a great 
deal of lead time to set this up with suppliers and software vendors to 
track DME at the patient level. A few suggested that we use aggregate 
data on DME costs from the cost reports instead.
     Non-routine supplies provided by the hospice. Most 
commenters indicated that this would be difficult to collect and record 
on claims. A number of commenters wrote that their software does not 
accommodate such reporting, and that it would create an additional 
burden on clinical staff to track these items. Several mentioned that 
it would take some lead time to modify existing systems to enable 
hospices to track and report this information accurately. A few 
suggested we use aggregate data on non-routine supplies from the cost 
reports instead.
     Drugs (injectable, non-injectable, and over-the-counter) 
provided by the hospice. Most commenters indicated that this would be 
difficult to collect and record on claims. Several asked if injectable 
drugs include infusion pumps, which is considered DME. Several 
commenters noted that the hospice staff person is not always the person 
administering drugs, making tracking more complicated; they suggested 
focusing on the fills, rather than drugs administered. Some wrote that 
hospices get their drugs from multiple pharmacies, making reporting 
more difficult due to inconsistencies in pharmacy billing. Others wrote 
that their data systems are not able to track drugs by patient, and 
suggested that we use aggregate data from the cost reports instead. 
Some noted that they purchase some drugs in larger quantities, making 
reporting at the patient level more complicated. A few noted that this 
could be done, but said that hospices would need lead time to prepare 
systems to track and report at the patient level. One suggested that we 
specify what cost structure drug charges

[[Page 27847]]

should be based upon, such as average wholesale price plus a 
percentage.
    In summary, commenters were largely supportive of our suggestions 
to collect additional visit and NPI data on claims. Many suggested 
collecting data on DME, supplies, and drugs from the cost reports, 
rather than at the patient level. Several commenters reminded us that 
their primary focus is patient care, and were concerned about the cost 
of such data collection. We appreciate the comments submitted, and will 
consider this input as we move forward towards implementing any new 
data collection for hospices. We expect to issue a change request 
detailing the upcoming data collection this spring or summer.
    Section 3132(a)(1)(C) of the Affordable Care Act also authorizes us 
to collect more data on hospice cost reports. The revisions to the 
hospice cost report and its associated instructions will be described 
in detail in a revision to the information collection request currently 
approved under OMB control number 0938-0758. As required by the 
Paperwork Reduction Act, we will publish the both 60-day and 30-day 
notices with comment periods in the Federal Register in the near 
future. Comments related to cost report revisions should be submitted 
as instructed in 60-day and 30-day notices that publish in the Federal 
Register.

E. Technical and Clarifying Regulations Text Change

    We are proposing to incorporate the following technical change to 
correct an erroneous cross reference in our regulations text.
Administrative Appeals (Sec.  418.311)
    A hospice that does not believe its payments have been properly 
determined may request a review from the intermediary or from the 
Provider Reimbursement Review Board (PRRB), depending on the amount in 
controversy. Section 418.311 details the procedures for appealing a 
payment decision and also refers to 42 CFR part 405, subpart R. The 
rationale for this appeals process was explained in the August 22, 1983 
Hospice proposed rule (48 FR 38146) and finalized in the December 16, 
1983 Hospice final rule (48 FR 56008). Hospices are permitted to appeal 
computation of the payment limit or the amount due to the hospice to 
the PRRB if the amount in controversy is $10,000 or more.
    We propose to make a technical correction in Sec.  418.311 to 
correct an erroneous reference to Sec.  405.1874. The published 
reference to Sec.  405.1874 does not exist and was a typographic error. 
We are correcting this error by changing the referenced Sec.  405.1874 
to Sec.  405.1875--Administrator review. Section 405.1875 allows for 
the Administrator, at his or her discretion, to immediately review any 
decision of the Board as described in the August 22, 1983 proposed and 
December 16, 1983 final rules (48 FR 38159, and 48 FR 56019, 
respectively).

