Vol. 77 Friday, 

No. 135 July 13, 2012 

Part III 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 409, 424, 431 et al. 

Medicare Program; Home Health Prospective Payment System Rate 

Update for Calendar Year 2013, Hospice Quality Reporting Requirements, 

and Survey and Enforcement Requirements for Home Health Agencies; 

Proposed Rule 

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41548 Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 409, 424, 431, 484, 488, 

489, and 498 

[CMS–1358–P] 

RIN 0938–AR18 

Medicare Program; Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2013, 

Hospice Quality Reporting 

Requirements, and Survey and 

Enforcement Requirements for Home 

Health Agencies 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

update the Home Health Prospective 

Payment System (HH PPS) rates, 

including the national standardized 60- 

day episode rates, the national per-visit 

rates, the low-utilization payment 

amount (LUPA), and outlier payments 

under the Medicare prospective 

payment system for home health 

agencies effective January 1, 2013. This 

rule also proposes requirements for the 

Hospice quality data reporting program. 

This proposed rule would also establish 

requirements for unannounced, 

standard and extended surveys of home 

health agencies (HHAs) and provide a 

number of alternative (or intermediate) 

sanctions that could be imposed if 

HHAs were out of compliance with 

Federal requirements. This proposed 

rule would set forth alternative 

sanctions that could be imposed instead 

of or in addition to termination of the 

HHA’s participation in the Medicare 

program, which could remain in effect 

up to a maximum of 6 months, until the 

HHA achieved compliance with the 

HHA Conditions of Participation (CoPs), 

or until the HHA’s provider agreement 

was terminated. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on September 4, 2012. 

ADDRESSES: In commenting, please refer 

to file code CMS–1358–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (Fax) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address only: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS– 

1358–P, P.O. Box 8016, Baltimore, 

MD 21244–8016. 

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– 

1358–P, Mail Stop C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244– 

1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Kristine Chu, (410) 786–8953, for 

information about the HH payment 

reform study and report. 

Robin Dowell, (410) 786–0060, for 

information about HH and Hospice 

quality improvement and reporting. 

Kim Evans, (410) 786–0009, for 

information about HH therapy 

policies. 

Mollie Knight, (410) 786–7948, for 

information about the HH market 

basket. 

Hillary Loeffler, (410) 786–0456, for 

information about the HH PPS. 

Lori Teichman, (410) 786–6684, for 

information about HHCAHPS. 

Patricia Sevast, 410–786–8135 and 

Peggye Wilkerson, 410–786–4857, for 

survey and enforcement requirements 

for HHAs. 

SUPPLEMENTARY INFORMATION: 

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. EST. 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 and Benefits 

II. Background 

A. Statutory Background 

B. System for Payment of Home Health 

Services 

C. Updates to the HH PPS 

III. Provisions of the Proposed Rule 

A. Case-Mix Measurement 

B. Outlier Policy 

C. CY 2013 Rate Update 

D. Home Health Face-to-Face Encounter 

E. Therapy Coverage and Reassessments 

F. Payment Reform: Home Health Study 

and Report 

G. International Classification of Diseases, 

10th Edition (ICD–10) Transition Plan 

and Grouper Enhancements 

IV. Quality Reporting for Hospices 

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A. Background and Statutory Authority 

B. Public Availability of Data Submitted 

C. Quality Measures for Hospice Quality 

Reporting Program and Data Submission 

Requirements for Payment Year FY 2014 

D. Quality Measures for Hospice Quality 

Reporting Program for Payment Year FY 

2015 and Beyond 

E. Additional Measures Under 

Consideration and Standardization of 

Data Collection 

V. Survey and Enforcement Requirements for 

Home Health Agencies 

A. Background and Statutory Authority 

B. Provisions of the Proposed Rule 

C. Provider Agreements and Supplier 

Approval 

D. Solicitation of Comments 

VI. Collection of Information Requirements 

VII. Response to Comments 

VIII. Regulatory Impact Analysis 

IX. Federalism Analysis 

Regulations Text 

Acronyms 

In addition, because of the many 

terms to which we refer by abbreviation 

in this proposed rule, we are listing 

these abbreviations and their 

corresponding terms in alphabetical 

order below: 

ACH LOS Acute Care Hospital Length of 

Stay 

ADL Activities of Daily Living 

APU Annual Payment Update 

BBA Balanced Budget Act of 1997, Pub. L. 

105–33 

BBRA Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 1999, 

Pub. L. 106–113 

CAD Coronary Artery Disease 

CAH Critical Access Hospital 

CBSA Core-Based Statistical Area 

CHF Congestive Heart Failure 

CMI Case-Mix Index 

CMS Centers for Medicare and Medicaid 

Services 

CoPs Conditions of Participation 

COPD Chronic Obstructive Pulmonary 

Disease 

CVD Cardiovascular Disease 

CY Calendar Year 

DM Diabetes Mellitus 

DRA Deficit Reduction Act of 2005, Pub. L. 

109–171, enacted February 8, 2006 

FDL Fixed Dollar Loss 

FI Fiscal Intermediaries 

FR Federal Register 

FY Fiscal Year 

HCC Hierarchical Condition Categories 

HCIS Health Care Information System 

HH Home Health 

HHCAHPS Home Health Care Consumer 

Assessment of Healthcare Providers and 

Systems Survey 

HH PPS Home Health Prospective Payment 

System 

HHAs Home Health Agencies 

HHRG Home Health Resource Group 

HIPPS Health Insurance Prospective 

Payment System 

IH Inpatient Hospitalization 

IRF Inpatient Rehabilitation Facility 

LTCH Long-Term Care Hospital 

LUPA Low Utilization Payment Amount 

MEPS Medical Expenditures Panel Survey 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Pub. L. 108–173, enacted December 

8, 2003 

MSA Metropolitan Statistical Areas 

MSS Medical Social Services 

NRS Non-Routine Supplies 

OBRA Omnibus Budget Reconciliation Act 

of 1987, Pub. L. 100–2–3, enacted 

December 22, 1987 

OCESAA Omnibus Consolidated and 

Emergency Supplemental Appropriations 

Act, Pub. L. 105–277, enacted October 21, 

1998 

OES Occupational Employment Statistics 

OIG Office of Inspector General 

OT Occupational Therapy 

OMB Office of Management and Budget 

PAC-PRD Post-Acute Care Payment Reform 

Demonstration 

PEP Partial Episode Payment Adjustment 

PT Physical Therapy 

QAP Quality Assurance Plan 

PRRB Provider Reimbursement Review 

Board 

RAP Request for Anticipated Payment 

RF Renal Failure 

RFA Regulatory Flexibility Act, Pub. L. 96– 

354 

RHHIs Regional Home Health 

Intermediaries 

RIA Regulatory Impact Analysis 

SLP Speech Language Pathology Therapy 

SNF Skilled Nursing Facility 

UMRA Unfunded Mandates Reform Act of 

1995. 

I. Executive Summary 

A. Purpose 

This rule proposes updates to the 

payment rates for home health agencies 

(HHAs) for Calendar Year (CY) 2013 as 

required under section 1895(b) of the 

Social Security Act (the Act). The 

proposed update to the prospective 

payment system addresses the market 

basket update, case-mix adjustments 

due to variation in costs among different 

units of services, adjustments for 

geographic differences in wage levels, 

outlier payments, the submission of 

quality data, and additional payments 

for services provided in rural areas. 

B. Summary of the Major Provisions 

In this proposed rule, we use the 

methods described in the CY 2012 HH 

PPS final rule (76 FR 68526) to update 

the prospective payment rates for CY 

2013 using a proposed rebased and 

revised market basket described in 

section III.C.1 of this rule. This rule 

discusses the proposed case-mix upcoding adjustment. In addition, we 

propose additional regulatory flexibility 

regarding therapy documentation and 

reassessments as well as face-to-face 

encounter requirements. We also 

provide an update on the transition plan 

for ICD–10 and the home health study 

concerning home health care access. In 

addition, this rule proposes new 

requirements concerning the hospice 

quality reporting program. Lastly, this 

proposed rule would establish 

requirements concerning HHAs. 

C. Summary of Costs and Benefits 

Provision description Total costs Total benefits Transfers 

CY 2013 HH PPS payment rate 

update.

N/A ................................................ The benefits of this proposed rule 

include paying more accurately 

for the delivery of Medicare 

home health services, providing 

additional regulatory flexibility 

for HHAs to comply with therapy requirements and face-toface encounter documentation 

requirements, and establishing 

alternative (or intermediate) 

sanctions that may be imposed 

when HHAs are out of compliance with Federal requirements.

The overall economic impact of 

this proposed rule is an estimated $20 million in decreased 

payments to HHAs. 

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Provision description Total costs Total benefits Transfers 

Survey and Certification Requirements.The components of the rule which 

address survey and certification 

requirements do not represent 

new costs with the exception of 

the Informal Dispute Resolution 

process (IDR). These requirements codify Survey and Certification policies which were implemented between 1987 and 

2011. We estimate that the 

costs associated with the IDRs 

will not be significantly greater 

than current actions related to 

termination actions.

The overall benefit of this rule is 

the expected increase in provider participation in discussions with the State Survey 

Agency or CMS Regional Offices related to survey findings 

via the IDR.

Enforcement Requirements ........... We estimate a onetime $2 million 

expense to modify internal systems to monitor Civil Monetary 

Penalties. There will also be annual operating expenses associated with maintaining the system, training surveyors and 

troubleshooting issues of 

$335,972.

HHAs will be provided incentives 

to maintain or regain compliance with the HHA Conditions 

of Participation through measures other than termination.

CMP Disbursement and Cost of 

Surveys.

This proposed rule would provide 

that State Medicaid programs 

share in the cost of HHA surveys. The cost ratio would be 

calculated at 63 percent for the 

Medicare program and 37 percent for the Medicaid program. 

The projected HHA survey 

budget for FY 2013 is $39.9 

million and FY 2014 at $45.7 

million. The anticipated State 

Medicaid share is $3.7 million 

and $4.2 million respectively 

(minus Federal match).

This is in compliance with OMB 

Circular A-87.

II. Background 

A. Statutory Background 

The Balanced Budget Act of 1997 

(BBA) (Pub. L. 105–33, enacted August 

5, 1997), significantly changed the way 

Medicare pays for Medicare HH 

services. Section 4603 of the BBA 

mandated the development of the HH 

PPS. Until the implementation of a HH 

PPS on October 1, 2000, HHAs received 

payment under a retrospective 

reimbursement system. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered HH services provided 

under a plan of care (POC) that were 

paid on a reasonable cost basis by 

adding section 1895 of the Social 

Security Act (the Act), entitled 

‘‘Prospective Payment For Home Health 

Services’’. Section 1895(b)(1) of the Act 

requires the Secretary to establish a HH 

PPS for all costs of HH services paid 

under Medicare. 

Section 1895(b)(3)(A) of the Act 

requires the following: (1) The 

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary; and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage levels 

among HHAs. 

Section 1895(b)(3)(B) of the Act 

addresses the annual update to the 

standard prospective payment amounts 

by the HH applicable percentage 

increase. Section 1895(b)(4) of the Act 

governs the payment computation. 

Sections 1895(b)(4)(A)(i) and 

(b)(4)(A)(ii) of the Act require the 

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

Section 1895(b)(4)(B) of the Act requires 

the establishment of an appropriate 

case-mix change adjustment factor for 

significant variation in costs among 

different units of services. 

Similarly, section 1895(b)(4)(C) of the 

Act requires the establishment of wage 

adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. Under section 

1895(b)(4)(c) of the Act, the wageadjustment factors used by the Secretary 

may be the factors used under section 

1886(d)(3)(E) of the Act. 

Section 1895(b)(5) of the Act gives the 

Secretary the option to make additions 

or adjustments to the payment amount 

otherwise paid in the case of outliers 

due to unusual variations in the type or 

amount of medically necessary care. 

Section 3131(b) of the Patient Protection 

and Affordable Care Act of 2010 (the 

Affordable Care Act) (Pub. L. 111–148, 

enacted March 23, 2010) revised section 

1895(b)(5) of the Act so that total outlier 

payments in a given year would not 

exceed 2.5 percent of total payments 

projected or estimated. The provision 

also made permanent a 10 percent 

agency-level outlier payment cap. 

In accordance with the statute, as 

amended by the BBA, we published a 

final rule in the July 3, 2000 Federal 

Register (65 FR 41128) to implement the 

HH PPS legislation. The July 2000 final 

rule established requirements for the 

new HH PPS for HH services as required 

by section 4603 of the BBA, as 

subsequently amended by section 5101 

of the Omnibus Consolidated and 

Emergency Supplemental 

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Appropriations Act (OCESAA) for Fiscal 

Year 1999, (Pub. L. 105–277, enacted 

October 21, 1998); and by sections 302, 

305, and 306 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 

Act (BBRA) of 1999, (Pub. L. 106–113, 

enacted November 29, 1999). The 

requirements include the 

implementation of a HH PPS for HH 

services, consolidated billing 

requirements, and a number of other 

related changes. The HH PPS described 

in that rule replaced the retrospective 

reasonable cost-based system that was 

used by Medicare for the payment of HH 

services under Part A and Part B. For a 

complete and full description of the HH 

PPS as required by the BBA, see the July 

2000 HH PPS final rule (65 FR 41128 

through 41214). 

Section 5201(c) of the Deficit 

Reduction Act of 2005 (DRA) (Pub. L. 

109–171, enacted February 8, 2006) 

added new section 1895(b)(3)(B)(v) to 

the Act, requiring HHAs to submit data 

for purposes of measuring health care 

quality, and links the quality data 

submission to the annual applicable 

percentage increase. This data 

submission requirement is applicable 

for CY 2007 and each subsequent year. 

If an HHA does not submit quality data, 

the HH market basket percentage 

increase is reduced 2 percentage points. 

In the November 9, 2006 Federal 

Register (71 FR 65884, 65935), we 

published a final rule to implement the 

pay-for-reporting requirement of the 

DRA, which was codified at 

§ 484.225(h) and (i) in accordance with 

the statute. 

The Affordable Care Act made 

additional changes to the HH PPS. One 

of the changes in section 3131 of the 

Affordable Care Act is the amendment 

to section 421(a) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) (Pub. 

L. 108–173, enacted on December 8, 

2003) as amended by section 5201(b) of 

the DRA. The amended section 421(a) of 

the MMA now requires, for HH services 

furnished in a rural area (as defined in 

section 1886(d)(2)(D) of the Act) with 

respect to episodes and visits ending on 

or after April 1, 2010, and before 

January 1, 2016, that the Secretary 

increase, by 3 percent, the payment 

amount otherwise made under section 

1895 of the Act. 

B. System for Payment of Home Health 

Services 

Generally, Medicare makes payment 

under the HH PPS on the basis of a 

national standardized 60-day episode 

payment rate that is adjusted for the 

applicable case-mix and wage index. 

The national standardized 60-day 

episode rate includes the six HH 

disciplines (skilled nursing, HH aide, 

physical therapy, speech-language 

pathology, occupational therapy, and 

medical social services). Payment for 

non-routine medical supplies (NRS) is 

no longer part of the national 

standardized 60-day episode rate and is 

computed by multiplying the relative 

weight for a particular NRS severity 

level by the NRS conversion factor (See 

section II.D.4.e). Payment for durable 

medical equipment covered under the 

HH benefit is made outside the HH PPS 

payment system. To adjust for case-mix, 

the HH PPS uses a 153-category casemix classification system to assign 

patients to a home health resource 

group (HHRG). The clinical severity 

level, functional severity level, and 

service utilization are computed from 

responses to selected data elements in 

the OASIS assessment instrument and 

are used to place the patient in a 

particular HHRG. Each HHRG has an 

associated case-mix weight which is 

used in calculating the payment for an 

episode. 

For episodes with four or fewer visits, 

Medicare pays national per-visit rates 

based on the discipline(s) providing the 

services. An episode consisting of four 

or fewer visits within a 60-day period 

receives what is referred to as a low 

utilization payment adjustment (LUPA). 

Medicare also adjusts the national 

standardized 60-day episode payment 

rate for certain intervening events that 

are subject to a partial episode payment 

adjustment (PEP adjustment). For 

certain cases that exceed a specific cost 

threshold, an outlier adjustment may 

also be available. 

C. Updates to the HH PPS 

As required by section 1895(b)(3)(B) 

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. The August 29, 2007 

final rule with comment period set forth 

an update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HHAs for CY 2008. 

The CY 2008 rule included an analysis 

performed on CY 2005 HH claims data, 

which indicated a 12.78 percent 

increase in the observed case-mix since 

2000. Case-mix represents the variations 

in conditions of the patient population 

served by the HHAs. Subsequently, a 

more detailed analysis was performed 

on the 2005 case-mix data to evaluate if 

any portion of the 12.78 percent 

increase was associated with a change 

in the actual clinical condition of HH 

patients. We examined data on 

demographics, family severity, and nonHH Part A Medicare expenditures to 

predict the average case-mix weight for 

2005. We identified 8.03 percent of the 

total case-mix change as real, and 

therefore, decreased the 12.78 percent of 

total case-mix change by 8.03 percent to 

get a final nominal case-mix increase 

measure of 11.75 percent (0.1278 * 

(1¥0.0803) = 0.1175). 

To account for the changes in casemix that were not related to an 

underlying change in patient health 

status, we implemented a reduction 

over 4 years in the national 

standardized 60-day episode payment 

rates and the NRS conversion factor. 

That reduction was to be 2.75 percent 

per year for 3 years beginning in CY 

2008 and 2.71 percent for the fourth 

year in CY 2011. In the CY 2011 HH PPS 

final rule (76 FR 68532) we updated our 

analyses of case-mix change and 

finalized a reduction of 3.79 percent, 

instead of 2.71 percent, for CY 2011. 

For CY 2012, we published the 

November 4, 2011 final rule (76 FR 

68526) (hereinafter referred to as the CY 

2012 HH PPS final rule) that set forth 

the update to the 60-day national 

episode rates and the national per-visit 

rates under the Medicare prospective 

payment system for HH services. In 

addition, as discussed in the CY 2012 

final rule (76 FR 68528), our analysis 

indicated that there was a 22.59 percent 

increase in overall case-mix from 2000 

to 2009 and that only 15.76 percent of 

that overall observed case-mix 

percentage increase was due to real 

case-mix change. As a result of our 

analysis, we identified a 19.03 percent 

nominal increase in case-mix. To fully 

account for the 19.03 percent nominal 

case-mix growth which was identified 

from 2000 to 2009, we finalized a 3.79 

percent payment reduction in CY 2012 

and 1.32 percent payment reduction for 

CY 2013. 

III. Provisions of the Proposed Rule 

A. Case-Mix Measurement 

Every year since the HH PPS CY 2008 

proposed rule, we have stated in HH 

PPS rulemaking that we would continue 

to monitor case-mix changes in the HH 

PPS and to update our analysis to 

measure change in case-mix, both real 

changes in case-mix and changes which 

are unrelated to changes in patient 

acuity (nominal). We have continued to 

monitor case-mix changes, and our 

latest analysis continues to support the 

need to make payment adjustments to 

account for nominal case-mix growth. 

Before measuring nominal case-mix 

growth, we examined the total case-mix 

growth every year from 2000 to 2010. 

Our latest analysis indicates that there 

was about a 1 percent increase in the 

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average case-mix weight from 2009 to 

2010. Specifically, the 2009 average 

case-mix was 1.3435 and the 2010 

average case-mix was 1.3578. We also 

examined the change in the reporting of 

secondary diagnoses on OASIS from 

2009 to 2010 and have observed an 

increase in the reporting of secondary 

diagnoses from 2009 to 2010, thereby 

contributing to the growth in total casemix. In addition, we looked at the 

change in the distribution of episodes 

by number of therapy visits from 2009 

to 2010 and saw that the percentage of 

non-therapy episodes decreased by 1.56 

percentage points and the percentage of 

episodes with therapy increased at all 

levels of therapy, thereby contributing 

to the growth in overall case-mix from 

2009 to 2010. Our analysis also showed 

a continued increase in the percentage 

of episodes with 14–19 and 20+ therapy 

visits. 

For the remainder of this section, we 

will discuss our latest analysis of real 

and nominal case-mix change. 

Section 1895(b)(3)(B)(iv) of the Act 

gives CMS the authority to implement 

payment reductions for nominal casemix growth, changes in case-mix that 

are not related to actual changes in 

patient characteristics over time. 

Nominal case-mix growth was assessed 

and reported in CY 2008, CY 2011, and 

CY 2012 rulemaking, and payment 

reductions to the base rate were 

implemented to account for the nominal 

case-mix growth observed. 

In CY 2008 rulemaking, to assess 

nominal case-mix growth, we first 

estimated real case-mix growth, changes 

in case-mix which are related to changes 

in patient characteristics, using a 

regression-based, predictive model of 

individual case-mix weights. The 

predictive model contained measures of 

patients’ demographic characteristics, 

clinical status, inpatient history, and 

Part A Medicare costs in the time period 

leading up to their home health 

episodes. The regression coefficients for 

the predictive model were developed 

using 2000 as a base year and were 

applied to episodes from 2005, allowing 

for estimation of the change in real casemix. We then determined the nominal 

case-mix growth from 2000 to 2005 

using the regression model-predicted 

real case-mix change and the total casemix change for the time period of 

interest. 

Our analysis indicated that there was 

a 12.78 percent increase in overall casemix from 2000 to 2005 and 8.03 percent 

of that overall observed case-mix change 

was identified as real case-mix change. 

As a result of our analysis, we adjusted 

the 12.78 percent of total change in 

case-mix downward by 8.03 percent to 

get a final nominal case-mix change 

measure of 11.75 percent (0.1278 * 

(1¥0.0803) = 0.1175). To account for 

the 11.75 percent increase in nominal 

case-mix, we implemented a payment 

reduction of 2.75 percent each year for 

3 years, beginning in 2008, and we 

planned to implement a payment 

reduction of 2.71 percent in CY 2011. 

Since the publication of the HH PPS 

CY 2008 proposed rule (72 FR 25395), 

we have continued to monitor case-mix 

changes in the HH PPS, and in CY 2011 

rulemaking we updated our analysis to 

measure more recent changes in real 

and nominal case-mix. In CY 2011 

rulemaking, to accommodate the shift to 

the 153-group system in 2008, we 

developed two regression-based models 

to assess nominal case-mix growth from 

2000 to 2008. One model was developed 

using 2000 as a base year and the 80 

grouper case-mix system. The regression 

coefficients in the model were applied 

to 2007 data to determine the change in 

real case-mix from 2000 to 2007. The 

second model was developed using 

2008 as a base year and the 153 grouper 

case-mix system. The regression 

coefficients in the model were applied 

to 2007 data to determine the change in 

real case-mix from 2007 to 2008. The 

data from both of the models were then 

used to calculate the overall real casemix change from 2000 to 2008. Our 

analysis indicated that there was a 19.40 

percent increase in overall case-mix 

from 2000 to 2008 and 10.07 percent of 

that overall observed case-mix change 

was identified as real case-mix change. 

Consequently, as a result of our 

analysis, we identified a 17.45 percent 

nominal increase in case-mix (0.1940 * 

(1¥0.1007) = 0.1745) from 2000 to 

2008. In other words, there was a 

growth in case-mix of 17.45 percent that 

was unrelated to differences in patient 

characteristics, reflecting changes in 

coding documentation and other 

behavioral responses to the home health 

prospective payment system rather than 

the treatment of more resource-intensive 

patients. To fully account for the 17.45 

percent nominal case-mix growth 

identified from 2000 to 2008, in the CY 

2011 proposed rule, we proposed a 3.79 

percent payment reduction (replacing 

the planned 2.71 percent payment 

reduction) in CY 2011 and an additional 

3.79 percent payment reduction in CY 

2012. 

We received many comments on our 

CY 2011 HH PPS proposed rule that 

criticized our methodology for assessing 

real and nominal case-mix change. In 

the CY 2011 HH PPS final rule, we 

implemented the proposed payment 

reduction of 3.79 percent to the national 

standardized episode rate in CY 2011. 

However, due to the extensive 

comments we received, we deferred 

finalizing a payment reduction for CY 

2012 until further study of the case-mix 

data and methodology was completed. 

To assess the validity of the criticisms 

we received about our models to 

measure real and nominal case-mix 

change, we procured an independent 

review of our methodology by a team at 

Harvard University led by Dr. David 

Grabowski. The review included an 

examination of the predictive regression 

models and data used in CY 2011 

rulemaking, and further analysis 

consisting of extensions of the model to 

allow a closer look at nominal case-mix 

growth by categorizing the growth 

according to provider types and 

subgroups of patients. 

When reviewing the model, the 

Harvard team found that overall, our 

models were robust. However, one area 

of potential refinement to our models 

that the Harvard team suggested was to 

incorporate variables derived from 

Hierarchical Condition Categories (HCC) 

data, which is used by CMS to riskadjust payments to managed care 

organizations in the Medicare program. 

During CY 2012 rulemaking, based on 

Dr. Grabowski and his team’s 

recommendation and our previous 

consideration to incorporate HCC data 

in our models to assess real case-mix 

change, we explored the effects of 

adding HCC patient classification data 

into our models. For our analysis of real 

and nominal case-mix growth from 2000 

to 2009, we incorporated the HCC 

community scores, HCC demographic 

variables, and disease indicator 

variables into our models. It should be 

noted that we enhanced our models 

with HCC data starting in 2005 due to 

the availability of HCC data in our 

analytic files. 

To use the HCC data as well as 

accommodate the shift to the 153-group 

system in 2008, we analyzed real casemix change for 3 different periods, from 

2000 to 2005, from 2005 to 2007, and 

from 2007 to 2009. The real case-mix 

change from 2000 to 2005 was assessed 

using the same variables used in the 

model described in the CY 2011 HH PPS 

proposed rule (75 FR 43238). The real 

case-mix change from 2005 to 2007 and 

from 2007 to 2009 was assessed using 

the pre-existing variable set plus 

additional information from the HCC 

variables. To determine the amount of 

real case-mix change from 2000 to 2009 

(0.0390 case-mix units), we added the 

measured real change in case-mix units 

for each of the 3 periods (0.0207 casemix units for 2000 to 2005, 0.0061 casemix units for 2005 to 2007, and 0.0122 

case-mix units for 2007 to 2009). We 

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then compared the real change in casemix (0.0390 case-mix units) for 2000 to 

2009 to the total change in case-mix 

from 2000 to 2009 (0.2476 case-mix 

units). The total change in case-mix 

from 2000 to 2009 was calculated as the 

difference between the average case-mix 

in 2000 (1.0959) and the average casemix in 2009 (1.3435). Based on the 

results from our models, we estimated 

15.76 percent (0.0390/0.2476 = 0.1576) 

of the total case-mix change as real. It 

should be noted that there is a 0.01 

percentage point difference between the 

calculated and actual value due to the 

fact that 0.0390 and 0.2476 are rounded 

figures. When taking into account the 

total case-mix change from 2000 to 2009 

of 22.59 percent ((1.3435 ¥ 1.0959)/ 

1.0959 = 0.2259) and the 15.76 percent 

of total case-mix change estimated as 

real from 2000 to 2009, we obtained a 

final nominal case-mix change measure 

of 19.03 percent (0.2259 * (1 ¥ 0.1576) 

= 0.1903) from 2000 to 2009. 

This year, we updated our estimates 

of real and nominal case-mix growth 

using 2010 data. To determine the 

amount of real case-mix growth from 

2000 to 2010, we needed to obtain an 

estimate of real case-mix change for 

2007 to 2010. We obtained this value 

using the same model as the one 

described in CY 2012 rulemaking, 

which was developed using 2009 data. 

We note that when developing an 

estimate of real case-mix change for 

2007 to 2010, we used 2010 data for all 

of the variables in the model except for 

the living arrangement variables. A 

crosswalk could not be built from 

OASIS C to OASIS B1 for the living 

arrangement variables and therefore we 

predicted the 2010 value based on 

trends from 2007 to 2009. After 

obtaining the estimate of real case-mix 

change for 2007 to 2010 (0.0150 casemix units), we added this estimate to 

the 2000 to 2005 estimate of real casemix change (0.0207 case-mix units) and 

the 2005 to 2007 estimate of real casemix change (0.0061 case-mix units). 

After adding together the estimated real 

case-mix change in case-mix units for 

the three periods, the total estimated 

change in real case-mix from 2000 to 

2010 was 0.0418 (0.0207 + 0.0061 + 

0.0150 = 0.0418). Given that the total 

change in case-mix from 2000 to 2010 

was 0.2619 case-mix units (1.3578 ¥ 

1.0959 = 0.2619), we estimate that 15.97 

percent of the total percentage change in 

the national average case-mix weight 

since the interim payment system 

baseline through 2010 is due to change 

in real case-mix (0.0418/0.2619 = 

0.1597). It should be noted that there is 

a 0.01 percentage point difference 

between the calculated and actual value 

due to the fact that 0.0418 and 0.2619 

are rounded figures. When taking into 

account the total measure of case-mix 

change (23.90 percent; see Table 1) and 

the 15.97 percent of total case-mix 

change estimated as real from 2000 to 

2010, we obtained a final nominal casemix change measure of 20.08 percent 

from 2000 to 2010 (0.2390 * (1 ¥ 

0.1597) = 0.2008). Please see Table 1 for 

additional information about the 

calculations used to make the real and 

nominal case-mix change estimates from 

2000 to 2010. 

Our estimates of real and nominal 

case-mix change are consistent with 

past results. Most of the case-mix 

change has been due to improved 

coding, coding practice changes, and 

other behavioral responses to the 

prospective payment system, such as 

increased use of high therapy treatment 

plans. 

TABLE 1—SUMMARY OF REAL AND

NOMINAL CASE-MIX CHANGE ESTIMATES: 2000–2010 

Measure Model 

Actual case-mix: 2000 ...................... 1.0959 

Actual case-mix: 2010 ...................... 1.3578 

Total change in case-mix ................. 0.2619 

Total percentage change .................. 23.90% 

Estimated real change in case-mix .. 0.0418 

Percent of total change estimated as 

real ................................................ 15.97% 

Percent of total change estimated as 

nominal (creep) ............................. 84.03% 

Real case-mix percent increase ....... 3.82% 

Nominal case-mix percent increase 20.08% 

As we described earlier in this 

proposed rule, our CY 2008 HH PPS 

final rule finalized a reduction over 4 

years in the national standardized 60- 

day episode payment rates to account 

for a large increase in case-mix from 

2000 to 2005 which we determined was 

not related to treatment of more intense 

patients. We implemented a 2.75 

percent reduction each year for 2008, 

2009, and 2010 and planned to reduce 

payments by 2.71 percent in 2011. In CY 

2011 rulemaking, we updated our 

analysis of nominal case-mix growth 

through 2008 and determined that there 

was 17.45 percent nominal case-mix 

growth from 2000 to 2008. Therefore, 

we proposed and finalized an increase 

in the planned 2.71 percent reduction to 

3.79 percent for CY 2011. For the CY 

2012 proposed rule, after updating our 

models to incorporate HCC data, we 

determined that there was a 19.03 

percent nominal case-mix change from 

2000 to 2009. To account for the 

nominal case-mix growth through 2009, 

we finalized a 3.79 percent payment 

reduction to the national standardized 

60-day episode rates for nominal casemix change for CY 2012 and a 1.32 

percent payment reduction to the rates 

in CY 2013. 

When including the latest data 

available, we determined that there was 

a 20.08 percent nominal case-mix 

change from 2000 to 2010. To fully 

account for the remainder of the 20.08 

percent increase in nominal case-mix 

beyond that which has been accounted 

for in previous payment reductions, we 

estimate that the percentage reduction 

to the national standardized 60-day 

episode rates for nominal case-mix 

change would be 2.18 percent. We 

considered proposing a 2.18 percent 

reduction to account for the remaining 

increase in measured nominal case-mix, 

and seek comments on that proposal, 

rather than moving forward with the 

1.32 percent reduction promulgated in 

last year’s CY 2012 HH PPS final rule. 

However for CY 2013, we propose to 

move forward with the 1.32 percent 

payment reduction to the national 

standardized 60-day episode rates as 

promulgated in the CY 2012 HH PPS 

Final Rule (76 FR 68532). Analysis, to 

date, would seem to indicate a high 

likelihood of continued growth in 

nominal case-mix going forward. As 

such, we will continue to monitor both 

real and nominal case-mix change and 

make updates as appropriate. CMS will 

consider any and all analyses as it 

continues to address the issue of the 

increase in nominal case-mix in future 

rulemaking. 

B. Outlier Policy 

1. Background 

Section 1895(b)(5) of the Act allows 

for the provision of an addition or 

adjustment to the national standardized 

60-day case-mix and wage-adjusted 

episode payment amounts in the case of 

episodes that incur unusually high costs 

due to patient home health (HH) care 

needs. Prior to the enactment of the 

Affordable Care Act, this section of the 

Act stipulated that projected total 

outlier payments could not exceed 5 

percent of total projected or estimated 

HH payments in a given year. In the July 

2000 final rule (65 FR 41188 through 

41190), we described the method for 

determining outlier payments. Under 

this system, outlier payments are made 

for episodes whose estimated costs 

exceed a threshold amount for each 

Home Health Resource Group (HHRG). 

The episode’s estimated cost is the sum 

of the national wage-adjusted per-visit 

payment amounts for all visits delivered 

during the episode. The outlier 

threshold for each case-mix group or 

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partial episode payment (PEP) 

adjustment is defined as the 60-day 

episode payment or PEP adjustment for 

that group plus a fixed dollar loss (FDL) 

amount. The outlier payment is defined 

to be a proportion of the wage-adjusted 

estimated cost beyond the wageadjusted threshold. The threshold 

amount is the sum of the wage and casemix adjusted PPS episode amount and 

wage-adjusted fixed dollar loss amount. 

The proportion of additional costs paid 

as outlier payments is referred to as the 

loss-sharing ratio. 

2. Regulatory Update 

In the CY 2010 HH PPS final rule (74 

FR 58080 through 58087), we discussed 

excessive growth in outlier payments, 

primarily the result of unusually high 

outlier payments in a few areas of the 

country. Despite program integrity 

efforts associated with excessive outlier 

payments in targeted areas of the 

country, we discovered that outlier 

expenditures still exceeded the 5 

percent, target and, in the absence of 

corrective measures, would have 

continued do to so. Consequently, we 

assessed the appropriateness of taking 

action to curb outlier abuse. To mitigate 

possible billing vulnerabilities 

associated with excessive outlier 

payments and adhere to our statutory 

limit on outlier payments, we adopted 

an outlier policy that included a 10 

percent agency level cap on outlier 

payments. This cap was implemented in 

concert with a reduced FDL ratio of 

0.67. These policies resulted in a 

projected target outlier pool of 

approximately 2.5 percent. (The 

previous outlier pool was 5 percent of 

total HH expenditures.) 

For CY 2010, we first returned 5 

percent of these dollars back into the 

national standardized 60-day episode 

rates, the national per-visit rates, the 

low utilization payment adjustment 

(LUPA) add-on payment amount, and 

the non-routine supplies (NRS) 

conversion factor. Then, we reduced the 

CY 2010 rates by 2.5 percent to account 

for the new outlier pool of 2.5 percent. 

This outlier policy was adopted for CY 

2010 only. 

3. Statutory Update 

As outlined in the CY 2011 HH PPS 

final rule (75 FR 70397 through 70399), 

section 3131(b)(1) of the Affordable Care 

Act amended section 1895(b)(3)(C) of 

the Act, ‘‘Adjustment for outliers,’’ 

states that ‘‘The Secretary shall reduce 

the standard prospective payment 

amount (or amounts) under this 

paragraph applicable to HH services 

furnished during a period by such 

proportion as will result in an aggregate 

reduction in payments for the period 

equal to 5 percent of the total payments 

estimated to be made based on the 

prospective payment system under this 

subsection for the period.’’ In addition, 

section 3131(b)(2) of the Affordable Care 

Act amended section 1895(b)(5) of the 

Act by redesignating the existing 

language as section 1895(b)(5)(A) of the 

Act, and revising it to state that the 

Secretary, ‘‘may provide for an addition 

or adjustment to the payment amount 

otherwise made in the case of outliers 

because of unusual variations in the 

type or amount of medically necessary 

care. The total amount of the additional 

payments or payment adjustments made 

under this paragraph with respect to a 

fiscal year or year may not exceed 2.5 

percent of the total payments projected 

or estimated to be made based on the 

prospective payment system under this 

subsection in that year.’’ 

As such, beginning in CY 2011, our 

HH PPS outlier policy is that we reduce 

payment rates by 5 percent and target 

up to 2.5 percent of total estimated HH 

PPS payments to be paid as outliers. To 

get there, we first returned the 2.5 

percent held for the target CY 2010 

outlier pool to the national standardized 

60-day episode rates, the national per 

visit rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

for CY 2010. We then reduced the rates 

by 5 percent as required by section 

1895(b)(3)(C) of the Act, as amended by 

section 3131(b)(1) of the Affordable Care 

Act. For CY 2011 and subsequent 

calendar years we target up to 2.5 

percent of estimated total payments to 

be paid as outlier payments, and apply 

a 10 percent agency-level outlier cap. 

4. Loss-Sharing Ratio and Fixed Dollar 

Loss (FDL) Ratio 

For a given level of outlier payments, 

there is a trade-off between the values 

selected for the FDL ratio and the losssharing ratio. A high FDL ratio reduces 

the number of episodes that can receive 

outlier payments, but makes it possible 

to select a higher loss-sharing ratio and, 

therefore, increase outlier payments for 

outlier episodes. Alternatively, a lower 

FDL ratio means that more episodes can 

qualify for outlier payments, but outlier 

payments per episode must then be 

lower. 

The FDL ratio and the loss-sharing 

ratio must be selected so that the 

estimated total outlier payments do not 

exceed the 2.5 percent aggregate level 

(as required by section 1895(b)(5)(A) of 

the Act). In the past, we have used a 

value of 0.80 for the loss-sharing ratio, 

which is relatively high, but preserves 

incentives for agencies to attempt to 

provide care efficiently for outlier cases. 

With a loss-sharing ratio of 0.80, 

Medicare pays 80 percent of the 

additional estimated costs above the 

outlier threshold amount. We are not 

proposing a change to the loss-sharing 

ratio in this proposed rule. In the CY 

2011 HH PPS final rule (75 FR 70398), 

in targeting total outlier payments as 2.5 

percent of total HH PPS payments, we 

implemented an FDL ratio of 0.67, and 

we maintained that ratio in CY 2012. 

The national standardized 60-day 

episode payment amount is multiplied 

by the FDL ratio. That amount is wageadjusted to derive the wage-adjusted 

FDL, which is added to the case-mix 

and wage-adjusted 60-day episode 

payment amount to determine the 

outlier threshold amount that costs have 

to exceed before Medicare will pay 80 

percent of the additional estimated 

costs. 

Based on simulations using CY 2010 

claims data, we estimate that outlier 

payments in 2012 will comprise 

approximately 2.12 percent of total HH 

PPS payments. Simulations based on CY 

2009 claims data completed for the CY 

2012 HH PPS final rule (76 FR 68528) 

suggested that outlier payments in 2011 

would comprise approximately 2.14 

percent of total HH PPS payments. As 

such, our simulations suggest outlier 

payments as a percentage total HH 

payments holding steady in CY 2009 

and CY 2010. However, we are 

proposing no change to the FDL, in part 

because we have not been able to verify 

these projections in our paid claims files 

since we implemented the 10 percent 

agency-level cap on outlier payments on 

January 1, 2010. Two claims processing 

errors were identified in our 

implementation of the 10 percent 

agency-level cap on outlier payments. 

These errors resulted in inaccuracies in 

outlier payment amounts in our paid 

claims files for CY 2010 and 2011. One 

error allows for certain HHAs to be paid 

beyond the cap, resulting in 

overpayments. The other applies the cap 

to HHAs who have not reached it yet, 

resulting in underpayments. System 

changes are currently underway, and 

thus the CY 2010 data file used in our 

analysis for this proposed rule reflects 

outlier payments with these claims 

processing errors. Furthermore, another 

consideration in proposing no change to 

the FDL is our implementation in the 

CY 2012 HH PPS final rule of changes 

to the case-mix weights. The changes 

put more weight on non-therapy cases 

that typically are more likely to receive 

outlier payments. The data showing the 

effects of the changes to the case-mix 

weights on outlier payments will not be 

available for analysis until next year. In 

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the final rule, we will update our 

estimate of the FDL ratio using the best 

analysis the most current and complete 

year of HH PPS data. 

5. Outlier Relationship to the HH 

Payment Study 

As we discuss later in this proposed 

rule, section 3131(d) of the Affordable 

Care Act requires CMS to conduct a 

study and report on developing HH 

payment revisions that will ensure 

access to care and payment for HH 

patients with high severity of illness. 

Our Report to Congress containing this 

study’s recommendations is due no later 

than March 1, 2014. Section 

3131(d)(1)(A)(iii) of the Affordable Care 

Act, in particular, states that this study 

may include analysis of potential 

revisions to outlier payments to better 

reflect costs of treating Medicare 

beneficiaries with high levels of severity 

of illness. 

C. CY 2013 Rate Update 

1. Rebasing and Revising of the Home 

Health Market Basket 

a. Background 

Section 1895(b)(3)(B) of the Act 

requires that the standard prospective 

payment amounts for CY 2013 be 

increased by a factor equal to the 

applicable home health market basket 

update for those HHAs that submit 

quality data as required by the 

Secretary. 

Effective for cost reporting periods 

beginning on or after July 1, 1980, we 

developed and adopted an HHA input 

price index (that is, the home health 

‘‘market basket’’). Although ‘‘market 

basket’’ technically describes the mix of 

goods and services used to produce 

home health care, this term is also 

commonly used to denote the input 

price index derived from that market 

basket. Accordingly, the term ‘‘home 

health market basket’’ used in this 

document refers to the HHA input price 

index. 

The percentage change in the home 

health market basket reflects the average 

change in the price of goods and 

services purchased by HHAs in 

providing an efficient level of home 

health care services. We first used the 

home health market basket to adjust 

HHA cost limits by an amount that 

reflected the average increase in the 

prices of the goods and services used to 

furnish reasonable cost home health 

care. This approach linked the increase 

in the cost limits to the efficient 

utilization of resources. For a greater 

discussion on the home health market 

basket, see the notice with comment 

period published in the February 15, 

1980 Federal Register (45 FR 10450, 

10451), the notice with comment period 

published in the February 14, 1995 

Federal Register (60 FR 8389, 8392), 

and the notice with comment period 

published in the July 1, 1996 Federal 

Register (61 FR 34344, 34347). 

Beginning with the FY 2002 HH PPS 

payments, we used the home health 

market basket to update payments under 

the HH PPS. We last rebased the home 

health market basket effective with the 

CY 2008 update. For more information 

on the HH PPS home health market 

basket, see our proposed rule published 

in the May 4, 2007 Federal Register (72 

FR 25435–25442). 

The home health market basket is a 

fixed-weight Laspeyres-type price 

index; its weights reflect the cost 

distribution for the base year while 

current period price changes are 

measured. The home health market 

basket is constructed in three major 

steps. First, a base period is selected and 

total base period expenditures are 

estimated for mutually exclusive and 

exhaustive spending categories based 

upon the type of expenditure. Then the 

proportion of total costs that each 

spending category represents is 

determined. These proportions are 

called cost or expenditure weights. 

The second step essential for 

developing an input price index is to 

match each expenditure category to an 

appropriate price/wage variable, called 

a price proxy. These proxy variables are 

mainly drawn from publicly available 

statistical series published on a 

consistent schedule, preferably at least 

quarterly. 

In the third and final step, the price 

level for each spending category is 

multiplied by the expenditure weight 

for that category. The sum of these 

products for all cost categories yields 

the composite index level in the market 

basket in a given year. Repeating the 

third step for other years will produce 

a time series of market basket index 

levels. Dividing one index level by an 

earlier index level will produce rates of 

growth in the input price index. 

We describe the market basket as a 

fixed-weight index because it answers 

the question of how much more or less 

it would cost, at a later time, to 

purchase the same mix of goods and 

services that was purchased in the base 

period. As such, it measures ‘‘pure’’ 

price changes only. The effects on total 

expenditures resulting from changes in 

the quantity or mix of goods and 

services purchased subsequent to the 

base period are, by design, not 

considered. 

b. Rebasing and Revising the Home 

Health Market Basket 

We believe that it is desirable to 

rebase the home health market basket 

periodically so that the cost category 

weights reflect changes in the mix of 

goods and services that HHAs purchase 

in furnishing home health care. We 

based the cost category weights in the 

current home health market basket on 

CY 2003 data. We are proposing to 

rebase and revise the home health 

market basket to reflect CY 2010 

Medicare cost report (MCR) data, the 

latest available and most complete data 

on the actual structure of HHA costs. 

The terms ‘‘rebasing’’ and ‘‘revising,’’ 

while often used interchangeably, 

actually denote different activities. The 

term ‘‘rebasing’’ means moving the base 

year for the structure of costs of an input 

price index (that is, in this exercise, we 

are proposing to move the base year cost 

structure from CY 2003 to CY 2010) 

without making any other major 

changes to the methodology. The term 

‘‘revising’’ means changing data sources, 

cost categories, and/or price proxies 

used in the input price index. 

For this proposed rebasing and 

revising, we modified the wages and 

salaries and benefits cost categories to 

reflect revised occupational groupings 

of BLS Occupational Employment 

Statistics (OES) data of HHAs. As a 

result of the revised groupings, we are 

also proposing changes to the wage and 

benefit price proxies used in the HH 

market basket. We are also proposing to 

break out the Administration and 

General (A&G), Operations and 

Maintenance, and All Other (residual) 

cost category weight into more detailed 

cost categories, based on the 2002 

Benchmark U.S. Department of 

Commerce, Bureau of Economic 

Analysis (BEA) Input-Output (I–O) 

Table for HHAs. We are proposing to 

revise the price proxies for the 

Insurance and Transportation cost 

categories. Finally, we are proposing the 

use of four new price proxies for the 

four additional cost categories. 

The major cost weights for this 

proposed revised and rebased home 

health market basket are derived from 

the Medicare Cost Reports (MCR) data 

for freestanding HHAs, whose cost 

reporting period began on or after 

January 1, 2010 and before January 1, 

2011. Using this methodology allowed 

our sample to include HHA facilities 

with varying cost report years including, 

but not limited to, the Federal fiscal or 

calendar year. We refer to the market 

basket as a calendar year market basket 

because the base period for all price 

proxies and weights are set to CY 2010. 

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We propose to maintain our policy of 

using data from freestanding HHAs 

because we have determined that they 

better reflect HHAs’ actual cost 

structure. Expense data for hospitalbased HHAs can be affected by the 

allocation of overhead costs over the 

entire institution. Due to the method of 

allocation, total expenses will be 

correct, but the individual components’ 

expenses may be skewed; therefore, if 

data from hospital-based HHAs were 

included, the resulting cost structure 

could be unrepresentative of the average 

HHA costs. 

Data on HHA expenditures for nine 

major expense categories (Wages and 

Salaries, Employee Benefits, 

Transportation, Operation and 

Maintenance, A&G, Professional 

Liability Insurance (PLI), Fixed Capital, 

Movable Capital, and a residual ‘‘All 

Other’’) were tabulated from the CY 

2010 Medicare HHA cost reports. As 

prescription drugs and DME are not 

payable under the HH PPS, we excluded 

those items from the home health 

market basket and from the 

expenditures. Expenditures for contract 

services were also tabulated from these 

CY 2010 Medicare HHA cost reports and 

allocated to Wages and Salaries, 

Employee Benefits, A&G, and Other 

Expenses. After totals for these cost 

categories were edited to remove reports 

where the data were deemed 

unreasonable (for example, when total 

costs were not greater than zero), we 

then determined the proportion of total 

costs that each category represents. The 

proportions represent the major rebased 

home health market basket weights. 

Next, we disaggregated the costs for 

the A&G, Operations and Maintenance 

and ‘‘All Other’’ cost weights using the 

latest available (2002 Benchmark) U.S. 

Department of Commerce, Bureau of 

Economic Analysis (BEA) Input-Output 

(I–O) Table, from which we extracted 

data for HHAs. The BEA I–O data, 

which are updated at 5-year intervals, 

were most recently described in the 

Survey of Current Business article, 

‘‘Benchmark Input-Output Accounts of 

the U.S., 2002’’ (December 2002). These 

data were aged from 2002 to 2010 using 

relevant price changes. The 

methodology we used to age the data 

applied the annual price changes from 

the price proxies to the appropriate cost 

categories. We repeated this practice for 

each year. This methodology reflects a 

slight revision from the methodology 

used to derive the 2003-based HHA 

market basket index. For the 2003-based 

index, we only disaggregated the A&G 

and ‘‘All Other’’ cost categories using 

BEA I–O data. For the 2010-based index, 

we are proposing to also disaggregate 

the Operations and Maintenance cost 

categories using the BEA I–O data. Our 

proposal is based on our examination of 

the MCR data which indicated that 

some providers may be including some 

operations and maintenance costs in the 

A&G category and/or other cost 

categories. The Operations and 

Maintenance cost category (which we 

previously proxied with the CPI for Fuel 

and Other Utilities) from the MCR 

showed a decrease in the cost weight 

obtained directly from the MCR data 

from 2003 to 2010, despite rapid 

increases in utility costs over this time 

period. The revised method would rely 

on the 2002 I–O data, aged by the 

relevant price proxy, to determine the 

Utilities cost weight. The resulting 

methodology shows an increase in the 

Utilities cost weight over the same time 

period, which we believe to be a more 

reasonable result. We believe this 

change in the methodology for 

estimating utility costs for HHAs better 

reflects the 2010 cost structures of 

HHAs. 

This process resulted in the 

identification of 16 separate cost 

categories, which is four more cost 

categories than presented in the 2003- 

based home health market basket. The 

additional cost categories 

(Administrative and Support Services, 

Financial Services, Medical Supplies, 

and Rubber and Plastics) stem from 

further disaggregating the Other 

Products and Other Services cost 

categories presented in the 2003-based 

index into more detail. The 

Administrative and Support Services 

cost weight would include expenses for 

a range of day-to-day office 

administrative services including but 

not limited to billing, recordkeeping, 

mail routing, and reception services. 

The Financial Services cost weight 

would reflect expenses for services 

including but not limited to banking 

services and security and commodity 

brokering. The Medical Supplies cost 

weight would reflect expenses for 

medical and surgical instruments as, 

well as laboratory analysis equipment. 

The Rubber and Plastics cost weight 

would reflect expenses for products 

such as plastic trash cans, and 

carpeting. We are proposing these 

additional cost categories in order to 

proxy price inflation in a more granular 

fashion. We provide our proposed price 

proxies in more detail below. 

The differences between the major 

categories for the proposed 2010-based 

index and those used for the current 

2003-based index are summarized in 

Table 2. We have allocated the Contract 

Services weight to the Wages and 

Salaries Employee Benefits, A&G, and 

Other Expenses cost categories in the 

proposed 2010-based index as we did in 

the 2003-based index. 

TABLE 2—COMPARISON OF 2003-BASED AND PROPOSED 2010-BASED HOME HEALTH MARKET BASKETS MAJOR COST

CATEGORIES AND WEIGHTS

Cost categories 

2003-Based home 

health market 

basket 

Proposed 

2010-based 

home health 

market basket 

Wages and Salaries, including allocated contract services’ labor .............................................................. 64.484 66.325 

Employee Benefits, including allocated contract services’ labor ................................................................ 12.598 12.210 

All Other Expenses including allocated contract services’ labor ................................................................ 22.918 21.465 

Total ...................................................................................................................................................... 100.000 100.000 

The complete proposed 2010-based 

cost categories and weights are listed in 

Table 3. 

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TABLE 3—COST CATEGORIES, WEIGHTS, AND PRICE PROXIES IN PROPOSED 2010-BASED HOME HEALTH MARKET

BASKET

Cost categories Weight Price proxy 

Compensation, including allocated contract services’ labor .......... 78.535 

Wages and Salaries, including allocated contract services’ labor 66.325 Proposed Home Health Occupational Wage Index (2010). 

Employee Benefits, including allocated contract services’ labor ... 12.210 Proposed Home Health Occupational Benefits Index (2010). 

Operations & Maintenance ............................................................. 1.002 CPI–U Fuel & Other Utilities. 

Professional Liability Insurance ...................................................... 0.375 CMS Physician Professional Liability Insurance Index. 

Administrative & General & Other Expenses including allocated 

contract services’ labor.

15.381 

Administrative Support ............................................................ 0.699 ECI for Compensation for Office and Administrative Services 

(Private). 

Financial Services ................................................................... 1.398 ECI for Compensation for Financial Services (Private). 

Medical Supplies ..................................................................... 1.278 PPI for Medical Surgical & Personal Aid Devices. 

Rubber & Plastics .................................................................... 1.226 PPI for Rubber & Plastic Products. 

Telephone ................................................................................ 0.881 CPI–U Telephone Services. 

Postage ................................................................................... 0.279 CPI–U Postage. 

Professional Fees .................................................................... 5.811 ECI for Compensation for Professional and Related Workers 

(Private). 

Other Products ........................................................................ 1.439 PPI Finished Goods less Food and Energy. 

Other Services ......................................................................... 2.370 ECI for Compensation for Service Occupations (Private). 

Transportation ................................................................................. 2.545 CPI–U Transportation. 

Capital-Related ............................................................................... 2.162 

Fixed Capital ................................................................................... 1.532 CPI–U Owner’s Equivalent Rent. 

Movable Capital .............................................................................. 0.630 PPI Machinery & Equipment. 

Total ......................................................................................... 100.000 * *

**Figures may not sum to total due to rounding. 

After we computed the CY 2010 cost 

category weights for the proposed 

rebased home health market basket, we 

selected the most appropriate wage and 

price indexes to proxy the rate of change 

for each expenditure category. With the 

exception of the price index for 

insurance costs, the proposed price 

proxies are based on Bureau of Labor 

Statistics (BLS) data and are grouped 

into one of the following BLS categories: 

• Employment Cost Indexes— 

Employment Cost Indexes (ECIs) 

measure the rate of change in employee 

wage rates and employer costs for 

employee benefits per hour worked. 

These indexes are fixed-weight indexes 

and strictly measure the change in wage 

rates and employee benefits per hour. 

They are not affected by shifts in skill 

mix. ECIs are superior to average hourly 

earnings as price proxies for input price 

indexes for two reasons: (a) They 

measure pure price change; and (b) they 

are available by occupational groups, 

not just by industry. 

• Consumer Price Indexes— 

Consumer Price Indexes (CPIs) measure 

change in the prices of final goods and 

services bought by the typical 

consumer. Consumer price indexes are 

used when the expenditure is more 

similar to that of a purchase at the retail 

level rather than at the wholesale level, 

or if no appropriate Producer Price 

Indexes (PPIs) were available. 

• Producer Price Indexes—PPIs 

measures average changes in prices 

received by domestic producers for their 

goods and services. PPIs are used to 

measure price changes for goods sold in 

other than retail markets. For example, 

a PPI for movable equipment is used 

rather than a CPI for equipment. PPIs in 

some cases are preferable price proxies 

for goods that HHAs purchase at 

wholesale levels. These fixed-weight 

indexes are a measure of price change 

at the producer or at the intermediate 

stage of production. 

We evaluated the price proxies using 

the criteria of reliability, timeliness, 

availability, and relevance. Reliability 

indicates that the index is based on 

valid statistical methods and has low 

sampling variability. Widely accepted 

statistical methods ensure that the data 

were collected and aggregated in way 

that can be replicated. Low sampling 

variability is desirable because it 

indicates that sample reflects the typical 

members of the population. (Sampling 

variability is variation that occurs by 

chance because a sample was surveyed 

rather than the entire population.) 

Timeliness implies that the proxy is 

published regularly, preferably at least 

once a quarter. The market baskets are 

updated quarterly and therefore it is 

important the underlying price proxies 

be up-to-date, reflecting the most recent 

data available. We believe that using 

proxies that are published regularly 

helps ensure that we are using the most 

recent data available to update the 

market basket. We strive to use 

publications that are disseminated 

frequently because we believe that this 

is an optimal way to stay abreast of the 

most current data available. Availability 

means that the proxy is publicly 

available. We prefer that our proxies are 

publicly available because this will help 

ensure that our market basket updates 

are as transparent to the public as 

possible. In addition, this enables the 

public to be able to obtain the price 

proxy data on a regular basis. Finally, 

relevance means that the proxy is 

applicable and representative of the cost 

category weight to which it is applied. 

The CPIs, PPIs, and ECIs selected by us 

to be proposed in this regulation meet 

these criteria. Therefore, we believe that 

they continue to be the best measure of 

price changes for the cost categories to 

which they would be applied. 

As part of the revising and rebasing of 

the home health market basket, we are 

proposing to revise and rebase the home 

health blended Wage and Salary index 

and the home health blended Benefits 

index. We would use these blended 

indexes as price proxies for the Wages 

and Salaries and the Employee Benefits 

portions of the proposed 2010-based 

home health market basket, as we did in 

the 2003-based home health market 

basket. A more detailed discussion is 

provided below. 

c. Price Proxies Used To Measure Cost 

Category Growth 

• Wages and Salaries For measuring 

price growth in the 2010-based home 

health market basket, we are proposing 

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to apply six price proxies to six 

occupational subcategories within the 

Wages and Salaries component, which 

would reflect the HHA occupational 

mix. This is the same approach used for 

the 2003-based index as there is not a 

published wage proxy for home health 

care workers that reflects only wage 

changes and not both wage and skill 

mix changes. 

The 2003-based blended wage index 

was comprised of four occupational 

subcategories proxied by five wage 

proxies. For the 2010 blended wage 

index, we are proposing to further 

disaggregate the service workers 

occupations into health and social 

assistance service and other service 

occupational groups. We are also 

proposing to explicitly disaggregate 

professional and technical (P&T) 

workers into health-related P&T and 

non health-related P&T workers. We are 

proposing to continue to use the 

National Industry-Specific Occupational 

Employment and Wage estimates for 

North American Industrial 

Classification System (NAICS) 621600, 

Home Health Care Services, published 

by the BLS Office of Occupational 

Employment Statistics (OES) as the data 

source for the cost shares of the home 

health specific blended wage and 

benefits proxy. This is the same data 

source that was used for the 2003-based 

HHA blended wage and benefit proxies; 

however, we are proposing to use the 

May 2010 estimates in place of the 

November 2003 estimates. Detailed 

information on the methodology for the 

national industry-specific occupational 

employment and wage estimates survey 

can be found at http://www.bls.gov/oes/ 

current/oes_tec.htm. 

The needed data on HHA 

expenditures for the six occupational 

subcategories (managerial, healthrelated P&T, non health-related P&T, 

health and social assistance service, 

other service occupations, and 

administrative/clerical) for the wages 

and salaries component were tabulated 

from the May 2010 OES data for NAICS 

621600, Home Health Care Services. 

This is a refinement to the four 

categories used for the 2003-based wage 

proxy. Table 4 compares the proposed 

2010 occupational assignments of the 

six CMS designated subcategories to the 

2003 occupational assignments of the 

four CMS designated subcategories. 

TABLE 4—PROPOSED 2010 OCCUPATIONAL ASSIGNMENTS COMPARED TO 2003 OCCUPATIONAL ASSIGNMENTS FOR CMS 

HH WAGE COMPOSITE INDEX

2010 Proposed Occupational Groupings 2003 Occupational Groupings 

Group 1 Management ..................................................................... Group 1 Management 

11–0000 Management Occupations ................................................. 11–0000 Management Occupations. 

Group 2 Non-Health Professional & Technical ............................ Group 2 Professional & Technical 

13–0000 Business and Financial Operations Occupations .............. 13–0000 Business and Financial Operations Occupations. 

15–0000 Computer and Mathematical Science Occupations .......... 15–0000 Computer and Mathematical Science Occupations. 

17–0000 Architecture and Engineering Occupations ....................... 17–0000 Architecture and Engineering Occupations. 

19–0000 Life, Physical, and Social Science Occupations ............... 19–0000 Life, Physical, and Social Science Occupations. 

23–0000 Legal Occupations ............................................................. 21–0000 Community and Social Services Occupations. 

25–0000 Education, Training, and Library Occupations .................. 23–0000 Legal Occupations. 

27–0000 Arts, Design, Entertainment, Sports, and Media Occupations.25–0000 Education, Training, and Library Occupations. 

Group 3 Health-Related Professional & Technical 27–0000 Arts, Design, Entertainment, Sports, and Media Occupations. 

29–1021 Dentists, General ............................................................... 29–0000 Healthcare Practitioners and Technical Occupations. 

29–1031 Dietitians and Nutritionists ................................................. 33–0000 Protective Service Occupations. 

29–1051 Pharmacists ....................................................................... 35–0000 Food Preparation and Serving Related Occupations. 

29–1062 Family and General Practitioners ...................................... 37–0000 Building and Grounds Cleaning and Maintenance Occupations. 

29–1063 Internists, General .............................................................. 41–0000 Sales and Related Occupations.

29–1069 Physicians and Surgeons, All Other .................................. 49–0000 Installation, Maintenance, and Repair Occupations. 

29–1071 Physician Assistants .......................................................... 51–0000 Production Occupations. 

29–1111 Registered Nurses ............................................................. 53–0000 Transportation and Material Moving Occupations. 

29–1122 Occupational Therapists.

29–1123 Physical Therapists.

29–1125 Recreational Therapists.

29–1126 Respiratory Therapists.

29–1127 Speech-Language Pathologists.

29–1129 Therapists, All Other.

29–1199 Health Diagnosing and Treating Practitioners, All Other.

Group 4 Other Service Workers .................................................... Group 3 Service Workers 

33–0000 Protective Service Occupations ......................................... 31–0000 Healthcare Support Occupations. 

35–0000 Food Preparation and Serving Related Occupations ........ 39–0000 Personal Care and Service Occupations. 

37–0000 Building and Grounds Cleaning and Maintenance Occupations.

39–0000 Personal Care and Service Occupations.

41–0000 Sales and Related Occupations.

49–0000 Installation, Maintenance, and Repair Occupations.

51–0000 Production Occupations.

53–0000 Transportation and Material Moving Occupations.

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TABLE 4—PROPOSED 2010 OCCUPATIONAL ASSIGNMENTS COMPARED TO 2003 OCCUPATIONAL ASSIGNMENTS FOR CMS 

HH WAGE COMPOSITE INDEX—Continued 

2010 Proposed Occupational Groupings 2003 Occupational Groupings 

Group 5 Health & Social Service Workers 

21–0000 Community and Social Services Occupations.

29–2011 Medical and Clinical Laboratory Technologists.

29–2012 Medical and Clinical Laboratory Technicians.

29–2021 Dental Hygienists.

29–2032 Diagnostic Medical Sonographers.

29–2034 Radiologic Technologists and Technicians.

29–2041 Emergency Medical Technicians and Paramedics.

29–2051 Dietetic Technicians.

29–2052 Pharmacy Technicians.

29–2054 Respiratory Therapy Technicians.

29–2061 Licensed Practical and Licensed Vocational Nurses.

29–2071 Medical Records and Health Information Technicians.

29–2099 Health Technologists and Technicians, All Other.

29–9012 Occupational Health and Safety Technicians.

29–9099 Healthcare Practitioner and Technical Workers, All Other.

31–0000 Healthcare Support Occupations.

Group 6 Administrative .................................................................. Group 4 Administrative 

43–0000 Office and Administrative Support Occupations ................ 43–0000 Office and Administrative Support Occupations. 

Total expenditures by occupation 

were calculated by taking the OES 

number of employees multiplied by the 

OES annual average salary. The wage 

and salary expenditures were aggregated 

based on the groupings in Table 5. We 

determined the proportion of total wage 

costs that each subcategory represents. 

These proportions listed in Table 5 

represent the major rebased and revised 

home health blended Wage and Salary 

index weights. 

TABLE 5—PROPOSED HOME HEALTH OCCUPATIONAL WAGES AND SALARIES INDEX (WAGES AND SALARIES COMPONENT

OF THE PROPOSED 2010 BASED HOME HEALTH MARKET BASKET) 

Cost category 2003 Weight Proposed 

2010 weight Price proxy BLS Series ID 

Health-Related Professional and Technical 

(P&T).

50.812 33.373 ECI for Wages & Salaries for Civilian Hospital Workers.CIU10262200 

00000I 

Non Health-Related P&T ................................ ........................ 2.253 ECI for Wages & Salaries in Private Industry 

for Professional, Specialty & Technical 

Workers.

CIU20254000 

00000I 

Managerial/Supervisory .................................. 9.007 8.260 ECI for Wages & Salaries in Private Industry 

for Executive, Administrative & Managerial 

Workers.

CIU20200001 

10000I 

Administrative/Clerical ..................................... 7.596 7.720 ECI for Wages & Salaries in Private Industry 

for Administrative Support, Including Clerical Workers.

CIU20200002 

20000I 

Health and Social Assistance Services .......... 32.584 35.772 ECI for Wages & Salaries for Civilian 

Healthcare and Social Assistance.

CIU10262000 

00000I 

Other Service Occupations ............................. ........................ 12.622 ECI for Wages & Salaries in Private Industry 

Service Occupations.

CIU20200003 

00000I 

Total ................................................................ 100.000 100.000 

A comparison of the yearly changes 

from CY 2010 to CY 2013 for the 2003- 

based HH wage and salary blend and the 

proposed 2010-based home health wage 

and salary blend is shown in Table 6. 

The average annual increase in the two 

price proxies is similar, and in no year 

is the difference greater than 0.3 

percentage point. 

TABLE 6—ANNUAL GROWTH IN PROPOSED 2010 HH WAGE BLEND AND 2003 HH WAGE BLEND

2010 2011 2012 2013 

HH Wage Blend 2010 ...................................................................................................................................... 1.6 1.5 2.1 2.7 

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TABLE 6—ANNUAL GROWTH IN PROPOSED 2010 HH WAGE BLEND AND 2003 HH WAGE BLEND—Continued 

2010 2011 2012 2013 

HH Wage Blend 2003 ...................................................................................................................................... 1.5 1.5 1.8 2.4 

Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with historical data through 1st Quarter 2012. 

• Employee benefits: For measuring 

employee benefits price growth in the 

2010-based home health market basket, 

we are proposing to apply applicable 

price proxies to the six occupational 

subcategories that are used for the wage 

blend listed in Table 7. The percentage 

change in the blended price of home 

health employee benefits is applied to 

this component, which is described in 

Table 7. 

TABLE 7—PROPOSED HOME HEALTH OCCUPATIONAL BENEFITS INDEX (EMPLOYEE BENEFITS COMPONENT OF THE

PROPOSED 2010-BASED HOME HEALTH MARKET BASKET) 

Cost category 2003 Weight Proposed 

2010 weight Price proxy 

Health-Related Professional and Technical (P&T) ...... 50.506 33.506 ECI for Benefits for Civilian Hospital Workers. 

Non Health-Related P&T .............................................. ........................ 2.246 ECI for Benefits in Private Industry for Professional, 

Specialty & Technical Workers. 

Managerial/Supervisory ................................................ 8.766 8.029 ECI for Benefits in Private Industry for Executive, Administrative & Managerial Workers. 

Administrative/Clerical .................................................. 7.698 7.789 ECI for Benefits in Private Industry for Administrative 

Support, Including Clerical Workers. 

Health and Social Assistance ....................................... 33.024 35.887 ECI for Benefits for Civilian Healthcare and Social Assistance Workers. 

Other Service Occupations .......................................... ........................ 12.542 ECI for Benefits in Private Industry Service Occupations. 

Total ....................................................................... 100.000 100.000 

There is no available data source that 

exists for benefit expenditures by 

occupation for the home health 

industry. Thus, to construct weights for 

the home health occupational benefits 

index we calculated the ratio of benefits 

to wages and salaries for CY 2010 for the 

six BLS ECI series we are proposing to 

use in the blended wage and benefit 

indexes. To derive the relevant benefit 

weight, we applied the benefit-to-wage 

ratios to each of the six occupational 

subcategories from the 2010 OES wage 

and salary weights, and normalized. For 

example, the ratio of benefits to wages 

from the 2010 home health occupational 

wage and benefit indexes for home 

health managers is 0.976. We apply this 

ratio to the 2010 OES weight for wages 

and salaries for home health managers, 

8.260, and then normalize those weights 

relative to the other five benefit 

occupational categories to obtain a 

benefit weight for home health 

managers of 8.029. 

A comparison of the yearly changes 

from CY 2010 to CY 2013 for the 2003- 

based HH benefit blend and the 

proposed 2010-based home health 

benefit blend is shown in Table 8. The 

average annual increase in the two price 

proxies is similar, and in no year is the 

difference greater than 0.3 percentage 

point. 

TABLE 8—ANNUAL GROWTH IN PROPOSED 2010 HH BENEFITS BLEND AND 2003 HH BENEFITS BLEND

2010 2011 2012 2013 

HH Benefits Blend 2010 .................................................................................................................................. 2.6 2.7 2.7 2.8 

HH Benefits Blend 2003 .................................................................................................................................. 2.4 3.0 2.5 2.9 

Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with historical data through 1st Quarter 2012. 

• Administrative and Support: We are 

proposing to use the ECI for 

Compensation for Office and 

Administrative Support Services 

(private industry) (BLS series code 

# CIU2010000220000I) to measure price 

growth of this cost category. The 2003- 

based index did not reflect this detailed 

cost category. 

• Financial Services: We are 

proposing to use the ECI for 

Compensation for Financial Activities 

(private industry) (BLS series code 

# CIU201520A000000I) to measure price 

growth of this cost category. The 2003- 

based index did not reflect this detailed 

cost category. 

• Medical Supplies: We are proposing 

to use the PPI for Medical Surgical & 

Personal Aid Devices (BLS series code 

# WPU156) to measure price growth of 

this cost category. The 2003-based index 

did not reflect this detailed cost 

category. 

• Rubber and Plastics: We are 

proposing to use the PPI for Rubber and 

Plastic Products (BLS series code 

# WPU07) to measure price growth of 

this cost category. The 2003-based index 

did not reflect this detailed cost 

category. 

• Operations and Maintenance: We 

are proposing to use CPI for Fuel and 

Utilities (BLS series code 

# CUUR0000SAH2) to measure price 

growth of this cost category. The same 

proxy was used for the 2003-based 

market basket. 

• Professional Liability Insurance: We 

are proposing to use the CMS Physician 

Professional Liability Insurance price 

index to measure price growth of this 

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cost category. The 2003-based index 

used the CPI for Household Insurance as 

the price proxy for this component. We 

are proposing to revise the price proxy 

for this category as we believe that it is 

more technically appropriate to proxy 

PLI price changes by an index specific 

to medical liability insurance. CMS 

currently does not have a PLI index 

specific to the HHA industry so we are 

proposing to use the CMS Physician 

Liability Insurance Index as we believe 

this would reasonably reflect the price 

changes associated with medical 

liability insurance purchased by home 

health agencies. 

To accurately reflect the price changes 

associated with physician PLI, each 

year, we solicit PLI premium data for 

physicians from a sample of commercial 

carriers. This information is not 

collected through a survey form, but 

instead is requested directly from, and 

provided by (on a voluntary basis), 

several national commercial carriers. As 

we require for our other price proxies, 

the PLI price proxy is intended to reflect 

the pure price change associated with 

this particular cost category. Thus, it 

does not include changes in the mix or 

level of liability coverage. To 

accomplish this result, we obtain 

premium information from a sample of 

commercial carriers for a fixed level of 

coverage, currently $1 million per 

occurrence and a $3 million annual 

limit. This information is collected for 

every State by physician specialty and 

risk class. Finally, the State-level, 

physician-specialty data are aggregated 

by effective premium date to compute a 

national total, using counts of 

physicians by State and specialty as 

provided in the AMA publication, 

Physician Characteristics and 

Distribution in the U.S. 

• Telephone: We are proposing to use 

CPI for Telephone Services (BLS series 

code # CUUR0000SEED) to measure 

price growth of this cost category. The 

same proxy was used for the 2003-based 

market basket. 

• Postage: We are proposing to use 

CPI for Postage (BLS series code 

# CUUR0000SEEC01) to measure price 

growth of this cost category. The same 

proxy was used for the 2003-based 

market basket. 

• Professional Fees: We are proposing 

to use the ECI for Compensation for 

Professional and Related Workers 

(private industry) (BLS series code 

# CIS2010000120000I) to measure price 

growth of this category. The same proxy 

was used for the 2003-based market 

basket. 

• Other Products: We are proposing 

to use the PPI for Finished Goods Less 

Food and Energy (BLS series code #) to 

measure price growth of this category. 

For the 2003-based market basket we 

used the CPI for All Items Less Food 

and Energy to proxy this category. We 

believe that the PPI better reflects 

business input costs than the CPI index 

which better reflects cost faced by 

consumers. 

• Other Services: We are proposing to 

use the ECI for Compensation for 

Service Occupations (private) (BLS 

series code # CIU2010000300000I) to 

measure price growth of this category. 

The same proxy was used for the 2003- 

based market basket. 

• Transportation: We are proposing 

to use the CPI for Transportation (BLS 

series code # CUUR00000SAT) to 

measure price growth of this category. 

The 2003-based market basket used the 

CPI for Private Transportation (BLS 

series code # CUUS0000SAT1). We are 

proposing to revise the price proxy to 

reflect price inflation of both private 

and public transportation costs. We are 

proposing this change as further 

investigation of the MCR instructions 

request providers to include both 

private and public transportation costs. 

• Fixed capital: We are proposing to 

use the CPI for Owner’s Equivalent Rent 

(BLS series code # CUUS0000SEHC) to 

measure price growth of this cost 

category. The same proxy was used for 

the 2003-based market basket. 

• Movable Capital: We are proposing 

to use the PPI for Machinery and 

Equipment (BLS series code # WPU11) 

to measure price growth of this cost 

category. The same proxy was used for 

the 2003-based market basket. 

As we did in the 2003-based home 

health market basket, we allocated the 

Contract Services’ share of home health 

agency expenditures among Wages and 

Salaries, Employee Benefits, A&G and 

Other Expenses. 

d. Rebasing Results 

A comparison of the yearly changes 

from CY 2010 to CY 2013 for the 2003- 

based home health market basket and 

the proposed 2010-based home health 

market basket is shown in Table 9. 

TABLE 9—COMPARISON OF THE 2003-BASED HOME HEALTH MARKET BASKET AND THE PROPOSED 2010-BASED HOME

HEALTH MARKET BASKET, PERCENT CHANGE, 2010–2013 

Home health 

market basket, 

2003-based 

Proposed home 

health market 

basket, 2010- 

based 

Difference 

(proposed 2010- 

based less 

2003-based) 

Historical: CY 2010 ........................................................................................................ 1.7 1.8 0.1 

Historical CY 2011 ......................................................................................................... 2.0 2.0 0.0 

CY 2012 ......................................................................................................................... 1.9 2.1 0.2 

CY 2013 ......................................................................................................................... 2.3 2.5 0.2 

Average Change: 2010–2013 ........................................................................................ 2.0 2.1 0.1 

Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with historical data through 1st Quarter 2012. 