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques. We are soliciting public comment on each of these issues 
for this section of this document that contains information collection 
requirements (ICRs).
    Section 1814(i)(5)(C) of the Act requires that each hospice submit 
data to the Secretary on quality measures specified by the Secretary. 
Such data must be submitted in a form and manner, and at a time 
specified by the Secretary. Under section 1814(i)(5)(D)(iii) of the 
Act, the Secretary must publish selected measures that will be 
applicable with respect to FY 2014 not later than October 1, 2012. In 
implementing the Hospice quality reporting program, we seek to collect 
measure information with as little burden to the providers as possible 
and which reflects the full spectrum of quality performance.
    We propose to implement a Hospice Experience of Care Survey to 
reflect the patients' families' and friends' perspectives of care in 
hospices. The 60-day notice for the field test of the survey was 
published on April 4, 2013 (78 FR 20323) under CMS-10475 (OCN 0938-
New). While we set out the requirements and burden estimates for the 
field study, it is too early to set out the requirements and burden 
estimates for the national implementation of the survey. We anticipate 
having the final survey instrument in 2014 and setting out the 
collection of information requirements and burden estimates in the 
proposed rule for CY 2015. We propose implementation of the survey in 
2015.
    In the August 4, 2011 FY 2012 Hospice Wage Index final rule (76 FR 
47302, 47320), to meet the quality reporting requirements for hospices 
for the FY 2014 payment determination as set forth in section 
1814(i)(5) of the Act, we finalized the requirement that hospices 
report two measures: (1) An NQF-endorsed measure that is related to 
pain management, NQF 0209; and (2) a structural measure that 
is not endorsed by NQF: Participation in a Quality Assessment and 
Performance Improvement (QAPI) program that includes at least three 
quality indicators related to patient care. In this rule, we propose 
that the structural measure related to QAPI indicators and the NQF 
0209 pain measure not be required for the hospice quality 
reporting program beyond data submission for the FY 2015 payment 
determination.
    We are not proposing to adopt any new measures in this proposed 
rule. However, we are proposing to implement a hospice patient-level 
data set to be used by all hospices to collect and submit standardized 
data about each patient admitted to hospice. This Hospice Item Set will 
be used to support the standardized collection and calculation of 
quality measures, collection of the requisite data elements. Hospices 
would be required to complete and submit an admission HIS and a 
discharge HIS on all patients admitted to hospice starting July 1, 2014 
for FY 2016 APU determination. The admission and discharge HIS will 
collect the standardized data elements needed to calculate 7 NQF 
endorsed measures for hospice.
    Using 2011 Medicare claims data we have estimated that there will 
be approximately 1,089,719 admissions across all hospices per year and 
therefore, we would expect that there should be 1,089,719 Hospice Item 
Sets (consisting of one admission and one discharge assessment per 
patient), submitted across all hospices yearly. There were 3,742 
certified hospices in the U.S. as of October 1, 2012; we estimate that 
each individual hospice will submit on average 291 Hospice Item Sets 
annually or 24 Hospice Items Sets per month.
    The Hospice Item Set consists of both an admission assessment and a 
discharge assessment. As noted above, we estimate that there will be 
1,089,719

[[Page 27848]]

hospice admissions across all hospices per year. Therefore, we expect 
there to be 2,179,438 Hospice Item Set submissions, (both admission and 
discharge assessment) submitted across all hospices annually or 181,620 
across all hospices monthly. We further estimate that there will be 582 
Hospice Item Set submissions by each hospice annually or 49 submissions 
monthly.
    For the Admission Hospice Item Set, we estimate that it will take 
14 minutes of time by a clinician such as a Registered Nurse at an 
hourly wage of $33.23 to abstract data for Admission Hospice Item Set. 
This would cost the facility approximately $7.75 for each admission 
assessment.\5\ We further estimate that it will take 5 minutes of time 
by clerical or administrative staff person such as a medical data entry 
clerk or medical secretary at an hourly wage of $15.59 to upload the 
Hospice Item Set data into the CMS system. This would cost the facility 
approximately $1.30 per assessment.\6\ For the Discharge Hospice Item 
Set, we estimate that it will take 5 minutes of time by a clinician 
such as a nurse at an hourly wage of $33.23 to abstract data for 
Discharge Hospice Item Set. This would cost the facility approximately 
$2.77. We further estimate that it will take 5 minutes of time by 
clerical or administrative staff such as a medical data entry clerk or 
medical secretary at an hourly wage of $15.59 to upload data into the 
CMS system. This would cost the facility approximately $1.30.
---------------------------------------------------------------------------

    \5\ 14 minutes of time by a Registered Nurse at $33.23/60 
minutes per hour = $0.56; $0.56 per one minute x 5 minutes = $7.75.
    \6\ 5 minutes of time by a Medical Data Entry Clerk at $15.59/60 
minutes per hour = $0.265; $0.265 per one minute x 5 minutes = 
$1.30.
---------------------------------------------------------------------------