Table 9 shows that the forecasted rate 

of growth for CY 2013, beginning 

January 1, 2013, for the proposed 

rebased and revised home health market 

basket is 2.5 percent, while the 

forecasted rate of growth for the current 

2003-based home health market basket 

is 2.3 percent. The higher growth rate 

for the 2010-based HHA market basket 

for CY 2013 is attributable to the 

proposed wage and benefit blended 

price proxies, as well as the relatively 

faster price growth for the A&G cost 

category. The revised wage and benefit 

blended index reflects a larger weight 

associated with health P&T occupations 

(which is proxied by the ECIs for 

Hospital Workers) compared to the 

2003-based index. The wage and benefit 

ECIs for hospital workers are currently 

projected to grow faster than the other 

ECIs in the blended indexes. 

e. Labor-Related Share 

In the 2003-based home health market 

basket the labor-related share was 

77.082 percent while the remaining 

non-labor-related share was 22.918 

percent. In the proposed revised and 

rebased home health market basket, the 

labor-related share would be 78.535 

percent. The labor-related share 

includes wages and salaries and 

employee benefits, as well as allocated 

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contract labor costs. The proposed nonlabor-related share would be 21.465 

percent. The increase in the laborrelated share using the 2010-based HH 

market basket is primarily due to the 

increase in costs associated with 

contract labor. Table 10 details the 

components of the labor-related share 

for the 2003-based and proposed 2010- 

based home health market baskets. 

TABLE 10—LABOR-RELATED SHARE OF CURRENT AND PROPOSED HOME HEALTH MARKET BASKETS

Cost category 

2003-based 

market basket 

weight 

Proposed 2010- 

based market 

basket weight 

Wages and Salaries ............................................................................................................................................ 64.484 66.325 

Employee Benefits ............................................................................................................................................... 12.598 12.210 

Total Labor-Related ...................................................................................................................................... 77.082 78.535 

Total Non Labor-Related .............................................................................................................................. 22.918 21.465 

f. Proposed CY 2013 Market Basket 

Update for HHAs 

For CY 2013, we are proposing to use 

an estimate of the proposed 2010-based 

HHA market basket to update payments 

to HHAs based on the best available 

data. Consistent with historical practice, 

we estimate the HHA market basket 

update for the HHA PPS based on IHS 

Global Insight, Inc.’s (IGI’s) forecast 

using the most recent available data. IGI 

is a nationally recognized economic and 

financial forecasting firm that contracts 

with CMS to forecast the components of 

the market baskets. 

Based on IGI’s second quarter 2012 

forecast with history through the first 

quarter of 2012, the projected HHA 

market basket update for CY 2013 is 2.5 

percent. Therefore, consistent with our 

historical practice of estimating market 

basket increases based on the best 

available data, we are proposing a 

market basket update of 2.5 percent for 

CY 2013. Furthermore, because the 

proposed CY 2013 annual update is 

based on the most recent market basket 

estimate for the 12-month period 

(currently 2.5 percent), we also are 

proposing that if more recent data are 

subsequently available (for example, a 

more recent estimate of the market 

basket), we would use such data, if 

appropriate, to determine the CY 2013 

annual update in the final rule. 

2. CY 2013 Home Health Payment 

Update Percentage 

Section 3401(e) of the Affordable Care 

Act amended section 1895(b)(3)(B) of 

the Act by adding a new clause (vi) 

which states, ‘‘After determining the 

home health market basket percentage 

increase * * * the Secretary shall 

reduce such percentage * * * for each 

of 2011, 2012, and 2013, by 1 percentage 

point. The application of this clause 

may result in the home health market 

basket percentage increase under clause 

(iii) being less than 0.0 for a year, and 

may result in payment rates under the 

system under this subsection for a year 

being less than such payment rates for 

the preceding year.’’ Therefore, the 

proposed CY 2013 market basket update 

of 2.5 percent must be reduced by 1 

percentage point. Thus, the proposed 

CY 2013 home health payment update 

is 1.5 percent. 

3. Home Health Quality Reporting 

Program (QRP) 

a. Background and Quality Reporting 

Requirements 

Section 1895(b)(3)(B)(v)(II) of the Act 

states that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ 

In addition, section 1895(b)(3)(B)(v)(I) 

of the Act states that ‘‘for 2007 and each 

subsequent year, in the case of a HHA 

that does not submit data to the 

Secretary in accordance with subclause 

(II) with respect to such a year, the HH 

market basket percentage increase 

applicable under such clause for such 

year shall be reduced by 2 percentage 

points.’’ This requirement has been 

codified in regulations at § 484.225(i). 

HHAs that meet the quality data 

reporting requirements are eligible for 

the full home health market basket 

percentage increase. HHAs that do not 

meet the reporting requirements are 

subject to a 2 percentage point reduction 

to the home health market basket 

increase. 

Section 1895(b)(3)(B)(v)(III) of the Act 

further states that ‘‘[t]he Secretary shall 

establish procedures for making data 

submitted under sub clause (II) available 

to the public. Such procedures shall 

ensure that a home health agency has 

the opportunity to review the data that 

is to be made public with respect to the 

agency prior to such data being made 

public.’’ 

As codified at § 484.250(a), we 

established that the quality reporting 

requirements could be met by the 

submission of OASIS assessments and 

Home Health CAHPS. In the CY 2012 

HH PPS final rule (76 FR 68576), we 

listed selected measures for the HH QRP 

and also established procedures for 

making the information available to the 

public by placing the information on the 

Home Health Compare Web site. The 

selected measures that are made 

available to the public can be viewed on 

the Home Health Compare Web site 

located at http://www.medicare.gov/ 

HHCompare/Home.asp. 

In the CY 2012 HH PPS final rule (76 

FR 68575), we finalized that we would 

also use measures derived from 

Medicare claims data to measure home 

health quality. 

b. OASIS Data Submission and OASIS 

Data for Annual Payment Update 

The Home Health Conditions of 

Participation (CoPs) at § 484.55(d) 

require that the comprehensive 

assessment must be updated and revised 

(including the administration of the 

OASIS) no less frequently than: (1) The 

last five days of every 60 days beginning 

with the start-of-care date, unless there 

is a beneficiary elected transfer, 

significant change in condition, or 

discharge and return to the same HHA 

during the 60-day episode; (2) within 48 

hours of the patient’s return to the home 

from a hospital admission of 24 hours 

or more for any reason other than 

diagnostic tests; and (3) at discharge. 

It is important to note that to calculate 

quality measures from OASIS data, 

there must be a complete quality 

episode, which requires both a Start of 

Care or Resumption of Care OASIS 

assessment and a Transfer or Discharge 

OASIS assessment. Failure to submit 

sufficient OASIS assessments to allow 

calculation of quality measures, 

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including transfer and discharge 

assessments, is failure to comply with 

the CoPs. 

Home Health Agencies do not need to 

submit OASIS data for those patients 

who are excluded from the OASIS 

submission requirements under the 

Home Health Conditions of 

Participation (CoPs) § 484.1 through 

§ 484.265. As described in the Medicare 

and Medicaid Programs: Reporting 

Outcome and Assessment Information 

Set Data as Part of the Conditions of 

Participation for Home Health Agencies 

Final Rule (CMS–3006–F) (70 FR 

76202), these are: 

• Those patients receiving only 

nonskilled services; 

• Those patients for whom neither 

Medicare nor Medicaid is paying for 

home health care (patients receiving 

care under a Medicare or Medicaid 

Managed Care Plan are not excluded 

from the OASIS reporting requirement); 

• Those patients receiving pre- or 

post-partum services; or 

• Those patients under the age of 18 

years. 

As set forth in the Medicare Program; 

Home Health Prospective Payment 

System Refinement and Rate Update for 

Calendar Year 2008 Final Rule (CMS– 

1541–CF) (72 FR 49863), HHAs that 

become Medicare-certified on or after 

May 31 of the preceding year are not 

subject to the OASIS quality reporting 

requirement nor any payment penalty 

for quality reporting purposes for the 

following year. For example, HHAs 

certified on or after May 31, 2012 are 

not subject to the 2 percentage point 

reduction to their market basket update 

for CY 2013. These exclusions only 

affect quality reporting requirements 

and do not affect the HHA’s reporting 

responsibilities under the Conditions of 

Participation and Conditions of 

Payment (70 FR 76202). 

c. Home Health Care Quality Reporting 

Program Requirements for CY 2014 

Payment and Subsequent Years 

(1) Submission of OASIS data 

For CY 2013, we propose to consider 

OASIS assessments submitted by HHAs 

to CMS in compliance with HHA 

Conditions of Participation and 

Conditions for Payment for episodes 

beginning on or after July 1, 2011 and 

before July 1, 2012 as fulfilling one 

portion of the quality reporting 

requirement for CY 2013. This time 

period would allow for 12 full months 

of data collection and would provide us 

with the time necessary to analyze and 

make any necessary payment 

adjustments to the payment rates for CY 

2013. We propose to continue this 

pattern for each subsequent year beyond 

CY 2013, considering OASIS 

assessments submitted in the time frame 

between July 1 of the calendar year two 

years prior to the calendar year of the 

Annual Payment Update (APU) effective 

date and July 1 of the calendar year one 

year prior to the calendar year of the 

APU effective date as fulfilling the 

OASIS portion of the quality reporting 

requirement for the subsequent APU. 

(2) Acute Care Hospitalization ClaimsBased Measure 

We have determined that claims data 

are a more robust source of data for 

accurately measuring acute care 

hospitalizations than other data sources. 

We propose that the claims-based Acute 

Care Hospitalization measure replace 

the OASIS-based measure on Home 

Health Compare. The OASIS-based 

measure will continue to be reported on 

the agency-specific Certification and 

Survey Provider Enhanced Reporting 

system (CASPER) reports. 

Due to technical issues with Home 

Health Compare files, we will delay the 

reporting of both ‘‘Emergency 

Department Use Without 

Hospitalization’’ and ‘‘Acute Care 

Hospitalization’’ until such time as the 

technical issues are resolved. The 

OASIS-based Acute Care 

Hospitalization measure will continue 

to be made available to the public via 

Home Health Compare until it is 

replaced with the claims-based measure. 

To summarize, for the CY 2013 

payment update and for subsequent 

annual payment updates, we propose to 

continue to use a HHA’s submission of 

OASIS assessments between July 1 and 

June 30 as fulfilling one portion of the 

quality reporting requirement for each 

payment year. Medicare claims data and 

HHCAHPS data will also be used to 

measure home health care quality. 

d. Home Health Care CAHPS Survey 

(HHCAHPS) 

In the HH PPS Rate Update for CY 

2012 HH PPS final rule (76 FR 68577), 

we stated that the expansion of the 

home health quality measures reporting 

requirements for Medicare-certified 

agencies includes the Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS®) Home Health Care 

(HHCAHPS) Survey for the CY 2012 

annual payment update (APU). In CY 

2012 we moved forward with the 

HHCAHPS linkage to the pay-forreporting (P4R) requirements affecting 

the HH PPS rate update for CY 2012. We 

are maintaining the stated HHCAHPS 

data requirements for CY 2013 that were 

set out in the CY 2012 HH PPS final 

rule, for the continuous monthly data 

collection and quarterly data 

submission of HHCAHPS data. 

Background and Description of 

HHCAHPS 

As part of the United States 

Department of Health and Human 

Services’ (DHHS) Transparency 

Initiative, we have implemented a 

process to measure and publicly report 

patient experiences with home health 

care, using a survey developed by the 

Agency for Healthcare Research and 

Quality’s (AHRQ’s) CAHPS® program, 

and endorsed by the National Quality 

Forum (NQF). The HHCAHPS survey is 

part of a family of CAHPS® surveys that 

asks patients to report on and rate their 

experiences with health care. The 

HHCAHPS survey presents home health 

patients with a set of standardized 

questions about their home health care 

providers and about the quality of their 

home health care. 

Prior to this survey, there was no 

national standard for collecting 

information about patient experiences 

that would enable valid comparisons 

across all home health agencies (HHAs). 

The history and development process 

for HHCAHPS has been given in 

previous rules, but it is also available on 

our Web site https:// 

homehealthcahps.org and also, in the 

annually-updated HHCAHPS Protocols 

and Guidelines Manual, which is 

downloadable from https:// 

homehealthcahps.org. 

For public reporting purposes, we 

present five measures—three composite 

measures and two global ratings of 

care—from the questions on the 

HHCAHPS survey. The publicly 

reported data are adjusted for 

differences in patient mix across home 

health agencies. Each composite 

measure consists of four or more 

questions regarding one of the following 

related topics: 

• Patient care (Q9, Q16, Q19, and 

Q24); 

• Communications between providers 

and patients (Q2, Q15, Q17, Q18, Q22, 

and Q23); and 

• Specific care issues on medications, 

home safety, and pain (Q3, Q4, Q5, Q10, 

Q12, Q13, and Q14). 

The two global ratings are the overall 

rating of care given by the HHA’s care 

providers (Q20), and the patient’s 

willingness to recommend the HHA to 

family and friends (Q25). 

The HHCAHPS survey is not 

supposed to measure the aspects of 

home health clinical care that can be 

captured through a medical record. 

Rather, the HHCAHPS survey focuses 

on areas where the home health patient 

is the best or only source for the 

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information. We believe that the 

HHCAHPS survey is a valid measure of 

patient’s perspectives of home health 

care. The developmental work for the 

HHCAHPS survey began in mid-2006, 

and the first HHCAHPS survey was 

field-tested (to validate the length and 

content of the survey) in 2008 by the 

AHRQ and the CAHPS® grantees, and 

the final HHCAHPS survey was used in 

a national randomized mode experiment 

in 2009 through 2010. 

The HHCAHPS survey is currently 

available in several languages. At the 

time of the CY 2010 HH PPS final rule, 

HHCAHPS was only available in 

English and Spanish translations. In the 

proposed rule for CY 2010, we stated 

that we would provide additional 

translations of the survey over time in 

response to suggestions for any 

additional language translations. We 

now offer HHCAHPS in English, 

Spanish, Chinese, Russian, and 

Vietnamese languages. We will continue 

to consider additional translations of the 

HHCAHPS in response to the needs of 

the home health patient population. 

All of the requirements about home 

health patient eligibility for the 

HHCAHPS survey and conversely, 

which home health patients are 

ineligible for the HHCAHPS survey are 

delineated and detailed in the 

HHCAHPS Protocols and Guidelines 

Manual, which is downloadable from 

https://homehealthcahps.org. Home 

health patients are eligible for 

HHCAHPS if they received at least two 

skilled home health visits in the past 

two months, and are paid for by 

Medicare or Medicaid. 

Home health patients are ineligible for 

inclusion in HHCAHPS surveys if one of 

these conditions pertains to them: 

• Are under the age of 18; 

• Are deceased prior to pulling 

sample; 

• Receive hospice care; 

• Received routine maternity care 

only; 

• Are not considered survey eligible 

because the state in which the patient 

lives restricts release of patient 

information for a specific condition or 

illness that the patient has; or 

• Requested that their names not be 

released to anyone. 

We stated in previous rules that 

Medicare-certified agencies are required 

to contract with an approved HHCAHPS 

survey vendor. This requirement is also 

codified. Beginning in summer 2009, 

interested vendors applied to become 

approved HHCAHPS survey vendors. 

HHCAHPS survey vendors are required 

to attend introductory and all update 

trainings conducted by CMS and the 

HHCAHPS Survey Coordination Team, 

as well as to pass a post-training 

certification test. We now have 

approximately 40 approved HHCAHPS 

survey vendors. The list of approved 

HHCAHPS survey vendors is available 

at https://homehealthcahps.org. 

HHCAHPS Oversight Activities 

We stated in prior final rules that 

vendors and HHAs would be required to 

participate in HHCAHPS oversight 

activities to ensure compliance with 

HHCAHPS protocols, guidelines, and 

survey requirements. The purpose of the 

oversight activities is to ensure that 

HHAs and approved survey vendors 

follow the HHCAHPS Protocols and 

Guidelines Manual. As stated 

previously in the CY 2010, CY 2011, 

and CY 2012 final rules, all approved 

survey vendors must develop a Quality 

Assurance Plan (QAP) for survey 

administration in accordance with the 

HHCAHPS Protocols and Guidelines 

Manual. An HHCAHPS survey vendor’s 

first QAP must be submitted within 6 

weeks of the data submission deadline 

date after the vendor’s first quarterly 

data submission. The QAP must be 

updated and submitted annually 

thereafter and at any time that changes 

occur in staff or vendor capabilities or 

systems. A model QAP is included in 

the HHCAHPS Protocols and Guidelines 

Manual. The QAP should include the 

following: 

• Organizational Background and 

Staff Experience 

• Work Plan 

• Sampling Plan 

• Survey Implementation Plan 

• Data Security, Confidentiality and 

Privacy Plan 

• Questionnaire Attachments 

As part of the oversight activities, the 

HHCAHPS Survey Coordination Team 

conducts on-site visits to the approved 

HHCAHPS survey vendors. The purpose 

of the site visits is to allow the 

HHCAHPS Coordination Team to 

observe the entire Home Health Care 

CAHPS Survey implementation process, 

from the sampling stage through file 

preparation and submission, as well as 

to assess how the HHCAHPS data are 

stored. The HHCAHPS Survey 

Coordination Team reviews the survey 

vendor’s survey systems, and assesses 

administration protocols based on the 

HHCAHPS Protocols and Guidelines 

Manual posted at https:// 

homehealthcahps.org. The systems and 

program review includes, but is not 

limited to the following: 

• Survey management and data 

systems; 

• Printing and mailing materials and 

facilities; 

• Telephone call center facilities; 

• Data receipt, entry and storage 

facilities; and 

• Written documentation of survey 

processes. 

After the site visits, HHCAHPS 

vendors are given a defined time period 

in which to correct any identified issues 

and provide follow-up documentation 

of corrections for review. HHCAHPS 

survey vendors are subject to follow-up 

site visits on an as-needed basis. 

We are proposing to codify the 

current guideline that all approved 

HHCAHPS survey vendors fully comply 

with all HHCAHPS oversight activities. 

We are proposing to include this survey 

requirement at § 484.250(c). 

HHCAHPS Requirements for CY 2014 

For the CY 2014 APU, we propose to 

continue monthly HHCAHPS data 

collection and reporting for four 

quarters. The data collection period for 

CY 2014 would include second quarter 

2012 through first quarter 2013 (the 

months of April 2012 through March 

2013). HHAs would be required to 

submit their HHCAHPS data files to the 

Home Health CAHPS Data Center for CY 

2014 for the second quarter 2012 by 

11:59 p.m., Eastern Time on October 18, 

2012; for the third quarter 2012 by 11:59 

p.m., Eastern Time on January 17, 2013; 

for the fourth quarter 2012 by 11:59 

p.m., Eastern Time on April 18, 2013; 

and for the first quarter 2013 by 11:59 

p.m., Eastern Time on July 18, 2013. 

As noted, we exempt HHAs receiving 

Medicare certification on or after April 

1, 2012 from the full HHCAHPS 

reporting requirement for the CY 2014 

APU, because these HHAs were not 

Medicare-certified in the period of April 

1, 2011 through March 31, 2012. These 

HHAs would not need to complete a 

Participation Exemption Request Form 

for the CY 2014 Annual Payment 

Update. We propose to maintain this 

stated exemption for new HHAs. 

As noted, HHAs that had fewer than 

60 HHCAHPS-eligible unduplicated or 

unique patients in the period of April 1, 

2011 through March 31, 2012 would be 

exempt from the HHCAHPS data 

collection and submission requirements 

for the CY 2014 APU. Such agencies 

would be required to submit their 

patient counts for the period of April 1, 

2011 through March 31, 2012 on the 

Participation Exemption Request form 

posted at https://homehealthcahps.org 

by 11:59 p.m., Eastern Time on January 

17, 2013. This deadline would be firm, 

as would be all of the quarterly data 

submission deadlines. 

HHCAHPS Requirements for CY 2015 

For the CY 2015 APU, we propose to 

continue to require the continuous 

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monthly HHCAHPS data collection and 

reporting for four quarters. The data 

collection period for CY 2015 would 

include second quarter 2013 through 

first quarter 2014 (the months of April 

2013 through March 2014). HHAs 

would be required to submit their 

HHCAHPS data files to the Home Health 

CAHPS Data Center for CY 2014 for the 

second quarter 2013 by 11:59 p.m., 

Eastern Time on October 17, 2013; for 

the third quarter 2013 by 11:59 p.m., 

Eastern Time on January 16, 2014; for 

the fourth quarter 2013 by 11:59 p.m., 

Eastern Time on April 17, 2014; and for 

the first quarter 2014 by 11:59 p.m., 

Eastern Time on July 17, 2014. 

We propose to continue to exempt 

HHAs receiving Medicare certification 

after the period in which HHAs do their 

patient count (April 1, 2012 through 

March 31, 2013) on or after April 1, 

2013 from the full HHCAHPS reporting 

requirement for the CY 2015 APU, 

because these HHAs would not have 

been Medicare-certified throughout the 

period of April 1, 2012 through March 

31, 2013. These HHAs do not need to 

complete a Participation Exemption 

Request Form for the CY 2015 Annual 

Payment Update. We propose to 

maintain this stated exemption for new 

HHAs. 

Likewise, we would require that all 

HHAs that had fewer than 60 

HHCAHPS-eligible unduplicated or 

unique patients in the period of April 1, 

2012 through March 31, 2013 would be 

exempt from the HHCAHPS data 

collection and submission requirements 

for the CY 2015 APU. Agencies with 

fewer than 60 HHCAHPS-eligible, 

unduplicated or unique patients in the 

period of April 1, 2012 through March 

31, 2013 would be required to submit 

their patient counts on the Participation 

Exemption Request form for CY 2015 

posted at https://homehealthcahps.org 

by 11:59 p.m., Eastern Time on January 

16, 2014. This deadline would be firm, 

as would be all of the quarterly data 

submission deadlines. 

HHCAHPS Reconsiderations and 

Appeals Process 

We believe that HHAs should monitor 

their respective HHCAHPS survey 

vendors to ensure that vendors submit 

their HHCAHPS data on time, by 

accessing their HHCAHPS Data 

Submission Reports on https:// 

homehealthcahps.org. This will help 

HHAs ensure that their data are 

submitted in the proper format for data 

processing to the HHCAHPS Data 

Center. 

We believe that the reconsiderations 

process for HHCAHPS should not be 

burdensome to HHAs. We have modeled 

the HHCAHPS reconsiderations process 

after the one that is used for Hospital 

CAHPS, in use for nearly 7 years. We 

have described the HHCAHPS 

reconsiderations process requirements 

in the notification memorandum that 

the RHHIs/MACs sent to the affected 

HHAs, on behalf of CMS. HHAs have 30 

days to send their reconsiderations to 

CMS. CMS has and will continue to 

fully examine all HHA reconsiderations. 

Summary of Proposed Changes in CY 

2013 

We are proposing only one change for 

the CY 2013 rule—to codify the 

HHCAHPS guideline that HHAs ensure 

that survey vendors fully comply with 

all HHCAHPS requirements. 

For Further Information on the 

HHCAHPS Survey 

We strongly encourage HHAs to learn 

about the survey and view the 

HHCAHPS Survey Web site at the 

official Web site for the HHCAHPS at 

https://homehealthcahps.org. Home 

health agencies can also send an email 

to the HHCAHPS Survey Coordination 

Team at HHCAHPS@rti.org, or 

telephone toll-free (1–866–354–0985) 

for more information about HHCAHPS. 

4. Home Health Wage Index 

Sections 1895(b)(4)(A)(ii) and (b)(4)(C) 

of the Act require the Secretary to 

provide appropriate adjustments to the 

proportion of the payment amount 

under the HH PPS that account for area 

wage differences, using adjustment 

factors that reflect the relative level of 

wages and wage-related costs applicable 

to the furnishing of home health 

services. For CY 2013, as in previous 

years, we are proposing to base the wage 

index adjustment to the labor portion of 

the HH PPS rates on the most recent 

pre-floor and pre-reclassified hospital 

wage index. We would apply the 

appropriate wage index value to the 

labor portion of the HH PPS rates based 

on the site of service for the beneficiary 

(defined by section 1861(m) of the Act 

as the beneficiary’s place of residence). 

Previously, we determined each HHA’s 

labor market area based on definitions 

of Metropolitan Statistical Areas (MSAs) 

issued by the Office of Management and 

Budget (OMB). We have consistently 

used the pre-floor, pre-reclassified 

hospital wage index data to adjust the 

labor portion of the HH PPS rates. We 

believe the use of the pre-floor, prereclassified hospital wage index data 

results in an appropriate adjustment to 

the labor portion of the costs, as 

required by statute. 

In the CY 2006 HH PPS final rule (70 

FR 68132), we began adopting revised 

labor market area definitions as 

discussed in the Office of Management 

and Budget (OMB) Bulletin No. 03–04 

(June 6, 2003). This bulletin announced 

revised definitions for Metropolitan 

Statistical Areas (MSAs) and the 

creation of Micropolitan Statistical 

Areas and Core-Based Statistical Areas 

(CBSAs). The bulletin is available 

online at www.whitehouse.gov/omb/ 

bulletins/b03-04.html. In addition, OMB 

published subsequent bulletins 

regarding CBSA changes, including 

changes in CBSA numbers and titles. 

This rule incorporates the CBSA 

changes published in the most recent 

OMB bulletin. The OMB bulletins are 

available at http://www.whitehouse.gov/ 

omb/bulletins/index.html. 

Finally, we would continue to use the 

methodology discussed in the CY 2007 

HH PPS final rule (71 FR 65884) to 

address those geographic areas in which 

there were no IPPS hospitals and, thus, 

no hospital wage data on which to base 

the calculation of the HH PPS wage 

index. For rural areas that do not have 

IPPS hospitals, and therefore, lack 

hospital wage data on which to base a 

wage index, we would use the average 

wage index from all contiguous CBSAs 

as a reasonable proxy. For rural Puerto 

Rico, we do not apply this methodology 

due to the distinct economic 

circumstances that exist there, but 

instead continue using the most recent 

wage index previously available for that 

area (from CY 2005). 

For urban areas without IPPS 

hospitals, we use the average wage 

index of all urban areas within the State 

as a reasonable proxy for the wage index 

for that CBSA. For CY 2012, the only 

urban area without IPPS hospital wage 

data is Hinesville-Fort Stewart, Georgia 

(CBSA 25980). 

The wage index values for rural areas 

and the CBSAs and their associated 

wage index values are available via the 

Internet at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/HomeHealthPPS/HomeHealth-Prospective-Payment-SystemRegulations-and-Notices.html 

5. Proposed CY 2013 Payment Update 

a. National Standardized 60-Day 

Episode Rate 

The Medicare HH PPS has been in 

effect since October 1, 2000. As set forth 

in the July 3, 2000 final rule (65 FR 

41128), the base unit of payment under 

the Medicare HH PPS is a national 

standardized 60-day episode rate. As set 

forth in § 484.220, we adjust the 

national standardized 60-day episode 

rate by a case-mix relative weight and a 

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wage index value based on the site of 

service for the beneficiary. 

In the CY 2008 HH PPS final rule with 

comment period, we refined the casemix methodology and also rebased and 

revised the home health market basket. 

To provide appropriate adjustments to 

the proportion of the payment amount 

under the HH PPS to account for area 

wage difference, we apply the 

appropriate wage index value to the 

labor portion of the HH PPS rates. As 

discussed in section III.C.1, we have 

proposed a labor-related share of the 

case-mix adjusted 60-day episode rate of 

78.535 percent and a non-labor-related 

share of 21.465 percent. The proposed 

CY 2013 HH PPS rates use the same 

case-mix methodology and application 

of the wage index adjustment to the 

labor portion of the HH PPS rates as set 

forth in the CY 2008 HH PPS final rule 

with comment period. Following are the 

steps we take to compute the case-mix 

and wage adjusted 60-day episode rate: 

(1) Multiply the national 60-day 

episode rate by the patient’s applicable 

case-mix weight. 

(2) Divide the case-mix adjusted 

amount into a labor (78.535 percent) 

and a non-labor portion (21.465 

percent). 

(3) Multiply the labor portion by the 

applicable wage index based on the site 

of service of the beneficiary. 

(4) Add the wage-adjusted portion to 

the non-labor portion, yielding the casemix and wage adjusted 60-day episode 

rate, subject to any additional applicable 

adjustments. 

In accordance with section 

1895(b)(3)(B) of the Act, this document 

constitutes the annual update of the HH 

PPS rates. The HH PPS regulations at 

§ 484.225 set forth the specific annual 

percentage update methodology. In 

accordance with § 484.225(i), for a HHA 

that does not submit home health 

quality data, as specified by the 

Secretary, the unadjusted national 

prospective 60-day episode rate is equal 

to the rate for the previous calendar year 

increased by the applicable home health 

market basket index amount minus two 

percentage points. Any reduction of the 

percentage change will apply only to the 

calendar year involved and will not be 

considered in computing the 

prospective payment amount for a 

subsequent calendar year. 

For CY 2013, we propose to update 

the national per-visit rates for each 

discipline by the applicable home 

health payment update percentage of 1.5 

percent. We propose to adjust the 

national per-visit rate by the appropriate 

wage index based on the site of service 

for the beneficiary, as set forth in 

§ 484.230. As discussed in the July 3, 

2000 HH PPS final rule, for episodes 

with four or fewer visits, Medicare pays 

the national per-visit amount by 

discipline, referred to as a low 

utilization payment amount (LUPA). We 

propose to adjust the labor portion of 

the updated national per-visit rates used 

to calculate LUPAs by the most recent 

pre-floor and pre-reclassified hospital 

wage index. We are also proposing to 

update the LUPA add-on payment 

amount and the NRS conversion factor 

by the applicable home health payment 

update of 1.5 percent for CY 2013. 

Medicare pays the 60-day case-mix 

and wage-adjusted episode payment on 

a split percentage payment approach. 

The split percentage payment approach 

includes an initial percentage payment 

and a final percentage payment as set 

forth in § 484.205(b)(1) and 

§ 484.205(b)(2). We may base the initial 

percentage payment on the submission 

of a request for anticipated payment 

(RAP) and the final percentage payment 

on the submission of the claim for the 

episode, as discussed in § 409.43. The 

claim for the episode that the HHA 

submits for the final percentage 

payment determines the total payment 

amount for the episode and whether we 

make an applicable adjustment to the 

60-day case-mix and wage-adjusted 

episode payment. The end date of the 

60-day episode as reported on the claim 

determines which calendar year rates 

Medicare would use to pay the claim. 

We may also adjust the 60-day casemix and wage-adjusted episode 

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A partial episode payment 

adjustment as set forth in § 484.205(d) 

and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

b. Proposed Updated CY 2013 National 

Standardized 60-Day Episode Payment 

Rate 

In calculating the annual update for 

the CY 2012 national standardized 60- 

day episode payment rates, we first look 

at the CY 2012 rates as a starting point. 

The CY 2012 national standardized 60- 

day episode payment rate is $2,138.52. 

Next, we update the payment amount 

by the proposed CY 2013 home health 

payment update of 1.5 percent. 

As previously discussed in section 

III.A. (‘‘Case-Mix Measurement’’) of this 

proposed rule, our updated analysis of 

the change in case-mix that is not due 

to an underlying change in patient 

health status reveals an additional 

increase in nominal change in case-mix. 

Therefore, we propose to reduce rates by 

1.32 percent in CY 2013. The national 

60-day episode payment amount is 

adjusted by the case-mix weight of the 

patient and by the wage index of the 

geographic area in which the beneficiary 

is located. The proposed CY 2013 

national standardized 60-day episode 

payment rate for an HHA that submits 

the required quality data is shown in 

Table 11. The proposed CY 2013 

national standardized 60-day episode 

payment rate for an HHA that does not 

submit the required quality data is 

updated by the proposed CY 2013 home 

health payment update (1.5 percent) 

minus 2 percentage points and is shown 

in Table 12. 

TABLE 11—PROPOSED CY 2013 NATIONAL 60-DAY EPISODE PAYMENT AMOUNT

CY 2012 National standardized 60-day episode payment rate 

Multiply by the 

proposed CY 2013 

home health payment update of 1.5 

percent 

Reduce by 1.32 

percent for nominal 

change in case-mix 

Proposed CY 2013 

National standardized 60-day episode payment rate 

$2,138.52 ............................................................................................................. × 1.015 × 0.9868 $2,141.95 

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TABLE 12—FOR HHAS THAT DO NOT SUBMIT THE QUALITY DATA—PROPOSED CY 2013 NATIONAL 60-DAY EPISODE

PAYMENT AMOUNT

CY 2012 National standardized 60-day episode payment rate 

Multiply by the 

proposed CY 2013 

home health 

payment 

update of 1.5 

percent minus 2 

percentage points 

(¥0.5 percent) 

Reduce by 1.32 

percent for nominal 

change in case-mix 

Proposed CY 2013 

national standardized 60-day episode payment rate 

$2,138.52 ............................................................................................................. × 0.995 × 0.9868 $2099.74 

c. National Per-Visit Rates 

The national per-visit rates are used to 

pay LUPAs and are also used to 

compute imputed costs in outlier 

calculations. The per-visit rates are paid 

by type of visit or home health 

discipline. The six home health 

disciplines are as follows: 

• Home Health Aide (HH aide); 

• Medical Social Services (MSS); 

• Occupational Therapy (OT); 

• Physical Therapy (PT); 

• Skilled Nursing (SN); and 

• Speech Language Pathology 

Therapy (SLP). 

In order to calculate the CY 2013 

national per-visit rates, the CY 2012 

national per-visit rates for each 

discipline are updated by the proposed 

CY 2013 home health payment update 

of 1.5 percent. The national per-visit 

rates are adjusted by the wage index 

based on the site of service of the 

beneficiary. The per-visit rates are not 

case-mix adjusted nor are they subject to 

the 1.32 percent reduction related to the 

nominal increase in case-mix. 

The per-visit payment amounts for 

LUPAs are separate from the LUPA 

Add-On amount which is paid for 

episodes that occur as the only episode 

or initial episode in a sequence of 

adjacent episodes. The CY 2013 national 

per-visit rates are shown in Table 13. 

TABLE 13—PROPOSED CY 2013 NATIONAL PER-VISIT PAYMENT AMOUNTS

For HHAs that DO submit the required 

quality data 

For HHAs that DO 

NOT submit the required quality data 

Home health discipline type 

CY 2012 per-visit 

amounts per 

60-day episode 

Multiply by the 

proposed CY 2013 

payment update of 

1.5 percent 

Proposed CY 2013 

per-visit payment 

Multiply by the 

proposed CY 2013 

payment update of 

1.5 percent minus 2 

percentage points 

(¥0.5 percent) 

Proposed CY 2013 

per-visit payment 

HH Aide ........................................ $51.13 × 1.015 $51.90 × 0.995 $50.87 

MSS ............................................. 180.96 × 1.015 183.67 × 0.995 180.06 

OT ................................................ 124.26 × 1.015 126.12 × 0.995 123.64 

PT ................................................. 123.43 × 1.015 125.28 × 0.995 122.81 

SN ................................................ 112.88 × 1.015 114.57 × 0.995 112.32 

SLP .............................................. 134.12 × 1.015 136.13 × 0.995 133.45 

d. LUPA Add-on Payment Amount 

Update 

Beginning in CY 2008, LUPA episodes 

that occur as the only episode or initial 

episode in a sequence of adjacent 

episodes are adjusted by adding an 

additional amount to the LUPA 

payment before adjusting for area wage 

differences. We update the LUPA 

payment amount by the proposed CY 

2013 home health payment update of 

1.5 percent. The LUPA add-on payment 

amount is not subject to the 1.32 percent 

reduction related to the nominal 

increase in case-mix. For CY 2013, we 

propose that the add-on to the LUPA 

payment to HHAs that submit the 

required quality data be updated by the 

proposed CY 2013 home health 

payment update of 1.5 percent. The 

proposed CY 2013 LUPA add-on 

payment amount is shown in Table 14. 

We propose that the add-on to the LUPA 

payment to HHAs that do not submit the 

required quality data would be updated 

by the proposed CY 2013 home health 

payment update (1.5 percent) minus two 

percentage points. 

TABLE 14—PROPOSED CY 2013 LUPA ADD-ON AMOUNTS

CY 2012 LUPA add-on amount 

For HHAs that DO 

submit the required quality data 

For HHAs that DO NOT submit the 

required quality data 

Multiply by the proposed CY 2013 

payment update of 

1.5 percent 

Proposed CY 2013 

LUPA add-on 

amount 

Multiply by the proposed CY 2013 

payment update of 

1.5 percent minus 2 

percentage points 

(¥0.5 percent) 

Proposed CY 2013 

LUPA add-on 

amount 

$94.62 .............................................................................. × 1.015 $96.04 × 0.995 $94.15 

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e. Nonroutine Medical Supply 

Conversion Factor Update 

Payments for nonroutine medical 

supplies (NRS) are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. We first increase CY 

2012 NRS conversion factor ($53.28) by 

the proposed payment update of 1.5 

percent. The final updated CY 2013 

NRS conversion factor for 2013 appears 

in Table 15. 

TABLE 15—PROPOSED CY 2013 NRS CONVERSION FACTOR FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY DATA

CY 2012 NRS conversion factor 

Multiply by the 

proposed CY 2013 

payment update of 

1.5 percent 

Proposed CY 2013 

NRS conversion 

factor 

$53.28 ...................................................................................................................................................... × 1.015 $54.08 

Using the NRS conversion factor 

($54.08) for CY 2013, the payment 

amounts for the various severity levels 

are shown in Table 16. 

TABLE 16—PROPOSED CY 2013 NRS PAYMENT AMOUNTS FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY DATA

Severity level Points 

(scoring) 

Relative 

Weight 

Proposed CY 

2013 NRS 

payment 

amount 

1 ........................................................................................................................................................... 0 ............. 0.2698 $14.59 

2 ........................................................................................................................................................... 1 to 14 ... 0.9742 52.68 

3 ........................................................................................................................................................... 15 to 27 2.6712 144.46 

4 ........................................................................................................................................................... 28 to 48 3.9686 214.62 

5 ........................................................................................................................................................... 49 to 98 6.1198 330.96 

6 ........................................................................................................................................................... 99+ ......... 10.5254 569.21 

For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2012 NRS conversion 

factor. We first increase the CY 2012 

NRS conversion factor ($53.28) by the 

proposed CY 2013 home health 

payment update of 1.5 percent minus 2 

percentage points. The CY 2013 NRS 

conversion factor for HHAs that do not 

submit quality data is shown in Table 

17. 

TABLE 17—PROPOSED CY 2013 NRS CONVERSION FACTOR FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY

DATA

CY 2012 NRS Conversion Factor 

Multiply by the 

proposed CY 2013 

payment update of 

1.5 percent minus 2 

percentage points 

(¥0.5 percent) 

Proposed CY 2013 

NRS conversion 

factor 

$53.28 ...................................................................................................................................................... × 0.995 $53.01 

The payment amounts for the various 

severity levels based on the updated 

conversion factor for HHAs that do not 

submit quality data are calculated in 

Table 18. 

TABLE 18—PROPOSED CY 2013 NRS PAYMENT AMOUNTS FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY

DATA

Severity level Points 

(scoring) 

Relative 

weight 

Proposed 

NRS 

payment 

amount 

1 ........................................................................................................................................................... 0 ............. 0.2698 $14.30 

2 ........................................................................................................................................................... 1 to 14 ... 0.9742 51.64 

3 ........................................................................................................................................................... 15 to 27 2.6712 141.60 

4 ........................................................................................................................................................... 28 to 48 3.9686 210.38 

5 ........................................................................................................................................................... 49 to 98 6.1198 324.41 

6 ........................................................................................................................................................... 99+ ......... 10.5254 557.95 

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6. Rural Add-On 

Section 421(a) of the MMA required, 

for home health services furnished in a 

rural area (as defined in section 

1886(d)(2)(D) of the Act), with respect to 

episodes or visits ending on or after 

April 1, 2004 and before April 1, 2005, 

that the Secretary increase the payment 

amount that otherwise would have been 

made under section 1895 of the Act for 

the services by 5 percent. 

Section 5201 of the DRA amended 

section 421(a) of the MMA. The 

amended section 421(a) of the MMA 

required, for home health services 

furnished in a rural area (as defined in 

section 1886(d)(2)(D) of the Act), on or 

after January 1, 2006 and before January 

1, 2007, that the Secretary increase the 

payment amount otherwise made under 

section 1895 of the Act for those 

services by 5 percent. 

Section 3131(c) of the Affordable Care 

Act amended Section 421(a) of the 

MMA to provide an increase of 3 

percent of the payment amount 

otherwise made under section 1895 of 

the Act for home health services 

furnished in a rural area (as defined in 

section 1886(d)(2)(D) of the Act), for 

episodes and visits ending on or after 

April 1, 2010 and before January 1, 

2016. 

The statute waives budget neutrality 

related to this provision, as the statute 

specifically states that the Secretary 

shall not reduce the standard 

prospective payment amount (or 

amounts) under section 1895 of the Act 

applicable to home health services 

furnished during a period to offset the 

increase in payments resulting in the 

application of this section of the statute. 

The 3 percent rural add-on is applied 

to the national standardized 60-day 

episode rate, national per-visit rates, 

LUPA add-on payment, and NRS 

conversion factor when home health 

services are provided in rural (nonCBSA) areas. Refer to Tables 19 through 

23 for these payment rates. 

TABLE 19—PROPOSED CY 2013 PAYMENT AMOUNTS FOR 60-DAY EPISODES FOR SERVICES PROVIDED IN A RURAL AREA

For HHAs that do submit quality data For HHAs that do not submit quality data 

Proposed CY 

2013 national standardized 60-day episode payment rate 

Multiply 

by the 3 percent rural 

add-on 

Proposed 

rural CY 2013 national standardized 

60-day episode payment rate 

Proposed CY 

2013 national standardized 60-day episode payment rate 

Multiply 

by the 3 percent rural 

add-on 

Proposed 

rural CY 2013 national standardized 

60-day episode payment rate 

$2,141.95 × 1.03 $2,206.21 $2,099.74 × 1.03 $2,162.73 

TABLE 20—PROPOSED CY 2013 PER-VISIT AMOUNTS FOR SERVICES PROVIDED IN A RURAL AREA

Home health discipline type 

For HHAs that do submit quality data For HHAs that do not submit quality data 

Proposed 

CY 2013 

per-visit rate 

Multiply 

by the 3 

percent 

rural add-on 

Proposed 

rural CY 

2013 pervisit rate 

Proposed 

CY 2013 

per-visit rate 

Multiply 

by the 3 

percent 

rural add-on 

Proposed 

rural CY 

2013 pervisit rate 

HH Aide ............................................................................ $51.90 × 1.03 $53.46 $50.87 × 1.03 $52.40 

MSS ................................................................................. 183.67 × 1.03 189.18 180.06 × 1.03 185.46 

OT .................................................................................... 126.12 × 1.03 129.90 123.64 × 1.03 127.35 

PT ..................................................................................... 125.28 × 1.03 129.04 122.81 × 1.03 126.49 

SN .................................................................................... 114.57 × 1.03 118.01 112.32 × 1.03 115.69 

SLP .................................................................................. 136.13 × 1.03 140.21 133.45 × 1.03 137.45 

TABLE 21—PROPOSED CY 2013 LUPA ADD-ON AMOUNTS FOR SERVICES PROVIDED IN RURAL AREAS

For HHAs that do submit quality data For HHAs that do not submit quality data 

Proposed CY 2013 

LUPA add-on amount 

Multiply by 

the 3 percent rural 

add-on 

Proposed rural CY 

2013 LUPA add-on 

amount 

Proposed CY 2013 

LUPA add-on amount 

Multiply by the 3 percent rural add-on 

Proposed rural CY 

2013 LUPA add-on 

amount 

$96.04 × 1.03 $98.92 $94.15 × 1.03 $96.97 

TABLE 22—PROPOSED CY 2013 NRS CONVERSION FACTOR FOR SERVICES PROVIDED IN RURAL AREAS

For HHAs that do submit quality data For HHAs that do not submit quality data 

Proposed CY 2013 

conversion factor 

Multiply by 

the 3 percent 

rural add-on 

Proposed rural CY 

2013 conversion 

factor 

Proposed CY 2013 

conversion factor 

Multiply 

by the 3 percent 

rural add-on 

Proposed CY rural 

2013 conversion 

factor 

$54.08 × 1.03 $55.70 $53.01 × 1.03 $54.60 

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TABLE 23—PROPOSED CY 2013 NRS PAYMENT AMOUNTS FOR SERVICES PROVIDED IN RURAL AREAS

Severity 

level 

Points 

(scoring) 

For HHAs that do submit quality data (NRS Conversion 

Factor = $55.70) 

For HHAs that do not submit quality data (NRS Conversion Factor = $54.60) 

Relative 

weight 

Total NRS 

payment amount for rural areas 

Relative 

weight 

Total NRS 

payment amount for rural areas 

1 ............. 0 0.2698 $15.03 0.2698 $14.73 

2 ............. 1 to 14 0.9742 54.26 0.9742 53.19 

3 ............. 15 to 27 2.6712 148.79 2.6712 145.85 

4 ............. 28 to 48 3.9686 221.05 3.9686 216.69 

5 ............. 49 to 98 6.1198 340.87 6.1198 334.14 

6 ............. 99+ 10.5254 586.26 10.5254 574.69 

D. Home Health Face-to-Face Encounter 

1. Acute or Post-Acute Physician 

Flexibility 

As a condition for payment, the 

Affordable Care Act requires that, prior 

to certifying a patient’s eligibility for the 

home health benefit, the physician must 

document that the physician himself or 

herself or an allowed nonphysician 

practitioner (NPP) has had a face-to-face 

encounter with the patient. Specifically, 

the Affordable Care Act states that a 

nurse practitioner or clinical nurse 

specialist, as those terms are defined in 

section 1861(aa)(5) of the Act, working 

in collaboration with the physician in 

accordance with State law, or a certified 

nurse-midwife (as defined in section 

1861(gg) of the Act) as authorized by 

State law, or a physician assistant (as 

defined in section 1861(aa)(5) of the 

Act) under the supervision of the 

physician may perform the face to face 

encounter and inform the certifying 

physician, who documents the 

encounter as part of the certification of 

eligibility. In the CY 2012 HH PPS final 

rule (76 FR 68597), we stated that, in 

addition to the certifying physician and 

allowed NPPs, the physician who cared 

for the patient in an acute or post-acute 

care facility, and who had privileges in 

such facility, could also perform the 

face-to-face encounter and inform the 

certifying physician, who would 

document the encounter as part of the 

certification of eligibility, and that 

encounter supported the patient’s 

homebound status and need for skilled 

services. 

For patients admitted to home health 

following care in an acute or post-acute 

care facility, the home health industry 

has asked whether it would be 

acceptable for an allowed NPP, working 

in the acute or post-acute facility, to 

perform the face-to-face encounter in 

collaboration with the acute or postacute care physician and communicate 

his or her clinical findings to the acute 

or post-acute care physician and, then, 

for the acute or post-acute care 

physician to communicate the NPP’s 

findings to the certifying physician. In 

practice, it is our understanding from 

these stakeholders that acute or postacute care physicians utilize NPPs to 

obtain information about the patient’s 

clinical condition. As such, the industry 

suggests that it would be reasonable and 

appropriate for an allowed NPP working 

in an acute or post-acute facility to 

perform the face-to-face encounter and 

communicate the clinical findings to the 

acute or post-acute care physician who 

would then communicate information 

regarding the patient’s homebound 

status and need for skilled services to 

the certifying physician. However, we 

do not believe the statute specifically 

addresses this situation. 

Currently, in guidance in the form of 

Qs and As and a recent MLN article 

available on CMS’ Home Health Agency 

Center Web site (http://www.cms.gov/ 

Center/Provider-Type/Home-HealthAgency-HHA-Center.html), we have 

communicated that physician residents, 

under the supervision of a teaching 

physician, would be allowed to perform 

the face-to-face encounter in the acute 

or post-acute facility and inform the 

teaching physician of the clinical 

findings of that face-to-face encounter. 

The teaching physician, in turn, informs 

the certifying physician of the clinical 

findings of the face-to-face encounter, to 

include the patient’s homebound status 

and the need for skilled services. 

A resident is not precluded from 

performing the face-to-face encounter 

because he or she is a physician and can 

perform the encounter. However, we 

stated that because a resident does not 

have privileges, the teaching physician 

would be responsible for informing the 

certifying physician of the patient’s 

homebound status and need for skilled 

services. Since we recognize this 

exchange of information between 

residents and teaching physicians as 

allowable under existing face-to-face 

requirements we believe that NPPs 

should not be precluded from 

performing the face-to-face encounter in 

collaboration with the acute or postacute care physician who has privileges 

and cared for the patient in the acute or 

post-acute facility, informing the acute 

or post-acute care physician of the 

patient’s clinical condition, and having 

the acute or post-acute care physician 

inform the certifying physician of the 

patient’s homebound status and need 

for skilled services. 

Therefore, for patients admitted to 

home health from an acute or post-acute 

facility, we propose to modify the 

regulations at § 424.22(a)(1)(v) to allow 

an NPP in an acute or post-acute facility 

to perform the face-to-face encounter in 

collaboration with or under the 

supervision of the physician who has 

privileges and cared for the patient in 

the acute or post-acute facility, and 

allow such physician to inform the 

certifying physician of the patient’s 

homebound status and need for skilled 

services. For the specific proposed 

changes to part 424, see the regulation 

text of this proposed rule. We encourage 

stakeholder comment on these proposed 

changes. 

In addition to meeting the goals of the 

face-to-face encounter provision, we 

believe this proposed policy change will 

result in more efficient care 

coordination between the acute or postacute NPP and physician, and the 

certifying physician. We believe this 

more efficient care delivery will result 

in an improved transition of care from 

the acute or post-acute facility to the 

home health setting. Improving a 

patient’s transition from one healthcare 

setting to another is widely regarded to 

be directly related to improved patient 

care and improved patient outcomes. 

We believe that this policy change 

would encourage the acute or post-acute 

NPP who is best informed of the 

patient’s most current clinical condition 

to collaboratively communicate the 

patient’s need for home health services 

to the physician who cared for the 

patient in the acute or post-acute 

facility, who would then inform the 

certifying physician. Because a standard 

protocol of communication or 

documentation is not mandated 

between the acute or post-acute NPP, 

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the acute or post-acute physician, and a 

patient’s community physician, we 

believe the additional flexibility with 

the face-to-face encounter will 

encourage increased communication 

between the allowed practitioners and 

better care coordination for the patient. 

Further, for patients admitted to home 

health from an acute or post-acute 

facility, such a policy would be 

consistent with what believe is the goal 

of the provision, which is increased 

physician involvement in a patient’s 

home health certification, without 

creating additional burden or preventing 

access to care. We believe that increased 

physician and NPP communication 

regarding the patient’s clinical 

condition fits within the framework of 

Congress’ goals associated with the faceto-face encounter requirement. 

2. Regulatory Text Clarification 

Additionally, because of the way our 

regulatory text is constructed at 

§ 424.22(a)(1)(v)(D), we received notice 

that claims are being denied if the faceto-face documentation is not ‘‘clearly 

titled’’ by the certifying physician. Our 

intent was that the face-to-face 

documentation be clearly titled, but not 

necessarily by the certifying physician. 

As such, we propose to revise our 

regulatory language so as to not be 

prescriptive as to what entity must title 

the documentation. The face-to-face 

documentation must still be signed by 

the certifying physician, and the content 

requirements are not changing. For the 

specific proposed changes to part 424, 

see the regulation text of this proposed 

rule. We encourage stakeholder 

comment on these proposed changes. 

E. Therapy Coverage and Reassessments 

1. Therapy Coverage 

In the CY 2011 HH PPS final rule (75 

FR 70389), we clarified policies related 

to how therapy services are to be 

provided and documented, and began 

requiring additional therapy 

documentation to support medical 

necessity to address continuing 

concerns regarding the provision of 

unnecessary therapy in the home health 

setting. Specifically, we required that: 

(1) Measurable treatment goals be 

described in the plan of care and that 

the patient’s clinical record demonstrate 

that the method used to assess a 

patient’s function include objective 

measurement and successive 

comparisons of measurements, thus 

enabling objective measurement of 

progress toward goals and/or therapy 

effectiveness; (2) a qualified therapist 

(instead of an assistant) perform the 

needed therapy service, assess the 

patient, measure progress, and 

document progress toward goals at least 

once least every 30 days during a 

therapy patient’s course of treatment; (3) 

for those patients needing more than 13 

or 19 therapy visits, we require that a 

qualified therapist (instead of an 

assistant) perform the therapy service 

required at the 13th or 19th visit, assess 

the patient, and measure and document 

effectiveness of the therapy; and (4) we 

cease coverage of therapy services if 

progress towards plan of care goals 

cannot be measured, unless the 

documentation supports the expectation 

that progress can be expected in a 

reasonable and predictable timeframe. 

We also finalized policies that provide 

additional flexibility for the 13th and 

19th visit requirements in cases when: 

(1) The patient resides in a rural area; 

(2) documented exceptional 

circumstances prevent the qualified 

therapist from making the required visit; 

and (3) patients receive more than one 

type of therapy. 

Although in the CY 2011 HH PPS 

final rule, we clarified our therapy 

coverage requirements and instituted 

polices that, in exceptional 

circumstances, provide flexibility in 

fulfilling these requirements, concerns 

regarding certain aspects of these 

policies persist. The first issue involves 

the timing of when the resumption of 

coverage occurs after a qualified 

therapist misses one of the required 

13th/19th or at least once every 30 days 

reassessment visits. Currently, when a 

qualified therapist misses one of the 

required reassessment visits, once the 

therapist has completed the required 

reassessment, coverage resumes after 

this reassessment visit. Some agencies 

and therapists believe they are being 

unfairly penalized by this policy and 

that the reassessment visit should be 

covered as therapy was also provided 

during that visit even though it was not 

timely. 

The second issue concerns patients 

receiving more than one type of therapy 

and the lack of coverage for all therapy 

disciplines if the required reassessment 

visit is missed for any one of the therapy 

disciplines for which therapy services 

are being provided. Currently, if a 

patient receives more than one type of 

therapy and the required reassessment 

visit is missed for any one of the therapy 

disciplines for which therapy services 

are being provided, therapy visits are 

not covered for any of the therapy 

disciplines until the qualified therapist 

that missed the reassessment visit 

complies with the reassessment visit 

requirements. Therefore, even if 

qualified therapists from the other 

therapy disciplines have completed all 

their required reassessment visits, 

therapy visits for these disciplines 

would not be covered until the qualified 

therapist who missed the reassessment 

visit has completed the previously 

missed reassessment visit. We received 

feedback from the home health industry 

that they believe this requirement is 

unfair in that it denies coverage for 

therapy disciplines that have met their 

requirement for qualified therapists to 

complete a reassessment visit and that 

they are providing what should be 

considered covered therapy services. 

We had additional concerns that this 

requirement may be negatively 

impacting beneficiaries’ access to 

therapy services. That is, if an agency 

anticipates a visit will not be covered 

because one qualified therapist has not 

completed the required reassessment, it 

might be reluctant for any therapy visits 

to occur until that missed reassessment 

visit is completed. This is obviously not 

in the best interest of the beneficiary. 

We propose to revise our regulations 

at § 409.44(c)(2)(i)(E) to state that if a 

qualified therapist missed a 

reassessment visit, therapy coverage 

would resume with the visit during 

which the qualified therapist completed 

the late reassessment, not the visit after 

the therapist completed late 

reassessment. We would expect 

minimal changes to claims submissions 

as a result of this policy change. 

However, we will monitor claims for 

unintended consequences, including 

possible up-coding associated with 

therapy-related home health resource 

groups (HHRGs) pre- and postimplementation. 

In addition, we propose to revise our 

regulations at § 409.44(c)(2)(i)(E) to state 

that in cases where multiple therapy 

disciplines are involved, if the required 

reassessment visit was missed for any 

one of the therapy disciplines for which 

therapy services were being provided, 

therapy coverage would cease only for 

that particular therapy discipline. 

Therefore, as long as the required 

therapy reassessments were completed 

timely for the remaining therapy 

disciplines, therapy services would 

continue to be covered for those therapy 

disciplines. We encourage stakeholder 

comment on these proposed changes. 

2. When Therapy Reassessment Visits 

Are To Be Conducted 

We continue to receive questions 

regarding acceptable visit ranges for the 

required 13th and 19th reassessment 

visits. As we codified at 

§ 409.44(c)(2)(i)(C)(1) and 

§ 409.44(c)(2)(i)(D)(1), if either a patient 

lives in a rural area, or documented 

circumstances outside the therapist’s 

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control prevent her or him from 

completing the reassessment visit at the 

13th or 19th visit, this requirement can 

be met by the therapist having made the 

visit during the 11th or 12th visit for the 

required 13th visit or the 17th or 18th 

visit for the required 19th visit. 

We also intended for similar 

flexibility to be applicable in cases 

where beneficiaries are receiving more 

than one type of therapy. Therefore, we 

included in our regulations at 

§ 409.44(c)(2)(i)(C)(2) and 

§ 409.44(c)(2)(i)(D)(2) that the therapist’s 

visit need only be ‘‘close to’’ the 13th 

and 19th visits. However, because we 

recognize the industry’s need for 

additional guidance, to provide more 

precise guidance, we propose to revise 

the regulations at § 409.44(c)(2)(i)(C)(1) 

and § 409.44(c)(2)(i)(D)(1) to clarify that 

in cases where the patient is receiving 

more than one type of therapy, qualified 

therapists could complete their 

reassessment visits during the 11th, 

12th, or 13th visit for the required 13th 

visit reassessment and the 17th, 18th, or 

19th visit for the required 19th visit 

reassessment. We encourage stakeholder 

comment on these proposed changes. 

3. Technical Correction to G-Code 

Description 

As part of our ‘‘Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2011,’’ (75 FR 

70389) we also provided notice of 

changes to existing G-codes and new Gcodes related to skilled nursing and 

therapy services (75 FR 43248). In 

Change Request 7182, we finalized these 

new and revised G-codes. These codes 

included G0158, which had as its 

description, ‘‘Services performed by a 

qualified occupational therapist 

assistant in the home health or hospice 

setting, each 15 minutes.’’ After the 

publication of these codes, a national 

therapy association informed us that the 

use of the word, ‘‘therapist’’ rather than 

‘‘therapy’’ is technically incorrect for 

the occupational therapy profession. 

This association requested that we 

change the terminology in the G-code. 

Because this description includes the 

terminology, ‘‘occupational therapist 

assistant,’’ we propose to make a 

technical correction to this terminology 

in G0158, so that the new description 

would instead include the terminology, 

‘‘occupational therapy assistant,’’ 

making it also consistent with § 484.4. 

F. Payment Reform: Home Health Study 

and Report 

To address concerns that some 

beneficiaries are at risk of not having 

access to Medicare home health services 

and that the current HH PPS may 

encourage providers to adopt selective 

admission patterns, section 3131(d) of 

the Affordable Care Act requires the 

Secretary to conduct a study on home 

health agency costs involved with 

providing access to care to low-income 

Medicare beneficiaries or beneficiaries 

in medically underserved areas, and in 

treating beneficiaries with varying levels 

of severity of illness (specifically, 

beneficiaries with ‘‘high levels of 

severity of illness’’). As part of the 

study, we plan to assess whether these 

vulnerable populations (low-income 

Medicare beneficiaries, beneficiaries in 

medically underserved areas, and 

beneficiaries with high levels of severity 

of illness) experience access issues. We 

may also analyze methods to revise the 

current HH PPS to ensure access to care 

and better account for costs for these 

beneficiaries. 

Methods to revise the current HH PPS 

could include payment adjustments for 

services that involve either more or 

fewer resources, changes to reflect 

resources involved with providing home 

health services to low-income Medicare 

beneficiaries or Medicare beneficiaries 

residing in medically underserved area, 

and ways outlier payments could be 

revised to reflect costs of treating 

Medicare beneficiaries with high 

severity of illness. In addition, section 

3131(d) of the Affordable Care Act 

allows for the investigation into other 

issues with the payment system as the 

Secretary determines appropriate. 

Therefore, in addition to examining 

access to care for vulnerable 

populations and examining ways to 

more accurately align payment with 

resource costs, we also plan to evaluate 

the current HH PPS and develop 

possible revisions to the payment 

system that might minimize 

vulnerabilities. 

As we stated in the CY 2012 proposed 

rule (76 FR 41025), we awarded a 

contract in the fall of 2010 to perform 

exploratory work for the study. The 

contractor performed a literature review 

of HH PPS payment vulnerabilities and 

access issues, established and convened 

technical expert panels and open door 

forums to help define the vulnerable 

populations and to gain insight on 

access issues these populations may 

face, and performed preliminary 

analysis looking at resource costs versus 

Medicare reimbursement. In September 

2011, we awarded a study contract to 

develop an analytic plan, perform 

detailed analysis, and if necessary, 

develop recommendations for changes 

to the HH PPS. We are in the 

preliminary stages of our analyses. We 

plan to provide updates regarding our 

progress in future rulemaking and open 

door forums. 

The Affordable Care Act requires that 

the Secretary submit a Report to 

Congress regarding the study no later 

than March 1, 2014. The report may 

contain recommendations for revisions 

to the HH PPS, recommendations for 

legislation and administrative action, 

and recommendations for whether 

further research is needed. The Congress 

also provided CMS with the authority to 

conduct a separate demonstration 

project to test recommended HH PPS 

changes resulting from the study. 

G. International Classification of 

Diseases, 10th Edition (ICD–10) 

Transition Plan and Grouper 

Enhancements 

On April 17, 2012 the Department of 

Health and Human Services (HHS) 

published a proposed rule 

‘‘Administrative Simplification: 

Adoption of a Standard for a Unique 

Health Plan Identifier; Addition to the 

National Provider Identifier 

Requirements; and a Change to the 

Compliance Date for ICD–10–CM and 

ICD–10–PCS Medical Data Code Set’’ 

(77 FR 22950) that proposed, among 

other things, to delay, from October 1, 

2013 to October 1, 2014, the compliance 

date for the International Classification 

of Diseases, 10th Edition diagnosis and 

procedure codes (ICD–10). Any changes 

to the effective date for ICD–10 

implementation would be announced in 

future rulemaking. We will include an 

update in our final rule and outline any 

impact on our ICD–10 transition plans 

as a result of the proposed change in 

ICD–10 compliance date. 

Although a compliance date change 

has been proposed, we continue to work 

with the HH PPS Grouper maintenance 

contractor to revise the HH PPS Grouper 

to accommodate ICD–10–CM codes. 

Home Health Agencies currently report 

IC–9–CM codes for their patients 

through OASIS–C. For Medicare 

patients, the data collection software 

invokes HH PPS Grouper software. The 

HH PPS Grouper will be revised to 

utilize ICD–10–CM codes. If determined 

to be appropriate, we plan to publish a 

draft list of ICD–10–CM codes for the 

HH PPS Grouper by the summer of 2012 

for industry review and comment. An 

email account on the ICD–10 section of 

the CMS Web site to facilitate receipt of 

comments on the draft list of ICD–10– 

CM codes will be provided. Our current 

plans are to describe the testing 

approach for the HH PPS Grouper to 

accommodate and process ICD–10 codes 

on the ICD–10 section of the CMS Web 

site in conjunction with the release of 

the draft grouper in April 2013. We plan 

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to update providers of any changes to 

our current plans through the following 

forums: the ICD–10 Home Health 

section of the CMS Web site, the Home 

Health, Hospice and DME Open Door 

Forums, and provider outreach sessions 

for ICD–10. 

In December 2008, we updated and 

released Attachment D: Selection and 

Assignment of OASIS Diagnoses to 

promote accurate selection and 

assignment of the patient’s diagnosis 

(https://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

HomeHealthPPS/OASIS_

Attachment_D_Guidance.html). This 

guidance was designed to ensure that 

providers limited the number of 

diagnoses assigned to M1024. In 

addition, Attachment D reminded HHA 

clinicians/coders to comply with ICD– 

9–CM coding guidelines when assigning 

primary and secondary diagnoses to the 

OASIS items M1020 and M1022. 

Analysis conducted by our HH PPS 

Grouper maintenance contractor 

revealed that many HHAs do not 

comply with these guidelines. The 

analysis demonstrated that HHAs are 

not limiting the number of diagnoses 

assigned to M1024 and continue to not 

comply with ICD–9–CM coding 

guidelines. We have reviewed the 

diagnosis codes identified in the HH 

PPS Grouper and confirmed that the 

only codes that cannot be reported as a 

primary or secondary diagnosis code 

(M1020 and M1022) are the fracture 

codes (V-code). As a result, we are 

proposing two enhancements for the HH 

PPS Grouper which we believe will 

encourage compliance with coding 

guidelines. 

We propose to restrict M1024 to only 

permit fracture (V-code) diagnoses 

codes which according to ICD–9–CM 

coding guidelines cannot be reported in 

a home health setting as a primary or 

secondary diagnosis. To further ensure 

compliance with proper coding 

guidelines, we propose to pair the 

fracture codes (V-code) with appropriate 

diagnosis codes and only when these 

pairings appear in the primary and 

payment diagnosis fields will the 

grouper award points. Currently, when 

a code from the Diabetes, Skin 1 or 

Neuro 1 group is submitted in the 

primary diagnosis position (M1020) the 

diagnosis code may score additional 

points. In situations where ICD–9 

coding guidelines have required a 

V-code to be submitted in the M1020 

position, HHAs have been instructed to 

report the etiology code in the payment 

diagnosis field (M1024) and receive 

equivalent scoring. Specifically, we are 

proposing a revision in HHRG logic to 

permit equivalent scoring when the 

Diabetes, Skin 1 or Neuro 1 codes are 

submitted immediately following the 

V-code in the M1020 position without 

requiring utilization of the payment 

diagnosis field. These grouper 

enhancements will enforce appropriate 

use of our payment diagnosis field 

based upon the guidance issued in 

Attachment D (putting us in a much 

more favorable position to eventually 

retire the payment diagnosis field) until 

we move to ICD–10 where there is no 

longer an issue with fracture codes, and 

ensure ICD–9 and ICD–10 coding 

guidelines are followed to assist in the 

eventual transition of grouping the 

claim, versus OASIS, to determine the 

appropriate HIPPS code for payment. 

IV. Quality Reporting for Hospices 

A. Background and Statutory Authority 

Section 3004 of the Affordable Care 

Act amends the Act to authorize a 

quality reporting program for hospices. 

As added by section 3004 (c), new 

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 fiscal year. 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 will 

not be cumulative and will not 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. Such data 

must be submitted in a form and 

manner, and at a time specified by the 

Secretary. Any measures selected by the 

Secretary must have been endorsed by 

the consensus-based entity which holds 

a contract regarding performance 

measurement with the Secretary under 

section 1890(a) of the Act. This contract 

is currently held by the National Quality 

Forum (NQF). However, section 

1814(i)(5)(D)(ii) 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 a measure(s) that 

is(are) not so endorsed as long as due 

consideration is given to measures that 

have been endorsed or adopted by a 

consensus-based organization identified 

by the Secretary. Under section 

1814(i)(5)(D)(iii) of the Act, the 

Secretary must publish selected 

measures that will be applicable with 

respect to FY 2014 no later than October 

1, 2012. 

B. Public Availability of Data Submitted 

Under section 1814(i)(5)(E) of the Act, 

the Secretary is required to establish 

procedures for making any quality data 

submitted by hospices available to the 

public. Such procedures will ensure 

that a hospice will have the opportunity 

to review the data regarding the 

hospice’s respective program before it is 

made public. 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 we 

make available to the public be 

meaningful data 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. 

We will announce the timeline for 

public reporting of data in future 

rulemaking. 

C. Quality Measures for Hospice Quality 

Reporting Program and Data 

Submission Requirements for Payment 

Year FY 2014. 

1. Quality Measures Required for 

Payment Year 2014 

In the Hospice Wage Index for Fiscal 

Year 2012 Final Rule (76 FR 47302, 

47320 (August 4, 2011)), 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 percentage of patients who 

report being uncomfortable because of 

pain on the initial assessment (after 

admission to hospice services) who 

report pain was brought to a comfortable 

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level within 48 hours. The data 

collection period for this measure is 

October 1, 2012 through December 31, 

2012, and the data submission deadline 

is 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 payor. 

• 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. Specifically, 

hospice programs are required to report 

whether or not they have a QAPI 

program that addresses at least three 

indicators related to patient care. In 

addition hospices are required to check 

off, from a list of topics, all patient care 

topics for which they have at least one 

QAPI indicator. The data collection 

period for this measure is October 1, 

2012 through December 31, 2012, and 

the data submission deadline is January 

31, 2013. Hospices are not asked to 

report their level of performance on 

these patient care related indicators. 

The information being gathered will be 

used by CMS to ascertain the breadth 

and content of existing hospice QAPI 

programs. This stakeholder input will 

help inform future measure 

development. 

Hospice programs will be evaluated 

for purposes of the quality reporting 

program based on whether or not they 

respond, not on how they respond or on 

performance level. No additional 

measures are required for payment year 

FY 2014. 

2. Data Submission Requirements for 

Payment Year 2014 

We will provide a Hospice Data 

Submission Form to be completed using 

a web-based data entry site. Training for 

use of this Web based data submission 

form will be provided to hospices 

through webinars and other 

downloadable materials before the data 

submission date. Though similar to the 

data entry site utilized during the 

hospice voluntary reporting period, the 

site will be changed to accommodate the 

addition of the NQF #0209 measure, as 

well as to simplify the data entry 

requirements for the structural measure. 

Hospices will be asked to provide 

identifying information, and then 

complete the web based data entry for 

the required measures. For hospices that 

cannot complete the web based data 

entry, a downloadable data entry form 

will be available upon request. 

The data submission form as well as 

details regarding education and 

resources related to the data collection 

and data submission for both the NQF 

#0209 measure and the structural 

measure will be provided on the CMS 

Web site at http://www.cms.gov/

Medicare/Quality-Initiatives-PatientAssessment-Instruments/HospiceQuality-Reporting/. 

D. Quality Measures for Hospice Quality 

Reporting Program for Payment Year FY 

2015 and Beyond 

1. Quality Measures Required for 

Payment Year FY 2015 and Subsequent 

Years 

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 propose that 

hospices report the following: 

• The NQF-endorsed measure that is 

related to pain management, NQF 

#0209: The percentage of patients who 

report being uncomfortable because of 

pain on the initial assessment (after 

admission to hospice services) who 

report pain was brought to a comfortable 

level within 48 hours. 

• The structural measure: 

Participation in a Quality Assessment 

and Performance Improvement (QAPI) 

Program that Includes at Least Three 

Quality Indicators Related to Patient 

Care. Specifically, hospice programs 

would report whether or not they have 

a QAPI program that addresses at least 

three indicators related to patient care. 

We are not extending the requirement 

that hospices provide a list of their 

patient care indicators. We invite 

comment on the proposed selection of 

measures. 

2. Data Submission Requirements for 

Payment Year FY 2015. 

As previously noted, in the Hospice 

Wage Index for Fiscal Year 2012 Final 

Rule, we finalized the following: 

• All hospice quality reporting 

periods subsequent to that for Payment 

Year FY 2014 be based on a calendar 

year rather than a calendar quarter. For 

example, January 1, 2013 through 

December 31, 2013 will be the data 

collection period used for determination 

of the hospice market basket update for 

each hospice in FY 2015, etc.; and 

• Hospices submit data in the fiscal 

year prior to the payment 

determination. For FY 2015 and beyond, 

the data submission deadline will be 

April 1 of each year. For example, April 

1, 2014 will be the data submission 

deadline used for determination of the 

hospice market basket update for each 

hospice in FY 2015, etc. 

E. Additional Measures Under 

Consideration and Standardization of 

Data Collection 

While initially we will build a 

foundation for quality reporting by 

requiring hospices to report one NQFendorsed measure and one structural 

measure, we seek to achieve a 

comprehensive set of quality measures 

to be available for widespread use for 

quality improvement and also informed 

decision making. The provision of 

quality care to hospice patients and 

families is of utmost importance to 

CMS. For annual payment 

determinations beyond FY2015, we are 

considering an expansion of the 

required measures to include some 

additional measures endorsed by NQF. 

The measures of particular interest are 

NQF numbers 1634, 1637, 1638, 1639, 

and 0208 and can be found by searching 

the NQF site at www.qualityforum.org. 

We welcome comments on whether all, 

some, any, or none of these measures 

should be considered for future 

rulemaking. A potential timeline and 

titles of future measures under 

consideration are included below. 

To support the standardized 

collection and calculation of quality 

measures specifically focused on 

hospice services, we believe the 

required data elements would 

potentially require a standardized 

assessment instrument. We are 

committed to developing a quality 

reporting program for hospices that 

utilizes standardized methods to collect 

data needed to calculate endorsed 

quality measures. To achieve this goal, 

we have been working on the initial 

development and testing of a hospice 

patient-level data item set. This patient 

level item set could be used by all 

hospices at some point in the future to 

collect and submit standardized data 

items about each patient admitted to 

hospice. These data could be used for 

calculating quality measures. Many of 

the items currently in testing are already 

standardized and included in 

assessments used by a variety of other 

providers. Other items have been 

developed specifically for the hospice 

care settings, and obtain information 

needed to calculate the hospiceappropriate quality measures that were 

endorsed by NQF in February 2012. We 

are considering a target date for 

implementation of a standardized 

hospice data item set as early as CY 

2014, dependent on development and 

infrastructure logistics. We welcome 

comments on the potential 

implementation of a hospice patientlevel data item set in CY 2014. 

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In developing the standardized data 

item set, we have included data items 

that will support the following endorsed 

measures: 

• 1617 Patients Treated With an 

Opioid Who Are Given a Bowel 

Regimen 

• 1634 Pain Screening 

• 1637 Pain Assessment 

• 1638 Dyspnea Treatment 

• 1639 Dyspnea Screening 

Starting with data collection in 2015, 

we envision these measures as possible 

measures that we would implement 

subject to future rulemaking. We 

welcome comments on the potential 

future implementation of these 

measures and the associated projected 

timeframe for implementation. 

We are also considering future 

implementation of measures based on 

an experience of care survey such as the 

Family Evaluation of Hospice Care 

Survey (FEHC). The NQF endorsed 

measure # 0208 Family Evaluation of 

Hospice Care is such a measure. 

Implementation of an experience of care 

measure and the associated use of a 

specified survey could precede or 

follow the implementation of a 

standardized data set. We do not 

envision implementation of both a data 

set and an experience of care survey in 

the same year and would project 

implementation in succession in order 

to avoid excessive burden to hospices. 

We solicit comment on the succession 

of implementation of these two 

potential requirements. 

Summary Tables: 

Data collection Data 

submission APU impact Measures 

Proposed in This Proposed Rule 

1/1/2013–12/31/2013 ........................................... 4/1/2014 FY 2015 

(10/1/2014) 

Structural measure without QAPI list NQF 0209. 

1/1/2014–12/31/2014 ........................................... 4/1/2015 FY 2016 

(10/1/2015) 

Structural measure without QAPI list NQF 0209. 

Target Date for Potential Future Implementation of Standardized Data Set 

Considering Hospice Standardized Data Item Set for implementation in CY 2014. 

Target Dates for Potential Implementation of Future Measures Under Consideration 

1/1/2015–12/31/2015 ........................................... 4/1/2016 FY 2017 

(10/1/2016) 

Structural measure without QAPI list NQF 0209. 