    We estimate that the total nursing time required for completion of 
both the admission and discharge assessments is 19 minutes at a rate of 
$33.23 per hour. The annualized cost across all Hospices for the 
nursing/clinical time required to complete both the admission and 
discharge Hospice Item sets is estimated to be $11,458,528 and the cost 
to each individual Hospice is estimated to be $3,062.14. The estimated 
time burden to hospices for a medical data entry clerk to complete the 
admission and discharge Hospice Item Set assessments is 10 minutes at a 
rate of $15.59 per hour. The cost for completion of the both the 
admission and discharge Hospice Item sets by a medical data entry clerk 
is estimated to be $2,829,401 across all Hospices and $756.12 to each 
Hospice.
    The total combined time burden for completion of the Admission and 
Discharge Hospice Data Item Sets is estimated to be 29 minutes. The 
total annualized cost across all hospices is estimated to be 
$14,287,929. For each individual hospice, this annualized cost is 
estimated to be $3,818.26. The estimated cost for each individual 
Hospice Item Set submission is $13.11.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer, [CMS-1449-P]
    Fax: (202) 395 6974; or
    Email: OIRA_submission@omb.eop.gov

V. Response to Comments

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

VI. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule follows Sec.  418.306(c) which requires annual 
issuance, in the Federal Register, of the hospice wage index based on 
the most current available CMS hospital wage data, including any 
changes to the definitions of Metropolitan Statistical Areas (MSAs). 
This rule proposes updates to the hospice payment rates for FY 2014. In 
addition, this proposed rule provides background on hospice care, 
clarifies diagnosis coding on hospice claims, updates the public on the 
status of hospice payment reform, proposes a technical and clarifying 
regulatory text change, and proposes changes to the hospice quality 
reporting program.

B. Overall Impact

    The overall impact of this proposed rule is an estimated net 
increase in Federal payments to hospices of $180 million, or 1.1 
percent, for FY 2014. This estimated impact on hospices is a result of 
the proposed hospice payment update percentage for FY 2014 of 1.8 
percent and changes to the FY 2014 hospice wage index, including a 
reduction to the BNAF by an additional 15 percent, for a total BNAF 
reduction of 70 percent (10 percent in FY 2010, and 15 percent per year 
for FY 2011 through FY 2014). A 70 percent reduced BNAF is computed to 
be 0.018449 (or 1.8449 percent). The BNAF reduction is part of a 7-year 
BNAF phase-out that was finalized in in the August 6, 2009 FY 2010 
Hospice Wage Index final rule (74 FR 39384), and is not a policy 
change.
1. Detailed Economic Analysis
    Column 4 of Table 9 shows the combined effects of the updated wage 
data (the 2012 pre-floor, pre-reclassified hospital wage index) and of 
the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 70 percent), comparing estimated payments for FY 2013 to 
estimated payments for FY 2014. The FY 2013 payments used for 
comparison have a 55 percent reduced BNAF applied. We estimate that the 
total hospice payments for FY 2014 would decrease by 0.7 percent. This 
0.7 percent is the result of a 0.1 percent reduction due to the use of 
updated wage data ($-20 million), and a 0.6 percent reduction due to 
the additional 15 percent reduction in the BNAF ($-100 million). This 
estimate does not take into account the proposed hospice payment update 
percentage of 1.8 percent (+$300 million) for FY 2014.
    Column 5 of Table 9 shows the combined effects of the updated wage 
data (the 2012 pre-floor, pre-reclassified hospital wage index), the 
additional 15 percent reduction in the BNAF (for a total BNAF reduction 
of 70 percent), and the proposed hospice payment update percentage of 
1.8 percent. The proposed 1.8 percent hospice payment update percentage 
is based on a 2.5 percent estimated inpatient hospital market basket 
update for FY 2014 reduced by a 0.4 percentage point productivity 
adjustment and by 0.3 percentage point as mandated by the Affordable 
Care Act. The estimated effect of the 1.8 percent proposed hospice 
payment update percentage is an increase in payments to hospices of 
approximately $300 million. Taking into account the 1.8 percent 
proposed hospice payment update percentage (+$300 million), the use of 
updated wage data ($-20 million), and the additional 15 percent 
reduction in the BNAF ($-100 million), it is estimated that hospice 
payments would increase by $180 million in FY 2014 ($300 million-$20 
million -$100 million = $180 million) or 1.1 percent in FY 2014.

[[Page 27849]]

a. Effects on Hospices
    This section discusses the impact of the projected effects of the 
hospice wage index and the effects of a proposed 1.8 percent hospice 
payment update percentage for FY 2014. This proposed rule continues to 
use the CBSA-based pre-floor, pre-reclassified hospital wage index as a 
basis for the hospice wage index and continues to use the same policies 
for treatment of areas (rural and urban) without hospital wage data. 
The proposed FY 2014 hospice wage index is based upon the 2012 pre-
floor, pre-reclassified hospital wage index and the most complete 
claims data available (FY 2012) with an additional 15 percent reduction 
in the BNAF (for a total BNAF reduction of 70 percent).
    For the purposes of our impacts, our baseline is estimated FY 2013 
payments with a 55 percent BNAF reduction, using the 2011 pre-floor, 
pre-reclassified hospital wage index. Our first comparison (column 3 of 
Table 9) compares our baseline to estimated FY 2014 payments (holding 
payment rates constant) using the updated wage data (2012 pre-floor, 
pre-reclassified hospital wage index). Consequently, the estimated 
effects illustrated in column 3 of Table 9 show the distributional 
effects of the updated wage data only. The effects of using the updated 
wage data combined with the additional 15 percent reduction in the BNAF 
are illustrated in column 4 of Table 9.
    We have included a comparison of the combined effects of the 
additional 15 percent BNAF reduction, the updated wage data, and the 
proposed 1.8 percent hospice payment update percentage for FY 2014 
(Table 9, column 5). Presenting these data gives the hospice industry a 
more complete picture of the effects on their total revenue based on 
changes to the hospice wage index and the BNAF phase-out as discussed 
in this proposed rule and the proposed FY 2014 hospice payment update 
percentage. Certain events may limit the scope or accuracy of our 
impact analysis, because such an analysis is susceptible to forecasting 
errors due to other changes in the forecasted impact time period. The 
nature of the Medicare program is such that the changes may interact, 
and the complexity of the interaction of these changes could make it 
difficult to predict accurately the full scope of the impact upon 
hospices.

   Table 9--Anticipated Impact on Medicare Hospice Payments of Updating the Pre-Floor, Pre-Reclassified Hospital Wage Index Data, Reducing the Budget
  Neutrality Adjustment Factor (BNAF) by an Additional 15 Percent (for a Total BNAF Reduction of 70 Percent) and Applying a 1.8 Percent Hospice Payment
                             Update Percentage, Compared to the FY 2013 Hospice Wage Index with a 55 Percent BNAF Reduction
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Percent change in
                                                                                                                    Percent change in   hospice payments
                                                                                                                     hospice payments  due to wage index
                                                                                       Number of    Percent change  due to wage index       change,
                                                                       Number of     routine home     in hospice         change,         additional 15%
                                                                       hospices      care days in    payments due     additional 15%      reduction in
                                                                                       thousands    to FY2014 wage     reduction in    budget neutrality
                                                                                                     index change   budget neutrality    adjustment and
                                                                                                                        adjustment       market basket
                                                                                                                                             update
 