.................... Considering NQF endorsed measures supported by a standardized data set: 

.................... • 1617 Patients Treated With an Opioid Who Are Given a 

Bowel Regimen 

.................... • 1634 Pain Screening 

.................... • 1637 Pain Assessment 

.................... • 1638 Dyspnea Treatment 

.................... • 1639 Dyspnea Screening 

.................... Considering NQF endorsed measure derived from the FEHC 

survey: 

.................... • 0208 Family Evaluation of Hospice Care 

V. Survey and Enforcement 

Requirements for Home Health 

Agencies 

A. Background and Statutory Authority 

In the 1980s and 1990s, home health 

services became a rapidly growing 

segment of Medicare expenditures. 

During that time, Congress enacted 

several laws that dramatically expanded 

the authority of CMS in its 

administration of the home health 

benefit. The Omnibus Budget 

Reconciliation Act of 1987 (OBRA ‘87) 

(Pub. L. 100–203, enacted on December 

22, 1987) amended the Act to 

incorporate provisions that would create 

mechanisms to improve the quality of 

home health services as well as longterm care services. It also provided the 

Secretary with the authority to change 

the manner in which CMS regulated and 

carried out enforcement actions with 

respect to HHAs participating in the 

Medicare program. Changes in both the 

HHA and long-term care arenas required 

significant adjustments and increased 

workload for CMS in its operation and 

regulatory oversight of these programs. 

The OBRA ‘87 amendments mandated 

an outcome-oriented survey process for 

HHAs that would include ‘‘a survey of 

the quality of care and services 

furnished by the agency as measured by 

indicators of medical, nursing, and 

rehabilitative care,’’ as reflected in 

section 1891(c)(2)(C)(i)(II) of the Act. We 

responded to that mandate by creating 

an outcome-oriented survey process for 

HHAs that included specific procedures 

to be followed, including visits to 

patients in their homes. We also defined 

in our policies, although not in 

regulation, the different types of surveys 

to be used, including the standard, 

partial extended and extended surveys 

addressed in section 1891 of the Act. 

This proposed rule would codify these 

types of surveys in regulation. 

To participate as an HHA in the 

Medicare program, an agency or 

organization must meet the definition of 

an HHA in section 1861(o) of the Act. 

Section 1861(o) of the Act defines an 

HHA as a public agency or private 

organization or a subdivision of such an 

agency or organization, which among 

other things, is primarily engaged in the 

provision of skilled nursing services and 

other therapeutic services, has policies 

established by a group of professional 

personnel, maintains clinical records, is 

licensed under State or local law, and 

meets the health and safety standards 

established by the Secretary. 

Additionally, section 1891(a) of the Act 

sets out specific participation 

requirements for HHAs. The regulations 

implementing sections 1861(o) and 

1891(a) of the Act are known as health 

and safety standards, or CoPs, for HHAs 

and are codified in 42 CFR part 484. 

Home health services are covered for 

the elderly and disabled under the 

Hospital Insurance (Part A) and 

Supplemental Medical Insurance (Part 

B) benefits of the Medicare program. 

Section 1861(m) of the Act defines the 

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term ‘‘home health services’’ as services 

that must be furnished by, or under 

arrangement with, an HHA that 

participates in the Medicare program, 

must be provided on a visiting basis to 

the individual’s home, and may include 

the following: 

• Part-time or intermittent skilled 

nursing care furnished by or under the 

supervision of a registered nurse. 

• Physical therapy, speech-language 

pathology, and occupational therapy. 

• Medical social services under the 

direction of a physician. 

• Part-time or intermittent home 

health aide services. 

• Medical supplies, other than drugs 

and biologicals, but including 

osteoporosis drugs. 

• Services of interns and residents if 

the HHA is owned by or affiliated with 

a hospital that has an approved medical 

education program. 

• Services at hospitals, skilled 

nursing facilities, or rehabilitation 

centers when they involve equipment 

too cumbersome to bring to the home. 

The HHA CoPs were originally issued 

in 1973, with revisions made in 1989 

and 1991, to implement provisions of 

section 4021 of OBRA ‘87, which added 

section 1891(a) to the Act. Additional 

minor revisions to the CoPs have been 

made since that time. Over the years, 

additional home-health-specific areas of 

focus for CMS have included 

adjustments to the home health 

Prospective Payment System (HH PPS) 

and Outcome and Assessment 

Information Set (OASIS). 

The CoPs apply to an HHA as an 

entity, as well as to the services 

furnished to each individual under the 

care of the HHA, unless the CoPs are 

specifically limited to Medicare/ 

Medicaid beneficiaries, such as the 

OASIS requirements at § 484.11, 

§ 484.20 and § 484.55. Under section 

1891(b) of the Act, the Secretary is 

responsible for assuring that the CoPs, 

and their enforcement, are adequate to 

protect the health and safety of 

individuals under the care of an HHA 

and to promote the effective and 

efficient use of public monies. 

The Secretary is authorized to enter 

into an agreement with a State survey 

agency (SA) under section 1864(a) of the 

Act or a national accreditation 

organization (AO) under section 1865(a) 

of the Act, with oversight by CMS 

Regional Offices, to determine whether 

HHAs meet the Federal participation 

requirements for Medicare. Section 

1902(a)(33)(B) of the Act provides for 

SAs to perform the same survey tasks 

for facilities participating or seeking to 

participate in the Medicaid program. 

The results of Medicare and Medicaidrelated surveys are used by CMS and the 

Medicaid State Agency, respectively, as 

the basis for a decision to enter into, 

deny, or terminate a provider agreement 

with the agency. To assess compliance 

with Federal participation requirements, 

surveyors conduct onsite inspections 

(surveys) of agencies. In the survey 

process, surveyors directly observe the 

actual provision of care and services to 

patients and the effect or possible effects 

of that care to assess whether the care 

provided meets the assessed needs of 

individual patients. An SA periodically 

surveys HHAs and certifies its findings 

to CMS and to the State Medicaid 

Agency if the HHA is seeking to acquire 

or maintain Medicare or Medicaid 

certification, respectively. The general 

requirements regarding the survey and 

certification process are codified at 42 

CFR part 488 and specific survey 

instructions are detailed in our State 

Operations Manual (SOM) (IOM Pub. 

100–07) and in policy transmittals. 

Certain providers and suppliers, 

including HHAs, are also deemed by 

CMS to meet the Federal requirements 

for participation if they are accredited 

by an AO whose program is approved 

by CMS to meet or exceed Federal 

requirements under section 1865(a). 

However, these deemed providers and 

suppliers are subject to validation 

surveys under § 488.7. 

On August 2, 1991, we published the 

Survey Requirements and Alternative 

Sanctions for Home Health Agencies 

proposed rule (56 FR 37054) that 

proposed to establish survey and 

enforcement requirements, as well as 

alternative sanctions for HHAs under 

section 1891 of the Act, implementing 

the OBRA ’87 provisions. 

While we attempted to finalize the 

proposed rule numerous times since its 

publication on August 2, 1991, 

sweeping changes in the law and other 

regulations, together with the demands 

of additional improvement efforts, 

impeded the promulgation of a final 

rule. Indeed, in response to the August 

2008 Office of Inspector General (OIG) 

Report, ‘‘Deficiency History and 

Recertification of Medicare Home 

Health Agencies,’’ (OEI–09–06–00040), 

we noted that the August 2, 1991 

proposed rule would require substantial 

revisions and republication to 

implement the alternative sanctions. 

Due to the considerable length of time 

that has passed since publication of the 

August 2, 1991 proposed rule, we are 

now publishing a new proposed rule, 

which would implement those survey 

and enforcement requirements, as well 

as establish alternative sanctions 

specified under 1891(f) for HHAs. 

B. Provisions of the Proposed Rule 

1. Overview 

Sections 4022 and 4023 of OBRA ’87 

amended the Act by adding sections 

1891(c) through (f) to establish 

requirements for surveying and 

certifying HHAs as well as to establish 

the authority of the Secretary to utilize 

varying enforcement mechanisms to 

terminate participation and to impose 

alternative sanctions if HHAs were 

found out of compliance with the CoPs. 

We propose to add new subparts I and 

J to 42 CFR part 488 to implement these 

sections of the Act. New subpart I 

would provide survey and certification 

guidance while new subpart J would 

outline the basis for enforcement of 

compliance standards for HHAs that are 

not in substantial compliance with 

Medicare participation requirements. 

In addition, we propose to amend 

certain sections of 42 CFR part 488, 

subpart A—General Provisions. 

Currently, the general provisions 

include specific references to survey, 

certification and enforcement 

procedures for long term care facilities 

and the residents of those facilities. We 

are proposing to amend several 

regulations, where appropriate, to also 

include reference to HHAs and the 

patients they serve. 

Specifically, we propose to amend 

§ 488.2 to include the statutory 

reference to home health services 

(section 1861(m) of the Act), HHAs 

(section 1861(o) of the Act), and the 

Conditions of Participation (CoPs) for 

HHAs and home health quality (section 

1891 of the Act). 

We propose to amend § 488.3 by 

revising paragraph (a)(1) to include the 

statutory citations concerning HHAs 

mentioned above. In addition, we 

propose to amend § 488.26 by revising 

paragraph (c)(2) and (e) to include 

references to ‘‘patient’’ and ‘‘patients’’ 

which is how individuals receiving 

services in an HHA are referenced. 

Furthermore, we propose to revise the 

heading for § 488.28 to include 

reference to HHAs with deficiencies. 

Rules for certification, documentation 

of findings, periodic review of 

compliance and approval, certification 

of noncompliance, and determining 

compliance are set forth, respectively, in 

§§ 488.12, 488.18, 488.20, 488.24, and 

488.26 of this part. 

2. Proposed New Subpart I—Survey and 

Certification of HHAs 

a. Basis and Scope (§ 488.700) 

Proposed section 488.700 of subpart I 

would specify the statutory authority for 

and general scope of standards proposed 

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in part 488 that establish the 

requirements for surveying HHAs to 

determine whether they meet the 

Medicare conditions of participation. In 

general, this proposed rule is based on 

the rulemaking authority in section 

1891 of the Act as well as specific 

statutory provisions identified in the 

preamble where appropriate. 

b. Definitions (§ 488.705) 

We propose to add § 488.705 which 

would define certain terms. Sections 

1891(c)(1) and (2) of the Act specify the 

requirements for types and frequency of 

surveys to be performed in HHAs, 

utilizing the terms ‘‘standard’’, 

‘‘abbreviated standard’’, ‘‘extended’’, 

‘‘partial extended’’ and ‘‘complaint’’ 

surveys, as well as specifying the 

minimum components of the standard 

and extended surveys. Therefore, we are 

proposing definitions for these surveys 

at § 488.705. 

In addition to those terms, we are 

proposing to add definitions for 

‘‘condition-level deficiency,’’ 

’’deficiency,’’ ‘‘noncompliance,’’ 

‘‘standard-level deficiency,’’ 

‘‘substandard care,’’ and ‘‘substantial 

compliance.’’ The definitions of the 

different surveys as well as the 

additional proposed definitions have 

been a part of longstanding CMS policy, 

but have not yet been codified in the 

regulations for HHAs. 

c. Standard Surveys (§ 488.710) 

At proposed § 488.710, a standard 

survey would be conducted not later 

than 36 months after the date of the 

previous standard survey, as specified at 

section 1891(c)(2)(A) of the Act. Section 

1891(c)(2)(C) of the Act requires for 

standard surveys, to the extent 

practicable, to review a case-mix 

stratified sample of individuals to 

whom the HHA furnishes services, 

which is reflected in proposed 

§ 488.710(a)(1). The statute specifies 

that CMS actually visit the homes of 

sampled patients, and that CMS conduct 

a survey of the quality of services being 

provided (as measured by indicators of 

medical, nursing, and rehabilitative 

care). At proposed § 488.710(a), we 

would specify minimum requirements 

and provide that visits to homes of 

patients could be done only with the 

consent of the patient, their guardian or 

legal representative. The purpose of the 

home visit would be to evaluate the 

extent to which the quality and scope of 

services furnished by the HHA attained 

and maintained the highest practicable 

functional capacity of each patient as 

reflected in the patient’s written plan of 

care and clinical records. Other forms of 

communication with patients, such as 

through telephone calls, could be used 

to complete surveys, if determined 

necessary by the State Survey Agency or 

CMS Regional Office. We also would 

provide in proposed § 488.710(b) that 

the survey agency’s failure to follow its 

own survey procedures would not 

invalidate otherwise legitimate 

determinations that deficiencies existed 

in an HHA. For example, if the 

Statement of Deficiencies was not 

forwarded to the provider within 10 

days of the end of the exit conference, 

this would not invalidate the underlying 

determinations. 

d. Partial Extended Survey (§ 488.715) 

In proposed § 488.715, the partial 

extended survey would be conducted to 

determine if deficiencies and/or 

deficient practice(s) exist that were not 

fully examined during the standard 

survey. It would be conducted when a 

standard-level noncompliance was 

identified; or if the surveyor believed 

that a deficient practice existed at a 

standard or condition-level that was not 

examined during the standard survey. 

During the partial extended survey, the 

surveyor would review, at a minimum, 

additional standard(s) under the same 

CoP in which the deficient practice was 

identified during the standard survey. 

The surveyors could also review any 

additional standards under the same or 

related CoPs which would assist in 

making a compliance decision. Under 

§ 488.24 of our regulations, which 

applies to most other providers and 

suppliers and upon which this proposed 

provision is modeled, the SA certifies 

that a provider is not in compliance 

with the CoPs where the deficiencies are 

of such character as to substantially 

limit the provider’s capacity to furnish 

adequate care or which adversely affect 

the health and safety of patients. A CoP 

may be considered out of compliance 

(and thus condition-level) for one or 

more standard level deficiencies, if, in 

a surveyor’s judgment, the standard 

level deficiency constitutes a significant 

or a serious finding that adversely 

affects, or has the potential to adversely 

affect, patient outcomes. Surveyors are 

to use their professional judgment, in 

concert with the Federal forms, policies 

and interpretive guidelines in their 

assessment of a provider’s compliance 

with the CoPs. The same procedures 

would be used with respect to HHAs. 

e. Extended Surveys (§ 488.720) 

As described in proposed § 488.720, 

the extended survey would review 

compliance with all CoPs and standards 

applicable to the HHA. It could be 

conducted at any time, at the discretion 

of CMS or the SA, but would be 

conducted when any condition level 

deficiency was found. This survey also 

would review the HHA’s policies, 

procedures, and practices that produced 

the substandard care, which we define 

in proposed § 488.705 as 

noncompliance with one or more 

Conditions of Participation at the 

condition-level. The extended survey 

would be conducted no later than 14 

calendar days after the completion of a 

standard survey which found the HHA 

had furnished substandard care. 

Additionally, the survey would review 

any associated activities that might have 

contributed to the deficient practice. 

f. Unannounced Surveys (§ 488.725) 

Section 1891(c)(1) of the Act requires 

that standard surveys be unannounced. 

Moreover, CMS policy (State Operations 

Manual (SOM) section 2700A) requires 

that all HHA surveys be unannounced; 

this policy would be set out at proposed 

§ 488.725, which also would provide 

that surveys be conducted with 

procedures and scheduling that renders 

the onsite surveys as unpredictable in 

their timing as possible. In addition, 

section 1891(c)(1) of the Act requires 

CMS to review State scheduling and 

survey procedures to ensure that the 

agency has taken all reasonable steps to 

avoid giving advance notice to HHAs of 

impending surveys through these 

procedures. Generally, as with respect 

to other provider-types, State survey 

agencies make every effort to lessen the 

predictability of a survey occurring at a 

specific time, day, or month. Moreover, 

section 1891(c)(1) of the Act states that 

any individual who notifies (or causes 

to be notified) an HHA of the time or 

date of the standard survey is subject to 

a civil money penalty (CMP) not to 

exceed $2,000. Accordingly, our 

proposed regulations at § 488.725 would 

reflect these survey requirements. 

g. Survey Frequency and Content 

(§ 488.730) 

In proposed § 488.730, we would set 

out the requirements for survey 

frequency and the substantive content of 

the survey, as discussed in § 488.710, 

§ 488.715, and § 488.720. Section 

1891(c)(2) of the Act requires HHAs to 

be subject to a standard survey at least 

every 36 months and the frequency of a 

standard survey to be commensurate 

with the need to assure the delivery of 

quality home health services. This 36 

month interval is based upon the last 

day of the last standard survey. This 

section of the Act also gives CMS the 

authority to conduct a survey as often as 

necessary to assure the delivery of 

quality home health services by 

determining whether an HHA complies 

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with the CoP or to confirm the 

correction of previous deficiencies. A 

standard survey or abbreviated standard 

survey may be conducted within two 

months of a change in ownership, 

administration or management of an 

HHA, as specified in 1891(c)(2)(B)(ii) of 

the Act, and must be conducted within 

2 months of a significant number of 

complaints reported against the HHA (as 

determined by CMS), and would also be 

conducted as otherwise directed by 

CMS to determine compliance with the 

CoP, such as the investigation of a 

complaint. Extended surveys and partial 

extended surveys may also be 

conducted at any time. As required in 

section 1891(c)(2)(D) of the Act, 

extended surveys and partial extended 

surveys must be conducted when an 

HHA is found to have furnished 

substandard care, and may also be 

conducted for other reasons at the 

discretion of CMS or the State in order 

to determine compliance with the CoP. 

h. Surveyor Qualifications (§ 488.735) 

Section 1891(c)(2)(C)(iii) of the Act 

requires ‘‘an individual who meets the 

minimum qualifications established by 

the Secretary’’ to conduct a survey of an 

HHA. We interpret this statutory 

language to mean that each individual 

on a survey team must meet certain 

minimum CMS qualifications. We set 

forth our proposed criteria for surveyor 

minimum qualifications in § 488.735. 

We are proposing that he or she 

successfully complete the relevant CMSsponsored Basic HHA Surveyor 

Training Course and any associated 

course prerequisites prior to conducting 

an HHA survey. 

Proposed § 488.735 would also set out 

the circumstances that would disqualify 

a surveyor from surveying a particular 

HHA as required by section 

1891(c)(2)(C)(iii) of the Act. A surveyor 

would be prohibited from surveying an 

HHA if the surveyor currently serves, or 

within the previous two years has 

served, on the staff of or as a consultant 

to, the HHA undergoing the survey. 

Specifically, the surveyor could not 

have been a direct employee, 

employment agency staff at the HHA, or 

an officer, consultant or agent for the 

surveyed HHA regarding compliance 

with CoPs. A surveyor would be 

prohibited from surveying an HHA if he 

or she has a financial interest or an 

ownership interest in that HHA. The 

surveyor would also be disqualified if 

he or she has a family member who has 

a financial interest or ownership interest 

with the HHA to be surveyed or has a 

family member who is a patient of the 

HHA to be surveyed. 

i. Certification of Compliance or NonCompliance (§ 488.740) 

We propose in § 488.740 to cross 

reference the rules for certification, 

documentation of findings, periodic 

review of compliance and approval, 

certification of non-compliance, and 

determining compliance for HHAs as set 

forth, respectively at § 488.12, § 488.18, 

§ 488.24 and § 488.26 of this part. These 

general rules must be followed when a 

State Agency certifies compliance or 

non-compliance of the HHA with the 

Act and Conditions of Participation. 

j. Informal Dispute Resolution (IDR) 

(§ 488.745) 

We propose in § 488.745 to make 

available to HHAs an IDR process to 

address disputes related to conditionlevel survey findings following an 

HHA’s receipt of the official statement 

of deficiencies. We propose adding an 

IDR process that would provide HHAs 

an informal opportunity to resolve 

disputes in the survey findings for those 

HHAs that are seeking recertification 

from the SA for continued participation 

in Medicare and for those HHAs that are 

currently under SA monitoring (either 

through a complaint or validation 

survey). Whenever possible, we want to 

provide every opportunity to settle 

disagreements at the earliest stage, prior 

to a formal hearing, conserving time and 

money potentially spent by the HHA, 

the State agency, and CMS. The goal of 

IDR is to offer an HHA the opportunity 

to refute one or more condition-level 

deficiencies cited on the official 

Statement of Deficiencies. An IDR 

between an HHA and the SA or RO, as 

appropriate, would allow the HHA an 

opportunity to provide an explanation 

of any material submitted to the SA and 

respond to the reviewer’s questions. 

In proposed § 488.745, we would 

provide HHAs with the option to 

dispute condition-level survey findings 

or repeat deficiencies warranting a 

sanction upon their receipt of the 

official Statement of Deficiencies. When 

survey findings indicate a condition 

level deficiency (or deficiencies), CMS 

or the State, as appropriate, would 

notify the HHA in writing of its 

opportunity to request an IDR of those 

deficiencies. This notice would be 

provided to the HHA at the time the 

Statement of Deficiencies is issued to 

the HHA. The HHA’s request for IDR 

must be submitted in writing, should 

include the specific deficiencies that are 

disputed, and should be submitted 

within the same 10 calendar day period 

that the HHA has for submitting an 

acceptable plan of correction. 

An HHA’s initiation of the IDR 

process would not postpone or 

otherwise delay the effective date of any 

enforcement action. The failure to 

complete an IDR would not delay the 

effective date of any enforcement action. 

Further, if any findings are revised or 

removed based on IDR, the official 

Statement of Deficiencies is revised 

accordingly and any enforcement 

actions imposed solely as a result of 

those revised or removed deficiencies 

are adjusted accordingly. We believe 

that the IDR procedures would maintain 

the balance between an HHA’s due 

process concerns and the public’s 

interest in the timely correction of HHA 

deficiencies. 

3. Proposed Subpart J—Alternative 

Sanctions for Home Health Agencies 

With Deficiencies 

a. Statutory Basis (§ 488.800) 

We are proposing rules for 

enforcement actions for HHAs with 

deficiencies, including alternative 

sanctions, at new subpart J. Under 

sections 1866(b)(2)(B) and 1891(e) of the 

Act and § 489.53(a)(3), we may 

terminate an HHA’s provider agreement 

if that HHA is not in substantial 

compliance with the Medicare 

requirements (that is, the failure to meet 

one or more conditions of participation 

is considered a lack of substantial 

compliance). We may also terminate an 

HHA that fails to correct its deficiencies 

within a reasonable time (ordinarily no 

more than 60 days), even if those 

deficiencies are at the standard (rather 

than condition) level at § 488.28. Prior 

to OBRA ’87, the only action available 

to CMS to address HHAs out of 

compliance with Federal requirements 

was termination of their Medicare 

provider agreement. Section 4023 of 

OBRA ’87 added subsections 1891(e) 

and (f) to the Act, which expanded the 

Secretary’s options to enforce Federal 

requirements for HHAs. Under section 

1891(e)(1) of the Act, if the Secretary 

determines on the basis of a standard, 

extended, or partial extended survey or 

otherwise, that a home health agency 

that is certified for participation under 

this title is no longer in compliance 

with the requirements specified in or 

pursuant to section 1861(o) or section 

1891(a) of the Act and determines that 

the deficiencies involved immediately 

jeopardize the health and safety of the 

individuals to whom the agency 

furnishes items and services, the 

Secretary shall take immediate action to 

remove the jeopardy and correct the 

deficiencies through the remedy 

specified in section 1891(f)(2)(A)(iii) or 

terminate the certification of the agency, 

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and may provide, in addition, for one or 

more of the other sanctions described in 

section 1891(f)(2)(A). 

We are proposing to set out the 

statutory basis for the new subsection at 

proposed § 488.800, which is sections 

1891(e) and (f) of the Act. Section 

1891(e) provides for termination of 

home health agencies that fail to comply 

with Conditions of Participation. This 

section also provides for ensuring that 

the procedures with respect to the 

conditions under which each of the 

alternative sanctions developed by the 

Secretary shall be designed to minimize 

the time between identification of 

deficiencies and imposition of these 

sanctions, including imposition of 

incrementally more severe fines for 

repeated or uncorrected deficiencies. 

Furthermore, this section specifies that 

these sanctions are in addition to any 

others available under State or Federal 

law, and, except for civil money 

penalties, are imposed prior to the 

conduct of a hearing. 

b. Definitions (§ 488.805) 

We are proposing to add § 488.805 to 

define the frequently used terms, 

including ‘‘directed plan of correction,’’ 

‘‘immediate jeopardy,’’ ‘‘new 

admission,’’ ‘‘per instance,’’ ‘‘plan of 

correction,’’ ‘‘repeat deficiency’’ and 

‘‘temporary management’’. 

Although section 1891 of the Act uses 

the term ‘‘intermediate sanctions,’’ for 

consistency with other enforcement 

rules, this proposed rule uses 

‘‘alternative sanctions,’’ which we 

consider to have the same meaning. 

c. General Provisions (§ 488.810) 

We propose in § 488.810 general rules 

for enforcement actions against an HHA 

with condition-level deficiencies. 

Sections 1891(e)(1) and (2) of the Act 

provide that if CMS finds that an HHA 

is not in compliance with the Medicare 

home health CoPs and the deficiencies 

involved either do or do not 

immediately jeopardize the health and 

safety of the individuals to whom the 

agency furnishes items and services, 

then we may terminate the provider 

agreement, impose an alternative 

sanction(s), or both. Therefore, our 

decision to impose one or more 

sanctions, including termination, would 

be based on condition-level 

deficiencies, found in an HHA during a 

survey, pursuant to section 1891(e)(2) of 

the Act. We would be able to impose 

one or more sanctions for each 

deficiency constituting noncompliance 

or for all deficiencies constituting 

noncompliance. 

It is also important to note that HHAs 

acquire certification for participation in 

Medicare via a SA survey or via 

accreditation by a CMS-approved AO. 

Accreditation by a CMS-approved AO is 

voluntary and not necessary to 

participate in Medicare. The AO 

communicates any condition level 

findings to the applicable CMS Regional 

Office. When an accredited HHA is to 

lose its accreditation status from the AO 

due to condition-level findings that 

remain uncorrected, we would follow 

the usual procedures for the resumption 

of oversight by the SA and the same 

procedures for imposition of alternative 

sanctions if appropriate. Once a 

sanction was imposed on an HHA, 

oversight and enforcement of that HHA 

would be by the SA from the accrediting 

organization until the HHA achieved 

compliance and the alternative sanction 

was removed or until the HHA was 

terminated from the Medicare program. 

It is CMS policy that any deficiencies 

found at a branch of the HHA would be 

counted against the HHA as a business 

entity. Therefore, regardless of whether 

the deficient practice is identified at the 

branch or the parent location, all 

sanctions imposed would apply to the 

parent HHA. However, these sanctions 

would not apply to any non-branch 

subunit that was associated with an 

HHA if such subunit were 

independently required to meet the 

CoPs for HHAs. Such subunit instead 

could have sanctions imposed on it 

based on deficient practices found at 

that subunit. For HHAs that operate 

branch offices in multiple states, we 

would base enforcement decisions on 

surveys conducted by the State in which 

the parent office is located. 

In proposed § 488.810(e) an HHA 

would be required to submit an 

acceptable plan of correction (POC) to 

CMS. We define plan of correction in 

proposed § 488.805 whether it has 

standard-level or condition-level as a 

plan developed by the HHA and 

approved by CMS that is the HHA’s 

written response to survey findings 

detailing corrective actions to cited 

deficiencies and specifies the date by 

which those deficiencies will be 

corrected. More specifically, a POC 

would detail how an HHA has or would 

correct each deficiency, how the HHA 

would act to protect patients in similar 

situations, how the HHA would ensure 

that each deficiency did not recur, how 

the HHA would monitor performance to 

sustain solutions, and in what 

timeframe corrective actions would be 

taken. We would determine if the POC 

was acceptable based on the information 

presented in the POC. 

In proposed § 488.810(f) CMS would 

provide written notification of the intent 

to impose a sanction including the 

specific sanction, the statutory basis for 

the sanction and appeal rights including 

an opportunity to participate in the 

proposed Informal Dispute Resolution 

process. 

An HHA may appeal the 

determination of noncompliance 

leading to the imposition of a sanction 

under the provisions of 42 CFR Part 498. 

A pending hearing does not delay the 

effective date of a sanction against an 

HHA and sanctions continue to be in 

effect regardless of any pending appeals 

proceedings. Civil money penalties 

continue to accrue during the pendency 

of an appeal, but will not be collected 

until a final agency determination, as 

we note in proposed § 488.845(f). 

d. Factors To Be Considered in Selecting 

Sanctions (§ 488.815) 

Section 1891(e)(2) of the Act provides 

that if CMS finds that an HHA is not in 

compliance with the Medicare home 

health CoPs and the deficiencies 

involved do not immediately jeopardize 

the health and safety of the individuals 

to whom the agency furnishes items and 

services, CMS may terminate the 

provider agreement, impose an 

alternative sanction(s), or both, at CMS’s 

discretion for a period not to exceed six 

months. The choice of any alternative 

sanction or termination would reflect 

the impact on patient care and the 

seriousness of the HHA’s patterns of 

noncompliance and would be based on 

the factors proposed in § 488.815. We 

could propose termination of the 

provider agreement and apply one or 

more sanctions for HHAs with the most 

egregious deficiencies, for an HHA that 

was unwilling or unable to achieve 

compliance within a maximum of six 

months, whether or not the violations 

constituted an ‘‘immediate jeopardy’’ 

situation. 

In proposed § 488.815 and consistent 

with section 1891(f)(3) of the Act, 

procedures for selecting the appropriate 

alternative sanction, including the 

amount of any CMP and the severity of 

each sanction, have been designed to 

minimize the time between the 

identification of deficiencies and the 

final imposition of sanctions. To 

determine which sanction or sanctions 

to apply, we propose that we would 

consider the following: 

• Whether the deficiencies pose 

immediate jeopardy to patient health 

and safety; 

• The nature, incidence, degree, 

manner, and duration of the deficiencies 

or noncompliance; 

• The presence of repeat deficiencies, 

the HHA’s compliance history in 

general, and specifically with reference 

to the cited deficiencies, and any history 

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of repeat deficiencies at either the 

parent or branch location; 

• Whether the deficiencies are 

directly related to a failure to provide 

quality patient care; 

• Whether the HHA is part of a larger 

organization with documented 

performance problems; 

• Whether the deficiencies indicate a 

system wide failure of providing quality 

care. 

Section 1891(f)(3) of the Act provides 

for the imposition of incrementally 

more severe fines for repeated or 

uncorrected deficiencies. We would 

define ‘‘repeat deficiency’’ in § 488.805 

as a standard or condition-level 

deficiency that was cited on a survey 

that was substantially the same as, or 

similar to, a finding of noncompliance 

issued within the preceding 365 days. 

The standard-level findings would be 

evaluated for condition-level 

noncompliance based on the HHA’s 

failure to correct and sustain 

compliance. As noted in proposed 

488.815(c), CMS would consider the 

presence of repeat deficiencies as a 

factor in selecting sanctions and civil 

money penalties. 

e. Available Sanctions (§ 488.820) 

Section 1891(f)(1)(A) of the Act 

provides that CMS shall ‘‘develop a 

range of intermediate [or alternative] 

sanctions’’ that may be imposed in 

addition to, or instead of, termination 

when CMS finds that an HHA has 

deficiencies. The Act explicitly provides 

for the following: Civil money penalties, 

suspension of payment for new 

admissions, and temporary 

management. We are proposing those 

alternative sanctions in this proposed 

rule. In addition to those specified in 

the statute, we are proposing to add the 

following additional alternative 

sanctions: A directed plan of correction, 

directed in-service training, and/or 

suspension of payment for new PPS 

episodes. The list of alternative 

sanctions that could be imposed for a 

noncompliant HHA is in proposed 

§ 488.820. 

f. Actions When Deficiencies Pose 

Immediate Jeopardy (§ 488.825) 

Under paragraph 1891(e)(1) of the 

Act, if CMS determined that the HHA’s 

deficiencies immediately jeopardize the 

health or safety of its patients, then CMS 

must take immediate action to notify the 

HHA of the immediate jeopardy 

situation and the HHA must correct the 

deficiencies. We are proposing to 

implement the statutory requirement by 

proposing that if the IJ situation was not 

addressed and resolved within 23 days 

because the HHA was unable or 

unwilling to correct the deficiencies, 

CMS would terminate the HHA’s 

provider agreement, using the 

procedures set out at § 489.53(d). In 

addition, CMS could impose one or 

more other alternative sanctions 

permitted by section 1891(f)(2) of the 

Act, including a civil money penalty 

(CMP), temporary management and/or 

suspension of all Medicare payments 

before the effective date of termination. 

We propose to set out these provisions 

as new § 488.825. 

We also propose in § 488.825 that for 

immediate jeopardy situations, we 

would terminate the HHA and we 

would give notice of the termination 

within 2 days before the effective date 

of the termination, which is consistent 

with the requirement for skilled nursing 

facilities in § 489.53(d)(2)(ii). Under our 

regular survey process, providers are 

advised of any immediate jeopardy 

findings upon discovery of the 

immediate jeopardy situation during the 

survey or as part of the exit conference 

at the end of the survey. This would 

give an HHA time to remove the 

immediate jeopardy and correct the 

deficiencies that gave rise to the 

immediate jeopardy finding. If the HHA 

fails to remove the immediate jeopardy 

situation, we would terminate the 

provider agreement no later than 23 

days from the last day of the survey. 

Consistent with the notice process 

established for hospital emergency 

departments with deficiencies that pose 

immediate jeopardy (set out at 

§ 489.53(b)), we are proposing at 

§ 488.825 that if an immediate jeopardy 

situation was not resolved within 23 

days because the HHA was unable or 

unwilling to correct deficiencies found 

during a survey, CMS would terminate 

the HHA’s provider agreement, using 

the termination procedures set out at 

§ 489.53 We propose to amend § 489.53 

by adding a new basis for termination at 

paragraph (a)(17), establishing that we 

would terminate an HHA’s provider 

agreement if the HHA failed to correct 

a deficiency or deficiencies within the 

required time frame. 

The notice of our intent to impose a 

sanction as proposed § 488.825(b) 

would include the nature of the 

noncompliance, the sanctions to be 

imposed, the effective date of the 

sanction, opportunity for IDR and the 

right to appeal the determination 

leading to the sanction. In order to 

assure an HHA achieved prompt 

compliance, we expect that we would 

give HHAs written notice of impending 

enforcement actions against them as 

quickly as possible following the 

completion of a survey of any kind. 

Finally, in proposed § 488.825(c), we 

would require an HHA whose provider 

agreement is terminated to 

appropriately and safely transfer its 

patients to another local HHA within 30 

days of termination. The HHA would be 

responsible for providing information, 

assistance and any arrangements 

necessary for the safe and orderly 

transfer of its patients. The State would 

be required to assist the HHA with this 

process. 

g. Actions When Deficiencies Are at the 

Condition-Level, But Do Not Pose 

Immediate Jeopardy (§ 488.830) 

While section 1891(e)(2) of the Act 

provides for termination of the HHA’s 

provider agreement as an enforcement 

option in non-immediate jeopardy 

situations, we are interested in 

providing incentives for HHAs to 

achieve and maintain full compliance 

with the requirements specified under 

sections 1861(o) and 1891(a) of the Act 

before termination becomes necessary. 

Accordingly, our proposed regulations 

at § 488.830 reflect this enforcement 

policy and address the definition of 

‘‘noncompliance,’’ provision of 15 day 

notice, criteria for continuation of 

payment, and termination time frame 

when there is no immediate jeopardy. 

The statute does not require CMS to 

discontinue alternative sanctions when 

it proposes to terminate an HHA’s 

participation in Medicare; thus, these 

sanctions, if imposed, could continue 

while CMS initiated termination 

proceedings. Therefore, alternative 

sanctions could be imposed before the 

termination became effective, but could 

not continue for a period that exceeded 

six months. Also, to protect the health 

and safety of individuals receiving 

services from the HHA, alternative 

sanctions would apply until the HHA 

achieved compliance or had its 

Medicare participation terminated. For 

example, the suspension of payment 

sanction would end when the HHA 

corrected all condition-level 

deficiencies or was terminated. 

We propose in § 488.830(b) that for a 

deficiency or deficiencies that do not 

pose immediate jeopardy, we would 

give the HHA at least 15 days advance 

notice of any proposed sanctions, except 

CMP, which would remain effective 

until the effective date of an impending 

termination (at 6 months) or until the 

HHA achieved compliance with CoPs, 

whichever was earlier. This is 

consistent with the general rule for 

providers and suppliers in § 489.53(d). 

Section 1891(f)(3) of the Act provides 

that the Secretary shall develop and 

implement specific procedures for 

determining the conditions under which 

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alternative sanctions are to be applied, 

including the amount of any penalties 

and the severity of each sanction. The 

following sections describe each 

possible sanction and procedures for 

imposing them. 

Finally, in proposed § 488.830(e), we 

would require an HHA whose provider 

agreement is terminated to 

appropriately and safely transfer its 

patients to another local HHA within 30 

days of termination. The HHA would be 

responsible for providing information, 

assistance and any arrangements 

necessary for the safe and orderly 

transfer of its patients. The State would 

be required to assist the HHA with this 

process. 

h. Temporary Management § 488.835 

We are proposing in § 488.835 when 

and how CMS applies temporary 

management, the duration of this 

sanction, and the payment procedures 

for temporary managers. We propose 

that temporary management means the 

temporary appointment by CMS or a 

CMS authorized agent of an authorized 

substitute manager or administrator 

(based on qualifications described in 

§ 484.4) who would be under the 

direction of the HHA’s governing body 

and who would have authority to hire, 

terminate or reassign staff, obligate HHA 

funds, alter HHA procedures, and 

manage the HHA to correct deficiencies 

identified in the HHA’s operation. We 

could impose temporary management 

when we determine that an HHA has 

condition-level deficiencies and that the 

deficiencies or the management 

limitations of the HHA are likely to 

impair the HHA’s ability to correct the 

deficiencies and return the HHA to full 

compliance with the CoPs within the 

required timeframe. We would impose 

temporary management to bring an HHA 

into compliance with program 

requirements in non-IJ cases within six 

months, as we propose in § 488.835(c). 