                                                                               (1)             (2)             (3)                (4)                (5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL HOSPICES......................................................           3,545          85,390            -0.1               -0.7                1.1
    URBAN HOSPICES................................................           2,575          74,784            -0.1               -0.7                1.1
    RURAL HOSPICES................................................             970          10,606            -0.2               -0.6                1.2
BY REGION--URBAN:
    NEW ENGLAND...................................................             129           2,780             1.0                0.4                2.2
    MIDDLE ATLANTIC...............................................             247           8,018             0.0               -0.6                1.2
    SOUTH ATLANTIC................................................             376          16,441            -0.7               -1.3                0.5
    EAST NORTH CENTRAL............................................             334          11,435             0.0               -0.6                1.2
    EAST SOUTH CENTRAL............................................             154           4,332            -0.5               -1.0                0.8
    WEST NORTH CENTRAL............................................             195           4,627             0.4               -0.2                1.6
    WEST SOUTH CENTRAL............................................             514           9,894            -0.4               -1.0                0.8
    MOUNTAIN......................................................             260           6,545            -0.8               -1.4                0.4
    PACIFIC.......................................................             331           9,432             0.9                0.3                2.1
    OUTLYING......................................................              35           1,280             0.3                0.3                2.1
BY REGION--RURAL:
    NEW ENGLAND...................................................              24             232            -0.7               -1.4                0.4
    MIDDLE ATLANTIC...............................................              42             563            -0.1               -0.7                1.1
    SOUTH ATLANTIC................................................             135           2,358            -0.3               -0.6                1.2
    EAST NORTH CENTRAL............................................             137           1,708             0.4               -0.2                1.6
    EAST SOUTH CENTRAL............................................             132           1,814             0.1                0.0                1.8
    WEST NORTH CENTRAL............................................             182           1,240            -0.9               -1.3                0.5
    WEST SOUTH CENTRAL............................................             175           1,537            -0.1               -0.2                1.6
    MOUNTAIN......................................................              95             665             0.3               -0.1                1.7
    PACIFIC.......................................................              47             473            -2.2               -2.9               -1.1
    OUTLYING......................................................               1              15             0.0                0.0                1.8
BY SIZE/DAYS:
    0-3499 DAYS (small)...........................................             587           1,021            -0.4               -0.9                0.9
    3500-19,999 DAYS (medium).....................................           1,711          17,331            -0.2               -0.7                1.1
    20,000+ DAYS (large)..........................................           1,247          67,037            -0.1               -0.7                1.1
TYPE OF OWNERSHIP:
    VOLUNTARY.....................................................           1,077          30,041             0.0               -0.6                1.2
    GOVERNMENT....................................................             486           8,911            -0.1               -0.7                1.1
    PROPRIETARY...................................................           1,982          46,438            -0.2               -0.8                1.0
HOSPICE BASE:

[[Page 27850]]

 
    FREESTANDING..................................................           2,547          69,752            -0.2               -0.8                1.0
    HOME HEALTH AGENCY............................................             521           9,848             0.3               -0.3                1.5
    HOSPITAL......................................................             458           5,574             0.0               -0.6                1.2
    SKILLED NURSING FACILITY......................................              19             216             0.2               -0.5                1.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Providers with hospice claims with dates of service between October 1, 2011 and September 30, 2012, based on the 2012 standard analytic file
  (SAF) as of December 31, 2012.
Note: The proposed 1.8 percent hospice payment update percentage for FY 2014 is based on an estimated 2.5 percent inpatient hospital market basket
  update, reduced by a 0.4 percentage point productivity adjustment and by 0.3 percentage point. Starting with FY 2013 (and in subsequent fiscal years),
  the market basket percentage update under the hospice payment system as described in section 1814(i)(1)(C)(ii)(VII) or section 1814(i)(1)(C)(iii) of
  the Act will be annually reduced by changes in economy-wide productivity as set out at section 1886(b)(3)(B)(xi)(II) of the Act. In FY 2013 through FY
  2019, the market basket percentage update under the hospice payment system will be reduced by an additional 0.3 percentage point (although for FY 2014
  to FY 2019, the potential 0.3 percentage point reduction is subject to suspension under conditions set out under section 1814(i)(1)(C)(v) of the Act).
REGION KEY:
NEW ENGLAND=Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; MIDDLE ATLANTIC=Pennsylvania, New Jersey, New York; SOUTH
  ATLANTIC=Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia; EAST NORTH
  CENTRAL=Illinois, Indiana, Michigan, Ohio, Wisconsin; EAST SOUTH CENTRAL=Alabama, Kentucky, Mississippi, Tennessee; WEST NORTH CENTRAL=Iowa, Kansas,
  Minnesota, Missouri, Nebraska, North Dakota, South Dakota; WEST SOUTH CENTRAL=Arkansas, Louisiana, Oklahoma, Texas; MOUNTAIN=Arizona, Colorado, Idaho,
  Montana, Nevada, New Mexico, Utah, Wyoming; PACIFIC=Alaska, California, Hawaii, Oregon, Washington; OUTLYING=Guam, Puerto Rico, Virgin Islands.

    Table 9 shows the results of our analysis. In column 1, we indicate 
the number of hospices included in our analysis as of December 31, 
2012, which had also filed claims in FY 2012. In column 2, we indicate 
the number of routine home care days that were included in our 
analysis, although the analysis was performed on all types of hospice 
care. Columns 3, 4, and 5 compare FY 2013 estimated payments with those 
estimated for FY 2014. The estimated FY 2013 payments incorporate a 
BNAF, which has been reduced by 55 percent. Column 3 shows the 
percentage change in estimated Medicare payments for FY 2014 due to the 
effects of the updated wage data only, compared with estimated FY 2013 
payments. The effect of the updated wage data can vary from region to 
region depending on the fluctuations in the wage index values of the 
pre-floor, pre-reclassified hospital wage index. Column 4 shows the 
percentage change in estimated hospice payments from FY 2013 to FY 2014 
due to the combined effects of using the updated wage data and reducing 
the BNAF by an additional 15 percent. Column 5 shows the percentage 
change in estimated hospice payments from FY 2013 to FY 2014 due to the 
combined effects of using updated wage data, an additional 15 percent 
BNAF reduction, and the proposed 1.8 percent hospice payment update 
percentage.
    The impact of changes in this proposed rule has been analyzed 
according to the type of hospice, geographic location, type of 
ownership, hospice base, and size. Table 9 categorizes hospices by 
various geographic and hospice characteristics. The first row of data 
displays the aggregate result of the impact for all Medicare-certified 
hospices. The second and third rows of the table categorize hospices 
according to their geographic location (urban and rural). Our analysis 
indicated that there are 2,575 hospices located in urban areas and 970 
hospices located in rural areas. The next two row groupings in the 
table indicate the number of hospices by census region, also broken 
down by urban and rural hospices. The next grouping shows the impact on 
hospices based on the size of the hospice's program. We determined that 
the majority of hospice payments are made at the routine home care 
rate. Therefore, we based the size of each individual hospice's program 
on the number of routine home care days provided in FY 2012. The next 
grouping shows the impact on hospices by type of ownership. The final 
grouping shows the impact on hospices defined by whether they are 
provider-based or freestanding.
    As indicated in column 1 of Table 9, there are 3,545 hospices. 
Approximately 44.1 percent of Medicare-certified hospices are 
identified as voluntary (non-profit) or government agencies; a majority 
(55.9 percent) are proprietary (for-profit), with 1,563 designated as 
non-profit or government hospices, and 1,982 as proprietary. In 
addition, our analysis shows that most hospices are in urban areas and 
provide the vast majority of routine home care days, most hospices are 
medium-sized, and the vast majority of hospices are freestanding.
b. Hospice Size
    Under the Medicare hospice benefit, hospices can provide four 
different levels of care. The majority of the days provided by a 
hospice are routine home care (RHC) days, representing about 97 percent 
of the services provided by a hospice. Therefore, the number of RHC 
days can be used as a proxy for the size of the hospice, that is, the 
more days of care provided, the larger the hospice. We currently use 
three size designations to present the impact analyses. The

[[Page 27851]]