We would also choose to impose 

temporary management as a sanction for 

deficiencies that posed immediate 

jeopardy to patient health and safety, as 

provided under proposed 

§ 488.825(a)(3). 

When temporary management is 

imposed, CMS would consider the HHA 

or SA’s recommendation for a 

temporary manager when making the 

appointment. The individual appointed 

as a temporary manager would be 

required to have work experience and 

education that would qualify such 

individual to oversee the correction of 

deficiencies so that the HHA could 

achieve substantial compliance with the 

Medicare requirements. Each State 

Survey Agency will maintain a list of 

recommended individuals who would 

be eligible to serve as temporary 

managers, and annually submit the list 

to CMS. 

If the HHA refused to relinquish 

authority and control to the temporary 

manager, we would terminate the 

HHA’s provider agreement. If a 

temporary manager was appointed, but 

the HHA failed to correct the conditionlevel deficiencies within 6 months from 

the last day of the survey, the HHA’s 

Medicare participation would be 

terminated. Additionally, if the HHA 

resumes management control without 

CMS’s approval, it would be deemed to 

be a failure to relinquish authority and 

control to the temporary manager and 

we would impose termination and 

could impose any additional sanctions. 

The appointment of a temporary 

manager would not relieve the HHA of 

its responsibility to achieve compliance. 

We propose in § 488.835(c) that 

temporary management would end 

when: 

• We determined that the HHA was 

in compliance with all CoPs and had the 

capability to remain in full compliance; 

• The HHA provider agreement was 

terminated; or 

• The HHA resumed management 

control without CMS approval. 

We believe that the proposed 

regulations at § 488.805 and § 488.835 

would provide the temporary manager 

with the authority necessary to manage 

the HHA and cause positive changes. 

The temporary manager would have the 

authority to hire, terminate, or reassign 

staff; obligate HHA funds; alter HHA 

policies and procedures; and otherwise 

manage an HHA to correct deficiencies 

identified in the HHA’s operations. 

Temporary management would be 

provided at the HHA’s expense. Before 

the temporary manager was installed, 

the HHA would have to agree to pay 

his/her salary directly for the duration 

of the appointment. We believe that the 

responsibility for the HHA to pay the 

expenses of the temporary manager is an 

inherent management responsibility of 

the agency for which the HHA is 

regularly reimbursed by Medicare and 

Congress, pursuant to section 1891(e)(1), 

though such temporary outside 

management might be necessary in 

some cases to bring the HHA back into 

compliance with the conditions of 

participation. We propose that the 

salary for the temporary manager would 

not be less than the amount equivalent 

to the prevailing salary paid by 

providers in the geographic area for 

positions of this type, based on the 

based on the Geographic Guide by the 

Department of Labor (BLS Wage Data by 

Area and Occupation). In addition, the 

HHA would have to pay for any 

additional costs that would have 

reasonably been incurred if such person 

had been in an employment 

relationship, and any other costs 

incurred by such a person in furnishing 

services under such an arrangement or 

as otherwise set by the State. An HHA’s 

failure to pay the salary of the 

temporary manager would be 

considered by CMS to be a failure to 

relinquish authority and control to 

temporary management. 

i. Suspension of Payment for All New 

Admissions and New Payment Episodes 

§ 488.840 

We are proposing at § 488.840 

regulations describing when and how 

CMS would apply a suspension of 

payment for new Medicare admissions 

and new PPS episodes of care. If an 

HHA had a condition-level deficiency or 

deficiencies (regardless of whether or 

not immediate jeopardy exists), we 

would suspend payments for new 

Medicare patient admissions to the 

HHA that were made on or after the 

effective date of the sanction. The 

suspension of payment would be for a 

period not to exceed six months and 

would end when the HHA either 

achieved substantial compliance or was 

terminated. Suspension of payment for 

new patient admissions and for new 

payment episodes that occurred on or 

after the effective date of the sanction 

could be imposed anytime an HHA was 

found to be out of substantial 

compliance. The CMS would provide 

the HHA with written notice of noncompliance at least two calendar days 

before the effective date of the sanction 

in immediate jeopardy situations 

(proposed § 488.825(b)) or at least 15 

calendar days before the effective date 

of the sanction in non-immediate 

jeopardy situations (proposed 

§ 488.830(b)). Our notice of suspension 

of payment for new admissions and new 

payment episodes would include the 

following: the nature of the noncompliance; the effective date of the 

sanction; and the right to appeal the 

determination leading to the sanction. 

We propose to define a ‘‘new 

admission’’ in § 488.805 as the 

following: 

• A patient who is admitted or 

readmitted to the HHA under Medicare 

on or after the effective date of a 

suspension of payment sanction; or 

• A new payment episode that occurs 

on or after the effective date of a 

suspension of payment sanction. We 

have expanded the definition of ‘‘new 

admission’’ to include new payment 

episodes because we believe that each 

new payment episode (the 60 day 

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payment episode of HHA care) marks 

the beginning of a new assessment and 

a new care plan for the patient. 

Furthermore, patients who are 

admitted before the effective date of the 

suspension and who have temporarily 

interrupted their treatment in the 

middle of a payment episode but are not 

discharged would not be subject to the 

suspension of payment. 

Further, section 1891(f)(2)(C) of the 

Act provides that a suspension of 

payment sanction shall terminate when 

CMS finds that the HHA is in 

substantial compliance with all of the 

requirements specified in, or developed 

in accordance with, sections 1861(o) 

and 1891(a) of the Act. That is, the 

suspension of payment sanction would 

end when the HHA was determined to 

have corrected all condition-level 

deficiencies, or upon termination, 

whichever is earlier. 

We would notify the HHA of the 

imposition of this sanction under 

proposed § 488.840(b)(1). Once such a 

sanction was imposed, we propose that 

the HHA would be required to notify 

any new patient admission and patients 

with new payment episodes that 

Medicare payment might not be 

available to this HHA because of the 

imposed suspension before care could 

be initiated. Moreover, the HHA would 

be precluded from charging the 

Medicare patient for those services 

unless it could show that, before 

initiating or continuing care, it had 

notified the patient or his/her 

representative both orally and in writing 

in a language that the patient or 

representative could understand, that 

Medicare payment might not be 

available. The suspension of payment 

would end when CMS terminated the 

provider agreement or CMS found, in 

accordance with 1891(f)(2)(C) of the Act, 

the HHA to be in compliance with all 

CoPs. 

In proposed § 488.840(b)(3) in 

accordance with section 1891(f)(2)(C) of 

the Act, if CMS terminated the provider 

agreement, or if the HHA was in 

substantial compliance with the CoPs 

(as determined by CMS), the HHA 

would not be eligible for any payments 

for services provided to new Medicare 

patients admitted during the time the 

suspension was in effect, or for existing 

Medicare patients beginning a new 

payment episode during their care. This 

policy would be consistent with the 

legislative history of OBRA ’87, which 

states that ‘‘suspended payments [are] 

not [to] be repaid to any agency once it 

has come back into compliance and the 

suspension has been lifted. It is the 

Committee’s belief that if such 

repayment were permitted, there would 

be little incentive for deficient agencies 

to come back into compliance as quickly 

as possible.’’ See H.R. Rep. No. 100– 

391(I) at 423 (1987). In accordance with 

the Committee’s intent, we would 

construe the term ‘‘suspend’’ to mean to 

temporarily stop Medicare payments, 

without the possibility of recovering the 

suspended payments. If compliance 

with the CoPs was achieved, we would 

resume payment to the HHA 

prospectively from the date that CMS 

had determined correction. 

In proposed § 488.840(c), the 

suspension of payment would end when 

CMS terminates the provider agreement 

or CMS finds, in accordance with 

section 1891(f)(2)(C) of the Act, the 

HHA to be in substantial compliance 

with all of the CoPs. 

j. Civil Money Penalties (CMPs) 

§ 488.845 

We are proposing in § 488.845 rules 

for imposition of CMPs. Under sections 

1891(e) and 1891(f)(2)(A)(i) of the Act, 

CMS may impose a CMP against an 

HHA that is determined to be out of 

compliance with one or more CoPs, 

regardless of whether the HHA’s 

deficiencies pose immediate jeopardy to 

patient health and safety. We could also 

impose a civil money penalty for the 

number of days of immediate jeopardy. 

The CMP amount cannot exceed 

$10,000 for each day of non-compliance. 

A deficiency found during a survey at 

a parent HHA or any of its branches 

results in a noncompliance issue for the 

entire HHA, which can be subject to the 

imposition of a CMP. 

In this section, we propose both a 

‘‘per day’’ and a ‘‘per instance’’ CMP at 

§ 488.845(a). The per day CMP would be 

imposed for each day of noncompliance 

with the CoPs. Additionally, should a 

survey identify a particular instance or 

instances of noncompliance during a 

survey, we propose to impose a CMP for 

that instance or those individual 

instances of noncompliance. We 

propose to define ‘‘per instance’’ in 

§ 488.805 as a single event of 

noncompliance identified and corrected 

during a survey, for which the statute 

authorizes CMS to impose a sanction. 

While there may be a single event which 

leads to noncompliance, there can also 

be more than one instance of 

noncompliance identified and more 

than one CMP imposed during a survey. 

For penalties imposed per instance of 

noncompliance, we are proposing 

penalties from $1,000 to $10,000 per 

instance. Such penalties would be 

assessed for one or more singular events 

of condition-level noncompliance that 

were identified at the survey and where 

the noncompliance was corrected 

during the onsite survey. 

Since the range of possible 

deficiencies is great and depends upon 

the specific circumstances at a 

particular time, it would be impossible 

to assign a specific monetary amount for 

each type of noncompliance that could 

be found. Thus, we believe that each 

deficiency would fit into a range of CMP 

amounts, which we discuss below. 

We are proposing that we would 

consider the following factors when 

determining a CMP amount, in addition 

to those factors that we would consider 

when choosing a type of sanction 

proposed in § 488.815: 

• The size of the agency and its 

resources. 

• The availability of other HHAs 

within a region, including service 

availability in a given region. 

• Accurate and credible resources 

such as PECOS and Medicare cost 

reports and claims information, that 

provide information on the operations 

and the resources of the HHA. 

• Evidence that the HHA has a builtin, self-regulating quality assessment 

and performance improvement system 

to provide proper care, prevent poor 

outcomes, control patient injury, 

enhance quality, promote safety, and 

avoid risks to patients on a sustainable 

basis that indicates the ability to meet 

the conditions of participation and to 

ensure patient health and safety. When 

several instances of noncompliance 

would be identified at a survey, more 

than one per-day or per instance CMP 

could be imposed as long as the total 

CMP did not exceed $10,000 per day. 

Also, a per-day and a per-instance CMP 

would not be imposed simultaneously 

for the same deficiency. 

At proposed § 488.845(b)(2), we 

would give ourselves the discretion to 

increase or reduce the amount of the 

CMP during the period of 

noncompliance depending on whether 

the level of noncompliance had changed 

at the time of a revisit survey. CMS 

could increase a CMP in increments 

based upon an HHA’s inability or 

unwillingness to correct deficiencies, 

the presence of a system wide failure in 

the provision of quality care or a 

determination of immediate jeopardy 

with potential for harm. CMS could also 

decrease a CMP in increments to the 

extent that it finds, pursuant to a revisit, 

that substantial and sustainable 

improvements have been implemented 

even though the HHA is not yet in full 

compliance if earnest efforts have been 

made to address the causes of 

deficiencies and sustain improvement, 

If an HHA cured the immediate 

jeopardy situation, but not the 

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condition-level deficiencies, we could 

reduce penalties from the upper range to 

a lower range imposed in nonimmediate jeopardy situations. 

However, section 1891(f)(2)(A)(i) of 

the Act specifies that the sanctions shall 

include a CMP in an amount not to 

exceed $10,000 for each day of 

noncompliance. Therefore, we are 

proposing at § 488.845(b)(2)(iii) that no 

CMP assessment exceed $10,000 per day 

of noncompliance. Because the Act 

directs us to establish the amounts of 

fines and the levels of severity, we 

propose to establish a three-tier system 

with subcategories which would 

establish the amount of a CMP. In 

proposed § 488.845(b)(3), (b)(4), and 

(b)(5), we propose the following would 

be ranges of civil money penalty 

amounts based on three levels of 

seriousness—upper, middle and lower: 

• Upper range—For a deficiency that 

poses immediate jeopardy to patient 

health and safety, we would assess a 

penalty within the range of $8,500 to 

$10,000 per day of condition level 

noncompliance. 

• Middle range—For repeat and/or a 

condition-level deficiency that did not 

pose immediate jeopardy, but is directly 

related to poor quality patient care 

outcomes, we would assess a penalty 

within the range of $2,500 to $8,500 per 

day of noncompliance with the CoPs. 

• Lower range—For repeated and/or 

condition-level deficiencies that did not 

constitute immediate jeopardy and were 

deficiencies in structures or processes 

that did not directly relate to poor 

quality patient care, we would assess a 

penalty within the range of $500 to 

$4,000 per day of noncompliance. 

Table is displayed to represent the 

relationship between the existing survey 

protocols and proposed ranges of CMP 

imposition. This table distinguishes 

proposed ranges based in IJ, Non-IJ, 

repeat deficiency and first time 

deficiency. It uses the terminology of 

structure, process, and outcomes, which 

is used in the quality improvement field 

as a hierarchy of measures. This 

structure would be further developed in 

the policy guidance stage and is 

presented for illustrative purposes only. 

TABLE 24—CMP 

[Per day] 

Level of seriousness CMP fine 

ranges/amount 

Immediate Jeopardy ...................................................................................................................................................................... $8,500–$10,000; 

(Non-IJ) Patient Care Outcomes ................................................................................................................................................... 2,500–8,500; 

Repeat Deficiency .......................................................................................................................................................................... 8,500 

42 CFR 484.18 Acceptance of Patients, Plan of Care, & Medical Supervision.

42 CFR 484.30 Skilled Nursing Services.

42 CFR 484.34 Medical Social Services.

42 CFR 484.36 Home Health Aide Services.

42 CFR 484.55 Comprehensive Assessment of Patients.

First time deficiency ....................................................................................................................................................................... 5,000 

42 CFR 484.18 Acceptance of Patients, Plan of Care, & Medical Supervision.

42 CFR 484.30 Skilled Nursing Services.

42 CFR 484.34 Medical Social Services.

42 CFR 484.36 Home Health Aide Services.

42 CFR 484.55 Comprehensive Assessment of Patients.

Structure or process issues ........................................................................................................................................................... 2,500 

42 CFR 484.10 Patient Rights.

42 CFR 484.12 Compliance With Federal, State and Local Laws, Disclosure and Ownership Information, and Accepted Professional Standards and Principles.

42 CFR 484.14 Organization, Services, and Administration.

42 CFR 484.48 Clinical Records.

Non-IJ Structure/process ............................................................................................................................................................... 500–4,000 

Repeat Deficiency at revisit or from prior survey .......................................................................................................................... 4,000 

42 CFR 484.11 Confidential OASIS Information.

42 CFR 484.16 Group of Professional Personnel.

42 CFR 484.20 Reporting OASIS Information.

42 CFR 484.52 Evaluation of the agency’s program.

First time deficiency ....................................................................................................................................................................... 500–3,000 

42 CFR 484.11 Confidential OASIS Information.

42 CFR 484.16 Group of Professional Personnel.

42 CFR 484.20 Reporting OASIS Information.

42 CFR 484.52 Evaluation of the agency’s program.

Other structure or process issues ................................................................................................................................................. 500–3,000 

Non patient care issues 42 CFR 484.34 Medical Social Services.

42 CFR 484.38 Qualifying to Furnish Outpatient Physical Therapy or Speech Pathology Services.

If we imposed a CMP, we would send 

the HHA written notification of the 

intent to impose it, including the 

amount of the CMP being imposed and 

the proposed effective date of the 

sanction. After a final agency 

determination is made, a final notice 

would be sent with the final amount 

due and the rate of interest to be 

charged on unpaid balances (as 

published quarterly in the Federal 

Register). The notice would include 

reference to the nature of the 

noncompliance; the statutory basis for 

the penalty; the proposed amount of the 

penalty per day/instance of 

noncompliance; the criteria we 

considered when determining the 

amount per-day or per-instance; the date 

on which the penalty would begin to 

accrue; when the penalty would stop 

accruing; when the penalty would be 

collected; and instructions for 

responding to the notice, including a 

statement of the HHA’s appeal rights, 

including an opportunity to participate 

in the proposed IDR process and, as 

discussed below, the right to a hearing, 

and the implications of waiving a 

hearing. In accordance with our existing 

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regulations at § 498.22(b)(3) and 

§ 498.40 and at proposed 

§ 488.845(c)(2), once a notice of intent to 

impose the CMP had been sent to the 

HHA, the HHA would have 60 days 

from the receipt of the notice to request 

an administrative hearing under 

§ 498.40 or waive its right to an 

administrative hearing in writing and 

receive a 35 percent reduction in the 

CMP amount. This reduction would be 

offered to encourage HHAs to address 

deficiencies more expeditiously and to 

save the cost of hearings and appeals. 

Upon such reduction, the CMP would 

be due within 15 days of the receipt of 

the HHA’s written request for waiver. 

The HHA could waive its right to a 

hearing in writing within 60 calendar 

days from the date of the notice initial 

determination. 

The per-day CMP would begin to 

accrue on the day of the survey that 

identified the HHA noncompliance, and 

would end on the date of correction of 

all deficiencies, or the date of 

termination. We are proposing at 

488.845(d) that in immediate jeopardy 

cases, if the immediate jeopardy was not 

removed, the CMP would continue to 

accrue until CMS terminated the 

provider agreement (within 23 calendar 

days after the last day of the survey 

which first identified the immediate 

jeopardy). Under proposed 

488.845(d)(4), if immediate jeopardy did 

not exist, the CMP would continue to 

accrue until the HHA achieved 

substantial compliance or until we 

terminated the provider agreement. 

Additionally, we are proposing at 

§ 488.845(d)(2) that the per-day and perinstance CMP would not be imposed 

simultaneously in conjunction with a 

survey. In no instance will the period of 

noncompliance be allowed to extend 

beyond 6 months from the last day of 

the original survey that determined 

noncompliance. If the HHA has not 

achieved compliance with the CoPs 

within those 6 months, we would 

terminate the HHA. The accrual of the 

CMP stops on the day the HHA provider 

agreement is terminated or the HHA 

achieves substantial compliance, 

whichever is earlier. 

Total CMP amounts would be 

computed after a final agency 

determination; that is, after: (1) 

Compliance was verified; (2) the HHA 

provider agreement was involuntarily 

terminated; or (3) administrative 

remedies had been exhausted. If the 

HHA had achieved substantial 

compliance, we would send a separate 

notice to the HHA describing the 

amount of penalty per day, the number 

of days the penalty accrued, the total 

amount due, the due date of the penalty, 

and the interest rate for any unpaid 

balance. For a per-instance CMP, we 

would include the amount of the 

penalty, the total amount due, the due 

date of the penalty, and the rate of 

interest for any unpaid balance. In the 

case of the HHA that was terminated, 

we would send the HHA any CMP 

notice of final amount or a due and 

payable notice information in the 

termination notice, as described in 

§ 489.53(d). 

In proposed § 488.845(f), a CMP 

would become due and payable 15 days 

from the notice of final administrative 

decision, which is after: 

• The time to appeal had expired 

without the HHA appealing its initial 

determination; 

• CMS received a request from the 

HHA waiving its right to appeal the 

initial determination; 

• A final decision of an 

Administrative Law Judge and/or DAB 

Appellate Board upheld CMS’s 

determinations; or 

• After an HHA achieves substantial 

compliance; or 

• The HHA was terminated from the 

program and no appeal request was 

received. 

A request for hearing would not delay 

the imposition of the CMP, but would 

only affect the collection of any final 

amounts due to CMP. If an HHA timely 

waived its right to a hearing under 

proposed § 488.845(c)(2)(ii), we would 

reduce the final CMP amount by 35 

percent. This reduction would be 

reflected once the CMP stops accruing: 

when the HHA achieved compliance 

before we received its request to waive 

a hearing, or the effective date of the 

termination occurred before we received 

the waiver request. 

The final CMP receivable amount 

would be determined when the per-day 

CMP accrual period ended (either when 

the HHA achieved compliance or was 

terminated). 

An HHA has three options for action 

following the imposition of a penalty: 

• The HHA could pay the fine in full 

for all CMPs imposed prior to the date 

a CMP is due and payable. 

• The HHA could request a hearing 

based on the determination of 

noncompliance with Medicare 

requirements. Within 60 days of receipt 

of the notice of imposition of a penalty, 

the HHA could file a request directly to 

the Departmental Appeals Board in the 

Office of the Secretary, Department of 

Health and Human Services with a copy 

to the State and CMS. In accordance 

with § 498.40(b), the HHA’s appeal 

request would identify the specific 

issues of contention, the findings of fact 

and conclusions of the law with which 

the agency disagreed, and the specific 

bases for contending that the survey 

findings and determinations were 

invalid. A hearing would be completed 

before any penalty was collected. 

However, sanctions would continue 

regardless of the timing of any appeals 

proceedings if the HHA had not met the 

CoPs. Requesting an appeal would not 

delay or end the imposition of a 

sanction. 

A CMP would begin to accrue on the 

date of the survey which identified the 

noncompliance. These include penalties 

imposed on a per day basis, as well as 

penalties imposed per instance of 

noncompliance. 

Offsets 

To maintain consistency in recovering 

a CMP among other types of providers 

who are subject to a CMP, we propose 

that the amount of any penalty, when 

determined, could be deducted (offset) 

from any sum CMS or the State 

Medicaid Agency owed to the HHA. 

Interest would be assessed on the 

unpaid balance of the penalty beginning 

on the due date. We propose that the 

rate of interest assessed on any unpaid 

balance would be based on the Medicare 

interest rate published quarterly in the 

Federal Register, as specified in 

§ 405.378(d). We would recover a CMP 

as set forth in section 1128A(f) of the 

Act. Those CMP receipts not recovered 

due to HHA failure to pay or inadequate 

funds for offset will be collected 

through the Debt Collection 

Improvement Act of 1996 which 

requires all debt owed to any Federal 

agency that is more than 180 days 

delinquent to be transferred to the 

Department of the Treasury for debt 

collection services. 

If payment was not received by the 

established due date, we propose to 

initiate action to collect the CMP 

through offset of monies owed or owing 

to the HHA. To initiate such an offset, 

we would instruct the appropriate 

Medicare Administrative Contractors/ 

Fiscal Intermediaries and, when 

applicable, the State Medicaid agencies 

to deduct unpaid CMP balances from 

any money owed to the agency. 

Disbursement of Recovered CMP Funds 

Under § 488.845(g)(1), we propose to 

divide the CMP amounts recovered and 

any corresponding interest between the 

Medicare and Medicaid programs, based 

on a proportion that is commensurate 

with the comparative Federal 

expenditures under Titles XVIII and XIX 

of the Act, using an average of years 

2007 to 2009 based on Medicaid 

Statistical Information System (MSIS) 

and HHA Prospective Payment System 

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(PPS) claims. Based on the proportions 

of HHA claims attributed to Medicare 

and Medicaid, respectively, for the FY 

2007–2009 period, approximately 63 

percent of the CMP amounts recovered 

would be deposited as miscellaneous 

receipts to the U.S. Department of the 

Treasury and approximately 37 percent 

will be returned to the State Medicaid 

Agency to improve the quality of care 

for those who need home-based care. 

We propose that, beginning one year 

after these rules are finalized and 

become effective, these proportions 

would be updated annually based on 

the most recent 3 year period for which 

CMS determined that the Medicare and 

Medicaid expenditure data were 

essentially complete. 

Costs of Home Health Surveys 

Consistent with the proposed 

disbursement to States of a portion of 

federally imposed-CMP amounts 

collected, this proposed rule would 

provide that State Medicaid programs 

share in the cost of HHA surveys for 

those HHAs that are Medicaid-certified. 

We propose to amend § 431.610(g) 

(Relations with standard-setting and 

survey agencies) to apply to HHA 

surveys the same cost accounting 

principles that are now applied to 

nursing homes. In other words, we are 

adding a reference to HHAs, along with 

nursing facilities (NFs) and Intermediate 

Care Facilities for Individuals with 

Intellectual Disabilities (ICF/IIDs). We 

project the initial cost to the Medicaid 

program would be approximately 37 

percent of the cost of surveys for duallycertified programs, based on the same 

cost allocation methodology we propose 

to use for the disbursement to States of 

CMP collections, as described above. 

We request comment on the new 

requirement for State Medicaid 

programs and the methodology for 

calculating the State share of both 

survey costs and CMP disbursement. 

k. Directed Plan of Correction § 488.850 

We are proposing in § 488.850 a 

directed plan of correction as an 

available sanction. This sanction is a 

part of the current nursing home 

alternative sanction procedures and has 

been an effective tool to encourage 

correction of deficient practices. 

Specifically, CMS would be able to 

impose a directed plan of correction on 

an HHA which is out of compliance 

with the Conditions of Participation. A 

directed plan of correction sanction 

would require the HHA to take specific 

actions in order to correct the deficient 

practice(s) if the HHA failed to submit 

an acceptable plan of correction. As 

proposed in § 488.850(b)(2) an HHA’s 

directed plan of correction would have 

to be developed by us or by the 

temporary manager, with our approval. 

The directed plan of correction would 

set forth the outcomes to be achieved, 

the corrective action necessary to 

achieve these outcomes, and the specific 

date the HHA would be expected to 

achieve such outcomes. For example, a 

directed plan of correction for a 

deficiency finding involving poor drug 

regimen review would likely indicate 

that the HHA would be required to: (1) 

Develop policies and procedures for 

assessing each patient and before 

accepting any new admissions; (2) 

assess every patient’s drug regimen 

according to the regulations at 

§ 484.55(c); and (3) train staff in correct 

policies and procedures and implement 

them. The HHA would be responsible 

for achieving compliance. If the HHA 

failed to achieve compliance within the 

timeframes specified in the directed 

plan of correction, we would impose 

one or more additional alternative 

sanctions until the HHA achieved 

compliance or was terminated from the 

Medicare program. Before imposing this 

sanction, we would provide appropriate 

notice to the HHA of this sanction under 

proposed § 488.810(f). 

l. Directed In-Service Training § 488.855 

We are proposing in § 488.855 when 

and how CMS would conduct directed 

in-service training for HHAs with 

deficiencies. Some compliance 

problems are a result of a lack of 

knowledge on the part of the health care 

provider relative to advances in health 

care technology and expectations of 

favorable patient outcomes. In proposed 

§ 488.855(a) directed in-service training 

would be used in situations where staff 

performance resulted in deficient 

practices. A directed in-service training 

program would correct this deficient 

practice through retraining the staff in 

the use of clinically and professionally 

sound methods to produce quality 

outcomes. Directed in-service training 

would be imposed if CMS determined 

that the HHA had a deficiency or 

deficiencies that indicated 

noncompliance, and that staff education 

was likely to correct the deficient 

practice(s). It could be imposed alone or 

in addition to other alternative 

sanctions. 

At proposed § 488.855(a)(3), HHAs 

would be required to use in-service 

programs conducted by instructors with 

an in-depth knowledge of the area(s) 

that would require specific training, so 

that positive changes would be achieved 

and maintained. HHAs would be 

required to participate in programs 

developed by well-established centers of 

health services education and training. 

These centers include, but are not 

limited to, schools of medicine or 

nursing, area health education centers, 

and centers for aging. We would only 

recommend possible training locations 

to an HHA and not require that the HHA 

utilize a specific school/center/provider. 

The HHA would be required to bear any 

resulting expenses. The ultimate 

evaluation of the training program 

would be in the demonstrated 

competencies of the HHA’s staff in 

achieving the desired patient care 

outcomes after completion of the 

training program. In proposed 

§ 488.855(b) if the HHA did not achieve 

compliance after such training, we 

could impose one or more additional 

sanctions. The HHA itself would pay for 

the directed in-service training for its 

staff. 

m. Continuation of Payments to HHAs 

With Deficiencies § 488.860 

We propose in § 488.860 rules 

concerning the continuation of 

Medicare payments to HHAs with 

condition-level deficiencies. Section 

1891(e)(4) of the Act provides that the 

Secretary may continue Medicare 

payments to HHAs not in compliance 

with the conditions for participation for 

up to six months if: 

• The survey agency finds it more 

appropriate to impose alternative 

sanctions to assure compliance with 

program requirements than to terminate 

the HHA from the Medicare program; 

• The HHA submits a plan of 

correction to the Secretary, and to the 

office the Secretary has delegated the 

authority to approve the plan of 

correction; and 

• The HHA agrees to repay the 

Federal government the payments under 

this arrangement should the HHA fail to 

take the corrective action as set forth in 

its approved plan of correction by the 

time of the revisit. 

We propose these same three criteria 

in § 488.860(a). If any of these three 

requirements set forth in the Act and in 

our proposed rule are not met, an HHA 

with condition-level deficiencies would 

not receive any Federal payments from 

the time that deficiencies were initially 

identified. We would terminate the 

agreement before the end of the 6-month 

correction period in accordance with 

proposed § 488.865 if the requirements 

proposed at § 488.860(a)(1) are not met. 

If any sanctions were also imposed, they 

would stop accruing or end when the 

HHA achieves compliance with all 

requirements, or when the HHA’s 

provider agreement is terminated, 

whichever is earlier. We would 

terminate the HHA’s provider agreement 

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if the HHA is not in compliance with 

the CoPs within 6 months of the last day 

of the survey. Finally, if an HHA 

provides an acceptable plan of 

correction but cannot achieve 

compliance with the CoPs within 6 

months of the last day of the survey, we 

are proposing in § 488.830(d) that CMS 

would terminate the provider 

agreement. 

n. Termination of Provider Agreement 

(§ 488.865) 

At § 488.865(a), we would address the 

termination of an HHA’s Medicare 

provider agreement, as well as the effect 

of such termination. Termination of the 

provider agreement would end all 

payments to the HHA, including any 

payments that were continued under 

proposed § 488.860. Termination would 

also end any alternative sanctions 

imposed against the HHA, regardless of 

any proposed timeframes for the 

sanction(s) originally specified. In 

proposed § 488.865(b) we would 

terminate the provider agreement if (1) 

the HHA failed to correct conditionlevel deficiencies within six months 

unless the deficiencies constitute 

immediate jeopardy; (2) the HHA failed 

to submit an acceptable plan of 

correction for approval by us under 

proposed § 488.810; or (3) the HHA 

failed to relinquish control to the 

temporary manager, if that sanction is 

imposed or (4) the HHA failed to meet 

the eligibility criteria for continuation of 

payments under proposed § 488.860. If 

CMS or the SA determined deficiencies 

existed which posed immediate 

jeopardy to patient health and safety, we 

would terminate the provider 

agreement. The provider could also 

voluntarily terminate its agreement. 

CMS and the SA would, if necessary, 

work with all Medicare-approved HHAs 

that were terminated to ensure the safe 

discharge and orderly transfer of all 

patients to another Medicare-approved 

HHA. 

The procedures for terminating a 

provider agreement are set forth in 

§ 489.53 and we are proposing to 

continue to use those procedures for an 

enforcement action terminating an HHA 

at § 488.865(d). These procedures form 

the basis for termination by CMS and 

specify a provider’s notice and appeal 

rights. Under § 488.865(e), we propose 

that the HHA could appeal the 

termination of its provider agreement in 

accordance with 42 CFR part 498. We 

are also proposing to add an exception 

to the general notice provision as well 

as to amend § 489.53(a) by adding a new 

paragraph (17) establishing that when 

an HHA failed to correct any deficiency 

(either standard-level or conditionlevel), we could terminate its provider 

agreement. The notification 

requirements in § 489.53(d)(1) requires 

that CMS give notice to any provider 

and the public at least 15 days before 

the effective date of a termination of a 

provider agreement. We are proposing a 

new clause in § 489.53(d)(2)(iii) which 

would provide for a timing exception to 

this general notice rule. Specifically, we 

propose that for HHA terminations 

based on deficiencies that posed 

immediate jeopardy to patient health 

and safety, we would give notice to the 

HHA of such termination at least 2 days 

before the effective date of the 

termination. As currently provided in 

§ 489.53(d)(4), we would give 

concurrent notice to the public when 

such termination occurred. 

C. Provider Agreements and Supplier 

Approval 

We are also proposing to amend 

§ 498.3, Scope and applicability, by 

revising paragraphs (b)(13), (b)(14) 

introductory text, (b)(14)(i), and (d)(10) 

to include specific reference to HHAs 

and to cross-refer to our proposed 

regulation at proposed § 488.740 

concerning appeals. 

D. Solicitation of Comments 

Presently, we are required only to give 

notice of an HHA termination to the 

public 15 days before the effective date 

of an involuntary termination. We are 

soliciting comments related to 

additional public notices. We are 

considering that when a suspension of 

payments for new admissions and new 

payment episodes or a civil money 

penalty is imposed, we could, at our 

discretion, issue a public notice. The 

issuance of additional publicly-reported 

notices when certain sanctions are 

imposed would offer information to 

patients who were choosing a provider 

of home health services, as well as to 

current recipients of home health care. 

A home health patient does not 

necessarily know when a survey has 

been conducted at an HHA and if 

deficiencies had been determined or any 

sanctions imposed unless a surveyor 

visited the patient during a survey or 

the patient requested a copy of a 

Statement of Deficiencies from the SA 

or HHA. We are also soliciting 

comments on the proposed definition of 

a ‘‘per instance’’ of noncompliance 

when imposing a CMP sanction. 

VI. Collection of Information 

Requirements 

While this proposed rule contains 

information collection requirements, 

this rule does not add new or revise any 

of the existing information collection 

requirements or burden with regard to: 

§ 424.22(a) (OCN 0938–1083), § 488.710 

(OCN 0938–0355; CMS–1515 and CMS– 

1572), and § 488.810(e) (OCN 0938– 

0391; CMS–2567). Nor does this 

proposed rule revise any of the existing 

information collection requirements or 

burden with regard to OASIS as 

discussed in preamble section III.C.3. 

and approved under OCN 0938–0760 or 

Home Health Care CAHPS as discussed 

in the same preamble section but 

approved under OCN 0938–1066. All of 

the requirements and burden estimates 

associated with these collections are 

currently approved by OMB and are not 

subject to additional OMB review under 

the authority of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). 

In § 431.610, HHAs would be added 

to the survey agency provision 

concerning State Plans. Since the State 

Medicaid Plans already include a 

provision that the State Survey Agencies 

will have qualified personnel perform 

onsite inspections as appropriate, we 

believe that this requirement is in the 

current plans and is inclusive of all 

Medicaid work being performed by the 

State Survey Agency. Consequently, the 

provision would not require a specific 

revision to any State Plans and would 

not impose any additional burden to 

States. 

In § 488.710, for each HHA the SA 

must (existing requirement) conduct 

standard surveys according to their 

agreements with CMS under sections 

1864 and 1891(c)(1) of the Act. CMS 

believes that the additional survey 

agency administrative activity required 

to impose alternative sanctions created 

by this rule will not generate a 

significant amount of additional 

paperwork burden at the State survey 

agency or HHA level. Imposing 

sanctions may require that states engage 

in some additional communication and 

carry out follow-up surveys, and CMS 

Regional Offices may need additional 

time for determining, imposing and 

tracking sanctions. In estimating appeal 

volume and costs, we note that in 2010 

only 260 providers out of 11,821 had 

condition level-deficiencies, and only 

seven of these involved immediate 

jeopardy situations. Further, the impact 

of additional activity on State budgets 

will be negligible because we estimate 

that about 63 percent of the cost 

attributable to Medicare will be paid to 

survey agencies under the authority 

provided by section 1864 for Medicare 

surveys; and Federal Medicaid funds 

will generally pay 75 percent of the 

remaining 37 percent share of costs, 

since there is an increased Federal 

match for State survey activities as 

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referenced in section 1903(a)(2) of the 

Act. In addition, the State will benefit 

financially by the additional CMP funds 

returned to the State to use for the 

benefit of home based care participants. 

SAs survey HHAs to determine 

compliance with the CoPs under part 

484 and follow the guidance contained 

in the State Operations Manual, S&C 

Memoranda, and Interpretive 

Guidelines. This rule would serve to 

codify some existing CMS policies 

while proposing new requirements 

which would be consistent with OBRA 

‘87 mandates discussed in the 

Background and Statutory Authority 

section. State Surveyor recordkeeping 

requirements already exist as Forms 

CMS–1515 and CMS–1572 (OMB 

control number known as information 

collection 0938–0355) and CMS–2567 

(OMB# 938–0391). CMS anticipates 

enhancing survey protocols and 

Interpretive Guidelines and providing 

additional S&C Memoranda and 

Surveyor Training in response to the 

issuance of new regulations. CMS 

would revise these currently approved 

collections as necessary in accordance 

with the final rule. 

In § 488.735, State and Federal 

surveyors would be required to 

complete the CMS-sponsored Basic 

HHA Surveyor Training Course before 

they can serve on a HHA survey team. 

The CMS Central Office currently 

provides national training to all State 

surveyors for all of the provider types 

that are surveyed for Medicare and 

Medicaid. Those training courses are 

funded entirely by the Central Office 

and there is no burden to States since 

our annual budgets to the States (for the 

performance of survey activities) 

includes the cost of the salaries and the 

travel for participating in all national 

training courses. These training courses 

are designed to teach the surveyors how 

to conduct the survey process in 

accordance with the applicable 

regulations and associated Interpretive 

Guidance. During the course of the 

survey, all of the data collection tools 

that may be used (see the reference to 

CMS–1515, –1572, and –2567 above) 

have been approved by OMB through 

the PRA process. 

Section 488.810(e) requires each HHA 

that has deficiencies constituting 

noncompliance to submit a plan of 

correction for approval by CMS. This is 

a current requirement for both standard 

and condition level deficiencies, so the 

burden associated with this requirement 

that is above and beyond the existing 

effort put forth by the HHA is to prepare 

and submit a plan of correction would 

be to notify their governing body, 

potentially prepare for IDR or to issue a 

check for a CMP. While there is 

paperwork burden associated with this 

plan of correction requirement, it is 

already required and currently approved 

under OMB# 0938–0391 (CMS–2567). 

Information Collection Requests Exempt 

From the Paperwork Reduction Act 

In accordance with 5 CFR 1320.4(a)(2) 

and (c), the following information 

collection activities are exempt from the 

requirements of the Paperwork 

Reduction Act since they are associated 

with administrative actions: (1) Section 

488.745(a) regarding HHA request to 

dispute condition-level survey findings; 

(2) § 488.810(g) regarding appeals; (3) 

§ 488.845(c)(2)(i) regarding the 

submission of a written request for a 

hearing or waiver of a hearing; (4) 

§ 488.840(b)(1)(ii) regarding HHA 

disclosure requirements; (5) § 488.845(c) 

regarding hearings; and (6) § 488.855 

regarding HHA deficiencies and 

directed in-service training. 

The information collection 

requirement in § 488.825(c) regarding 

the transfer of care is exempt from the 

requirements of the Paperwork 

Reduction Act since it is associated with 

an administrative action (5 CFR 

1320.4(a)(2) and (c)) and we estimate 

fewer than ten provider agreements will 

be terminated annually (5 CFR 

1320.3(c)). 

Information Collection Requests 

Regarding the Quality Reporting for 

Hospices 

Within the preamble of this proposed 

rule, in section IV, we note that section 

3004 of the Affordable Care Act amends 

the Social Security Act (the Act) to 

authorize a quality reporting program 

for hospices. 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. As added by section 

3004(c), new 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 two percentage points for any 

hospice that does not comply with the 

quality data submission requirements 

with respect to that fiscal year. 

In implementing the Hospice quality 

reporting program, CMS seeks to collect 

measure-related information with as 

little burden to the providers as possible 

and which reflects the full spectrum of 

quality performance. Our purpose in 

collecting this data is to help achieve 

better health care and improve health 

through the widespread dissemination 

and use of performance information. 

The Hospice Data Submission form 

intended for data submission by January 

31, 2013 (for the structural measure 

related to patient care-focused QAPI 

indicators) and for data submission by 

April 1, 2013 (for the NQF #0209 

measure related to pain) has been made 

available for public comment through a 

60-day Federal Register notice that 

published on June 4, 2012 (77 FR 

32977). A follow up 30-day notice will 

publish after the 60-day comment 

period closes. Technically, the form is 

not associated with this proposed rule 

but is discussed within this document 

to provide background information. 

VII. 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. 

VIII. Regulatory Impact Analysis 

A. Introduction 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (March 22, 1995; Pub. L. 

104–4), and the Congressional Review 

Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. A 

regulatory impact analysis (RIA) must 

be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). This 

proposed rule does not reach the 

economic threshold and thus is not 

considered a major rule. In accordance 

with the provisions of Executive Order 

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12866, this regulation was reviewed by 

the Office of Management and Budget. 

B. Statement of Need 

This proposed rule adheres to the 

following statutory requirements. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered HH services provided 

under a plan of care (POC) that were 

paid on a reasonable cost basis by 

adding section 1895 of the Act, entitled 

‘‘Prospective Payment For Home Health 

Services’’. Section 1895(b)(1) of the Act 

requires the Secretary to establish a HH 

PPS for all costs of HH services paid 

under Medicare. In addition, section 

1895(b)(3)(A) of the Act requires (1) the 

computation of a standard prospective 

payment amount include all costs for 

HH services covered and paid for on a 

reasonable cost basis and that such 

amounts be initially based on the most 

recent audited cost report data available 

to the Secretary, and (2) the 

standardized prospective payment 

amount be adjusted to account for the 

effects of case-mix and wage levels 

among HHAs. Section 1895(b)(3)(B) of 

the Act addresses the annual update to 

the standard prospective payment 

amounts by the HH applicable 

percentage increase. Section 1895(b)(4) 

of the Act governs the payment 

computation. Sections 1895(b)(4)(A)(i) 

and (b)(4)(A)(ii) of the Act require the 

standard prospective payment amount 

to be adjusted for case-mix and 

geographic differences in wage levels. 

Section 1895(b)(4)(B) of the Act requires 

the establishment of appropriate casemix adjustment factors for significant 

variation in costs among different units 

of services. Lastly, section 1895(b)(4)(C) 

of the Act requires the establishment of 

wage adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to HH services 

furnished in a geographic area 

compared to the applicable national 

average level. 

Section 1895(b)(5) of the Act, as 

amended by section 3131 of the 

Affordable Care Act, gives the Secretary 

the option to make changes to the 

payment amount otherwise paid in the 

case of outliers because of unusual 

variations in the type or amount of 

medically necessary care. Section 

1895(b)(3)(B)(v) of the Act requires 

HHAs to submit data for purposes of 

measuring health care quality, and links 

the quality data submission to the 

annual applicable percentage increase. 

Also, section 3131 of the Affordable 

Care Act requires that HH services 

furnished in a rural area (as defined in 

section 1886(d)(2)(D) of the Act) with 

respect to episodes and visits ending on 

or after April 1, 2010, and before 

January 1, 2016, receive an increase of 

3 percent the payment amount 

otherwise made under section 1895 of 

the Act. 

C. Overall Impact 

The update set forth in this proposed 

rule applies to Medicare payments 

under HH PPS in CY 2013. Accordingly, 

the following analysis describes the 

impact in CY 2013 only. We estimate 

that the net impact of the proposals in 

this rule is approximately $20 million in 

CY 2013 savings. The $20 million 

impact reflects the distributional effects 

of an updated wage index ($70 million 

decrease) the +1.5 percent HH payment 

update ($300 million increase), and the 

¥1.32 percent case-mix adjustment 

applicable to the national standardized 

60-day episode rates ($250 million 

decrease). The $20 million in savings is 

reflected in the first row of column 3 of 

Table 25 as 0.10 percent decrease in 

expenditures when comparing the 

current CY 2012 HH PPS to the 

proposed CY 2013 HH PPS. The RFA 

requires agencies to analyze options for 

regulatory relief of small entities, if a 

rule has a significant impact on a 

substantial number of small entities. For 

purposes of the RFA, small entities 

include small businesses, nonprofit 

organizations, and small governmental 

jurisdictions. Most hospitals and most 

other providers and suppliers are small 

entities, either by nonprofit status or by 

having revenues of less than $7.0 

million to $34.5 million in any 1 year. 

For the purposes of the RFA, our 

updated data show that approximately 

98 percent of HHAs are considered to be 

small businesses according to the Small 

Business Administration’s size 

standards with total revenues of $13.5 

million or less in any 1 year. Individuals 

and States are not included in the 

definition of a small entity. The 

Secretary has determined that this 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. We 

define small HHAs as either nonproprietary or proprietary with total 

revenues of $13.5 million or less in any 

1 year. We estimate that approximately 

18 percent of HHAs are classified as 

non-proprietary. Analysis of Medicare 

claims data reveals a 0.11 percent 

decrease in estimated payments to small 

HHAs in CY 2013. 

A discussion on the alternatives 

considered is presented in section V.E. 

below. The following analysis, with the 

rest of the preamble, constitutes our 

initial RFA analysis. We solicit 

comment on the RFA analysis provided. 

In this proposed rule, we have stated 

that our analysis reveals that nominal 

case-mix continues to grow under the 

HH PPS. Specifically, nominal case-mix 

has grown from the 19.03 percent 

growth identified in our analysis for CY 

2012 rulemaking to 20.08 percent for 

this year’s rulemaking (see further 

discussion in section III.A.). As such, 

we believe it is appropriate to reduce 

the HH PPS rates using the 1.32 percent 

payment reduction promulgated in the 

CY 2012 HH PPS Final Rule (76 FR 

68532) in moving towards more 

accurate payment for the delivery of 

home health services. Our analysis 

shows that smaller HHAs are impacted 

slightly more than are larger HHAs by 

the proposed provisions of this rule. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of RFA. 

For purposes of section 1102(b) of the 

Act, we define a small rural hospital as 

a hospital that is located outside of a 

metropolitan statistical area and has 

fewer than 100 beds. This proposed rule 

applies to HHAs. Therefore, the 

Secretary has determined that this 

proposed rule would not have a 

significant economic impact on the 

operations of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2012, that 

threshold is approximately $139 

million. This proposed rule is not 

anticipated to have an effect on State, 

local, or tribal governments in the 

aggregate, or by the private sector, of 

$139 million or more. 

D. Detailed Economic Analysis 

This proposed rule sets forth updates 

to the HH PPS rates contained in the CY 

2012 HH PPS final rule. The impact 

analysis of this proposed rule presents 

the estimated expenditure effects of 

policy changes proposed in this rule. 

We use the latest data and best analysis 

available, but we do not make 

adjustments for future changes in such 

variables as number of visits or casemix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare home 

health benefit, based on Medicare 

claims from 2010. We note that certain 

events may combine to limit the scope 

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or accuracy of our impact analysis, 

because such an analysis is futureoriented and, thus, susceptible to errors 

resulting from other changes in the 

impact time period assessed. Some 

examples of such possible events are 

newly-legislated general Medicare 

program funding changes made by the 

Congress, or changes specifically related 

to HHAs. In addition, changes to the 

Medicare program may continue to be 

made as a result of the Affordable Care 

Act, or new statutory provisions. 

Although these changes may not be 

specific to the HH PPS, the nature of the 

Medicare program is such that the 

changes may interact, and the 

complexity of the interaction of these 

changes could make it difficult to 

predict accurately the full scope of the 

impact upon HHAs. 

Table 25 represents how HHA 

revenues are likely to be affected by the 

policy changes proposed in this rule. 

For this analysis, we used linked home 

health claims and OASIS assessments; 

the claims represented a 100-percent 

sample of 60-day episodes occurring in 

CY 2010. The first column of Table 25 

classifies HHAs according to a number 

of characteristics including provider 

type, geographic region, and urban and 

rural locations. The second column 

shows the payment effects of the wage 

index only. The third column shows the 

payment effects of all the proposed 

policies outlined earlier in this rule. For 

CY 2013, the average impact for all 

HHAs due to the effects of the wage 

index is a 0.34 percent decrease in 

payments. The overall impact for all 

HHAs, in estimated total payments from 

CY 2012 to CY 2013, is a decrease of 

approximately 0.10 percent. 

As shown in Table 25, the combined 

effects of all of the changes vary by 

specific types of providers and by 

location. In general, facility-based, 

proprietary agencies in rural areas 

would be impacted positively as a result 

of the proposed the provisions of this 

rule. In addition, free-standing, other 

volunteer/non-profit agencies and 

facility-based volunteer/non-profit 

agencies in urban areas would be 

impacted positively. 

TABLE 25—PROPOSED HOME HEALTH AGENCY POLICY IMPACTS FOR CY 2013, BY FACILITY TYPE AND AREA OF THE

COUNTRY

Group 

Comparisons 

Impact of all 

CY 2013 

policies1

(percent) 

Percent 

change due to 

the effects of 

the updated 

wage index 

(percent) 

All Agencies ............................................................................................................................................................. ¥0.34 ¥0.10 

Type of Facility 

Free-Standing/Other Vol/NP ............................................................................................................................. 0.04 0.32 

Free-Standing/Other Proprietary ...................................................................................................................... ¥0.46 ¥0.23 

Free-Standing/Other Government .................................................................................................................... ¥0.45 ¥0.19 

Facility-Based Vol/NP ....................................................................................................................................... ¥0.06 0.20 

Facility-Based Proprietary ................................................................................................................................ ¥0.35 ¥0.11 

Facility-Based Government .............................................................................................................................. ¥0.46 ¥0.22 

Subtotal: Freestanding .............................................................................................................................. ¥0.36 ¥0.12 

Subtotal: Facility-based ............................................................................................................................. ¥0.13 0.13 

Subtotal: Vol/NP ........................................................................................................................................ 0.01 0.27 

Subtotal: Proprietary .................................................................................................................................. ¥0.45 ¥0.22 

Subtotal: Government ............................................................................................................................... ¥0.46 ¥0.20 

Type of Facility (Rural * Only) 

Free-Standing/Other Vol/NP ............................................................................................................................. ¥0.61 ¥0.36 

Free-Standing/Other Proprietary ...................................................................................................................... ¥0.83 ¥0.61 

Free-Standing/Other Government .................................................................................................................... ¥0.56 ¥0.28 

Facility-Based Vol/NP ....................................................................................................................................... ¥0.51 ¥0.26 

Facility-Based Proprietary ................................................................................................................................ 0.16 0.39 

Facility-Based Government .............................................................................................................................. ¥0.56 ¥0.31 

Type of Facility (Urban * Only) 

Free-Standing/Other Vol/NP ............................................................................................................................. 0.15 0.42 

Free-Standing/Other Proprietary ...................................................................................................................... ¥0.40 ¥0.17 

Free-Standing/Other Government .................................................................................................................... ¥0.31 ¥0.07 

Facility-Based Vol/NP ....................................................................................................................................... 0.07 0.33 

Facility-Based Proprietary ................................................................................................................................ ¥0.58 ¥0.34 

Facility-Based Government .............................................................................................................................. ¥0.34 ¥0.10 

Type of Facility (Urban* or Rural*) 

Rural ................................................................................................................................................................. ¥0.72 ¥0.48 

Urban ................................................................................................................................................................ ¥0.26 ¥0.02 

Facility Location: Region* 

North ................................................................................................................................................................. 0.17 0.45 

South ................................................................................................................................................................ ¥0.69 ¥0.45 

Midwest ............................................................................................................................................................. ¥0.25 ¥0.02 

West .................................................................................................................................................................. 0.39 0.64 

Outlying ............................................................................................................................................................. ¥0.49 ¥0.25 

Facility Location: Area of the Country 

New England .................................................................................................................................................... 0.61 0.88 

Mid Atlantic ....................................................................................................................................................... ¥0.09 0.20 

South Atlantic ................................................................................................................................................... ¥0.41 ¥0.17 

East South Central ........................................................................................................................................... ¥1.12 ¥0.91 

West South Central .......................................................................................................................................... ¥0.76 ¥0.53 

East North Central ............................................................................................................................................ ¥0.32 ¥0.10 

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TABLE 25—PROPOSED HOME HEALTH AGENCY POLICY IMPACTS FOR CY 2013, BY FACILITY TYPE AND AREA OF THE

COUNTRY—Continued 

Group 

Comparisons 

Impact of all 

CY 2013 

policies1

(percent) 

Percent 

change due to 

the effects of 

the updated 

wage index 

(percent) 

West North Central ........................................................................................................................................... 0.11 0.35 

Mountain ........................................................................................................................................................... ¥0.56 ¥0.31 

Pacific ............................................................................................................................................................... 0.82 1.06 

Outlying ............................................................................................................................................................. ¥0.49 ¥0.25 

Facility Size: (Number of First Episodes) 

<100 .................................................................................................................................................................. ¥0.49 ¥0.26 

100 to 249 ........................................................................................................................................................ ¥0.54 ¥0.31 

250 to 499 ........................................................................................................................................................ ¥0.46 ¥0.22 

500 to 999 ........................................................................................................................................................ ¥0.40 ¥0.17 

1,000 or More ................................................................................................................................................... ¥0.08 0.18 

Facility Size: (estimated total revenue) ............................................................................................................ ........................ ........................

Small (estimated total revenue < $13.5 million) ............................................................................................... ¥0.34 ¥0.11 

Large (estimated total revenue > $13.5 million) .............................................................................................. ¥0.18 0.12 

Note: Based on a 100 percent sample of CY 2010 claims linked to OASIS assessments. 

* Urban/rural status, for the purposes of these simulations, is based on the wage index on which episode payment is based. The wage index is 

based on the site of service of the beneficiary. 

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. 1Percent change due to the effects of the updated wage index, the 1.5 percent proposed payment update, and the 1.32 percent case-mix 

adjustment. 

E. Alternatives Considered 

As described in section VI.C. above, if 

we implement the case-mix adjustment 

for CY 2013 along with the home health 

payment update and the updated wage 

index, the aggregate impact would be a 

net decrease of $20 million in payments 

to HHAs, resulting from a $70 million 

decrease due to the updated wage index, 

a $300 million increase due to the home 

health payment update, and a $250 

million decrease from the 1.32 percent 

case-mix adjustment. If we were to not 

implement the 1.32 case-mix 

adjustment, Medicare would pay an 

estimated $250 million more to HHAs in 

CY 2013, for a net increase of $230 

million in payments to HHAs (market 

basket update of $300 million minus 

$70 million due to the updated wage 

index). We believe that not 

implementing a case-mix adjustment, 

and paying out an additional $250 

million to HHAs when those additional 

payments are not reflective of HHAs 

treating sicker patients, would not be in 

line with the intent of the HH PPS, 

which is to pay accurately and 

appropriately for the delivery of home 

health services to Medicare 

beneficiaries. 

Section 1895(b)(3)(B)(iv) of the Act 

gives CMS the authority to implement 

payment reductions for nominal casemix growth, changes in case-mix that 

are unrelated to actual changes in 

patient health status. We are committed 

to monitoring the accuracy of payments 

to HHAs, which includes the 

measurement of the increase in nominal 

case-mix, which is an increase in casemix that is not due to patient acuity. As 

discussed in section III.A. of this rule, 

we have determined that there is a 20.08 

percent nominal case-mix change from 

2000 to 2010. For CY 2013, we propose 

to move forward with the 1.32 percent 

payment reduction to the national 

standardized 60-day episode rates as 

promulgated in the CY 2012 HH PPS 

final rule (76 FR 68532). 

We believe that the alternative of not 

implementing a case-mix adjustment to 

the payment system in CY 2013 to 

account for the increase in case-mix that 

is not real would be detrimental to the 

integrity of the PPS. As discussed in 

section III.A. of this rule, because 

nominal case-mix continues to grow as 

we update our analysis with more 

current data and thus to date we have 

not accounted for all the increase in 

nominal case-mix growth, we believe it 

is appropriate to reduce HH PPS rates 

now, thereby paying more accurately for 

the delivery of home health services 

under the Medicare home health 

benefit. The other reduction to HH PPS 

payments, a 1.0 percentage point 

reduction to the proposed CY 2013 

home health market basket update, is 

discussed in this rule and is not 

discretionary as it is a requirement in 

section 1895(b)(3)(B)(vi) of the Act (as 

amended by the Affordable Care Act). 

We solicit comment on the 

alternatives considered in this analysis. 

F. Survey and Enforcement 

Requirements for Home Health Agencies 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $7.0 million to $34.5 million in any 

1 year. Individuals and States are not 

included in the definition of a small 

entity. We are not preparing an analysis 

for the RFA because we have 

determined, and the Secretary certifies, 

that this proposed regulation would not 

have a significant economic impact on 

a substantial number of small entities. 

In 2010, out of a total of 11,814 HHAs 

enrolled in the Medicare program, only 

260 HHA providers had the potential to 

be sanctioned based on noncompliance 

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with one or more CoPs. This would be 

2.2 percent of the HHAs (small entities 

affected) which is less that 5 percent. 

We believe the benefit would be in 

assuring public health and safety CMS 

believes this proposed rule will have a 

minor impact on HHAs and SAs. This 

minor rule determination was made by 

examining the following survey data for 

calendar year (CY) 2010 in the CMS 

Providing Data Quickly (PDQ) System: 

Survey Activity Report, the Citation 

Frequency Report, the Condition-Level 

Deficiencies Report and the Active 

Provider Count Report(s). 

Our data below reflects the 

probability of low impact for monetary 

sanctions. In any given year 

approximately 11,814 surveyed agencies 

have the possibility of having a 

mandatory unannounced survey, but 

only 260 are likely to be cited for 

condition level noncompliance. 

TABLE 26 

CMS Survey data CY 2010 Total 

Active HHAs ......................... 11,814 

Standard Surveys Completed 3,960 

Complaint Surveys Completed ................................ 1,446 

Standard + Complaint Surveys Completed ................ 5,406 

HHAs with ≥1 CoP Citation .. 260 

Also, by comparison, in our review of 

the nursing home data reports, we have 

found less than 0.3 percent of nursing 

homes have been subject to the 

Temporary Management Sanction in 

2008 therefore we do not anticipate any 

major impact on home health provider 

costs with this sanction in the proposed 

regulation. 

Because implementation of the 

complex and far-reaching provisions of 

this proposed rule for CMS would 

require an infrastructure overhaul with 

changes to current tracking mechanisms 

and a nationwide training effort to train 

surveyors, their supervisors and related 

CMS personnel, we propose an effective 

date of one year following a final 

regulation. 

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 also 

conform to the provisions of section 603 

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 for Medicare payment 

regulations and has fewer than 100 

beds. We are not preparing an analysis 

for section 1102(b) of the Act because 

we have determined, and the Secretary 

certifies, that this proposed regulation 

would not have a significant impact on 

the operations of a substantial number 

of small rural hospitals. 

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 2012, that threshold level is 

approximately $139 million. This rule 

will have no consequential effect on 

State, local, or tribal governments or on 

the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We would incur certain administrative 

expenses in the course of designing and 

managing a CMP process. One-time 

costs are estimated at $2 million for 

redesigning certain parts of the survey 

information system (ASPEN) and 

ongoing expenses for maintenance and 

associated modifications of the system 

are estimated at $75,000 per year. In 

addition, we would incur expenses for 

training Federal and State surveyors, 

developing and publishing the 

necessary training and instruction 

documents and procedures, and 

tracking and reporting of CMP data. We 

estimate one 6 hour webinar training 

and trouble-shooting session per year 

involving approximately 302 surveyor 

and ancillary State and Federal 

personnel (1812 person-hours) and 190 

hours for training development and 

design. We also estimate 104 hours per 

year in trouble-shooting and responding 

to questions. The total combined person 

hours of 2106 would cost $299,052 

annually. We also estimate ongoing 

CMS costs for managing the collection 

and disbursement of CMPs to require 

about 260 person hours per year or 

approximately $36,920. The grand total 

amounts to $2 million in onetime 

expenses and approximately $335,972 

in annual operating costs. The 

provisions in this proposed rule related 

to survey protocols have already been 

incorporated into long standing CMS 

survey policy, implemented in the years 

after 1987 and most recently revised in 

2011. We project that aggregate 

Medicare and Medicaid home health 

survey costs in FY 2013 and FY 2014 

would be $39.9 million and $45.7 

million, respectively. Assuming a 

standard State Medicaid obligation of 37 

percent of the total, the Medicaid share 

would amount to $14.7 million and 

$16.9 million, respectively. The cost of 

surveys is treated as a Medicaid 

administrative cost, reimbursable at the 

professional staff rate of 75 percent. At 

this rate the net State Medicaid costs 

incurred in FYs 2013 and 2014 would 

be approximately $3.7 million and $4.2 

respectively, spread out across all States 

and territories. 

G. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars_

a004_a-4), in Table 27, we have 

prepared an accounting statement 

showing the classification of the 

transfers associated with the provisions 

of this proposed rule. This table 

provides our best estimate of the 

decrease in Medicare payments under 

the HH PPS as a result of the changes 

presented in this proposed rule. 

TABLE 27—ACCOUNTING STATEMENT

Category Transfers 

Classification of Estimated Transfers, from the CY 2012 HH PPS to the CY 2013 HH PPS 

Annualized Monetized Transfers ............................................................. ¥$20 million 

From Whom to Whom? ........................................................................... Federal Government to HH providers. 

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TABLE 27—ACCOUNTING STATEMENT—Continued 

Federal Medicaid HH Survey and Certification Costs FYs 2013 to FY 2014 

Category Transfers 

Units Discount Rate 

7% 3% 

Classification of Estimated Transfers Relating to the Medicare and Medicaid Home Health Survey and Certification Costs, 

FYs 2013 to 2014 

Annualized Monetized Transfers ............................................................. $11.9 Million .................................. $11.9 Million. 

From Whom to Whom? ........................................................................... Federal Government to Medicaid HH Survey Agencies. 

State Medicaid HH Survey and Certification Costs FYs 2013 to FY 2014 

Category Transfers 

Units Discount Rate 

7% 3% 

Annualized Monetized Transfers ............................................................. $3.9 Million .................................... $3.9 Million. 

From Whom to Whom? ........................................................................... State Governments to Medicaid HH Survey Agencies. 

Medicare HH Survey and Certification Costs FYs 2013 to FY 2014 

Category Transfers 

Units Discount Rate 

7% 3% 

Annualized Monetized Transfers ............................................................. ¥$15.8 Million ............................... ¥$15.8 Million. 

From Whom to Whom? ........................................................................... Federal Government to Medicare HH Survey Agencies. 

H. Conclusion 

In conclusion, we estimate that the 

net impact of the proposals in this rule 

is approximately $20 million in CY 

2013 savings. The ¥$20 million impact 

to the proposed CY 2013 HH PPS 

reflects the distributional effects of an 

updated wage index ($70 million 

decrease), the 1.5 percent home health 

payment update ($300 million increase), 

and a 1.32 percent case-mix adjustment 

applicable to the national standardized 

60-day episode rates ($250 million 

decrease). This analysis, together with 

the remainder of this preamble, 

provides a Regulatory Impact Analysis. 

In addition, this proposed rule would 

provide that State Medicaid programs 

share in the cost of HHA surveys. The 

cost ratio would be calculated at 63 

percent for the Medicare program and 

37 percent for the Medicaid program. 

The projected HHA survey budget for 

FY 2013 is $39.9 million and FY 2014 

at $45.7 million. The anticipated State 

Medicaid share is $3.7 million and $4.2 

million respectively (minus Federal 

match). 

IX. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a proposed rule 

(and subsequent final rule) that imposes 

substantial direct requirement costs on 

State and local governments, preempts 

State law, or otherwise has Federalism 

implications. We have reviewed this 

proposed rule under the threshold 

criteria of Executive Order 13132, 

Federalism, and have determined that it 

would not have substantial direct effects 

on the rights, roles, and responsibilities 

of States, local or tribal governments. 

List of Subjects 

42 CFR Part 409 

Health facilities, Medicare. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 431 

Grant programs-health, Health 

facilities, Medicaid, Privacy, Reporting 

and recordkeeping requirements. 

42 CFR Part 484 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 488 

Administrative practice and 

procedure, Health facilities, Medicare, 

Record and reporting requirements. 

42 CFR Part 489 

Health facilities, Medicare, Reporting 

and recordkeeping requirements. 

42 CFR Part 498 

Administrative practice and 

procedure, Health facilities, Health 

professions, Medicare reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

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Federal Register / Vol. 77, No. 135 / Friday, July 13, 2012 / Proposed Rules 41593 

PART 409—HOSPITAL INSURANCE 

BENEFITS 

1. The authority citation for part 409 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395(hh)). 

2. Section 409.44 is amended by 

revising paragraphs (c)(2)(i)(C)(2), 

(c)(2)(i)(D)(2), (c)(2)(i)(E) introductory 

text, and (c)(2)(i)(E)(1) to read as 

follows: 

§ 409.44 Skilled services requirements. 

* * * * * 

(c) * * * 

(2) * * * 

(i) * * * 

(C) * * * 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide all of the therapy services and 

functionally reassess the patient in 

accordance with paragraph (c)(2)(i)(A) 

of this section during the visit 

associated with that discipline which is 

schedule to occur after the 10th therapy 

visit but no later than the 13th therapy 

visit per the plan of care. 

(D) * * * 

(2) Where more than one discipline of 

therapy is being provided, the qualified 

therapist from each discipline must 

provide all of the therapy services and 

functionally reassess the patient in 

accordance with paragraph (c)(2)(i)(A) 

of this section during the visit 

associated with that discipline which is 

schedule to occur after the 16th therapy 

visit but no later than the 19th therapy 

visit per the plan of care. 

(E) As specified in paragraphs 

(c)(2)(i)(A), (B), (C), and (D) of this 

section, therapy visits for the therapy 

discipline(s) not in compliance with 

these policies will not be covered until 

the following conditions are met: 

(1) The qualified therapist has 

completed the reassessment and 

objective measurement of the 

effectiveness of the therapy as it relates 

to the therapy goals. As long as 

paragraphs (c)(2)(i)(E)(2) and 

(c)(2)(i)(E)(3) of this section are met, 

therapy coverage resumes with the 

completed reassessment therapy visit. 

* * * * * 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

3. The authority citation for part 424 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395(hh)). 

4. Section 424.22 is amended by— 

A. Revising paragraph (a)(1)(v) 

introductory text. 

B. Redesignating paragraphs 

(a)(1)(v)(A), (a)(1)(v)(B), (a)(1)(v)(C), and 

(a)(1)(v)(D) as paragraphs (a)(1)(v)(C), 

(a)(1)(v)(D), (a)(1)(v)(E), and (a)(1)(v)(F), 

respectively. 

C. Adding new paragraphs (a)(1)(v)(A) 

and (a)(1)(v)(B). 

D. Revising newly redesignated 

paragraphs (a)(1)(v)(C) and (a)(1)(v)(F). 

The revisions and additions read as 

follows: 

§ 424.22 Requirements for home health 

services. 

* * * * * 

(a) * * * 

(1) * * * 

(v) The physician responsible for 

performing the initial certification must 

document that the face-to-face patient 

encounter, which is related to the 

primary reason the patient requires 

home health services, has occurred no 

more than 90 days prior to the home 

health start of care date or within 30 

days of the start of the home health care 

by including the date of the encounter, 

and including an explanation of why 

the clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

services as defined in § 409.42(a) and (c) 

of this chapter, respectively. 

(A) The face-to-face encounter must 

be performed by one of the following: 

(1) The certifying physician himself or 

herself. 

(2) A physician, with privileges, who 

cared for the patient in an acute or postacute care facility from which the 

patient was directly admitted to home 

health. 

(3) A nurse practitioner or a clinical 

nurse specialist (as those terms are 

defined in section 1861(aa)(5) of the 

Act) who is working in accordance with 

State law and in collaboration with the 

certifying physician or in collaboration 

with an acute or post-acute care 

physician with privileges who cared for 

the patient in the acute or post-acute 

care facility from which the patient was 

directly admitted to home health. 

(4) A certified nurse midwife (as 

defined in section 1861(gg)of the Act) as 

authorized by State law, under the 

supervision of the certifying physician 

or under the supervision of an acute or 

post-acute care physician with 

privileges who cared for the patient in 

the acute or post-acute care facility from 

which the patient was directly admitted 

to home health. 

(5) A physician assistant (as defined 

in section 1861(aa)(5) of the Act) under 

the supervision of the certifying 

physician or under the supervision of an 

acute or post-acute care physician with 

privileges who cared for the patient in 

the acute or post-acute care facility from 

which the patient was directly admitted 

to home health. 

(B) The documentation of the face-toface patient encounter must be a 

separate and distinct section of, or an 

addendum to, the certification, and 

must be clearly titled and dated and the 

certification must be signed by the 

certifying physician. 

(C) In cases where the face-to-face 

encounter is performed by an acute or 

post-acute care physician who cared for 

the patient in an acute or post-acute care 

facility or by a non-physician 

practitioner in collaboration with or 

under the supervision of such an acute 

or post-acute care physician who is not 

directly communicating to the certifying 

physician the clinical findings (i.e., the 

patient’s homebound status and need 

for intermittent skilled nursing services 

or therapy services as defined in 

§ 409.42(a) and (c) of this chapter), the 

acute or post-acute care physician must 

communicate the clinical findings of 

that face-to-face encounter to the 

certifying physician. In all other cases 

where a non-physician practitioner 

performs the face-to-face encounter, the 

nonphysician practitioner must 

communicate the clinical findings of 

that face-to-face patient encounter to the 

certifying physician. 

* * * * * 

(F) The physician responsible for 

certifying the patient for home care 

must document the face-to-face 

encounter on the certification itself, or 

as an addendum to the certification (as 

described in paragraph (a)(1)(v) of this 

section), that the condition for which 

the patient was being treated in the faceto-face patient encounter is related to 

the primary reason the patient requires 

home health services, and why the 

clinical findings of such encounter 

support that the patient is homebound 

and in need of either intermittent 

skilled nursing services or therapy 

services as defined in § 409.42(a) and (c) 

of this chapter respectively. The 

documentation must be clearly titled 

and dated and the documentation must 

be signed by the certifying physician. 

* * * * * 

PART 431—STATE ORGANIZATION 

AND GENERAL ADMINISTRATION 

5. The authority citation for part 431 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act, (42 U.S.C. 1302) 

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6. Section 431.610 is amended by 

revising paragraph (g) introductory text 

to read as follows: 

§ 431.610 Relations with standard-setting 

and survey agencies. 

* * * * * 

(g) Responsibilities of survey agency. 

The plan must provide that, in 

certifying NFs, HHAs, and ICF–IIDs, the 

survey agency designated under 

paragraph (e) of this section will— 

* * * * * 

PART 484—HOME HEALTH SERVICES 

7. The authority citation for part 484 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395(hh)). 

8. Section 484.250 is amended by 

adding paragraph (c)(3) to read as 

follows: 

§ 484.250 Patient assessment data. 

* * * * * 

(c) * * * 

(3) Approved HHCAHPS survey 

vendors must fully comply with all 

HHCAHPS oversight activities, 

including allowing CMS and its 

HHCAHPS program team to perform site 

visits at the vendors’ company 

locations. 

PART 488—SURVEY, CERTIFICATION, 

AND ENFORCEMENT PROCEDURES 

9. The authority citation for part 488 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act, unless otherwise noted 

(42 U.S.C. 1302 and 1395(hh)); Section 6111 

of the Patient Protection and Affordable Care 

Act (Pub. L. 111–148) 

10. Section 488.2 is amended by 

adding the following statutory basis in 

numerical order as follows: 

§ 488.2 Statutory basis. 

* * * * * 

1861(m)—Requirements for home 

health services. 

1861(o)—Requirements for home 

health agencies. 

* * * * * 

1891—Conditions of participation for 

home health agencies; home health 

quality. 

* * * * * 

11. Section 488.3 is amended by 

revising paragraph (a)(1) to read as 

follows: 

§ 488.3 Conditions of participation; 

conditions for coverage; and long-term care 

requirements. 

(a) * * * 

(1) Meet the applicable statutory 

definition in sections 1138(b), 1819, 

1832(a)(2)(F), 1861, 1881, 1891, or 1919 

of the Act. 

* * * * * 

12. Section 488.26 is amended by 

revising paragraphs (c)(2) and (e) to read 

as follows: 

§ 488.26 Determining compliance. 

* * * * * 

(c) * * * 

(2) The survey process uses resident 

and patient outcomes as the primary 

means to establish the compliance 

process of facilities and agencies. 

Specifically, surveyors will directly 

observe the actual provision of care and 

services to residents and/or patients, 

and the effects of that care, to assess 

whether the care provided meets the 

needs of individual residents and/or 

patients. 

* * * * * 

(e) The State survey agency must 

ensure that a facility’s or agency’s actual 

provision of care and services to 

residents and patients and the effects of 

that care on such residents and patients 

are assessed in a systematic manner. 

13. The section heading for § 488.28 is 

revised to read as follows: 

§ 488.28 Providers or suppliers, other than 

SNFs, NFs, and HHAs with deficiencies. 

* * * * * 

14. A new subpart I is added to read 

as follows: 

Subpart I—Survey and Certification of 

Home Health Agencies 

Sec. 

488.700 Basis and scope. 

488.705 Definitions. 

488.710 Standard surveys. 

488.715 Partial extended surveys. 

488.720 Extended surveys. 

488.725 Unannounced surveys. 

488.730 Survey frequency and content. 

488.735 Surveyor qualifications. 

488.740 Certification of compliance or 

noncompliance. 

488.745 Informal Dispute Resolution (IDR). 

Subpart I—Survey and Certification of 

Home Health Agencies 

§ 488.700 Basis and scope. 

Section 1891 of the Act establishes 

requirements for surveying HHAs to 

determine whether they meet the 

Medicare conditions of participation. 

§ 488.705 Definitions. 

As used in this subpart— 

Abbreviated standard survey means a 

focused survey other than a standard 

survey that gathers information on an 

HHA’s compliance with specific 

conditions of participation. An 

abbreviated standard survey may be 

based on complaints received, a change 

of ownership or management, or other 

indicators of specific concern such as 

reapplication for Medicare billing 

privileges following a deactivation. 

Complaint survey means a survey that 

is conducted to investigate specific 

allegations of noncompliance. 

Condition-level deficiency means 

noncompliance as described in § 488.24 

of this part. 

Deficiency is a violation of the Act 

and regulations contained in part 484, 

subparts A through C of this chapter, is 

determined as part of a survey, and can 

be either standard or condition-level. 

Extended survey means a survey that 

reviews all conditions of participation. 

It may be conducted at any time but 

must be conducted when one or more 

condition-level deficiencies 

(substandard care) are identified. 

Noncompliance means any deficiency 

found at the condition-level or standardlevel. 

Partial extended survey means a 

survey conducted to determine if 

deficiencies and/or deficient practice(s) 

exist that were not fully examined 

during the standard survey. The 

surveyors may review any additional 

requirements which would assist in 

making a compliance finding. 

Standard-level deficiency means 

noncompliance with one or more of the 

standards that make up each condition 

of participation for HHAs. 

Standard survey means a survey 

conducted in which the surveyor 

reviews the HHA’s compliance with a 

select number of standards and/or 

conditions of participation in order to 

determine the quality of care and 

services furnished by an HHA as 

measured by indicators related to 

medical, nursing, and rehabilitative 

care. 

Substandard care means 

noncompliance with one or more 

conditions of participation, including 

deficiencies which could result in 

actual or potential harm to patients at an 

HHA. 