three categories are--(1) small agencies having 0 to 3,499 RHC days; 
(2) medium agencies having 3,500 to 19,999 RHC days; and (3) large 
agencies having 20,000 or more RHC days. The FY 2014 updated wage data 
before any BNAF reduction are anticipated to decrease payments to large 
hospices by 0.1 percent, to medium hospices by 0.2 percent, and to 
small hospices by 0.4 percent (column 3), respectively. The updated 
wage data and the additional 15 percent BNAF reduction (for a total 
BNAF reduction of 70 percent) are anticipated to decrease estimated 
payments to small hospices by 0.9 percent, to medium hospices by 0.7 
percent, and to large hospices by 0.7 percent (column 4). Finally, the 
updated wage data, the additional 15 percent BNAF reduction (for a 
total BNAF reduction of 70 percent), and the proposed 1.8 percent 
hospice payment update percentage are projected to increase estimated 
payments by 0.9 percent for small hospices, by 1.1 percent for medium 
hospices, and by 1.1 percent for large hospices (column 5).
c. Geographic Location
    Column 3 of Table 9 shows the estimated impact of using updated 
wage data without the BNAF reduction. Urban hospices are anticipated to 
experience a decrease of 0.1 percent and rural hospices are anticipated 
to experience a decrease of 0.2 percent in payments. Urban hospices can 
anticipate an increase in payments in New England of 1.0 percent, in 
the West North Central region of 0.4 percent, in the Pacific region of 
0.9 percent and in Outlying regions of 0.3 percent. Urban hospices can 
anticipate a decrease in payments ranging from 0.8 percent in the 
Mountain region to 0.4 percent in the West South Central region. Urban 
hospices in Middle Atlantic and East North Central are not anticipated 
to be affected by the updated wage data.
    Rural hospices are estimated to see a decrease in payments in six 
regions, ranging from 2.2 percent in the Pacific region to 0.1 percent 
in the West South Central and Middle Atlantic regions. Rural hospices 
can anticipate an increase in payments in three regions ranging from 
0.1 percent in the East South Central region to 0.4 percent in the East 
North Central region. There is no anticipated change in payments for 
Outlying regions due to the use of updated wage data.
    Column 4 shows the combined effect of the updated wage data and the 
additional 15 percent BNAF reduction on estimated payments, as compared 
to the FY 2013 estimated payments using a BNAF with a 55 percent 
reduction. Overall, hospices are anticipated to experience a 0.7 
percent decrease in payments, with urban hospices experiencing an 
estimated decrease of 0.7 percent and rural hospices experiencing an 
estimated decrease of 0.6 percent. All urban areas other than Outlying, 
Pacific and New England regions are estimated to see decreases in 
payments, ranging from 1.4 percent in the Mountain region to 0.2 
percent in the West North Central region. Rural hospices are estimated 
to experience a decrease in payments in seven regions, ranging from 2.9 
percent in the Pacific region to 0.1 percent in the Mountain region. 
Payments in the Outlying and East South Central regions are anticipated 
to stay relatively stable.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction, and the proposed 1.8 percent 
hospice payment update percentage on estimated FY 2014 payments as 
compared to estimated FY 2013 payments. Overall, hospices are 
anticipated to experience a 1.1 percent increase in payments, with 
urban hospices anticipated to experience a 1.1 percent increase in 
payments, and rural hospices anticipated to experience a 1.2 percent 
increase in payments. Urban hospices are anticipated to experience an 
increase in estimated payments in every region, ranging from 0.4 
percent in the Mountain region to 2.2 percent in New England. Rural 
hospices in every region but one are estimated to see an increase in 
payments ranging from 0.4 percent in New England to 1.8 percent in the 
East South Central and Outlying regions. The Pacific region is 
estimated to see a decrease in payments of 1.1 percent.
d. Type of Ownership
    Column 3 demonstrates the effect of the updated wage data on FY 
2014 estimated payments, versus FY 2013 estimated payments. We 
anticipate that using the updated wage data would decrease estimated 
payments to proprietary (for-profit) and Government hospices by 0.2 
percent and 0.1 percent, respectively. Voluntary (non-profit) hospices 
are expected to have no change in payments. Column 4 demonstrates the 
combined effects of the updated wage data and of the additional 15 
percent BNAF reduction. Estimated payments to voluntary (non-profit), 
proprietary (for-profit) and government hospices are anticipated to 
decrease by 0.6 percent, 0.8 percent and 0.7 percent, respectively. 
Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 70 
percent), and the proposed 1.8 percent hospice payment update 
percentage on estimated payments, comparing FY 2014 to FY 2013. 
Estimated FY 2014 payments are anticipated to increase for voluntary 
(non-profit) hospices, for proprietary (for-profit) hospices, and 
government hospices, by 1.2, 1.0, and 1.1 percent, respectively.
e. Hospice Base
    Column 3 demonstrates the effect of using the updated wage data, 
comparing estimated payments for FY 2014 to FY 2013. Estimated payments 
are anticipated to decrease for freestanding hospices by 0.2 percent. 
Estimated payments are anticipated to increase for Home Health Agency 
and Skilled Nursing Facility based hospices by 0.3 percent and by 0.2 
percent, respectively. Hospital based hospices are estimated to 
experience no change in payments. Column 4 shows the combined effects 
of the updated wage data and reducing the BNAF by an additional 15 
percent, comparing estimated payments for FY 2014 to FY 2013. All 
hospice facilities are anticipated to experience decrease in payments 
ranging from 0.8 percent for freestanding hospices to 0.3 percent for 
Home Health Agency based hospices. Column 5 shows the combined effects 
of the updated wage data, the additional 15 percent BNAF reduction, and 
the proposed 1.8 percent hospice payment update percentage on estimated 
payments, comparing FY 2014 to FY 2013. Estimated payments are 
anticipated to increase for all hospices, ranging from 1.0 percent for 
freestanding hospices to 1.5 percent for Home Health Agency based 
hospices.
f. Effects on Other Providers
    This proposed rule only affects Medicare hospices, and therefore 
has no effect on other provider types.
g. Effects on the Medicare and Medicaid Programs
    This proposed rule only affects Medicare hospices, and therefore 
has no effect on Medicaid programs. As described previously, estimated 
Medicare payments to hospices in FY 2014 are anticipated to decrease by 
$20 million due to the update in the wage index data, and to decrease 
by $100 million due to the additional 15 percent reduction in the BNAF 
(for a total 70 percent reduction in the BNAF). However, the proposed 
hospice payment update percentage of 1.8 percent is anticipated to 
increase Medicare payments by $300 million. Therefore, the total effect 
on Medicare

[[Page 27852]]

hospice payments is estimated to be a $180 million increase (1.1 
percent).
h. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 10 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with this proposed rule. Table 10 provides our 
best estimate of the increase in Medicare payments under the hospice 
benefit as a result of the changes presented in this proposed rule 
using data for 3,545 hospices in our database.

       Table 10--Accounting Statement: Classification of Estimated
                  Expenditures, From FY 2013 to FY 2014
                             [In $Millions]
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $180.
From Whom to Whom.........................  Federal Government to
                                             Hospices.
------------------------------------------------------------------------

i. Conclusion
    In conclusion, the overall effect of this proposed rule is an 
estimated $180 million increase in Federal Medicare payments to 
hospices due to the wage index changes (including the additional 15 
percent reduction in the BNAF) and the proposed hospice payment update 
percentage of 1.8 percent. Furthermore, the Secretary has determined 
that this will not have a significant impact on a substantial number of 
small entities, or have a significant effect relative to section 
1102(b) of the Act.
2. Regulatory Flexibility Act Analysis
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
almost all hospices are small entities as that term is used in the RFA. 
The great majority of hospitals and most other health care providers 
and suppliers are small entities by meeting the Small Business 
Administration (SBA) definition of a small business (in the service 
sector, having revenues of less than $7.0 million to $34.5 million in 
any 1 year), or being nonprofit organizations. While the SBA does not 
define a size threshold in terms of annual revenues for hospices, it 
does define one for home health agencies ($14 million; see http://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdf). 
For the purposes of this proposed rule, because the hospice benefit is 
a home-based benefit, we are applying the SBA definition of ``small'' 
for home health agencies to hospices; we will use this definition of 
``small'' in determining if this proposed rule has a significant impact 
on a substantial number of small entities (for example, hospices). We 
estimate that 95 percent of hospices have Medicare revenues below $14 
million or are nonprofit organizations and therefore are considered 
small entities.
    HHS's practice in interpreting the RFA is to consider effects 
economically ``significant'' only if they reach a threshold of 3 to 5 
percent or more of total revenue or total costs. As noted above, the 
combined effect of the updated wage data, the additional 15 percent 
BNAF reduction, and the proposed FY 2014 hospice payment update 
percentage of 1.8 percent results in an increase in estimated hospice 
payments of 1.1 percent for FY 2014. For small and medium hospices (as 
defined by routine home care days), the estimated effects on revenue 
when accounting for the updated wage data, the additional 15 percent 
BNAF reduction, and the proposed FY 2014 hospice payment update 
percentage reflect increases in payments of 0.9 percent and 1.1 
percent, respectively. Therefore, the Secretary has determined that 
this proposed rule will not create a significant economic impact on a 
substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This proposed rule only 
affects hospices. Therefore, the Secretary has determined that this 
proposed rule would not have a significant impact on the operations of 
a substantial number of small rural hospitals.
3. Unfunded Mandates Reform Act Analysis
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2013, that 
threshold is approximately $141 million. This proposed rule is not 
anticipated to have an effect on State, local, or tribal governments, 
in the aggregate, or on the private sector of $141 million or more.

VII. Federalism Analysis and Regulations Text

    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 
proposed rule under the threshold criteria of Executive Order 13132, 
Federalism, and have determined that it will not have substantial 
direct effects on the rights, roles, and responsibilities of States, 
local or tribal governments.

List of Subjects in 42 CFR Part 418

    Health Facilities, Hospice Care, Medicare, Reporting and record 
keeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR part 418 as set forth 
below:

PART 418--HOSPICE CARE

0
1. The authority citation for part 418 continues to read as follows:

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


Sec.  418.311  [Amended]

0
2. Amend Sec.  418.311 by removing the reference to ``Sec.  405.1874'' 
and adding in its place the reference ``Sec.  405.1875''.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program) (Catalog of Federal Domestic Assistance Program 
No. 93.773, Medicare--Hospital Insurance; and Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: April 23, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 25, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-10389 Filed 4-29-13; 4:15 pm]
BILLING CODE 4120-01-P