Substantial compliance means 

compliance with all condition-level 

requirements, as determined by CMS or 

the State. 

§ 488.710 Standard surveys. 

(a) For each HHA, the survey agency 

must conduct a standard survey not 

later than 36 months after the date of the 

previous standard survey that includes, 

but is not limited to, all of the following 

(to the extent practicable): 

(1) A case-mix stratified sample of 

individuals furnished items or services 

by the HHA. 

(2) Visits to the homes of patients, 

(the purpose of the home visit is to 

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evaluate the extent to which the quality 

and scope of services furnished by the 

HHA attained and maintained the 

highest practicable functional capacity 

of each patient as reflected in the 

patient’s written plan of care and 

clinical records), but only with their 

consent, and, if determined necessary 

by CMS or the survey team, other forms 

of communication with patients 

including telephone calls. 

(3) Review of indicators that include 

the outcomes of quality care and 

services furnished by the agency as 

indicated by medical, nursing, and 

rehabilitative care. 

(4) Review of compliance with a 

select number of regulations most 

related to high-quality patient care. 

(b) The survey agency’s failure to 

follow the procedures set forth in this 

section will not invalidate otherwise 

legitimate determinations that 

deficiencies exist at an HHA. 

§ 488.715 Partial extended surveys. 

A partial extended survey is 

conducted to determine if standard or 

condition-level deficiencies are present 

in the conditions of participation not 

fully examined during the standard 

survey and there are indications that a 

more comprehensive review of 

conditions of participation would 

determine if a deficient practice exists. 

§ 488.720 Extended surveys. 

(a) Purpose of survey. The purpose of 

an extended survey is: 

(1) To review and identify the policies 

and procedures that caused an HHA to 

furnish substandard care. 

(2) To determine whether the HHA is 

in compliance with all of the conditions 

of participation. 

(b) Timing and basis for survey. An 

extended survey must be conducted not 

later than 14 calendar days after 

completion of a standard survey which 

found that a HHA had furnished 

substandard care. 

§ 488.725 Unannounced surveys. 

(a) Basic rule. All HHA surveys must 

be unannounced and conducted with 

procedures and scheduling that renders 

the onsite surveys as unpredictable in 

their timing as possible. 

(b) State survey agency’s scheduling 

and surveying procedures. CMS reviews 

each survey agency’s scheduling and 

surveying procedures and practices to 

assure that the survey agency has taken 

all reasonable steps to avoid giving 

notice of a survey through the 

scheduling procedures and conduct of 

the surveys. 

(c) Civil money penalties. Any 

individual who notifies an HHA, or 

causes an HHA to be notified, of the 

time or date on which a standard survey 

is scheduled to be conducted is subject 

to a Federal civil money penalty not to 

exceed $2,000. 

§ 488.730 Survey frequency and content. 

(a) Basic period. Each HHA must be 

surveyed not later than 36 months after 

the last day of the previous standard 

survey. Additionally, a survey may be 

conducted as frequently as necessary 

to— 

(1) Assure the delivery of quality 

home health services by determining 

whether an HHA complies with the Act 

and conditions of participation; and 

(2) Confirm that the HHA has 

corrected deficiencies that were 

previously cited. 

(b) Change in HHA information. A 

standard survey or an abbreviated 

standard survey may be conducted 

within 2 months of a change in any of 

the following: 

(1) Ownership; 

(2) Administration; or 

(3) Management of the HHA. 

(c) Complaints. A standard survey, or 

abbreviated standard survey— 

(1) Must be conducted of an HHA 

within 2 months of when a significant 

number of complaints against the HHA 

are reported to CMS, the State, the State 

or local agency responsible for 

maintaining a toll-free hotline and 

investigative unit, or any other 

appropriate Federal, State, or local 

agency; or 

(2) As otherwise required to 

determine compliance with the 

conditions of participation such as the 

investigation of a complaint. 

§ 488.735 Surveyor qualifications. 

(a) Minimum qualifications. Surveys 

must be conducted by individuals who 

meet minimum qualifications 

prescribed by CMS. In addition, before 

any State or Federal surveyor may serve 

on an HHA survey team (except as a 

trainee), he/she must have successfully 

completed the relevant CMS-sponsored 

Basic HHA Surveyor Training Course 

and any associated course prerequisites. 

All surveyors must follow the principles 

set forth in § 488.24 through § 488.28 

according to CMS policies and 

procedures for determining compliance 

with the conditions of participation. 

(b) Disqualifications. Any of the 

following circumstances disqualifies a 

surveyor from surveying a particular 

agency: 

(1) The surveyor currently works for, 

or, within the past two years, has 

worked with the HHA to be surveyed as: 

(i) A direct employee; 

(ii) An employment agency staff at the 

agency; or 

(iii) An officer, consultant, or agent 

for the agency to be surveyed 

concerning compliance with conditions 

of participation specified in or pursuant 

to sections 1861(o) or 1891(a) of the Act. 

(2) The surveyor has a financial 

interest or an ownership interest in the 

HHA to be surveyed. 

(3) The surveyor has a family member 

who has a relationship with the HHA to 

be surveyed. 

(4) The surveyor has an immediate 

family member who is a patient of the 

HHA to be surveyed. 

§ 488.740 Certification of compliance or 

noncompliance. 

Rules to be followed for certification, 

documentation of findings, periodic 

review of compliance and approval, 

certification of noncompliance, and 

determining compliance of HHAs are set 

forth, respectively, in § 488.12, § 488.18, 

§ 488.20, § 488.24, and § 488.26. 

§ 488.745 Informal Dispute Resolution 

(IDR). 

(a) Opportunity to refute survey 

findings. Upon the provider’s receipt of 

an official statement of deficiencies, 

HHAs are afforded the option to request 

an informal opportunity to dispute 

condition-level survey findings. 

(b) Failure to conduct IDR timely. 

Failure of CMS or the State, as 

appropriate, to complete IDR shall not 

delay the effective date of any 

enforcement action. 

(c) Revised Statement of Deficiencies 

as a result of IDR. If any findings are 

revised or removed by CMS or the State 

based on IDR, the official statement of 

deficiencies is revised accordingly and 

any enforcement actions imposed solely 

as a result of those cited deficiencies are 

adjusted accordingly. 

(d) Notification. When the survey 

findings indicate a condition-level 

deficiency, CMS or the State, as 

appropriate, must provide the agency 

with written notification of the 

opportunity for participating in an IDR 

process at the time the official statement 

of deficiencies is issued. The request for 

IDR must be submitted in writing to the 

State or CMS, should include the 

specific deficiencies that are disputed, 

and should be made within the same 10 

calendar day period that the HHA has 

for submitting an acceptable plan of 

correction. 

15. A new subpart J is added to read 

as follows: 

Subpart J—Alternative Sanctions for Home 

Health Agencies With Deficiencies 

Sec. 

488.800 Statutory basis. 

488.805 Definitions. 

488.810 General provisions. 

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488.815 Factors to be considered in 

selecting sanctions. 

488.820 Available sanctions. 

488.825 Action when deficiencies pose 

immediate jeopardy. 

488.830 Action when deficiencies are at the 

condition-level but do not pose 

immediate jeopardy. 

488.835 Temporary management. 

488.840 Suspension of payment for all new 

patient admissions and new payment 

episodes. 

488.845 Civil money penalties. 

488.850 Directed plan of correction. 

488.855 Directed in-service training. 

488.860 Continuation of payments to an 

HHA with deficiencies. 

488.865 Termination of provider agreement. 

Subpart J—Alternative Sanctions for 

Home Health Agencies With 

Deficiencies 

§ 488.800 Statutory basis. 

Section 1891(e) through (f) of the Act 

authorizes the Secretary to take actions 

to remove and correct deficiencies in an 

HHA through an alternative sanction or 

termination or both. Furthermore, this 

section specifies that these sanctions are 

in addition to any others available 

under State or Federal law, and, except 

for civil money penalties, are imposed 

prior to the conduct of a hearing. 

§ 488.805 Definitions. 

As used in this subpart— 

Directed plan of correction means 

CMS or the temporary manager (with 

CMS/SA approval) may direct the HHA 

to take specific corrective action to 

achieve specific outcomes within 

specific timeframes. 

Immediate jeopardy means a situation 

in which the provider’s noncompliance 

with one or more requirements of 

participation has caused, or is likely to 

cause serious injury, harm, impairment, 

or death to a patient(s). 

New admission means an individual 

who becomes a patient or is readmitted 

to the HHA on or after the effective date 

of a suspension of payment sanction or 

new payment episode of an existing 

patient on or after the effective date of 

a suspension of payment sanction. 

Per instance means a single event of 

noncompliance identified and corrected 

through a survey, for which the statute 

authorizes CMS to impose a sanction; 

Plan of correction means a plan 

developed by the HHA and approved by 

CMS that is the HHA’s written response 

to survey findings detailing corrective 

actions to cited deficiencies and 

specifies the date by which those 

deficiencies will be corrected. 

Repeat deficiency means a standard or 

condition-level deficiency that is cited 

on the current survey and is 

substantially the same as, or similar to, 

a finding of noncompliance issued on 

the most recent previous survey. 

Temporary management means the 

temporary appointment by CMS or a 

CMS authorized agent of a substitute 

manager or administrator based upon 

qualifications described in § 484.4 and 

§ 484.14(c), under the direction of the 

HHA’s governing body who has 

authority to hire, terminate or reassign 

staff, obligate funds, alter procedures, 

and manage the HHA to correct 

deficiencies identified in the HHA’s 

operation. 

§ 488.810 General provisions. 

(a) Purpose of sanctions. The purpose 

of sanctions is to ensure prompt 

compliance with program requirements 

in order to protect the health and safety 

of individuals under the care of an 

HHA. 

(b) Basis for imposition of sanctions. 

When CMS chooses to apply one or 

more sanctions specified in § 488.820, 

the sanctions are applied on the basis of 

noncompliance with conditions of 

participation found through surveys and 

may be based on failure to correct 

previous deficiency findings as 

evidenced by repeat deficiencies. 

(c) Number of sanctions. CMS may 

apply one or more sanctions for each 

deficiency constituting noncompliance 

or for all deficiencies constituting 

noncompliance. 

(d) Extent of sanctions imposed. 

When CMS imposes a sanction, the 

sanction applies to the parent HHA and 

its respective branch offices. The 

sanctions imposed on a parent and/or 

its respective branches do not apply to 

the associated subunit. 

(e) Plan of correction requirement. 

Regardless of which sanction is applied, 

a non-compliant HHA must submit a 

plan of correction for approval by CMS. 

(f) Notification requirements—(1) 

Notice. CMS provides written 

notification to the HHA of the intent to 

impose the sanction. 

(2) Date of enforcement action. The 

notice periods specified in § 488.825(b) 

and § 488.830(b) begin the day after the 

HHA receives the notice. 

(g) Appeals. (1) The provisions of part 

498 of this chapter apply when the HHA 

requests a hearing on a determination of 

noncompliance leading to the 

imposition of a sanction, including 

termination of the provider agreement. 

(2) A pending hearing does not delay 

the effective date of a sanction, 

including termination, against an HHA. 

Sanctions continue to be in effect 

regardless of the timing of any appeals 

proceedings. 

§ 488.815 Factors to be considered in 

selecting sanctions. 

CMS bases its choice of sanction or 

sanctions on consideration of one or 

more factors that include, but are not 

limited to, the following: 

(a) The extent to which the 

deficiencies pose immediate jeopardy to 

patient health and safety. 

(b) The nature, incidence, manner, 

degree, and duration of the deficiencies 

or noncompliance. 

(c) The presence of repeat 

deficiencies, the HHA’s overall 

compliance history and any history of 

repeat deficiencies at either the parent 

or branch location. 

(d) The extent to which the 

deficiencies are directly related to a 

failure to provide quality patient care. 

(e) The extent to which the HHA is 

part of a larger organization with 

performance problems. 

(f) An indication of any system-wide 

failure to provide quality care. 

§ 488.820 Available sanctions. 

In addition to termination of the 

provider agreement, the following 

alternative sanctions are available: 

(a) Civil money penalties. 

(b) Suspension of payment for all new 

admissions and new payment episodes. 

(c) Temporary management of the 

HHA. 

(d) Directed plan of correction, as set 

out at § 488.850. 

(e) Directed in-service training, as set 

out at § 488.855. 

§ 488.825 Action when deficiencies pose 

immediate jeopardy. 

(a) Immediate jeopardy. If there is 

immediate jeopardy to the HHA’s 

patient health or safety— 

(1) CMS immediately terminates the 

HHA provider agreement in accordance 

with § 489.53 of this chapter. 

(2) CMS terminates the HHA provider 

agreement no later than 23 days from 

the last day of the survey, if the 

immediate jeopardy has not been 

removed by the HHA. 

(3) In addition to a termination, CMS 

may impose one or more alternative 

sanctions, as appropriate. 

(b) 2-day notice. Except for civil 

money penalties, for all sanctions 

specified in § 488.820 that are imposed 

when there is immediate jeopardy, 

notice must be given at least 2 calendar 

days before the effective date of the 

enforcement action. 

(c) Transfer of care. An HHA, if its 

provider agreement is terminated, is 

responsible for providing information, 

assistance, and arrangements necessary 

for the proper and safe transfer of 

patients to another local HHA within 30 

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days of termination. The State must 

assist the HHA in the safe and orderly 

transfer of care and services for the 

patients to another local HHA. 

§ 488.830 Action when deficiencies are at 

the condition-level but do not pose 

immediate jeopardy. 

(a) Noncompliance. If the HHA is no 

longer in compliance with the 

conditions of participation, either 

because the deficiencies substantially 

limit the provider’s capacity to furnish 

adequate care but do not pose 

immediate jeopardy, or because the 

HHA has repeat noncompliance with 

standard-level deficiencies or repeat 

condition-level deficiencies that would 

lead to noncompliance based on the 

HHA’s failure to correct and sustain 

compliance as described in their 

proposed plan of correction with the 

condition as set forth in part 484 of this 

chapter, CMS will: 

(1) Terminate the HHA’s provider 

agreement; or 

(2) In addition to, or as an alternative 

to termination for a period not to exceed 

six months, impose one or more 

alternative sanctions set forth in 

§ 488.820(a) through (f) of this subpart. 

(b) 15-day notice. Except for civil 

money penalties, for all sanctions 

specified in § 488.820 imposed when 

there is no immediate jeopardy, notice 

must be given at least 15 calendar days 

before the effective date of the 

enforcement action. The requirements of 

the notice are set forth in § 488.810(f). 

(c) Not meeting criteria for 

continuation of payment. If an HHA 

does not meet the criteria for 

continuation of payment under 

§ 488.860(a), CMS will terminate the 

HHA’s provider agreement in 

accordance with § 488.865. 

(d) Termination time frame when 

there is no immediate jeopardy. CMS 

terminates an HHA within 6 months of 

the last day of the survey, if the HHA 

is not in compliance with the conditions 

of participation, and the terms of the 

plan of correction have not been met. 

(e) Transfer of care. An HHA, if its 

provider agreement is terminated, is 

responsible for providing information, 

assistance, and arrangements necessary 

for the proper and safe transfer of 

patients to another local HHA within 30 

days of termination. The State must 

assist the HHA in the safe and orderly 

transfer of care and services for the 

patients to another local HHA. 

§ 488.835 Temporary management. 

(a) Application. (1) CMS may impose 

temporary management of an HHA if it 

determines that an HHA has a 

condition-level deficiency(ies) and CMS 

determines that management limitations 

or the deficiencies are likely to impair 

the HHA’s ability to correct deficiencies 

and return the HHA to full compliance 

with the conditions of participation 

within the timeframe required. 

(2) [Reserved] 

(b) Procedures. (1) CMS notifies the 

HHA that a temporary manager is being 

appointed. 

(2) If the HHA fails to relinquish 

authority and control to the temporary 

manager, CMS terminates the HHA’s 

provider agreement in accordance with 

§ 488.865. 

(c) Duration and effect of sanction. 

Temporary management continues 

until— 

(1) CMS determines that the HHA has 

achieved substantial compliance and 

has the management capability to 

ensure continued compliance with all 

the conditions of participation; 

(2) CMS terminates the provider 

agreement; or 

(3) The HHA reassumes management 

control without CMS approval. In such 

case, it would be a failure to relinquish 

authority and control to temporary 

management and CMS initiates 

termination of the provider agreement 

and may impose additional sanctions. 

Temporary management will not exceed 

a period of six months from the date of 

the survey identifying noncompliance. 

(d) Payment of salary. (1) The 

temporary manager’s salary— 

(i) Is paid directly by the HHA while 

the temporary manager is assigned to 

that HHA; and 

(ii) Must be at least equivalent to the 

sum of the following: 

(A) The prevailing salary paid by 

providers for positions of this type in 

what the State considers to be the 

HHA’s geographic area (prevailing 

salary based on the Geographic Guide 

by the Department of Labor (BLS Wage 

Data by Area and Occupation); 

(B) Any additional costs that would 

have reasonably been incurred by the 

HHA if such person had been in an 

employment relationship; and 

(C) Any other costs incurred by such 

a person in furnishing services under 

such an arrangement or as otherwise set 

by the State. 

(2) An HHA’s failure to pay the salary 

and other costs of the temporary 

manager described in paragraph (d)(1) of 

this section is considered a failure to 

relinquish authority and control to 

temporary management. 

(3) The costs of a temporary manager 

is not an allowable item on a cost report, 

as described in § 488.30. 

§ 488.840 Suspension of payment for all 

new patient admissions and new payment 

episodes. 

(a) Application. (1) CMS may suspend 

payment for all new admissions and 

new payment episodes if an HHA is 

found to have condition-level 

deficiencies, regardless of whether those 

deficiencies pose immediate jeopardy. 

(2) CMS will consider this sanction 

for any deficiency related to poor 

patient care outcomes, regardless of 

whether the deficiency poses immediate 

jeopardy. 

(b) Procedures—(1) Notices. (i) Before 

suspending payments for new 

admissions or new payment episodes, 

CMS provides the HHA notice of the 

suspension of payment for all new 

admissions and all new payment 

episodes as set forth in § 488.810(f). The 

CMS notice of suspension will include 

the nature of the non-compliance; the 

effective date of the sanction; and the 

right to appeal the determination 

leading to the sanction. 

(ii) The HHA may not charge a newly 

admitted HHA patient who is a 

Medicare beneficiary for services for 

which Medicare payment is suspended 

unless the HHA can show that, before 

initiating care, it gave the patient or his 

or her representative oral and written 

notice of the suspension of Medicare 

payment in a language and manner that 

the beneficiary or representative can 

understand. 

(2) Restriction. (i) Suspension of 

payment for all new admissions and 

new payment episodes sanction may be 

imposed anytime an HHA is found to be 

out of substantial compliance. 

(ii) Suspension of payment for 

patients with new admissions or 

patients with new payment episodes 

will remain in place until CMS 

determines that the HHA has achieved 

substantial compliance or is 

involuntarily terminated with the 

conditions of participation, as 

determined by CMS. 

(3) Resumption of payments. 

Payments to the HHA resume 

prospectively on the date that CMS 

determines that the HHA has achieved 

substantial compliance with the 

conditions of participation. 

(c) Duration and effect of sanction. 

This sanction ends when— 

(1) CMS determines that the HHA is 

in substantial compliance with all of the 

conditions of participation; or 

(2) When the HHA is terminated or 

CMS determines that the HHA is not in 

compliance with the conditions of 

participation at a maximum of 6 months 

from the date noncompliance was 

determined. 

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§ 488.845 Civil money penalties. 

(a) Application. (1) CMS may impose 

a civil money penalty against an HHA 

for either the number of days the HHA 

is not in compliance with one or more 

conditions of participation or for each 

instance that an HHA is not in 

compliance, regardless of whether the 

HHA’s deficiencies pose immediate 

jeopardy. 

(2) CMS may impose a civil money 

penalty for the number of days of 

immediate jeopardy. 

(3) A per-day and a per-instance CMP 

may not be imposed simultaneously for 

the same deficiency. 

(b) Amount of penalty. (1) Factors 

considered. CMS takes into account the 

following factors in determining the 

amount of the penalty: 

(i) The factors set out at § 488.815. 

(ii) The size of an agency and its 

resources. 

(iii) The availability of other HHAs 

within a region. 

(iv) Accurate and credible resources, 

such as PECOS, Medicare cost reports 

and Medicare/Medicaid claims 

information that provide information on 

the operation and resources of the HHA. 

(v) Evidence that the HHA has a builtin, self-regulating quality assessment 

and performance improvement system 

to provide proper care, prevent poor 

outcomes, control patient injury, 

enhance quality, promote safety, and 

avoid risks to patients on a sustainable 

basis that indicates the ability to meet 

the conditions of participation and to 

ensure patient health and safety. 

(2) Adjustments to penalties. Based on 

revisit survey findings, adjustments to 

penalties may be made after a review of 

the provider’s attempted correction of 

deficiencies. 

(i) CMS may increase a CMP in 

increments based on a HHA’s inability 

or unwillingness to correct deficiencies, 

the presence of a system-wide failure in 

the provision of quality care, or a 

determination of immediate jeopardy 

with actual harm versus immediate 

jeopardy with potential for harm. 

(ii) CMS may also decrease a CMP in 

increments to the extent that it finds, 

pursuant to a revisit, that substantial 

and sustainable improvements have 

been implemented even though the 

HHA is not yet in full compliance with 

the conditions of participation. 

(iii) No penalty assessment shall 

exceed $10,000 for each day of 

noncompliance. 

(3) Upper range of penalty. Penalties 

in the upper range of $8,500 to $10,000 

per day of noncompliance are imposed 

for a condition-level deficiency that is 

immediate jeopardy. The penalty in this 

range will continue until compliance 

can be determined based on a revisit 

survey. 

(4) Middle range of penalty. Penalties 

in the range of $3,500–$8,500 per day of 

noncompliance are imposed for a repeat 

and/or condition-level deficiency that 

does not constitute immediate jeopardy, 

but is directly related to poor quality 

patient care outcomes. 

(i) $8,500 per day for a repeat 

deficiency or deficiencies. 

(ii) $2500 to $5,000 per day for other 

deficiencies. 

(5) Lower range of penalty. Penalties 

within this range are imposed for a 

repeat and/or condition-level deficiency 

that does not constitute immediate 

jeopardy and that is related 

predominately to structure or processoriented conditions (such as OASIS 

submission requirements) rather than 

directly related to patient care 

outcomes. 

(i) $4,000 per day for a repeat 

deficiency or deficiencies. 

(ii) $500 to $3,000 per day for other 

deficiencies. 

(6) Per instance penalty. Penalties 

imposed per instance of noncompliance 

may be assessed for one or more 

singular events of condition-level 

noncompliance that are identified and 

where the noncompliance was corrected 

during the onsite survey. When 

penalties are imposed for per instance of 

noncompliance, or more than one per 

instance of noncompliance, the 

penalties will be in the range of $1,000 

to $10,000 per instance, not to exceed 

$10,000 each day of noncompliance. 

(7) Decreased penalty amounts. If the 

immediate jeopardy situation is 

removed, but condition-level 

noncompliance continues, CMS will 

shift the penalty amount imposed per 

day from the upper range to the middle 

or lower range. An earnest effort to 

correct any systemic causes of 

deficiencies and sustain improvement 

must be evident. 

(8) Increased penalty amounts. (i) In 

accordance with paragraph (b)(2) of this 

section, CMS will increase the per day 

penalty amount for any condition-level 

deficiency or deficiencies which, after 

imposition of a lower-level penalty 

amount, become sufficiently serious to 

pose potential harm or immediate 

jeopardy. 

(ii) CMS increases the per day penalty 

amount for deficiencies that are not 

corrected and found again at the time of 

revisit survey(s) for which a lower-level 

penalty amount was previously 

imposed. 

(iii) CMS may impose a more severe 

amount of penalties for repeated 

noncompliance with the same 

condition-level deficiency or 

uncorrected deficiencies from a prior 

survey. 

(c) Procedures—(1) Notice of intent. 

CMS provides the HHA with written 

notice of the intent to impose a civil 

money penalty. The notice includes the 

amount of the CMP being imposed, the 

basis for such imposition, and the 

proposed effective date of the sanction. 

(2) Appeals—(i) Appeals procedures. 

An HHA may request a hearing on the 

determination of the noncompliance 

that is the basis for imposition of the 

civil money penalty. The request must 

meet the requirements in § 498.40 of 

this chapter. 

(ii) Waiver of a hearing. An HHA may 

waive the right to a hearing, in writing, 

within 60 days from the date of the 

notice imposing the civil money 

penalty. If an HHA timely waives its 

right to a hearing, CMS reduces the 

penalty amount by 35 percent, and the 

amount is due within 15 days of the 

HHAs agreeing in writing to waive the 

hearing. If the HHA does not waive its 

right to a hearing in accordance to the 

procedures specified in this section, the 

civil money penalty is not reduced by 

35 percent. 

(d) Accrual and duration of penalty. 

(1) The per day civil money penalty may 

start accruing as early as the beginning 

of the date of the survey that determines 

that the HHA was out of compliance, as 

determined by CMS. 

(2) A civil money penalty for each per 

instance of noncompliance is imposed 

in a specific amount for that particular 

deficiency, with a maximum of $10,000 

per day per HHA. A penalty that is 

imposed per day and per instance of 

noncompliance may not be imposed 

simultaneously. 

(3) Duration of per day penalty when 

there is immediate jeopardy. (i) In the 

case of noncompliance that poses 

immediate jeopardy, CMS must 

terminate the provider agreement within 

23 calendar days after the last date of 

the survey if the immediate jeopardy is 

not removed. 

(ii) A penalty imposed per day of 

noncompliance will stop accruing on 

the day the provider agreement is 

terminated or the HHA achieves 

substantial compliance, whichever 

occurs first. 

(4) Duration of penalty when there is 

no immediate jeopardy. (i) In the case of 

noncompliance that does not pose 

immediate jeopardy, the daily accrual of 

per day civil money penalties is 

imposed for the days of noncompliance 

prior to the notice specified in 

paragraph (c)(1) of this section and an 

additional period of no longer than 6 

months following the last day of the 

survey. 

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(ii) If the HHA has not achieved 

compliance with the conditions of 

participation, CMS terminates the 

provider agreement. The accrual of civil 

money penalty stops on the day the 

HHA agreement is terminated or the 

HHA achieves substantial compliance, 

whichever is earlier. 

(e) Computation and notice of total 

penalty amount. (1) When a civil money 

penalty is imposed on a per day basis 

and the HHA achieves compliance with 

the conditions of participation as 

determined by a revisit survey, CMS 

sends a final notice to the HHA 

containing all of the following 

information: 

(i) The amount of penalty assessed per 

day. 

(ii) The total number of days of 

noncompliance. 

(iii) The total amount due. 

(iv) The due date of the penalty. 

(v) The rate of interest to be assessed 

on any unpaid balance beginning on the 

due date, as provided in paragraph (f)(4) 

of this section. 

(2) When a civil money penalty is 

imposed for per instance of 

noncompliance, CMS sends a notice to 

the HHA containing all of the following 

information: 

(i) The amount of the penalty that was 

assessed. 

(ii) The total amount due. 

(iii) The due date of the penalty. 

(iv) The rate of interest to be assessed 

on any unpaid balance beginning on the 

due date, as provided in paragraph (f)(6) 

of this section. 

(3) In the case of an HHA for which 

the provider agreement has been 

involuntarily terminated and for which 

a civil money penalty was imposed on 

a per day basis, CMS sends this penalty 

information after one of the following 

actions has occurred: 

(i) Final administrative decision is 

made. 

(ii) The HHA has waived its right to 

a hearing in accordance with paragraph 

(c)(2)(ii) of this section. 

(iii) Time for requesting a hearing has 

expired and CMS has not received a 

hearing request from the HHA. 

(f) Due date for payment of penalty. 

A penalty is due and payable 15 days 

from notice of the final administrative 

decision. 

(1) Payments are due for all civil 

money penalties within 15 days: 

(i) After a final administrative 

decision when the HHA achieves 

substantial compliance before the final 

decision or the effective date of 

termination before final decision, 

(ii) After the time to appeal has 

expired and the HHA does not appeal or 

fails to timely appeal the initial 

determination, 

(iii) After CMS receives a written 

request from the HHA requesting to 

waive its right to appeal the 

determinations that led to the 

imposition of a sanction, 

(iv) After substantial compliance is 

achieved, or 

(v) After the effective date of 

termination. 

(2) A request for hearing does not 

delay the imposition of any penalty; it 

only potentially delays the collection of 

the final penalty amount. 

(3) If an HHA waives its right to a 

hearing according to paragraph (c)(2)(ii) 

of this section, CMS will apply a 35 

percent reduction to the CMP amount 

when: 

(i) The HHA achieved compliance 

with the conditions of participation 

before CMS received the written waiver 

of hearing; or 

(ii) The effective date of termination 

occurs before CMS received the written 

waiver of hearing. 

(4) The period of noncompliance may 

not extend beyond 6 months from the 

last day of the survey. 

(5) The amount of the penalty, when 

determined, may be deducted (offset) 

from any sum then or later owing by 

CMS or State Medicaid to the HHA. 

(6) Interest is assessed and accrues on 

the unpaid balance of a penalty, 

beginning on the due date. Interest is 

computed at the rate specified in 

§ 405.378(d) of this chapter. 

(g) Penalties collected by CMS—(1) 

Disbursement of CMPs. Civil money 

penalties and any corresponding 

interest collected by CMS from 

Medicare and Medicaid participating 

HHAs are disbursed in proportion to 

average dollars spent by Medicare and 

Medicaid at the national level based on 

MSIS and HHA PPS data for a three year 

fiscal period. 

(i) Based on expenditures for the FY 

2007–2009 period, the initial 

proportions to be disbursed are 63 

percent returned to the U.S. Treasury 

and 37 percent returned to the State 

Medicaid agency. 

(ii) Beginning one year after the 

effective date of this section, CMS shall 

annually update these proportions 

based on the most recent 3-year fiscal 

period, prior to the year in which the 

CMP is imposed, for which CMS 

determines that the relevant data are 

essentially complete. 

(iii) The portion corresponding to the 

Medicare is returned to the U.S. 

Department of Treasury as 

miscellaneous receipts. 

(iv) The portion corresponding to the 

Medicaid payments is returned to the 

State Medicaid agency. 

(2) Penalties may not be used for 

Survey and Certification operations nor 

as the State’s Medicaid non-Federal 

medical assistance or administrative 

match. 

§ 488.850 Directed plan of correction. 

(a) Application. CMS may impose a 

directed plan of correction when an 

HHA: 

(1) Has one or more deficiencies that 

warrant directing the HHA to take 

specific actions; or 

(2) Fails to submit an acceptable plan 

of correction. 

(b) Procedures. (1) Before imposing 

this sanction, CMS provides the HHA 

notice of the impending sanction. 

(2) CMS or the temporary manager 

(with CMS approval) may direct the 

HHA to take corrective action to achieve 

specific outcomes within specific 

timeframes. 

(c) Duration and effect of sanction. If 

the HHA fails to achieve compliance 

with the conditions of participation 

within the timeframes specified in the 

directed plan of correction, CMS: 

(1) May impose one or more other 

sanctions set forth in § 488.820; or 

(2) Terminates the provider 

agreement. 

§ 488.855 Directed in-service training. 

(a) Application. CMS may require the 

staff of an HHA to attend in-service 

training program(s) if CMS determines 

that— 

(1) The HHA has deficiencies that 

indicate noncompliance; 

(2) Education is likely to correct the 

deficiencies; and 

(3) The programs are conducted by 

established centers of health education 

and training or consultants with 

background in education and training 

with Medicare Home Health Providers, 

or as deemed acceptable by CMS and/ 

or the State (by review of a copy of 

curriculum vitas and/or resumes/ 

references to determine the educator’s 

qualifications). 

(b) Procedures. (1) Action following 

training. After the HHA staff has 

received in-service training, if the HHA 

has not achieved compliance, CMS may 

impose one or more other sanctions 

specified in § 488.820. 

(2) Payment. The HHA pays for the 

directed in-service training for its staff. 

§ 488.860 Continuation of payments to an 

HHA with deficiencies. 

(a) Continued payments. CMS may 

continue payments to an HHA with 

condition-level deficiencies that do not 

constitute immediate jeopardy for up to 

6 months from the last day of the survey 

if the criteria in paragraph (a)(1) of this 

section are met. 

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(1) Criteria. CMS may continue 

payments to an HHA not in compliance 

with the conditions of participation for 

the period specified in paragraph (a) of 

this section if all of the following 

criteria are met: 

(i) The HHA has been imposed an 

alternative sanction or sanctions and 

termination has not been imposed. 

(ii) The HHA has submitted a plan of 

correction approved by CMS. 

(iii) The HHA agrees to repay the 

Federal government payments received 

under this provision if corrective action 

is not taken in accordance with the 

approved plan and timetable for 

corrective action. 

(2) CMS may terminate the HHA’s 

provider agreement any time if the 

criteria in paragraph (a)(1) of this 

section are not met. 

(b) Cessation of payments for new 

admissions. If termination is imposed, 

either on its own or in addition to an 

alternative sanction or sanctions, or if 

any of the criteria set forth in paragraph 

(a)(1) of this section are not met, the 

HHA will receive no Medicare 

payments, as applicable, for new 

admissions following the last day of the 

survey. 

(c) Failure to achieve compliance with 

the conditions of participation. If the 

HHA does not achieve compliance with 

the conditions of participation by the 

end of the period specified in paragraph 

(a) of this section, CMS will terminate 

the provider agreement of the HHA in 

accordance with § 488.865 of this part. 

§ 488.865 Termination of provider 

agreement. 

(a) Effect of termination by CMS. 

Termination of the provider agreement 

ends— 

(1) Payment to the HHA; and 

(2) Any alternative sanction(s). 

(b) Basis for termination. CMS 

terminates an HHA’s provider 

agreement under any one of the 

following conditions— 

(1) The HHA is not in compliance 

with the conditions of participation. 

(2) The HHA fails to submit an 

acceptable plan of correction within the 

timeframe specified by CMS. 

(3) The HHA fails to relinquish 

control to the temporary manager, if that 

sanction is imposed by CMS. 

(4) The HHA fails to meet the 

eligibility criteria for continuation of 

payment as set forth in § 488.860(a)(1). 

(c) Notice. CMS notifies the HHA and 

the public of the termination, in 

accordance with procedures set forth in 

§ 489.53 of this chapter. 

(d) Procedures for termination. CMS 

terminates the provider agreement in 

accordance with procedures set forth in 

§ 489.53 of this chapter. 

(e) Appeal. An HHA may appeal the 

termination of its provider agreement by 

CMS in accordance with part 498 of this 

chapter. 

PART 489—PROVIDER AGREEMENTS 

AND SUPPLIER APPROVAL 

16. The authority citation for part 489 

continues to read as follows: 

Authority: Secs. 1102, 1128I and 1819, 

1820(e), 1861, 1864(m), 1866, 1869, and 1871 

of the Social Security Act (42 U.S.C. 1302, 

1351i–3, 1395x, 1395aa(m), 1395cc, 1395ff, 

and 1395hh). 

17. Section 489.53 is amended by 

adding paragraphs (a)(17) and (d)(2)(iii) 

to read as follows: 

§ 489.53 Termination by CMS. 

(a) * * * 

(17) In the case of an HHA, it failed 

to correct any deficiencies within the 

required time frame. 

* * * * * 

(d) * * * 

(2) * * * 

(iii) Home health agencies (HHAs). 

For an HHA with deficiencies that pose 

immediate jeopardy to the health and 

safety of patients, CMS gives notice to 

the HHA at least 2 days before the 

effective date of termination of the 

provider agreement. 

* * * * * 

PART 498—APPEALS PROCEDURES 

FOR DETERMINATIONS THAT AFFECT 

PARTICIPATION IN THE MEDICARE 

PROGRAM AND FOR 

DETERMINATIONS THAT AFFECT THE 

PARTICIPATION OF ICFS/MR AND 

CERTAIN NFs IN THE MEDICAID 

PROGRAM 

18. The authority citation for part 498 

continues to read as follows: 

Authority: Secs. 1102 and 1871 the Social 

Security Act (42 U.S.C. 1302 and 1395hh). 

19. Section 498.3 is amended by 

revising paragraphs (b)(13), (b)(14) 

introductory text, (b)(14)(i), and (d)(10) 

to read as follows: 

§ 498.3 Scope and applicability. 

* * * * * 

(b) * * * 

(13) Except as provided at 

§ 498.3(d)(12) for SNFs, NFs, and HHAs 

the finding of noncompliance leading to 

the imposition of enforcement actions 

specified in § 488.406 or § 488.740 of 

this chapter, but not the determination 

as to which sanction was imposed. The 

scope of review on the imposition of a 

civil money penalty is specified in 

§ 488.438(e) of this chapter. 

(14) The level of noncompliance 

found by CMS in a SNF, NF, or HHA 

but only if a successful challenge on this 

issue would affect— 

(i) The range of civil money penalty 

amounts that CMS could collect (for 

SNFs or NFs, the scope of review during 

a hearing on imposition of a civil money 

penalty is set forth in § 488.438(e) of 

this chapter); or 

* * * * * 

(d) * * * 

(10) For a SNF, NF, or HHA— 

(i) The finding that the provider’s 

deficiencies pose immediate jeopardy to 

the health or safety of the residents or 

patients; 

(ii) Except as provided in paragraph 

(b)(13) of this section, a determination 

by CMS as to the provider’s level of 

noncompliance; and 

(iii) For SNFs and NFs, the imposition 

of State monitoring. 

* * * * * 

Authority: Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program. 

Dated: June 27, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: June 28, 2012. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2012–16836 Filed 7–6–12; 4:15 pm] 

BILLING CODE 4120–01–P 

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